Titan Global (TTGH) 10-Q 2009 Q1 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 November 30, 2008

or

¨ 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 x  No ¨

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

Large accelerated filer ¨Accelerated filer ¨  Non-accelerated filer ¨  Smaller reporting company x

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

As of January 20, 2009 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 Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Submission of Matters to a Vote of Security Holders	48
Item 5.	Other information	48
Item 6.	Exhibits	48
	Signatures	49

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-K, contain additional information concerning many of these risk factors, and copies of these filings are available from the Company upon request and without charge.

3

Titan Global Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except common stock share data)

	November 30,			August 31,
	2008			2008
ASSETS
Current assets:
Cash and cash equivalents	$	2,921		$	2,379
Restricted cash and short term investments		624			620
Accounts receivable, trade (less allowance for doubtful accounts of $31 and $109 and sales allowance of $112 and $0, respectively)		3,236			6,966
Inventory		7,179			10,910
Prepaid expenses and other current assets		718			1,062
Assets of discontinued operations, current		2,680			5,583
Total current assets		17,358			27,520
Equipment and improvements, net		10,141			10,512
Definite-lived intangible assets, net		501			584
Goodwill and indefinite-lived intangible assets		9,277			9,277
Capitalized loan fees, net		503			561
Other assets		51			9
Assets of discontinued operations, non-current		1,107			1,529
Total assets	$	38,938		$	49,992
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	16,639		$	18,016
Accrued liabilities		4,983			4,990
Current portion of long-term debt		1,020			1,020
Related party - notes payable		2,856			2,791
Short-term notes payable		8			8
Loss in excess of investment of subsidiary		12,992			12,992
Liabilities of discontinued operations, current		30,683			25,679
Total current liabilities		69,181			65,496
Lines of credit		9,705			12,393
Long-term debt, net of discount of $3,766 and $4,090, respectively		4,526			4,865
Long-term derivative liabilities		6,983			3,181
Other long-term liabilities		1,913			1,901
Liabilities of discontinued operations, non-current		29,741			35,722
Total liabilities		122,049			123,558
Commitments and contingencies
Stockholders' deficit:
Common stock-$0.001 par value; 950,000,000 shares authorized; 54,754,809 shares issued: 53,430,652 outstanding		55			55
Additional paid-in capital		30,784			30,800
Accumulated deficit		(112,236	)		(102,707	)
Treasury stock, at cost, 1,324,157 shares		(1,714	)		(1,714	)
Total stockholders' deficit		(83,111	)		(73,566	)
Total liabilities and stockholders' deficit	$	38,938		$	49,992

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

4

Titan Global Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

	Three Months Ended
	11/30/2008			11/30/2007
Sales - Energy division	$	75,682		$	90,015
Sales - Communications division		2,714			-
Total sales		78,396			90,015
Cost of sales - Energy division		68,923			84,924
Cost of sales - Communications division		2,684			-
Total cost of sales		71,607			84,924
Gross margin		6,789			5,091
Operating expenses:
Sales and marketing		136			23
General and administrative expenses		8,204			5,520
Amortization of intangibles		83			69
Loss from operations		(1,634	)		(521	)
Other income (expenses):
Other income		80			52
Interest expense		(1,227	)		(628	)
Gain (loss) on value of derivative instruments		(3,802	)		2,417
Income (loss) before income taxes		(6,583	)		1,320
Provision (benefit) for income taxes, net of valuation allowances		-			-
Net income (loss) from continuing operations		(6,583	)		1,320
Loss from discontinued operations		(2,946	)		(25,793	)
Net loss		(9,529	)		(24,473	)
Accrual of preferred stock dividend		(34	)		(34	)
Net loss applicable to common stockholders	$	(9,563	)	$	(24,507	)
Net income (loss) applicable to common stockholders per share:
Basic and diluted
Continuing operations	$	(0.12	)	$	0.03
Discontinued operations		(0.06	)		(0.51	)
Net loss	$	(0.18	)	$	(0.48	)
Number of weighted-average common shares outstanding:
Basic and diluted		53,430,652			50,543,634

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

5

Titan Global Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

	Three Months Ended
	11/30/2008			11/30/2007
Cash flows from operating activities:
Net income (loss) from continuing operations	$	(6,583	)	$	1,320
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		563			504
Bad debt and sales return expense		236			-
Non-cash compensation		18			5
Non-cash asset retirement obligation accretion expense		23			23
Non-cash interest expense		324			123
Amortization of debt discounts and bank fees		58			46
Amortization of intangibles		83			69
Gain (loss) on fair value of derivative liabilities		3,802			(2,417	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		3,494			(4,135	)
Inventory		3,730			(844	)
Prepaid expenses and other current assets		346			204
Other assets		(42	)		53
Accounts payable and accrued liabilities		(2,016	)		1,801
Other liabilities		(13	)		426
Total adjustments		10,606			(4,142	)
Net cash provided by (used in) operating activities of continuing operations		4,023			(2,822	)
Net cash provided by (used in) operating activities of discontinued operations		1,721			(5,936	)
Net cash provided by (used in) operating activities		5,744			(8,758	)
Cash flows from investing activities:
Equipment and improvements expenditures		(195	)		(86	)
Restricted investment to collateralize obligation		(3	)		(4,250	)
Proceeds form sale of fixed assets		3			-
Cash paid to sellers of Appco		-			(30,000	)
Cash provided by acquisitions		-			3,627
Net cash provided by (used in) investing activities of continuing operations		(195	)		(30,709	)
Net cash used in investing activities of discontinued operations		-			(347	)
Net cash provided by (used in) investing activities		(195	)		(31,056	)
Cash flows from financing activities:
Proceeds from issuance of common stock		-			5,000
Proceeds from sale leaseback transaction		-			15,000
Proceeds from issuance of long-term debt		-			11,000
Proceeds from lines of credit, net of repayments		(3,393	)		9,543
Proceeds from related party notes		65			-
Payments on long-term debt		42			(3,972	)
Capitalized loan fees		-			(775	)
Purchase of treasury stock		-			(41	)
Net cash provided by (used in) financing activities of continuing operations		(3,286	)		35,755
Net cash provided by (used in) financing activities of discontinued operations		(1,801	)		9,779
Net cash provided by (used in) financing activities		(5,087	)		45,534
Net increase in cash and cash equivalents		462			5,720
Cash and cash equivalents at beginning of period including cash of discontinued operations		2,469			1,190
Cash and cash equivalents at end of period including cash of discontinued operations	$	2,931		$	6,910
Cash and cash equivalents at end of period of discontinued operations	$	10		$	1,054
Cash and cash equivalents at end of period of continuing operations	$	2,921		$	5,856

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Titan Global Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flow Continued

(In thousands)

	Three Months Ended
	11/30/2008		11/30/2007
Supplemental disclosures of cash flow information:
Interest Paid	$	350	$	906
Income Tax Paid	$	-	$	-
Non-cash activities:
Issuance of redeemable preferred stock for acquisition of note receivable	$	-	$	7,245
Issuance of common stock for  acquisition of note receivable	$	-	$	4,000

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

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TITAN GLOBAL HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 1 - Basis of Presentation and Nature of Business

Basis of Presentation

The accompanying unaudited condensed 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 period ended November 30, 2008 are not indicative of the results that may be expected for the fiscal year ending August 31, 2009. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report to Shareholders on Form 10-K for the fiscal year ended August 31, 2008 as filed with the Securities and Exchange Commission on December 1, 2008. All significant intercompany accounts and transactions have been eliminated in preparation of the condensed consolidated financial statements. All amounts referenced below are stated in thousands except shares and per share amounts unless otherwise noted.

The preparation of unaudited condensed 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 condensed 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, resolution of discontinued operations, loss in excess of investment in subsidiary and sales returns.

Nature of Business

Organization:

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.

Nature of Operations:

The Company currently operates in two market segments – (i) energy through our Titan Global Energy group and (ii) telecommunications through our Titan Communications group.

Energy Segment

Our operations include retail convenience stores and wholesale petroleum distribution in the Southeastern and Central United States.  We operate 78 convenience store locations in Tennessee, Oklahoma, Kentucky and Virginia, where we offer merchandise, foodservice, motor fuel and other services consistent with the convenience store industry.   In addition, we sell liquid motor fuels to an additional 160 locations through either wholesale distribution contracts or consignment arrangements primarily to convenience stores located in Tennessee, Kentucky, Virginia and North Carolina. During the three months ended November 30, 2008 and 2007, we distributed approximately 23,800 and 31,600, respectively, gallons of branded and unbranded motor fuel from refiners and terminal operators for our retail convenience store locations, wholesale distribution contracts and consigned locations. Our business experiences substantial seasonality due to customer behaviors during different seasons. In general, sales and operating income are highest in our third and fourth fiscal quarters which occur in the spring and summer months.  Our lowest activity months are during the winter months.

We offer Marathon, BP, Citgo and Exxon branded motor fuel and unbranded motor fuel.  We purchase our gasoline from these major oil companies, terminal operators and independent refiners.  We purchase our branded gasoline and diesel fuel from major oil companies under supply agreements at the stated rack price or the market price quoted at each terminal as adjusted per the terms of the applicable contracts.  Our inventories of gasoline generally turn in approximately seven or less days.

8

Communications Segment

Our communications division provides its customers efficient, cost-effective international prepaid telecommunications calling cards.  We provide our end-user customers through our distribution network international prepaid calling cards that offer efficient calling options to foreign countries.  Prepaid, also known as pay-as-you-go and pay-in-advance, is service that is paid for prior to usage. Many consumers prefer prepaid because it offers improved budget controls, access and flexibility while not requiring deposits or constraining contracts. This method of payment has been widely used in foreign markets and is gaining acceptance in the United States. We generally design our cards on a region/country specific basis to offer our customers enhanced value to their preferred call destinations.  Our cards are generally sold in $2, $3 and $5 denominations.  The prepaid international calling cards we are currently distributing are sourced from one provider. We purchase the cards for a fixed price; mark the cards up, taking into consideration our fixed overhead and profit margin, and sell through our distribution network.

Discontinued Operations

In August 2008, the Company evaluated the operations of the Titan Electronics Group, which has been historically included in the Company’s electronics and homeland security division and determined to cease operations.  The Electronics Group includes Nexus, Titan East Inc. f/k/a Titan PCB East, Inc and Titan Electronics, Inc. The Company began liquidating the remaining assets including fixed assets, inventory and accounts receivable.  As such, the operations of Titan Electronics Group have been included as discontinued operations as of and for the three months ending November 30, 2008 and 2007.

In August 2008, the Company evaluated its communications division and determined to classify the operations of Oblio Telecom, StartTalk and Titan Wireless as discontinued. As such, the operations of a portion of the Communications division have been included as discontinued operations as of and for the three months ending November 30, 2008 and 2007.

In August 2008, the Company’s Titan Apparel subsidiary ceased operations and we began liquidating the remaining assets including inventory, accounts receivable and fixed assets.  The operations of Titan Apparel have been classified as discontinued operations as of and for the three months ending November 30, 2008 and 2007.

Liquidity:

Our principal sources of liquidity are our existing cash, cash equivalents and short-term investments, cash generated from operations, and cash available from borrowings under our revolving credit facilities. We may also generate liquidity from offerings of debt and/or equity in the capital markets. As of November 30, 2008, we had a total of $2,921 in unrestricted cash and cash equivalents, including $10 in cash from discontinued operations. As of November 30, 2008, we also had restricted cash and cash equivalents and short-term investments of $624 that included funds set aside or pledged to secure lines of credit with key suppliers. We believe that our existing cash and investments, liquidity under our revolving credit facility and anticipated cash flows from operations will be sufficient to meet our operating and capital requirements through at least the next twelve months.

We currently intend to seek opportunities to acquire strategic assets that will enhance our holdings in our energy division.  .  On January 15, 2009, the Company closed on the acquisition of Crescent Fuels, Inc. (“Crescent Fuels”). The acquisition of Crescent Fuels increases the Company’s aggregate lines of credit with fuel suppliers and our unleveraged asset base.  Increased lines of credit with fuel suppliers decrease our reliance on financing our working capital needs through our asset based revolving credit facilities.  Increasing unleveraged assets creates more borrowing capacity under our revolving credit facilities.  The combination of these two factors increases the company’s liquidity and financing options and lowers our borrowing costs.  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.

Operating Activities - Cash provided by operating activities was $5,744 ($4,023 from continuing operations and $1,721 from discontinued operations) during the three months ended November 30, 2008 compared to cash used in operating activities of $8,758 ($2,822 used in continuing operations and $5,936 used in discontinued operations) during the three months ended November 30, 2007. The increase in cash provided by operations is due primarily to the decreases in accounts receivable and inventories net of the decrease in accounts payable. Decreases in accounts receivable, inventories and accounts payable were primarily due to lower fuels prices during the three months ended November 30, 2008.

9

Investing Activities - Cash used in investing activities was $195 ($195 used in continuing operations and $0 used in discontinued operations) during the three months ended November 30, 2008 compared to cash used in investing activities of $31,056 ($30,709 used in continuing operations and $347 used in discontinued operations) during the three months ended November 30, 2007. The decrease in cash used in investing activities is due primarily to $30,000 paid to the sellers of Appco in the three months ended November 30, 2007.

Financing Activities - Cash used in financing activities during the three months ended November 30, 2008 was $5,087 ($3,286 used in continuing operations and $1,801 used in discontinued operations) compared to cash provided by financing activities of $45,534 ($35,755 provided by continuing operations and $9,779 used in discontinued operations) during the three months ended November 30, 2007. The decreases in cash provided from financing activities in the three months ended November 30, 2008 is due primarily to credit line repayments. In the same period last year the Company’s received approximately $35,000 from a sale leaseback transaction, common stock issuance and long-term debt issuance.

Note 2 – Acquisition

Acquisition of Crescent Fuels

The Company formed Titan Global Energy Group to acquire and manage complementary energy sector assets. On October 24, 2008 the Company entered into two stock purchase agreements, one with Phillip Near and one with Johnson Enterprises of Kansas, LLC, Jeff McReynolds, Karen E. Reeder Trust, Harrison F. Johnson, Jr., and Martha M. Johnson Trust, to purchase 100% of the outstanding common and preferred stock of Crescent Fuels. The acquisition closed on January 15, 2009. Crescent Fuels distributes motor fuels to approximately 360 wholesale and consignment locations and operates 36 convenience stores in Kansas, Oklahoma, Missouri, Louisiana and Arkansas.  The primary reason for the purpose of the acquisition was to broaden the geographical footprint of our fuel distribution and convenience store operations in our Titan Global Energy division.   The purchase price for the common and preferred stock of Crescent Fuels under the stock purchase agreements included shares of the Company’s common stock, warrants to purchase the common stock of the Company and cash.   This transaction will be recorded in the Company’s second fiscal quarter ending February 28, 2009.

On September 30, 2008, the Company entered into a continuing unconditional guaranty with Marshall & Isley Bank (“M&I”), the senior secured lender of Crescent Fuels’ subsidiary Crescent Oil Inc.  The unconditional guaranty is limited to $19,000.  In addition to the unconditional guaranty provided by the Company, additional guarantees are provided to M&I by a senior member of Crescent Fuels’ management.  Based on the guarantees, Crescent Fuels is considered a variable interest entity.  Management performed a quantitative analysis and determined the Company is not the primary beneficiary of Crescent Fuels and therefore the results of operations and the balance sheet should not be consolidated with the Company as of the date of the continuing unconditional guaranty.

Note 3 – Recent Accounting Pronouncements

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 FASB 141(R) and the effect that adopting FASB 141 (R) will have on our results of operations or financial position.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”, (“SFAS 160”). SFAS 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating SFAS 160 and the effect that adopting SFAS 160 will have on our results of operations or financial position.

10

In March 2008, the FASB issued FAS 161, “Disclosures about Derivative Instruments and Hedging Activities—anamendment of FASB Statement No. 133 (“FAS 161”). FASB Statement No. 133, Accounting for Derivative Instruments andHedging Activities, establishes, among other things, the disclosure requirements for derivative instruments and for hedging activities. FAS 161 amends and expands thedisclosure requirements of Statement 133 with the intent to provide users of financialstatements with an enhanced understanding of (i) How and why an entity uses derivative instruments(ii) How derivative instruments and related hedged items are accounted for underStatement 133 and its related interpretations(iii)How derivative instruments and related hedged items affect an entity’s financialposition, financial performance, and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

The Company is currently evaluating FAS 161, and how the effect that adopting FAS 161 will have on our results of operations or financial position.

In April 2008, the FASB issued Staff Position 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is prohibited. The Company is currently evaluating FSP 142-3, 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 November 30, 2008 consisted of employee options/warrants to purchase 550,000 common shares, warrants to purchase 11,730,000 common shares and preferred stock convertible into 3,252,238 common shares) are not considered in the computations. During the three months ended November 30, 2007 the common stock equivalents that were anti-dilutive and therefore not considered in the calculations consisted of employee options/warrants to purchase 1,492,500 common shares, warrants to purchase 12,230,000 shares and preferred stock convertible into 3,184,738 common shares.

Note 5 - Inventory

Inventory consisted of finished goods. There were no inventory reserves.

Discontinued operations inventories, net of allowance of $1,249 and $4,095 were $1,632 and $7,318 at November 30, 2008 and 2007, respectively.

Note 6 - Greystone Business Credit

Titan Global 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. 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.

11

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 January 20, 2009, the common stock underlying the warrant has not yet been registered.  No penalties have been assessed by Greystone related to this obligation.

At November 30, 2008 the revolver had an outstanding balance of $9,287 and the term notes had a carrying value of $2,969 (net of discount of $343) 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 5.5% at November 30, 2008.

Discontinued Operations of Communications and Electronics and Homeland Security Division

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 required to have a minimum unused availability under the line of between $200 and $1,000. The Company was obligated to use any refunds on commercial taxes including Universal Service Fees (“USF”) to repay the term loans. As of November 30, 2008, the Company has no excess availability based on collateral under the line.

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 are to be paid off in 48 equal installments of $135 per month which will result in repayment of the principal.

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 0.5% 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 and 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.

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 the Company.

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 reestablish Term Loan B and advance the Company up to $1,500.

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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 17, 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.

On February 29, 2008, the Company entered into Amendment #11 with Greystone.  The amendment expands the definition of eligible borrowers under the loan and security agreement for the communications division to include newly formed entities.

On March 5, 2008, Term Loan C’s outstanding balance of $5,000 was paid in full.

On May 30, 2008, the Company entered into Amendment #12 with Greystone.  In the amendment Greystone consented to the Company’s entry into an unsecured subordinated indebtedness with Mike Kadlec, at the time, the CEO of Titan Electronics Inc. who resigned as of July 18, 2008.  In addition, the amendment specified the terms and conditions of term loan E for $300 with $25 per month amortization payments beginning July 1, 2008.  Term loan E carries interest at prime plus 6%.

On June 9, 2008, the Company entered into Amendment #13 with Greystone.  The amendment set the term loan D limit at $1,050 and established a 44 month amortization term for term loan D.

On October 13, 2008, the Company entered into Amendment #14 with Greystone.  The amendment created a borrowing account sub-limit for the loans related to the Company’s Planet Direct subsidiary to $3,000, acknowledged the formation of our Global Wholesale International Inc. subsidiary and defined what qualifies as an eligible account for borrowing base calculation purposes for Planet Direct.

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As of November 30, 2008, the Term Loan B balance is $1,618 and the Revolver has a balance of $12,582 with an excess available credit of $0 based on actual borrowing capacity. Interest rates on the revolver were 4.25% on $12,282 and 5.5% on $299. Term Loan B has an interest rate of 10.75%. Loans B and the revolver are included in the Electronic and Homeland Security and Communications Divisions discontinued operations.

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 November 30, 2009.  No penalties have been assessed related to this violation.

Discontinued Operations of Global Brands Division

On December 14, 2007, the Company through its subsidiary Titan Apparel, Inc. (“TAPP”) entered into a Loan and Security Agreement in connection with a Secured Party Bill of Transfer of the collateral of Global Brand Marketing Inc. (“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 initially guaranteed the obligations of TAPP up to $250. In September 2008, the Company entered into an amendment to the parent guaranty of the TAPP Loan and Security Agreement with Greystone that limited the amount of the Company’s guaranty to a maximum of $2,500. At November 30, 2008 the revolver had an outstanding balance of $2,888 and the term note had a balance of $4,351 and an excess available credit of $0 based on actual borrowing capacity.  The interest rates on the revolving credit facility and term loans were 9% and 14.5% respectively, at November 30, 2008.

Modification Agreement with Greystone Business Credit II, LLC

In the fourth quarter of fiscal 2008, the Company entered into a modification agreement with Greystone.  The agreement set forth (1) general terms and conditions of the structure a future working relationship concerning any assets that may become available from the Chapter 7 bankruptcy proceeding of USAD (2) a 36 month amortization schedule of the over advance attributable to the discontinued operations of Oblio Telecom (3) terms and conditions of the related party loan from the Crivello Group to our subsidiary, Titan Nexus (4) an outline of the working structure for the Planet Direct sub-limit portion of the Titan Loan Agreement (5) consent to transfer the ownership of certain parcels of real estate owned by Appco in partial satisfaction of  indebtedness owed by the Company to the Crivello Group (6) modifications to the Appco monthly amortization schedule should the Company continue to be unable to obtain certain leasehold mortgages in favor of Greystone (7) terms and conditions of future merger transactions with our Titan Apparel subsidiary (8) conditions subject to additional loan facilities being made available to Titan Apparel  and (9) an interest surcharge of 3.5% on any over advance with our Titan Apparel subsidiary.

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Concurrent with the modification agreement with Greystone, our Chairman, David Marks and Frank Crivello executed a joint and severable limited recourse guaranty of $5,000 for the debts of the Company owed to Greystone. In addition, Farwell Equity Partners II, LLC, a related party to David Marks and Frank Crivello executed a limited recourse guaranty for the debts of the Company owed to Greystone that is secured by 6,000,000 common shares of Marine Growth Ventures, Inc. common stock shares.  The Farwell Equity Partners II pledge is limited to the pledged shares.  The pledged Marine Growth Ventures, Inc. common shares are traded on the OTC Bulletin Board and were trading at $0.10 per share on January 7, 2009.

Note 7 – YA Global

On September 17, 2007, the Company issued a secured convertible debenture in the principal amount of $6,000 to YA Global which funds were advanced to us 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 November 30, 2008, the note had a recorded balance of $2,577 with an unamortized discount of $3,423. No payments have been made and the Company has not been notified of any defaults.

Note 8 – Seller-Financed Notes and Preferred Stock in Discontinued Operations

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 Oblio 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:

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· 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 November 30, 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 15.

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 Stock as a liability at fair value and to re-measure that value each reporting period with changes being charged to operations.

As of November 30, 2008, the Company has recorded $3,570 as debt related to the note and $4,912 related to the preferred stock (which includes $412 in accrued dividends).  No dividend payments have been made as of January 19, 2009. The Series A Preferred Stock in included in the discontinued operations long-term liabilities at November 30, 2008 and 2007.

Note 9 – Titan Electronics Convertible Preferred Stock in Discontinued Operations

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;

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• 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.

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 a long-term liability at face value.

Note 10 – Leases

Operating Leases

The Company through its Appco subsidiary operates 78 leased convenience stores in Tennessee, Oklahoma, Kentucky, and Virginia. The convenience store non-cancellable leases expire at various dates between 2009 and 2027 with monthly rents from $1 to $20. Real estate taxes, insurance, and maintenance expenses are obligations of the Company.

The Company also leases facilities for the telecommunications division and administrative headquarters.

Rent expense for continuing operations totaled $1,174 and $907 for the three months ended November 30, 2008 and 2007, respectively. Rent expense for discontinued operations totaled $12 and $482 for the three months ended November 30, 2008 and 2007, respectively.

Note 11 – Long-Term Debt

Long-term debt consisted of the following:

Issue	Interest	Expiration
Date	Rate	Date	Instrument	2008
09/17/2007	5.50%	09/17/2012	$20,000 Secured Revolving Note	9,286
09/17/2007	5.5% to 7.25%	09/17/2012	$5,200 Term Notes	3,312
09/17/2007	10%	09/17/2010	$6,000 Convertible Debentures	6,000
12/14/2007	5.50%	12/29/2009	$3,000 Secured Revolving Note	419
Total debt				19,017
Less discount from warrants and derivatives				(3,766)
Total carrying value of debt				15,251
Less current portion of long-term debt				(1,020)
Total long-term debt				$                14,231

Long-term debt repayments are due as follows:

Fiscal Year	YA Global		Greystone Revolvers		Greystone Term Debt		Total Long- Term Debt
2009	$	-	$	-	$	1,020	$	1,020
2010		-		419		1,020	$	1,439
2011		6,000		-		1,005	$	7,005
2012		-		9,286		267	$	9,553
	$	6,000	$	9,705	$	3,312	$	19,017

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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 140%, (3) risk free interest rates between 2.27% and 4.11% and (4) dividend rate of 0%.

The fair value of the individual long-term embedded and free standing derivatives at November 30, 2008 is as follows:

Issue Date	Expiration Date	Instrument	Exercise Price per Share		2008
9/17/07	9/17/12	Long-term fair value of conversion feature of convertible debenture			$	6,533
Long-term embedded derivatives						6,533
9/17/07	9/17/12	500,000 Warrants	$	2.00		153
9/17/07	9/17/12	525,000 Warrants	$	2.47		152
9/17/07	9/17/12	525,000 Warrants	$	2.81		145
Total long-term free-standing derivatives						450
	Total embedded and free-standing derivative liabilities				$	6,983

Note 13 – Related-Party Note Payables and Transactions

The Company's policy is to enter into transactions with related parties on terms that, on the whole, are more favorable, or no less favorable, than those available from unaffiliated third parties. Based on the Company's experience in the business sectors in which the Company operates and the terms of its transactions with unaffiliated third parties, the Company believes that all of the transactions described below met this policy standard at the time they occurred.

On September 28, 2007, the Company entered into a 6.5% promissory note with Frank Crivello, (Crivello) managing partner of the Crivello Group (a stockholder).  The maturity date of the note was March 28, 2008.  As of November 30, 2008, the outstanding balance of the note payable was $988.  Payment on the note has not been made and the revised maturity date has not been determined as of January 20, 2009.

On February 29, 2008, the Company entered into a 10% promissory note with The Irrevocable Children’s Trust I and II (a stockholder). The note has a six-month term with all interest and principal due at maturity.  As of November 30, 2008, the outstanding balance of the promissory note payable was $960 and a revised maturity date has not been determined as of January 20, 2009.

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 matured on September 4, 2008.  Interest is payable monthly and the principal amount is due at maturity.  As of November 30, 2008, the outstanding balance of the promissory note payable was $55 and is included in the discontinued operations current liabilities balance. Stephen Kennedy is currently a Director of the Company. As of January 20, 2009, the note balance of $55 is outstanding and a revised maturity date has not been determined.

As of November 30, 2008, the Company owes $114 in accrued interest payable and $44 in other business expense payables.

Related party interest expense was $ 67 in the three months ended November 30, 2008.

During the year ended August 31, 2007, the Company entered into a Finder’s Fee Agreement with Crivello related to the Appco purchase. Upon the closing of the acquisition, the Company agreed to pay a cash fee of $750 and issue 10,000,000 ten year warrants to Crivello. The Appco acquisition closed on September 17, 2007. As a result of the completion, the Company issued the warrants to Crivello and recorded a payable for the cash fee. The Company accounted for these transactions in the first quarter of fiscal year 2008. The warrants were subsequently cancelled.

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Note 14 - 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 three months ended November 30, 2008.

Employee stock option activity is summarized as follows:

	Three Months Ended
	11/30/2008
Outstanding, September 1, 2008		1,094,167
Granted		-
Exercised		-
Forfeited/Expired		(544,167	)
Outstanding, November 30, 2008		550,000
Non-vested, September 1, 2008		16,667
Grants		-
Vested		-
Forfeitures		(16,667	)
Non-vested, November 30, 2008		-
Average exercise price per share:	$	1.18
Outstanding, September 1, 2008	$	-
Granted	$	0.91
Forfeited/expired	$	0.78
Outstanding, November 30, 2008	$	0.78
Exercisable	$	1.18
Non Vested, September 1, 2008	$	-
Non-vested, November 30, 2008
Weighted-average grant date fair value:	$	1.10
Non-vested, September 1, 2008	$	-
Grants	$	-
Vested	$	1.10
Forfeited	$	-
Non-vested, November 30, 2008
Weighted-average remaining term of outstanding options and warrants	3.83 years
Weighted-average remaining term of exercisable options and warrants	3.83 years

Note 15– 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 November 30, 2008, the Company had repurchased 1,274,157 shares for $1,660 including transaction costs under the repurchase program. The Company did not make any repurchases during the three months ended November 30, 2008.

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Period		Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
05/09/07	05/31/07		90,500	$	1.21		90,500		3,909,500
06/01/07	06/30/07		291,907		1.12		241,907		3,667,593
07/01/07	07/31/07		32,900		1.19		32,900		3,634,693
08/01/07	08/31/07		672,000		1.48		672,000		2,962,693
09/01/07	11/30/07		24,850		1.62		24,850		2,937,843
12/01/07	02/29/08		212,000		0.98		212,000		2,725,843
Total			1,324,157	$	1.30		1,274,157

Note 16 – Litigation

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

The following matters are pending:

ACE TECH CIRCUIT CO., LTD.

On or about September 2008, the Company was notified of a collections lawsuit filed by Ace Tech Circuit Co., Ltd. ("Ace Tech").  The lawsuit alleges the Company is the dba of its subsidiary Titan PCB West and Titan Electronics.  Ace Tech is seeking approximately $459 for alleged failure to pay for delivered product. The Company has accrued $422 of the amounts alleged to be due in its accounts payable as of November 30, 2008 and is disputing the difference of $37.

ADVANCED SURFACE FINISHING

In July 2008, the Company's subsidiary Titan PCB West n/k/a Titan Electronics, Inc. (“Titan Electronics”) was notified of a collections lawsuit and a writ of attachment granted to Advanced Surface Finishing ("AFS").  AFS is seeking approximately $143 from Titan Electronics for alleged failure to pay for delivered product. The Company has accrued $58 of the amounts alleged to be due in its accounts payable as of November 30, 2008 and is disputing the difference of $85.

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 November 30, 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 August 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 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.  On July 25, 2008, the district court denied Asia Telecom’s special appearance.  We are now proceeding with pre-trial discovery against Asia Telecom.

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.

20

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, which has been paid in full. 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.

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, 199th 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 $140 in Clifton’s bank accounts.  Clifton has unsuccessfully attempted to dissolve the Writ of Garnishment.  On September 22, 2008, the district court entered a final judgment against Clifton Prepaid Communications Corp. and Clifton Pre-Paid Corp. in the amount of approximately $2,500.  The final judgment did not include Aref Aref because two weeks prior to trial, Aref Aref filed for personal bankruptcy in an effort to thwart Oblio’s collection efforts.  On or about October 1, 2008, the district court entered judgment in the bankruptcy action directing Bank of America, N.A. and J.P. Morgan Chase Bank to release the garnished funds to Oblio, which was received on December 8, 2008. As of November 30, 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.

FASTPRINT CIRCUIT TECHNOLOGIES

In August 2008, the Company was notified of a collections lawsuit filed by Fastprint Circuit Technologies (“Fastprint”). Fastprint is in the process of amending its lawsuit to name the Company's subsidiary Titan Electronics as the defendant.  No specific demand has been made although Fastprint seeks damages for alleged failure to pay for delivered product.

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 November 30, 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 162nd 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 November 30, 2008. As of November 30, 2008, the Company has fully reserved and allowed for the $1,319 in accounts receivable from Hawaii Global.

21

ILDN WEST, LLC

On January 5, 2009, the Company and its subsidiaries, Oblio, Titan Communications and Planet Direct were notified that it was being sued by ILDN West, LLC (“ILDN”).  ILDN is seeking $239 for alleged unpaid invoices for services rendered in Los Angeles County: Superior Court, California.  This action is currently pending.  The Company has accrued  the amounts alleged to be due in its accounts payable as of November 30, 2008.

INTERNATIONAL ELECTRONIC COMPONENTS USA

On or about September 2008, the Company was notified of a collections lawsuit filed by International Electronic Components USA ("IEC") against the Company and its subsidiary Titan PCB West and several individuals.  IEC obtained a writ of attachment against subsidiary Titan PCB West.  IEC alleges the Company is the alter ego of its subsidiary Titan PCB West and is seeking approximately $235 for alleged failure to pay for delivered product.  A motion to quash service of summons and complaint as against the Company has been filed. The Company has accrued the amounts alleged to be due in its accounts payable at November 30, 2008.

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 November 30, 2008 and is disputing the difference of $93.  On December 17, 2008, the plaintiff, Latin American VOIP, voluntarily dismissed without prejudice all of its claims against the defendants.

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 November 30, 2008, Oblio has accrued the amount of the Agreed Judgment in accounts payable.

PALPILOT

In August 2008, the Company's subsidiary Titan PCB West f/k/a Titan EMS was notified of a collections lawsuit filed by Palpilot.  Palpilot is seeking approximately $99 for alleged failure to pay for delivered product. The Company has accrued the amounts alleged to be due in its accounts payable at November 30, 2008.

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 14th 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.

22

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 $10,000. 

The case is currently set for trial 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 November 30, 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.

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.

OTHER LEGAL MATTERS

As of November 30, 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 operations classified as discontinued operations associated with the  matters referenced above, including Clifton.

Note 17 – Commitments and Contingencies

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 November 30, 2008, $632 of the original settlement obligation remains unpaid all of which is a current liability.

Note 18 - Segment Information

The Company currently operates in two market segments – (i) energy through our Titan Global Energy group and (ii) telecommunications through our Titan Communications group.

The Company, through its subsidiaries Titan Communications and Pinless, dba Planet Direct, is engaged in the creation, marketing, and distribution of prepaid telephone cards and 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.

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	Three Months Ended
	11/30/2008
	Comm			Energy			Corp.			Total
Sales:	$	2,714		$	75,682		$	-		$	78,396
Interest expense:		73			654			500			1,227
Net loss from continuing operations		(790	)		(354	)		(5,439	)		(6,583	)
Identifiable assets-continuing operations, net		1,400			33,095			656			35,151
Accounts receivable, net:		358			2,878			-			3,236
Inventory, net		700			6,479			-			7,179
Equipment and improvements, net:		118			9,877			146			10,141
Depreciation expense:		1			529			33			563
Goodwill and indefinite lived intangible assets:		-			9,277			-			9,277
Definite lived intangible assets, net		-			501			-			501

	Three Months Ended
	11/30/2007
	Comm		Energy			Corp.		Total
Sales:	$	-	$	90,015		$	-	$	90,015
Interest expense:		-		381			247		628
Net income (loss) from continuing operations		-		(435	)		1,755		1,320
Identifiable assets-continuing operations, net		-		43,751			9,147		52,898
Accounts receivable, net:		-		9,680			-		9,680
Inventory, net		-		8,732			-		8,732
Equipment and improvements, net:		-		11,978			137		12,115
Depreciation expense:				547			12		559
Goodwill and indefinite lived intangible assets:		-		9,277			-		9,277
Definite lived intangible assets, net:		-		831			-		831

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.  There were no intersegment sales during the periods shown above.

Note 19- Deconsolidated Subsidiary and Bankruptcy Filing in Global Brands Segment

USAD

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. 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. Effective June 12, 2008, the Company’s USAD subsidiary’s asset were seized by the Bankruptcy Court as a result of an involuntary Chapter 7 bankruptcy petition filed by several of USAD’s creditors.  As such, the operations of USAD have been deconsolidated from the operating results of the Company.

In connection with the deconsolidation of USAD from the operating results of the Company on June 12, 2008, a cumulative loss in excess of investment in subsidiary is carried as a liability until such time as the Company is formally relieved from its obligations by the bankruptcy court.  As of November 30, 2008, this liability was $12,992.  The loss in excess of investment in subsidiary is comprised of the net equity in USAD.

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Note 20 – Discontinued Operations

Titan Electronics Group Discontinued Operations

In August 2008, the Company evaluated the operations of the Titan Electronics Group, which has been historically included in the Company’s electronics and homeland security division and determined to cease operations.  The Electronics Group includes Nexus, Titan East Inc. f/k/a Titan PCB East, Inc and Titan Electronics, Inc. The Company is currently liquidating the remaining assets including fixed assets, inventory and accounts receivable.  As such, the operations of Titan Electronics Group have been included as discontinued operations as of and for the period ending November 30, 2008 and 2007.

The results of operations for the three months ended November 30, 2008 and 2007 of the discontinued Electronics Group subsidiaries are as follows:

	Three months ended
	11/30/08			11/30/07
Sales	$	(159	)	$	6,781
Cost of sales		239			6,120
		(398	)		661
Operating expenses
Sales and marketing		83			574
General and administrative		239			679
Bad debt expense		157			33
Amortization of intangibles		-			-
Loss from operations		(877	)		(625	)
Other income (expense)
Interest expense		(131	)		(189	)
Gain (loss) on value of derivative instruments		(933	)		1,388
Gain on disposal of assets		107			-
Other income		20			-
Gain (loss) before provision for income taxes		(1,814	)		574
Provision for income taxes		-			-
Gain (loss) available to common stockholders	$	(1,814	)	$	574

Depreciation expense included in Cost of sales was $0 and $180 for the years ended November 30, 2008 and 2007, respectively.

25

The principal balance sheet items of the assets held for sale as of November 30, 2008 and 2007 are stated below:

	11/30/08		11/30/07
Current Assets
Cash and cash equivalents	$	-	$	441
Accounts receivable, trade (less allowance for doubtful accounts and sales allowance of $185 and $1,053)		112		4,784
Inventory, net		404		2,405
Prepaid expenses and other assets		37		40
Total current assets	$	553	$	7,670
Non-current assets
Equipment and improvements, net	$	916	$	3,217
Goodwill and indefinite-lived intangibles		-		8,571
Other assets		-		162
Total non-current assets	$	916	$	11,950
Current liabilities
Accounts payable, trade	$	4,165	$	3,069
Accrued liabilities		285		1,296
Related party payable		55		-
Current portion of long-term debt, net		328		339
Short-term notes		439		320
Total current liabilities	$	5,272	$	5,024
Non-current liabilities
Lines of credit	$	300	$	4,195
Redeemable, convertible preferred stock		7,245		7,245
Long-term derivative liabilities		3,016		10,702
Long-term debt		338		597
Other long-term liability		-		118
Total non-current liabilities	$	10,899	$	22,857

Long-term debt as of November 30, 2008 consisted of the following:

Issue	Expiration		Outstanding at
Date	Date	Instrument	11/30/2008
12/29/2006	12/01/2010	$20,000 Line of Credit	$	300
02/11/2008	02/01/2011	$830 Term Notes		396
11/30/2007	08/31/2010	Other		270
				966
Less current portion of long-term debt				(328	)
Total long-term debt			$	638

26

Long-term debt repayments are due as follows:

Fiscal Year	Other		Greystone Revolvers		Greystone Term Debt		Total Long- Term Debt
2009	$	120	$	-	$	208	$	328
2010		120		300		188		608
2011		30		-		-		30
	$	270	$	300	$	396	$	966

Communications Division Discontinued Operations

In August 2008, the Company evaluated its communications division and determined to classify the operations of Oblio Telecom, StartTalk and Titan Wireless as discontinued.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company reviews intangibles for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's business enterprise below its carrying value. The impairment test requires management to estimate the fair value of the Company's overall business enterprise down to the reporting unit level. The Company performs its annual impairment test in its fiscal fourth quarter. No impairment charges were recorded in the fiscal year ended August 31, 2007. In the year ended August 31, 2008, management committed to a plan to dispose of certain assets and liabilities of certain operations in the Communications division.

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 the Company is 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 the Company’s 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 in the amount of $14,572 with the exception of the trade names as of November 30, 2007.

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 and committed to plan to discontinue operations as of August 31, 2008.

27

The results of operations for the three months ended November 30, 2008 and 2007 of the discontinued Communications subsidiaries are as follows:

	Three months ended
	11/30/08			11/30/07
Sales	$	-		$	22,328
Cost of sales		-			18,270
		-			4,058
Operating expenses
Sales and marketing		-			98
General and administrative		13			2,218
Bad debt expense		94			4,493
Depreciation expense		-			69
Amortization of intangibles		-			1,363
Loss from operations		(107	)		(4,183	)
Other income (expense)
Gain (loss) on value of derivative instruments		(433	)		738
Interest expense		(413	)		(647	)
Loss on impairment		-			(14,573	)
Gain on disposal of assets		159
Other expense		-			(4	)
Loss before provision for income taxes		(794	)		(18,669	)
Provision for income taxes		-			-
Accrual of preferred stock dividend		(34	)		(34	)
Loss available to common stockholders	$	(828	)	$	(18,703	)

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The principal balance sheet items of the assets held for sale as of November 30, 2008 and 2007 are stated below:

	11/30/08		11/30/07
Current Assets
Cash and cash equivalents	$	-	$	168
Accounts receivable, trade (less allowance for doubtful accounts and sales allowance of $16,060 and $10,798 )		776		7,605
Inventory, net		-	��	251
Prepaid expenses and other assets		79		371
Total current assets	$	855	$	8,395
Non-current assets
Equipment and improvements, net	$	-	$	626
Definite-lived intangible assets, net		-		4,633
Capitalized loan fees		191		368
Total non-current assets	$	191	$	5,627
Current liabilities
Accounts payable, trade	$	12,208	$	11,613
Accrued liabilities		685		676
Deferred revenue		-		10,471
Related party note		-		250
Current portion of long-term debt, net		510		511
Long-term seller-financed note, current		3,570		2,147
Total current liabilities	$	16,973	$	25,668
Non-current liabilities
Lines of credit	$	12,282	$	13,343
Long-term debt		1,108		1,392
Long-term seller-financed note		-		1,354
Redeemable, convertible preferred stock		4,912		4,777
Long-term derivative liabilities		540		2,315
Total non-current liabilities	$	18,842	$	23,181

Long-term debt as of November 30, 2008 consisted of the following:

Issue	Expiration		Outstanding at
Date	Date	Instrument	11/30/2008
08/12/2005	03/31/2009	$4,823 Seller-Financed Debt	$	3,570
12/29/2006	12/29/2009	$20,000 Line of Credit		12,282
12/29/2006	07/01/2009	$7,608 Term Notes A & B		1,618
Total debt				17,470
Less current portion of long-term debt				(4,080	)
Total long-term debt and seller financed note			$	13,390

Long-term debt repayments are due as follows:

Fiscal Year	F&L Note		Greystone Revolvers		Greystone Term Debt		Total Long- Term Debt
2009	$	3,570	$	-	$	510	$	4,080
2010		-		12,282		1,108		13,390
	$	3,570	$	12,282	$	1,618	$	17,470

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Global Brands Discontinued Operations

In August 2008, the Company’s Titan Apparel subsidiary ceased operations and we began liquidating the remaining assets including inventory, accounts receivable and fixed assets.  The operations of Titan Apparel have been classified as discontinued operations as of and for the period ending November 30, 2008.

The results of operations of the discontinued Titan Apparel subsidiaries are as follows:

	Three months ended
	11/30/08			11/30/07
Sales	$	372		$	3,183
Cost of sales		(13	)		3,205
		385			(22	)
Operating expenses
Sales and marketing		-			515
General and administrative		150			342
Bad debt expense		351			31
Depreciation expense		-			26
Amortization of intangibles		-			64
Loss from operations		(116	)		(1,000	)
Other income (expense)
Interest income		-			41
Interest expense		(232	)		(170	)
Loss on impairment		-			(6,569	)
Gain on disposal of assets		10			-
Loss before provision for income taxes		(338	)		(7,698	)
Provision for income taxes		-			-
Loss available to common stockholders	$	(338	)	$	(7,698	)

30

The principal balance sheet items of the assets held for sale as of November 30, 2008 are stated below:

	11/30/08		11/30/07
Current Assets
Cash and cash equivalents	$	9	$	446
Accounts receivable, trade (less allowance for doubtful accounts of $754 and $1,377)		35		4,176
Inventory, net		1,228		4,661
Prepaid expenses and other assets		-		828
Total current assets	$	1,272	$	10,111
Non-current assets
Equipment and improvements, net	$	-	$	2,052
Definite-lived intangible assets, net		-		2,496
Other assets		-		98
Total non-current assets	$	-	$	4,646
Current liabilities
Accounts payable, trade	$	769	$	7,794
Accrued liabilities		431		2,689
Current portion of long-term debt, net		4,351		869
Short term notes		-		1,250
Lines of credit, current		2,887		-
Total current liabilities	$	8,438	$	12,602
Non-current liabilities
Lines of credit	$	-	$	6,581
Long-term debt		-		2,866
Other Long-term liability		-		300
Total non-current liabilities	$	-	$	9,747

Debt as of November 30, 2008 consisted of the following:

Issue	Expiration		Outstanding at
Date	Date	Instrument	11/30/2008
12/14/2007	12/29/2009	$14,000 Secured Revolving Note	$	2,887
12/14/2007	12/29/2009	$2,000 Term Notes		4,351
Total debt				7,238
Less current portion of long-term debt				(7,238	)
Total long-term debt			$	-

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 condensed consolidated financial statements and the related notes included elsewhere in this report.

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Overview

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

Summary Corporate Background

Titan Global Holdings (the “Company”, “We”, “Us”, “Our” or “Titan”) is a holding company owning subsidiaries engaged in a number of diverse business activities.  The most material of these are in the energy and telecommunications industries.  We own and are in the process of discontinuing operations in the electronics manufacturing, and apparel industries.  The Company is domiciled in the state of Utah and its corporate headquarters are in Richardson, Texas.

Our operating subsidiaries are managed in a decentralized fashion.  Our corporate headquarters provides very limited support to our operating subsidiaries and there is minimal involvement by the corporate headquarters in running the day-to-day business activities of our operating units.  Our corporate headquarters participates and is ultimately responsible for arranging financing, allocating capital, sourcing senior leadership and influencing the strategic direction of each operating unit.

We are opportunistic buyers of companies that offer a value proposition either through initiating operating efficiencies by our experienced management team and or synergies with our existing operations.  In either case, our management team is experienced in financing acquired operations with innovative lenders with what we perceive as minimal dilution to our existing shareholders.  The Company is committed to serving our shareholders and customers through our endeavors in a variety of businesses.   The Company pursues opportunities in a variety of industries as part of a diversification strategy coupled with opportunistic acquisitions.  Once acquired, our management assesses specific industry appropriate strategies to build revenue, enhance margins and contain general and administrative expenses.

The Company has two active wholly-owned subsidiaries operating in two divisions – Titan Global Energy Group and the Communications Division.  Titan Global Energy division includes Appalachian Oil Company, Inc. (“Appco”).  Appco is primarily engaged in the distribution of petroleum fuels and the operation of retail convenience stores. The Communications division consists of Planet Direct Inc., an innovative distributor of prepaid international long distance calling cards.  We are in the process of winding down and or liquidating several other subsidiaries including Oblio Telecom, Inc. (“Oblio”) which was previously a distributor of prepaid international long distance calling cards that ran on a network operated by another subsidiary that we are discontinuing, StartTalk Inc. (“StartTalk”), Titan Wireless Communications, Inc. (“Titan Wireless”), whose primary assets were liquidated in January 2008, Titan Global Brands that includes USA Detergents, Inc. (“USAD”), which was a manufacturer and distributor of value-branded home care products and Titan Apparel Inc, (“Titan Apparel’) which designed and distributed footwear, the Titan Electronics and Homeland Security division including Titan PCB East, Inc. (“Titan East”), whose primary assets were sold in a transaction that closed on August 1, 2008, Titan Electronics Inc. (formerly PCB West, Inc.) whose primary assets were sold in a transaction that closed effective July 18, 2008, and Titan Nexus Inc., which is in the process of being liquidated.

Business Overview

The Company’s business strategy is to create shareholder value in each of its operating divisions, which include energy and communications. 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 as follows:

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 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 78 convenience store locations in Tennessee, Kentucky, Oklahoma and Virginia.

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On October 24, 2008, Titan entered into two stock purchase agreements to purchase all of the outstanding common and preferred stock of Crescent Fuels. The acquisition closed on January 15, 2009.  Crescent Fuels based in Independence, Kansas, is a regional petroleum company that owns and operates an extensive petroleum distribution network that is comprised of 324 dealer locations and 56 store locations in Kansas, Missouri, Oklahoma, Arkansas and Louisiana.

Titan Global Energy Group’s business strategy is to:

· Integrate the operations and distribution network of Appco and Crescent.

· Increase conversion of dealer locations to store operations in markets we serve.

· 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

The business strategy of the communications division is to re-establish the company in the prepaid international calling card distribution business through direct relationships with terminating carriers in destination countries.   Our focus is on the distribution segment of the business not involving providing inbound or outbound termination or end user customer service.  We are developing a new distribution network that ultimately serves independently owned and operated convenience stores through a direct relationship with our owned and operated stores and a network of distributors.  We are currently operating this segment of our business through Planet Direct Inc.   

Prior to the creation of Planet Direct, the Company operated Oblio Telecom and StartTalk.  StartTalk provided network support for prepaid international communications products and Oblio distributed prepaid international communications products in independently owned wholesale and retail channels. In the quarter ended February 29, 2008, 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 a terminating communications network provider in the prepaid international long distance market.

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.

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 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 November 30, 2008 we had an allowance for doubtful accounts of $31. 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.

In the communications division, we recognize sales upon the activation of our prepaid calling cards by our customers.  We provide our customers with a limited right of return.  We record net sales as gross sales less an allowance for returns.  At November 30, 2008, we had a $112 allowance for sales returns.  Actual returns may differ materially from our estimates and revisions to the allowance may be required from time to time.

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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 occasionally 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 the communications division, cost of sales consists of printing, shipping and the cost of the cards from the service provider.  We accrue for the cost of the cards from the service provider as the cards are activated by our customers.  Our payment terms with the service provider vary based on the first use of the card by the end user of the telecommunication services.

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 and 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 freestanding options or warrants.  Additionally, we may issue options or warrants to non-employees in connection with consulting or other services they provide. Although the terms of the options and warrants may not provide for net-cash settlement, in certain  circumstances, physical or net-share  settlement is deemed to not be within our control and, accordingly, we are required to account for these freestanding options and warrants as derivative liabilities, rather than as equity. Certain instruments, including convertible debt and equity instruments and freestanding options and warrants, may be subject to registration rights agreements, which impose penalties for failure to register the underlying common stock. The existence of these potential cash penalties may require that the embedded conversion option and the freestanding options or warrants be accounted for as derivative instrument liabilities.

Derivative 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 statement of operations. For derivative liabilities related to freestanding 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 freestanding 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.

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.

Operating and Non-Operating Expenses

Each division’s operating expenses for the three months ended November 30, 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.

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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.

Results of Operations

As of November 30, 2008, the Company has a working capital deficit of $51,823 including current assets and current liabilities from discontinued operations, a working capital deficit of $23,820 excluding current assets and current liabilities from discontinued operations and an accumulated deficit of $112,236. The Company generated sales of $78,396 and $90,015 for the three months ended November 30, 2008 and 2007, respectively; and incurred a net loss of $9,529 and $24,473 for the three months ended November 30, 2008 and 2007, respectively.

Three Months Ended November 30, 2008 Compared to the Three Months Ended November 30, 2007

Sales

Energy

Sales decreased $14,333 or 15.9% to $75,682 in the three months ended November 30, 2008 from $90,015 in the three months ended November 30, 2007.  Sales decreased in the energy division due to decreases in the amount of fuel purchased from refiners in Texas and Louisiana and sold to other fuel distributors for nominal margin and a decrease in gallons sold in the Company’s retail locations sold offset by changes in the retail prices of fuel products between the comparable periods.

Communications

Sales increased to $2,714 in the three months ended November 30, 2008 from $0 in the three months ended November 30, 2007. During January 2008, the Company created 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 develop distribution business through direct relationships with terminating carriers in destination countries.

Cost of Sales

Energy

Cost of sales decreased $16,001 or 18.8% to $68,923 in the three months ended November 30, 2008 from $84,924 in the three months ended November 30, 2007. Cost of sales as a percentage of sales was 94.3% compared to 91.1% in the same period in the prior year.  The decrease in cost of sales at Appco due to decreases in the amount of fuel purchased from refiners in Texas and Louisiana and sold to other fuel distributors for nominal margin and a decrease in gallons sold in the Company’s retail locations sold offset by changes in the wholesale prices of fuel products between the comparable periods.

Communications

Cost of sales increased to $2,684 in the three months ended November 30, 2008 from to $0 in the three months ended November 30, 2007. In January 2008, the Company created 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 develop distribution business through direct relationships with terminating carriers in destination countries.

Sales and Marketing

Energy

Sales and marketing expenses increased by $15 to $38 in the three months ended November 30, 2008 from $23 in the three months ended November 30, 2007. This nominal increase is insignificant for explanation.

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Communications

Sales and marketing expenses increased to $98 in the three months ended November 30, 2008 from $0 in the three months ended November 30, 2007. In January 2008, the Company created 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 develop distribution business through direct relationships with terminating carriers in destination countries.

General and Administrative Expenses

Energy

General and administrative expenses increased $1,255 or 24.5% to $6,368 for the three months ended November 30, 2008 from $5,113 for the three months ended November 30, 2007. As a percentage of energy sales, general and administrative expense were 8.4% in the three months ended November 30, 2008 compared to 5.7% in the same period in 2007.  The $1,255 increase is due to the inclusion of the operating results of Appco for the full quarter for the three months ending November 30, 2008 and from the acquisition date of September 17, 2007 through November 30, 2007 for the prior comparable period.  Additionally, general and administrative expenses as a percent of sales increased between the comparable periods due to sales of fuel purchased from refiners in Texas and Louisiana and sold to other fuel distributors for nominal margin in the prior period not occurring in the current period.

Communications

General and administrative expenses increased to $648 in the three months ended November 30, 2008 from $0 in the three months ended November 30, 2007. As a percentage of communication sales, general and administrative expense was 24% in the three months ended November 30, 2008.  In January 2008, the Company created Titan Communications and the Pinless Inc. subsidiary dba Planet Direct Inc. Through these subsidiaries, the communications division will further its strategic endeavors in the prepaid international long distance marketplace and develop distribution business through direct relationships with terminating carriers in destination countries

Corporate

General and administrative expenses increased $781 or 191.9% to $1,188 in the three months ended November 30, 2008 from $407 in the three months ended November 30, 2007, an increase of $781.  The increase in corporate general and administrative expenses from the prior year is due primarily to an increase in salaries and wages of $516 and an increase of $156 in professional and consulting expenses. General and administrative expenses as a percentage of sales was 0.6% in the three months ended November 30, 2008 compared to 0.5 % in the same period of the prior year. The prior period included a one time $375 credit in accrued bonus expenses that were not paid. Corporate general and administrative expenses are comprised primarily of salaries and wages, investor relation expenses, professional fees, consulting expenses, travel and insurance expenses.

Amortization Expense

Energy

Amortization expenses increased $14 or 20.3% to $83 in the three months ended November 30, 2008 from $69 in the three months ended November 30, 2007. As a percentage of sales, amortization expense was less than 1%. The increase in amortization expense is due to the inclusion of the operating results of Appco for the full quarter for the three months ending November 30, 2008 and from the acquisition date of September 17, 2007 through November 30, 2007 for the prior comparable period.

Other Income (Expense)

Energy

Interest expense increased $273 or 71.7% to $654 in the three months ended November 30, 2008 from $381 in the three months ended November 30, 2007. As a percentage of Energy sales, interest expense was 0.9% in the three months ended November 30, 2008 compared to 0.4% in the same period in the prior year. The increase in interest expense is partially due to the inclusion of the operating results of Appco for the full quarter for the three months ending November 30, 2008 and from the acquisition date of September 17, 2007 through November 30, 2007 for the prior comparable period and certain annual fees charged by the primary lender in the three months ending November 30, 2008 that were not charged in the comparable prior year period.

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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 Energy segment recognized non-cash expense from the change in fair value of its derivative liabilities of $52 in the three months ended November 30, 2008 compared to $176 in non-cash income in the in the three months ended November 30, 2007.

Communications

Interest expense increased to $73 in the three months ended November 30, 2008 compared to $0 in the in the three months ended November 30, 2007. As a percentage of Telecommunications sales, interest expense was 2.7% in the three months ended November 30, 2008. In January 2008, the Company created Titan Communications and began operations in the Company’s Pinless Inc. subsidiary as Planet Direct Inc.

Corporate

Interest expense increased $253 or 102.4% to $500 in the three months ended November 30, 2008 from $247 in the three months ended November 30, 2007. Interest expense is primarily related to the non-cash interest expense of 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 Corporate segment recognized non-cash expense from the change in fair value of its derivative liabilities of $3,750 in the three months ended November 30, 2008 compared to $2,241 in non-cash income in the in the three months ended November 30, 2007.

Discontinued operations

During the year ended August 31, 2008, the Company’s management committed to a plan to dispose of certain assets and liabilities of its Telecommunications Division, Electronic Homeland Security Division and its Titan Global Brands division.

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A summary of the results of operations are below:

	Three Months Ended
	11/30/2008						11/30/2007
				% of  Sales						% of Sales			$ Change			% Change
Sales - Communications division	$	-			-		$	22,328			69		$	(22,328	)		-100	%
Sales - Electronics and Homeland Security division		(159	)		(75	)		6,781			21			(6,940	)		-102	%
Sales - Global Brands division		372			175			3,183			10			(2,811	)		-88	%
Total sales		213			100			32,292			100			(32,079	)		-99	%
Cost of sales - Communications division		-			-			18,270			82			(18,270	)		-100	%
Cost of sales - Electronics and Homeland Security division		239			109			6,120			90			(5,881	)		-96	%
Cost of sales - Global Brands division		(13	)		(3	)		3,205			101			(3,218	)		-100	%
Total cost of sales		226			106			27,595			85			(27,369	)		-99	%
		(13	)		(6	)		4,697			15			(4,710	)		-100	%
Operating expenses:
Sales and marketing		83			39			1,187			4			(1,105	)		-93	%
General and administrative		402			189			3,239			10			(2,837	)		-88	%
Bad debt expense		602			283			4,557			14			(3,954	)		-87	%
Depreciation expense		-			-			95			-			(95	)		-100	%
Amortization of intangibles		-			-			1,427			4			(1,427	)		-100	%
Total operating expenses		1,087			511			10,505			32			(9,418	)		-90	%
Loss from operations		(1,100	)		(517	)		(5,808	)		(18	)		4,708			-81	%
Other income		20			10			37			-			(17	)		-45	%
Interest expense		(776	)		(364	)		(1,006	)		(3	)		230			-23	%
Gain on disposal of assets		276			129			-			-			276			0	%
Loss on impairment		-			-			(21,142	)		(65	)		21,142			-100	%
Gain (loss) on value of derivative instruments		(1,366	)		(641	)		2,126			7			(3,492	)		-164	%
Loss before provision for income taxes	$	(2,946	)		(1,383	)%	$	(25,793	)		(79	)%		22,847			-89	%

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash, cash equivalents and short-term investments, cash generated from operations, and cash available from borrowings under our revolving credit facilities. We may also generate liquidity from offerings of debt and/or equity in the capital markets. As of November 30, 2008, we had a total of $2,921 in unrestricted cash and cash equivalents, including $10 in cash from discontinued operations. As of November 30, 2008, we also had restricted cash and cash equivalents and short-term investments of $624 that included funds set aside or pledged to secure lines of credit with key suppliers. We believe that our existing cash and investments, liquidity under our revolving credit facility and anticipated cash flows from operations will be sufficient to meet our operating and capital requirements through at least the next twelve months.

We currently intend to seek opportunities to acquire strategic assets that will enhance our holdings in our energy division.  On January 15, 2009, the Company closed on the acquisition of Crescent Fuels. The acquisition of Crescent Fuels increases the Company’s aggregate lines of credit with fuel suppliers and our unleveraged asset base.  Increased lines of credit with fuel suppliers decrease our reliance on financing our working capital needs through our asset based revolving credit facilities.  Increasing unleveraged assets creates more borrowing capacity under our revolving credit facilities.  The combination of these two factors increases the company’s liquidity and financing options and lowers our borrowing costs.  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.

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Operating Activities - Cash provided by operating activities was $5,744 ($4,023 from continuing operations and $1,721 from discontinued operations) during the three months ended November 30, 2008 compared to cash used in operating activities of $8,758 ($2,822 used in continuing operations and $5,936 used in discontinued operations) during the three months ended November 30, 2007. The increase in cash provided by operations is due primarily to the decreases in accounts receivable and inventories net of the decrease in accounts payable. Decreases in accounts receivable, inventories and accounts payable were primarily due to lower fuels prices during the three months ended November 30, 2008.

Investing Activities - Cash used in investing activities was $195 ($195 used in continuing operations and $0 used in discontinued operations) during the three months ended November 30, 2008 compared to cash used in investing activities of $31,056 ($30,709 used by continuing operations and $347 used in discontinued operations) during the three months ended November 30, 2007. The decrease in cash used in investing activities is due primarily to $30,000 paid to the sellers of Appco in the three months ended November 30, 2007.

Financing Activities - Cash used in financing activities during the three months ended November 30, 2008 was $5,087 ($3,286 used in continuing operations and $1,801 used in discontinued operations) compared to cash provided by financing activities of $45,534 ($35,755 provided by continuing operations and $9,779 used by discontinued operations) during the three months ended November 30, 2007. The decreases in cash provided from financing activities in the three months ended August 31, 2008 is due primarily to credit line repayments. In the same period last year the Company’s received approximately $35,000 from a sale leaseback transaction, common stock issuance and long-term debt issuance.

Impact of Inflation

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

Our energy experiences substantial seasonality due to customer activity behaviors during different seasons; in general, sales and operating income are highest in our third and fourth fiscal quarters which occur in the spring and summer months.  Our lowest activity months are during the winter 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.

Consolidation Policy

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material inter-company transactions have been eliminated.

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Use of Estimates

The preparation of 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, valuation reserves for accounts receivable, calculation of deferred revenue, allocation of purchase price, inventory, impairment of intangible assets, deferred tax accounts, fair value of equity instruments issued and sales returns.

Revenue Recognition

The Company recognizes revenues when the following criteria are met: (1) the Company has persuasive evidence of an arrangement, such as contracts, purchase orders or written requests; (2) the Company has completed delivery and no significant obligations remain; (3) its price to its customer is fixed or determinable and (4) collection is probable.

The Company recognizes sales of petroleum and other items when the title passes to the customer.  We recognize the amounts earned from sales to wholesale customers as revenues, net of sales or excise tax. Shipping and handling costs charged to customers are included in our sales.

In the communications division, we recognize sales upon the activation of our prepaid calling cards by our customers.  We provide our customers with a limited right of return.  We record net sales as gross sales less an allowance for returns.  At November 30, 2008, we had a $112 allowance for sales returns.  Actual returns may differ materially from our estimates and revisions to the allowance may be required from time to time.

Cash and Cash Equivalents

The Company considers highly liquid investments with a maturity of three months or less to be cash equivalents and consist primarily of interest-bearing bank accounts.

Accounts Receivable

The Company’s accounts receivable are due from a variety of customers. Credit is extended based on an evaluation of a customer’s financial condition. Accounts receivable are generally due between 7 to 30 days and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company performs ongoing credit evaluation of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management’s expectations. The Company determines its allowance by considering a number of factors, including the length of time accounts are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company, and the condition of the general economy and industry as a whole. The Company writes off accounts receivable when they become uncollectible. At November 30, 2008, the Company provided an allowance for doubtful accounts totaling $31.

Asset Retirement Obligation

In 2001, the FASB issued SFAS 143, “Accounting for Asset Retirement Obligations.” SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires companies to record the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The liability is capitalized as part of the related long-lived asset’s carrying amount. Over time, accretion of the liability is recognized as an operating expense, and the capitalized cost is amortized over the expected useful life of the related asset. The Company’s asset retirement obligations (“ARO”) relate primarily to the future shutdown of fuel storage tanks.

The Company has adopted the provisions of SFAS 143 to record the ARO that could be incurred upon the future closure of facilities. Accretion of the ARO on properties from which production has commenced has been calculated using the estimated life of the facility. The amounts recognized upon adoption are based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rate. At November 30, 2008, the Company has recorded a liability of $1,424 related to ARO.

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Concentration of Credit Risk

The Company generally extends credit to its customers and performs ongoing credit evaluations of its customers. Typically, the Company does not require collateral. The Company routinely reviews the collectibility of its accounts receivable and considers the following factors when determining collectibility of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer’s financial condition. If the financial condition of a customer were to deteriorate, adversely affecting its ability to make payments, an allowance would be required. There are no individual customers that comprise a significant amount of total sales in either the Titan Global Energy group or the communications group in the three months ended November 30, 2008.

Inventories

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

In our communications division, our policy is to value activated prepaid international cards at the lower of cost or market.

Equipment and Improvements

Equipment and improvements are carried at cost less depreciation and amortization which is provided using the straight-line method.

Depreciable assets acquired through an asset or stock purchase agreement are depreciated over their remaining useful life from the date of the asset or stock purchase agreement based on the respective assets purchase date and or the date the asset was initially placed in service.

Intangible Assets

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company reviews intangibles for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the Company's business enterprise below its carrying value. The impairment test requires management to estimate the fair value of the Company's overall business enterprise down to the reporting unit level. The Company performs its annual impairment test in its fiscal fourth quarter.

Impairment of Long-Lived Assets

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

Advertising

The Company expenses advertising costs when incurred. Advertising expense totaled $136 and $23 for the three months ended November 30, 2008, and 2007, respectively. Advertising expense in discontinued operations totaled $84 and $1,187 for the three months ended November 30, 2008, and 2007, respectively.

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.

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Loss in excess of investment in USAD

Under Accounting Research Bulletin No. 51 (“ARB No. 51”), consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Under these rules, legal reorganization or bankruptcy represents conditions which can preclude consolidation or equity method accounting as control rests with the Bankruptcy Court, rather than the majority owner. Accordingly, we deconsolidated USAD as of June 12, 2008, eliminating all future operations from the financial results of operations. Therefore, in accordance with ARB No. 51, we follow the cost method of accounting to record the interest in USAD, our wholly owned subsidiary which declared bankruptcy on June 12, 2008. Under cost method accounting, income will only be recognized to the extent of cash received in the future or when the Company is discharged from the bankruptcy, at which time, any loss in excess of the investment in subsidiary can be recognized into income as discussed below. As a result of the deconsolidation, The Company had a negative basis in its investment in USAD because the subsidiary generated significant losses in excess of its asset balances. This negative investment, “Loss in excess of investment in subsidiary” is reflected as a single amount on the audited consolidated statement of financial condition as a $12,992 liability as of November 30, 2008. This balance was comprised of a negative investment in USAD. Since USAD results are no longer consolidated and management believes that it is not probable that it will be obligated to fund future operating losses at USAD, any adjustments reflected in USAD financial statements subsequent to June 12, 2008 are not expected to affect the results of operations of the Company. The reversal of our liability into income will occur when either USAD bankruptcy is discharged and the amount of the Company’s remaining investment in USAD is determined or we reach a final settlement in the Bankruptcy Court related to any claims against the Company. The Company will continue to evaluate our cost method investment in USAD quarterly to review the reasonableness of the liability balance.

Stock Based Compensation

Effective September 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123(R) (revised 2004), “Share Based Payment” using the modified-prospective method. Under SFAS 123(R), stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the consolidated statement of operations during the three months ended November 30, 2007 includes compensation expense for stock-based payment awards of $18.

The Black-Scholes option valuation model was developed for estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because option valuation models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The Company's options do not have the characteristics of traded options; therefore, the option valuation models do not necessarily provide a reliable measure of the fair value of its options.

Fair Value of Financial Instruments

SFAS No. 157 defines and establishes a framework for measuring fair value and expands related disclosures. This Statement does not require any new fair value measurements. We use fair value measurements to measure, among other items, purchased assets and investments, leases and derivative contracts. We also use them to assess impairment of properties, plants, and equipment, intangible assets, and goodwill. The Statement does not apply to share-based payment transactions and inventory pricing. SFAS No. 157 is effective for the Company’s financial assets and financial liabilities beginning in 2008. In February 2008, FASB Staff Position 157-2, Effective Date of Statement 157, deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The nonfinancial assets and nonfinancial liabilities held by the Company include asset retirement obligations, assets held for sale, goodwill, and trade names.

Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, use of unobservable prices or inputs are used to estimate the current fair value, often using an internal valuation model. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the item being valued.

SFAS No. 157 prioritizes the inputs used in measuring fair value into the following hierarchy:

Level 1 Quoted prices (unadjusted) to active markets for identical assets and liabilities;

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Level 2	Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
Level 3	Unobservable inputs in which little or no market activity exits, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

At November 30, 2008, the carrying amount of the Company's cash and cash equivalents, accounts receivable, long-term debt, redeemable preferred stock, lines of credit and accounts payable, approximates their estimated fair values due to the market rates and short-term maturities of those financial instruments using Level 1 observable inputs.

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 and 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, the Company may also issue freestanding options or warrants.  Additionally, the Company 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 company control and, accordingly, the Company is required to account for these freestanding options and warrants as derivative liabilities, rather than as equity.

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

Derivative 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 statement of operations.  For derivative liabilities related to freestanding warrants and embedded conversion features, the Company uses the Black-Scholes option pricing model to determine the fair value.  For derivative liabilities related to registration rights agreements and cash payment premiums, the Company uses 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 freestanding derivative liabilities exceed the total proceeds received, an immediate charge to the statements of operations 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 instruments, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to the statement 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.

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

Segment Reporting

Based on a number of factors, including differences in products and services, regulatory environment, customers and the Company's integration and management strategies, the Company determined that it operated in two distinct business segments.

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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 Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act, as of the end of the period covered by this Quarterly Report.

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 required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, including ensuring that such material information is accumulated and communicated to our Chief Executive and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The matters identified are with regard to insufficient documentation of our board of directors meetings, insufficient maintenance of stock option and warrant grant documents, inadequate documentation of processes and procedures surrounding our system of internal controls, inadequate maintenance of executed copies of corporate documents from debt agreements and lack of proper segregation of duties in the cash disbursements processing cycle. 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: The Company continued strengthening its system of internal controls during the first quarter of fiscal 2009. During the later half of our fiscal 2008, we consolidated the accounting function for our discontinued operations in our corporate headquarters in Richardson, Texas.  This consolidation process continued through the first quarter of 2009 as we added additional accounting resources to facilitate proper segregation of duties, implement additional review procedures and improve the monthly and quarterly reconciliation process.  There have been no other changes in the Company’s internal control over financial reporting during the three months ended November 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

Unless otherwise indicated, all numbers (except per share amounts) presented under this Item 1 are stated in thousands.

ACE TECH CIRCUIT CO., LTD.

On or about September 2008, the Company was notified of a collections lawsuit filed by Ace Tech Circuit Co., Ltd. ("Ace Tech").  The lawsuit alleges the Company is the dba of its subsidiary Titan PCB West and Titan Electronics.  Ace Tech is seeking approximately $459 for alleged failure to pay for delivered product. The Company has accrued $422 of the amounts alleged to be due in its accounts payable as of November 30, 2008 and is disputing the difference of $37.

ADVANCED SURFACE FINISHING

In July 2008, the Company's subsidiary Titan PCB West n/k/a Titan Electronics, Inc. (“Titan Electronics”) was notified of a collections lawsuit and a writ of attachment granted to Advanced Surface Finishing ("AFS").  AFS is seeking approximately $143 from Titan Electronics for alleged failure to pay for delivered product. The Company has accrued $58 of the amounts alleged to be due in its accounts payable as of November 30, 2008 and is disputing the difference of $85.

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 November 30, 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 August 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 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.  On July 25, 2008, the district court denied Asia Telecom’s special appearance.  We are now proceeding with pre-trial discovery against Asia Telecom.

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, which has been paid in full. 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.

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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, 199th 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 $140 in Clifton’s bank accounts.  Clifton has unsuccessfully attempted to dissolve the Writ of Garnishment.  On September 22, 2008, the district court entered a final judgment against Clifton Prepaid Communications Corp. and Clifton Pre-Paid Corp. in the amount of approximately $2,500.  The final judgment did not include Aref Aref because two weeks prior to trial, Aref Aref filed for personal bankruptcy in an effort to thwart Oblio’s collection efforts.  On or about October 1, 2008, the district court entered judgment in the bankruptcy action directing Bank of America, N.A. and J.P. Morgan Chase Bank to release the garnished funds to Oblio, which was received on December 8, 2008. As of November 30, 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.

FASTPRINT CIRCUIT TECHNOLOGIES

In August 2008, the Company was notified of a collections lawsuit filed by Fastprint Circuit Technologies (“Fastprint”).  Fastprint is in the process of amending its lawsuit to name the Company's subsidiary Titan Electronics as the defendant.  No specific demand has been made although Fastprint seeks damages for alleged failure to pay for delivered product.

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 November 30, 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 162nd 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 November 30, 2008. As of November 30, 2008, the Company has fully reserved and allowed for the $1,319 in accounts receivable from Hawaii Global.

ILDN WEST, LLC

On January 5, 2009, the Company and its subsidiaries, Oblio, Titan Communications and Planet Direct were notified that it was being sued by ILDN West, LLC (“ILDN”).  ILDN is seeking $239 for alleged unpaid invoices for services rendered in Los Angeles County: Superior Court, California.  This action is currently pending.  The Company has accrued the amounts alleged to be due in its accounts payable as of November 30, 2008.

INTERNATIONAL ELECTRONIC COMPONENTS USA

In or about September 2008, the Company was notified of a collections lawsuit filed by International Electronic Components USA ("IEC") against the Company and its subsidiary Titan PCB West and several individuals.  IEC obtained a writ of attachment against subsidiary Titan PCB West.  IEC alleges the Company is the alter ego of its subsidiary Titan PCB West and is seeking approximately $235 for alleged failure to pay for delivered product.  A motion to quash service of summons and complaint as against the Company has been filed. The Company has accrued the amounts alleged to be due in its accounts payable at November 30, 2008.

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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 November 30, 2008 and is disputing the difference of $93. On December 17, 2008, the plaintiff, Latin American VOIP, voluntarily dismissed without prejudice all of its claims against the defendants.

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 November 30, 2008, Oblio has accrued the amount of the Agreed Judgment in accounts payable.

PALPILOT

In August 2008, the Company's subsidiary Titan PCB West f/k/a Titan EMS was notified of a collections lawsuit filed by Palpilot.  Palpilot is seeking approximately $99 for alleged failure to pay for delivered product. The Company has accrued the amounts alleged to be due in its accounts payable at November 30, 2008.

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 14th 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 $10,000. 

The case is currently set for trial the week of April 20, 2009.

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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 November 30, 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.

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.

OTHER LEGAL MATTERS

As of November 30, 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 operations classified as discontinued operations associated with the  matters referenced above, including Clifton.

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)

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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)

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