UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, DC
20549





FORM
10-QSB




(Mark
one)




x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the
quarterly period ended: March 31,
2008




o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE ACT




For the
transition period from _________ to ___________





Commission
file number 000-08924





TWL
Corporation


(Exact
name of small business issuer as specified in its charter)





Nevada
            73-0981865(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification No.)





4101 International Parkway,
Carrollton, Texas 75007


(Address
of principal executive offices)





(972)
309-4000


(Issuer’s
telephone number)








Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.  Yes x No o








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








As of
April 30, 2008, 15,043,902 shares of the issuer’s common stock were
outstanding.







1





TWL
Corporation and Subsidiaries





Throughout
this report, we refer to TWL Corporation, together with its subsidiaries, as
“we”, “us”, “our company”, “TWL” or “the Company.”





THIS FORM
10-QSB FOR THE NINE MONTHS ENDED MARCH 31, 2008, CONTAINS FORWARD-LOOKING
STATEMENTS, INCLUDING STATEMENTS ABOUT THE CONTINUED STRENGTH OF OUR BUSINESS
AND OPPORTUNITIES FOR FUTURE GROWTH. IN SOME CASES, YOU CAN IDENTIFY
FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS “MAY”, “WILL”, “SHOULD”,
“EXPECT”, “PLAN”, “INTEND”, “ANTICIPATE”, “BELIEVE”, “ESTIMATE”, “PREDICT”,
“POTENTIAL” OR “CONTINUE”, THE NEGATIVE OF SUCH TERMS OR OTHER COMPARABLE
TERMINOLOGY. WE BELIEVE THAT OUR EXPECTATIONS ARE REASONABLE AND ARE BASED ON
REASONABLE ASSUMPTIONS.  HOWEVER, SUCH FORWARD-LOOKING STATEMENTS BY
THEIR NATURE INVOLVE RISKS AND UNCERTAINTIES.





WE
CAUTION THAT A VARIETY OF FACTORS, INCLUDING BUT NOT LIMITED TO THE FOLLOWING,
COULD CAUSE OUR BUSINESS AND FINANCIAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED IN FORWARD-LOOKING STATEMENTS:  DETERIORATION IN
CURRENT ECONOMIC CONDITIONS; OUR ABILITY TO PURSUE BUSINESS STRATEGIES; PRICING
PRESSURES; CHANGES IN THE REGULATORY ENVIRONMENT; OUR ABILITY TO ATTRACT AND
RETAIN QUALIFIED PROFESSIONALS; INDUSTRY COMPETITION; CHANGES IN INTERNATIONAL
TRADE; MONETARY AND FISCAL POLICIES; OUR ABILITY TO INTEGRATE FUTURE
ACQUISITIONS SUCCESSFULLY; AND OTHER FACTORS DISCUSSED MORE FULLY IN
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS BELOW, AS WELL AS IN OTHER REPORTS SUBSEQUENTLY FILED FROM TIME TO
TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.  WE ASSUME NO
OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS.





2





TWL Corporation and Subsidiaries


TABLE
OF CONTENTS







PART
      I. FINANCIAL INFORMATIONITEM 1.
            
            Financial
      StatementsConsolidated Balance Sheet as of March 31,
      2008
            4Consolidated Statements of Operations for the Three and
      Nine Months Ended March 31, 2008 and 2007
            5Consolidated Statements of Cash Flows for the Nine Months
      Ended March 31, 2008 and 2007
            6Notes to Consolidated Financial
    Statements
            7ITEM 2.
            
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            17ITEM 3.
            
            Controls and Procedures
            22PART
      II. OTHER INFORMATIONITEM 2.
            
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            23ITEM 6.
            
            Exhibits
            23




3
 Table of Contents





TWL Corporation and Subsidiaries


Consolidated
Balance Sheet





March
      31,2008(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            471,573Accounts
      receivable, net of allowance for doubtful accounts of
    $444,123
            
            
            2,350,467Inventory,
      net
            
            
            759,564Prepaid
      expenses and other current assets
            
            
            568,808Total
      current assets
            
            
            4,150,412Property
      and equipment, net
            
            
            9,148,257Loan
      origination costs, net
            
            
            856,101Other
      assets
            
            
            124,093Total
      assets
            
            $
            14,278,863Liabilities
      and stockholders' deficitCurrent
      liabilities:Line
      of credit
            
            $
            806,712Notes
      payable, net of unamortized discount of $288,889
            
            
            866,361Notes
      payable - related parties, net of unamortized discount of
      $757,127
            
            
            3,271,649Accounts
      payable
            
            
            4,932,542Accrued
      expenses
            
            
            6,466,656Interest
      payable, including amount due to related parties of
    $1,741,726
            
            
            2,102,507Deferred
      revenue
            
            
            4,432,556Current
      portion of obligations under capital leases
            
            
            1,451,732Total
      current liabilities
            
            
            24,330,715Long-term
      liabilities:Obligations
      under capital leases
            
            
            9,633,789Notes
      payable, net of unamortized discount of $120,371
            
            
            949,143Notes
      payable - related parties, net of unamortized discount of
      $1,702,466
            
            
            2,577,535Other
      long-term liabilities
            
            
            58,000Total
      long-term liabilities
            
            
            13,218,467Total
      liabilities
            
            
            37,549,182Commitments
      and contingenciesStockholders'
      deficitPreferred
      stock, 10,000,000 shares authorized, no parSeries
      A, 1,750,000 issued and outstanding; liquidation preference of $1.00 per
      share, plus accrued unpaid dividends
            
            
            2,109,375Series
      B, 2,800,000 shares to be issued and outstanding; liquidation preference
      of $1.00 per share, plus accrued unpaid dividends
            
            
            6,533,333Common
      stock, 750,000,000 shares authorized, $0.0001 par value; 14,643,902 shares
      issued and outstanding
            
            
            1,464Additional
      paid-in capital
            
            
            56,821,329Accumulated
      deficit
            
            
            (88,710,773
            )Other
      comprehensive loss
            
            
            (25,047
            )Total
      stockholders' deficit
            
            
            (23,270,319
            )Total
      liabilities and stockholders' deficit
            
            $
            14,278,863








The
accompanying notes are an integral part of this consolidated financial
statement.





4
 Table of Contents





TWL Corporation and Subsidiaries


Consolidated
Statements of Operations




Three
      months ended
            
            
            Nine
      months endedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)
            
            
            (unaudited)Revenues,
      net:Subscription
            
            $
            2,713,409
            
            
            $
            2,652,459
            
            
            $
            7,935,263
            
            
            $
            8,334,212Single
      event
            
            
            1,560,337
            
            
            
            1,678,993
            
            
            
            5,233,035
            
            
            
            6,920,889Production
            
            
            488,748
            
            
            
            523,192
            
            
            
            1,468,052
            
            
            
            1,573,886Other
            
            
            678,434
            
            
            
            678,031
            
            
            
            2,265,300
            
            
            
            1,824,938Total
      revenues, net
            
            
            5,440,928
            
            
            
            5,532,675
            
            
            
            16,901,650
            
            
            
            18,653,925Cost
      and expenses:Royalty,
      printing, delivery and communications costs
            
            
            1,728,972
            
            
            
            898,962
            
            
            
            4,265,311
            
            
            
            3,873,329Salaries
      and benefits
            
            
            4,162,687
            
            
            
            5,001,331
            
            
            
            12,967,104
            
            
            
            13,671,674Selling,
      general & administrative, excluding salaries and
    benefits
            
            
            1,260,596
            
            
            
            702,887
            
            
            
            5,487,768
            
            
            
            4,351,101Amortization
      of program inventory
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,142,145Depreciation
      & amortization
            
            
            293,636
            
            
            
            246,683
            
            
            
            887,847
            
            
            
            747,328Total
      cost and expenses
            
            
            7,445,891
            
            
            
            6,849,863
            
            
            
            23,608,030
            
            
            
            24,785,577Loss
      from operations
            
            
            (2,004,963
            )
            
            
            (1,317,188
            )
            
            
            (6,706,380
            )
            
            
            (6,131,652
            )Other
      income (expense):Interest,
      net
            
            
            (440,082
            )
            
            
            (667,575
            )
            
            
            (1,361,768
            )
            
            
            (5,487,267
            )Interest,
      net - related party
            
            
            (411,101
            )
            
            
            -
            
            
            
            (977,776
            )
            
            
            -Income
      (loss) in non-consolidated affiliate
            
            
            28,679
            
            
            
            (226,690
            )
            
            
            (99,349
            )
            
            
            (226,690
            )Loss
      on refinancing of debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,633,840
            )Other
      income
            
            
            16,867
            
            
            
            -
            
            
            
            72,703
            
            
            
            106,659Total
      other income (expense)
            
            
            (805,637
            )
            
            
            (894,265
            )
            
            
            (2,366,190
            )
            
            
            (7,241,138
            )Loss
      before income taxes
            
            
            (2,810,600
            )
            
            
            (2,211,453
            )
            
            
            (9,072,570
            )
            
            
            (13,372,790
            )Provision
      for income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss
            
            $
            (2,810,600
            )
            
            $
            (2,211,453
            )
            
            $
            (9,072,570
            )
            
            $
            (13,372,790
            )Preferred
      stock dividends
            
            
            (75,250
            )
            
            
            (75,250
            )
            
            
            (225,750
            )
            
            
            (441,917
            )Net
      loss available to common stockholders
            
            $
            (2,885,850
            )
            
            $
            (2,286,703
            )
            
            $
            (9,298,320
            )
            
            $
            (13,814,707
            )Net
      loss per common share - basic and dilutive
            
            $
            (0.23
            )
            
            $
            (1.05
            )
            
            $
            (0.83
            )
            
            $
            (6.39
            )Weighted
      average shares outstanding
            
            
            12,808,902
            
            
            
            2,170,776
            
            
            
            11,140,569
            
            
            
            2,162,676








The
accompanying notes are an integral part of these consolidated financial
statements.





5
 Table of Contents





TWL Corporation and Subsidiaries


Consolidated
Statements of Cash Flows





Nine
      months endedMarch 31,2008
            
            
            2007(unaudited)
            
            
            (unaudited)Operating
      activities:Net
      loss
            
            $
            (9,072,570
            )
            
            $
            (13,372,790
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      on property and equipment
            
            
            887,720
            
            
            
            747,715Foreign
      currency translation adjustments
            
            
            (10,192
            )
            
            
            (11,631
            )Amortization
      of program inventory
            
            
            -
            
            
            
            2,142,145Common
      stock issued for services
            
            
            1,626,667
            
            
            
            129,907Employee
      stock-based compensation
            
            
            1,160,364
            
            
            
            444,754Amortization
      of loan origination costs
            
            
            313,833
            
            
            
            226,830Amortization
      of debt discount
            
            
            483,877
            
            
            
            5,461,349Gain
      on settlement of accounts payable
            
            
            (55,337
            )
            
            
            (106,659
            )Changes
      in operating assets and liabilities:(Increase)
      decrease in accounts receivable
            
            
            288,264
            
            
            
            (662,928
            )(Increase)
      decrease in inventory
            
            
            25,583
            
            
            
            4,563(Increase)
      decrease in prepaid expenses and other
            
            
            (56,526
            )
            
            
            (245,568
            )Increase
      (decrease) in accounts payable and accrued expenses
            
            
            (158,798
            )
            
            
            1,815,165Increase
      (decrease) in deferred revenue
            
            
            542,374
            
            
            
            692,752Increase
      (decrease) in interest payable
            
            
            912,441
            
            
            
            739,490Increase
      (decrease) in other liabilities
            
            
            (4,750
            )
            
            
            62,750Net
      cash used in operating activities
            
            
            (3,117,050
            )
            
            
            (1,932,156
            )Investing
      activities:Purchases
      of property and equipment
            
            
            (95,006
            )
            
            
            (28,137
            )Net
      cash used in investing activities
            
            
            (95,006
            )
            
            
            (28,137
            )Financing
      activities:Capital
      lease payments
            
            
            (958,105
            )
            
            
            (891,296
            )Net
      borrowings (repayments) on line of credit
            
            
            (253,403
            )
            
            
            1,200,000Borrowings
      under notes payable
            
            
            1,560,000
            
            
            
            3,505,342Payments
      on notes payable
            
            
            (603,260
            )
            
            
            (223,088
            )Loan
      origination costs
            
            
            -
            
            
            
            (427,000
            )Proceeds
      from the sale of common stock
            
            
            2,590,000
            
            
            
            -Net
      cash provided by financing activities
            
            
            2,335,232
            
            
            
            3,163,958Net
      increase (decrease) in cash and cash equivalents
            
            
            (876,824
            )
            
            
            1,203,665Cash
      and cash equivalents at beginning of period
            
            
            1,348,397
            
            
            
            181,339Cash
      and cash equivalents at end of period
            
            $
            471,573
            
            
            $
            1,385,004Supplemental
      disclosures of cash flow information:Total
      cash paid during the period for interest
            
            
            867,714
            
            
            
            884,251Common
      stock issued for conversion of notes payable
            
            
            280,000
            
            
            
            -Common
      stock issued for purchase of software
            
            
            3,600,000
            
            
            
            -Note
      payable issued for purchase of software
            
            
            564,747
            
            
            
            -Liabilities
      assumed for the development of purchased software
            
            
            272,646
            
            
            
            -Beneficial
      conversion on convertible debentures
            
            
            927,582
            
            
            
            4,319,771Preferred
      stock issued for debt origination costs
            
            
            -
            
            
            
            833,333Preferred
      stock reduction in conversion price for debt discount
            
            
            -
            
            
            
            375,000Deemed
      dividend on preferred stock
            
            
            -
            
            
            
            250,000Series
      A preferred stock issued in connection with debt
    transactions
            
            
            234,375
            
            
            
            3,210,000Series
      A preferred stock retired in connection with debt
    transactions
            
            
            -
            
            
            
            (1,960,000
            )Warrants
      issued in debt transaction
            
            
            407,583
            
            
            
            261,271Warrants
      surrendered in debt transaction
            
            
            -
            
            
            
            (326,160
            )






The
accompanying notes are an integral part of these consolidated financial
statements.





6
 Table of Contents





TWL Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Note
1 – Business and Basis of Presentation





TWL
Corporation (“TWL” or the “Company”) is creating a global learning company by
acquiring operating subsidiaries that specialize in educational and training
content, delivery, and services for particular industries or that target a
particular segment of the workforce.  The Company believes that there
are product and service synergies between and among our various subsidiaries
that position us to create a global learning company that can provide integrated
learning services to corporations, organizations, educational institutions, and
individual learners, using a variety of delivery technologies, platforms and
methods to meet the growing need for global learning solutions.  The
Company believes that it will be one of the first companies to be able to serve
major multinational employers at multiple levels of their organizations and
assist these customers to meet the challenges of a major turnover in the world’s
workforce over the coming decade. Factors such as demographics, technology, and
globalization will require enterprises, organizations and governments around the
world to invest in human capital to remain competitive.





We
operate through our primary operating subsidiary, TWL Knowledge Group, Inc.,
located in our 205,000 square foot digital multimedia production center in
Carrollton, Texas, in the greater Dallas metropolitan area.  At this
global learning center we create, distribute and archive rich media skills
training courses and services for workplace learning and certification for
approximately 2,000 corporate, institutional, and government customers in
healthcare, industrial services, and public safety including law enforcement,
fire services, emergency medical services, private security, homeland security,
first responders, and other federal and state agencies.  We distribute
content to our customers through a variety of learning media including
satellite, Internet-based e-learning management system, PC-based simulation
software platform, CD-ROM, and DVD.  Our proprietary brands include
the Law Enforcement Training Network (LETN), HomelandOne, the Fire and Emergency
Training Network (FETN), and others.  In our healthcare division,
Trinity Workforce Learning, we participate in 16 distinct accreditations for
medical-related continuing professional education and
certification.  While our strategic focus is to grow our assets and
operations in North America, we continue to maintain ownership positions in
small operating subsidiaries in Australia.





These
financial statements include the accounts of TWL and its consolidated
subsidiaries.  All significant intercompany transactions and accounts
have been eliminated in consolidation.





The
accompanying unaudited interim consolidated financial statements and related
notes have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
with the instructions to Form 10-QSB and Item 310 of Regulation
S-B.  Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.  However, in the
opinion of management, the accompanying unaudited interim consolidated financial
statements reflect all adjustments that are necessary for a fair presentation of
the financial position, results of operations, and cash flows for the interim
periods presented. This includes normal and recurring adjustments.





The
results of operations for the three and nine months ended March 31, 2008 are not
necessarily indicative of the results to be expected for the full
year.  These unaudited interim consolidated financial statements
should be read in conjunction with the audited financial statements and related
notes thereto included in the Company’s Annual Report on Form 10-KSB for the
year ended June 30, 2007.





Net
Loss per Share





Basic net
loss per share amounts are computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding during
the period.  Diluted net loss per share amounts are computed by
dividing net loss available to common stockholders by the weighted average
number of common shares and common stock equivalents outstanding during the
period.  Diluted per share amounts assume the conversion, exercise, or
issuance of all potential common stock instruments unless the effect is
anti-dilutive, thereby reducing the loss per common share.  Our common
stock equivalents include all common stock issuable upon conversion of preferred
stock and notes payable and the exercise of outstanding options and
warrants.  As the Company incurred losses in all periods presented,
the inclusion of those potential common shares in the calculation of diluted
loss per share would have an anti-dilutive effect.  Therefore, basic and
diluted per share amounts are the same in all periods presented.  The
aggregate number of common stock equivalents excluded from the diluted net loss
per share calculation was 24,248,927 and 17,522,546 for the nine months ended
March 31, 2008 and 2007, respectively.





7
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Use
of Estimates





The
preparation of the Company’s 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 balance sheet date and the reported amounts of revenues and costs during the
reporting periods.  Actual results could differ from those
estimates.  On an ongoing basis, the Company reviews its estimates
based on information that is currently available.  Changes in facts
and circumstances may cause the Company to revise its
estimates.  Significant estimates include revenue recognition,
valuation and allocation of the purchase consideration of the assets and
liabilities and assets acquired in business combinations and equity investments
in associated companies, our determination of fair value of common stock issued
in business combinations and equity investments in associated companies, and the
annual valuation and review for impairment of assets acquired and of long-lived
assets.  Actual results could differ from estimates under different
assumptions and conditions, and such results may affect income, financial
position or cash flows.





Stock-Based
Compensation





Stock-based
compensation expense for the three and nine month periods ended March 31, 2008
and 2007 is as follows:





Three
      months ended
            
            
            Nine
      months endedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Vested
      shares
            
            $
            159,339
            
            
            $
            (163,186
            )
            
            $
            368,675
            
            
            $
            141,826Unvested
      shares
            
            
            186,629
            
            
            
            254,904
            
            
            
            791,689
            
            
            
            302,928Total
            
            $
            345,968
            
            
            $
            91,718
            
            
            $
            1,160,364
            
            
            $
            444,754








The
estimated fair value of options and warrants is amortized to expense using the
straight-line method over the vesting period.  The expense for options and
warrants was calculated using the Black-Scholes option pricing model with the
following assumptions:




Nine
      months endedMarch 31,2008
            
            2007Risk-free
      interest rate
            3.90
      - 5.01%
            
            3.18
      - 3.85%Dividend
      yield
            Nil
            
            NilVolatility
            157
      - 225%
            
            133%Expected
      life
            1
      - 7 years
            
            3
      years




The
Company accounts for the issuance of equity instruments to acquire goods and/or
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
determinable in accordance with the provisions of EITF Issue No. 96-18, Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services, and EITF Issue No. 00-18, Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than
Employees.





8
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Note
2 – Going Concern Uncertainty





During
the nine months ended March 31, 2008, the Company incurred a net loss of
$9,072,570 and experienced a cash flow deficit from its operations in the amount
of $3,117,050. As of March 31, 2008, the Company had a cash balance of $471,573
and a negative working capital balance of $20,180,303.  The negative
working capital is attributable to extending payments to vendors and increased
short-term borrowings. It is anticipated that such losses and cash flow deficits
will continue in the foreseeable future. During the nine months ended March 31,
2008, the Company received gross cash proceeds from the sale of its common stock
of $2,590,000 and from the issuance of notes payable of $1,560,000. These
proceeds are being used for general working capital purposes.





Currently,
we do not have an established source of revenues sufficient to cover our
operating costs to allow us to continue as a going concern.  We cannot
be certain that our existing sources of cash will be adequate to meet our
liquidity requirements.  Based on our cash balance at May 1, 2008, we
will not be able to sustain operations for more than one month without
additional sources of funding. To meet our present and future liquidity
requirements, we will continue to seek additional funding through private
placements, conversion of outstanding loans and payables into common stock, and
collections on accounts receivable. There can be no assurance that we will be
successful in obtaining more debt and/or equity financing in the future or that
our results of operations will materially improve in either the short-term or
the long-term. If we fail to obtain such financing and improve our results of
operations, we will be unable to meet our obligations as they become
due.  This raises substantial doubt about our ability to continue as a
going concern.





Our
financial statements have been prepared using accounting principles generally
accepted in the United States of America generally applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  Accordingly, our
consolidated financial statements do not include any adjustments relating to the
recoverability of assets or classification of liabilities that might be
necessary should we be unable to continue as a going concern.





Note
3 – Reverse Common Stock Split





On
December 12, 2007, the Company effected a one-for-twenty reverse stock split to
common shareholders. All common share and per share information referenced and
presented within this filing has been retroactively adjusted to reflect the
reverse stock split.





Note
4 – Notes Payable





Borrowings
under notes payable arrangements, net of unamortized discount, consisted of the
following:


March 31, 2008Notes
      payable:$2,500,000
      of senior secured term notes due August 31, 2009, bearing interest at
      prime plus 3% but never less than 9% (9% interest rate as of March 31,
      2008) (a)
            
            $
            1,393,241$400,000
      of 9% unsecured convertible notes due January 7, 2006, convertible into
      common stock at $9 per share, past due
            
            
            400,000Other
      notes payable
            
            
            22,263Total
      notes payable
            
            
            1,815,504Less
      current maturities
            
            
            866,361Long-term
      notes payable
            
            $
            949,143




(a)
            In
      August 2006, the Company entered into agreements with Laurus Master Fund,
      Ltd., (“Laurus”), one of which provided for a secured three-year term note
      with a face amount of $2,500,000, and matures on August 31,
      2009.  The note carries an interest rate of prime plus three
      percent (but never less than nine percent), and may be prepaid at any time
      subject to certain redemption premiums, plus accrued
      interest.  The note is secured by a blanket lien on all of the
      Company's assets and the assets of the Company's
    subsidiaries.





9
 Table of Contents




TWL
Corporation and Subsidiaries
 Notes
to Consolidated Financial Statements
 March
31, 2008
 (unaudited)


Note
5 – Notes Payable - Related Parties





Borrowings
under notes payable arrangements with related parties, net of unamortized
discount, consisted of the following:


March 31, 2008Notes
      payable - related parties:$4,500,000
      of 15% senior secured convertible notes due March 31, 2010 to TIGP,
      convertible into common stock at $0.60 per share (a)
            
            
            4,500,000$1,125,000
      of 15% senior secured convertible notes due March 31, 2011 to TIGP,
      convertible into common stock at $0.60 per share (b)
            
            
            360,592$500,000
      of 15% senior secured convertible notes due December 17, 2011 to TIGP,
      convertible into common stock at $0.60 per share (c)
            
            
            103,122$1,000,000
      of 15% senior secured convertible notes due January 28, 2012 to TIGP,
      convertible into common stock at $0.60 per share (d)
            
            
            181,511$60,000
      of 15% senior secured convertible notes due February 24, 2012 to TIGP,
      convertible into common stock at $0.60 per share (e)
            
            
            9,865$1,000,000
      of non-interest bearing unsecured notes due December 31, 2011
      (f)
            
            
            420,317Non-interest
      bearing unsecured notes due December 31, 2004, past due
            
            
            22,3298%
      unsecured notes payable on demand
            
            
            109,972Non-interest
      bearing unsecured notes payable on demand
            
            
            76,476$100,000
      of non-interest bearing unsecured notes due December 31, 2006, past
      due
            
            
            25,000$20,000
      of non-interest bearing unsecured convertible notes due December 31, 2005,
      convertible into common stock at $0.20 per share, past due
            
            
            20,000$20,000
      of non-interest bearing unsecured convertible notes due December 31, 2006,
      convertible into common stock at $0.20 per share, past due
            
            
            20,000Total
      notes payable - related parties
            
            
            5,849,184Less
      current maturities
            
            
            3,271,649Long-term
      notes payable - related parties
            
            $
            2,577,535








(a)
            In
      March 2007, Trinity Investments GP (“TIGP”) acquired debt with a face
      value of $4,500,000 previously issued to Palisades Master Fund,
      Ltd.  The notes mature March 31, 2010, bear interest at the rate
      of 15% per annum, and are convertible into common stock at $0.60 per
      share.  The debt agreement includes an anti-dilution clause such
      that incremental shares may be issuable in future financing
      transactions.  The notes are secured by all of the Company’s
      assets (in junior position to Laurus), as well as the assets of its
      wholly-owned subsidiary, TWL Knowledge Group, Inc.  In April
      2007, the board of directors of the Company appointed Laird Q. Cagan (Mr.
      Cagan) as a director of the Company. Effective May 2008, Mr. Cagan was
      appointed Chairman of the Board of Directors. Mr. Cagan is the general
      partner of TIGP, and he is the cousin of Dennis J. Cagan, the Company’s
      Vice Chairman.





(b)
            Also
      in March 2007, the Company entered into a debt financing transaction with
      TIGP for the issuance of up to an aggregate of $4,000,000 in face amount
      of convertible debentures, of which the Company ultimately received gross
      proceeds of $1,125,000 pursuant to this agreement.  The notes
      mature March 31, 2011, bear interest at the rate of 15% per annum, and are
      convertible into common stock at $0.60 per share.  The notes are
      secured by all of the Company’s assets (in junior position to Laurus), as
      well as the assets of its wholly-owned subsidiary, TWL Knowledge Group,
      Inc.





10
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





(c)
            In
      November 2007, the Company entered into a debt financing transaction with
      TIGP, in which the Company issued $500,000 of convertible debentures. The
      notes mature December 17, 2011, bear interest at the rate of 15% per
      annum, and are convertible into common stock at $0.60 per share. The
      convertible debentures were issued with four year warrants to purchase
      333,333 shares of common stock at $0.60 per share. The notes are secured
      by all of the Company’s assets (in junior position to Laurus), as well as
      the assets of its wholly-owned subsidiary, TWL Knowledge Group, Inc. The
      Company recorded the fair value of the warrants as a debt discount of
      $130,636 and is amortizing this discount to interest over the life of the
      debt. Additionally, a beneficial conversion feature of $297,302 was
      recorded and is being amortized to interest over the life of the
      debt.





(d)
            In
      January 2008, the Company entered into a debt financing transaction with
      TIGP, in which the Company issued $1,000,000 of convertible debentures.
      The notes mature January 28, 2012, bear interest at the rate of 15% per
      annum, and are convertible into common stock at $0.60 per share. The
      convertible debentures were issued with four year warrants to purchase
      666,667 shares of common stock at $0.60 per share. The notes are secured
      by all of the Company’s assets (in junior position to Laurus), as well as
      the assets of its wholly-owned subsidiary, TWL Knowledge Group, Inc. The
      Company recorded the fair value of the warrants as a debt discount of
      $261,271 and is amortizing this discount to interest over the life of the
      debt. Additionally, a beneficial conversion feature of $594,605 was
      recorded and is being amortized to interest over the life of the
      debt.





(e)
            In
      February 2008, the Company entered into a debt financing transaction with
      TIGP, in which the Company issued $60,000 of convertible debentures. The
      notes mature February 24, 2012, bear interest at the rate of 15% per
      annum, and are convertible into common stock at $0.60 per share. The
      convertible debentures were issued with four year warrants to purchase
      40,000 shares of common stock at $0.60 per share. The notes are secured by
      all of the Company’s assets (in junior position to Laurus), as well as the
      assets of its wholly-owned subsidiary, TWL Knowledge Group, Inc. The
      Company recorded the fair value of the warrants as a debt discount of
      $15,676 and is amortizing this discount to interest over the life of the
      debt. Additionally, a beneficial conversion feature of $35,676 was
      recorded and is being amortized to interest over the life of the
      debt.





(f)
            In
      February 2008, the Company entered into an agreement to purchase software
      owned by Divergent Entertainment, Inc. (DEI) from Daniel Hammett (Mr.
      Hammett), the sole shareholder of DEI. Along with other consideration as
      noted below, the Company agreed to pay Mr. Hammett $1,000,000 to be
      distributed over a period of four years in quarterly installments. The
      final payment is due December 31, 2011 and the note is non-interest
      bearing. The Company recorded imputed interest as a debt discount of
      $435,253 and is amortizing this discount to interest over the life of the
      debt. In February 2008, the board of directors of the Company appointed
      Mr. Hammett as a director of the
Company.





Other
consideration for the purchase of software included the issuance of 2,000,000
shares of common stock valued at $3,600,000 and the assumption of liabilities
for the development of the software of $272,646. This purchase will provide the
Company with both a new product (first product release is anticipated to be in
May 2008) as well as an important new delivery platform that is anticipated to
augment the Company’s current online LMS, satellite television, and media (DVD,
VHS) distribution technologies.




The new
delivery platform is an advanced PC-based simulation software application,
specifically designed to deliver professional quality and performance in skills
training, practice and testing, in a quasi-virtual reality environment, at a
reasonable price. The initial product to be launched using this cutting-edge
technology is planned to be Firefighter: Everybody Goes HomeTM.  This
PC-based simulation product will simulate drills and real-life firefighting
scenarios.  The Company anticipates that such training in a safe,
PC-based environment will not only augment firefighters’ live training
exercises, but will also reduce live training time, expense and
injury.  The Company anticipates that Firefighter: Everybody Goes
HomeTM will be a valuable complement to its current firefighter training products
offered through the Company’s Fire & Emergency Training
Network.





11
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Note
6 – Line of Credit





In August
2006, the Company entered into agreements with Laurus, one of which provided for
a secured three-year revolving note (line of credit) with a maximum amount of
$5,000,000, subject to borrowing base computations, and matures on August 1,
2009.  The line carries an interest rate of prime plus two percent
(but never less than nine percent), and may be prepaid at any time without
penalty. The note is secured by a blanket lien on all of the Company's assets
and the assets of the Company's subsidiaries.





In March
2008, the Company entered into an overadvance agreement with Laurus, which
allows the Company to borrow up to $500,000 in addition to the maximum amount
allowed by the borrowing base computations on the line of credit. The
overadvance amount is reduced by $25,000 per month from October 2008 through
July 2009. A lump sum payment of $225,000 is due on August 1, 2009. The
overadvance carries the same interest rate as the line of credit.





As of
March 31, 2008, the balance on the line of credit totaled $806,712, and carried
an interest rate of 9%.





Note
7 – Stock Option Plan





As of
March 31, 2008, an aggregate of 100,000,000 shares of common stock were
authorized for issuance pursuant to the Company’s 2002 Stock Plan (the “Plan”).
The Plan allowed for a maximum aggregate number of shares that may be optioned
and sold under the plan of (a) 150,000 shares, plus (b) an annual 25,000
increase to be added on the last day of each fiscal year beginning in 2003
unless a lesser amount is determined by the board of directors. The Plan became
effective with its adoption and remains in effect for ten years unless
terminated earlier. On December 30, 2003, the board of directors amended the
Plan to allow for a maximum aggregate number of shares that may be optioned and
sold under the plan of (a) 300,000 shares, plus (b) an annual 50,000 increase to
be added on the last day of each fiscal year beginning in 2004 unless a lesser
amount is determined by the board of directors. Options granted under the plan
vest pro rata over a 48 month period and are typically issued with a four to
seven year term.  In some cases, selected officers and directors have
been given accelerated vesting schedules.





The
Company issued stock options to employees, officers and directors, and the
following schedule summarizes the activity for the nine months ended March 31,
2008:


WeightedAverageExerciseShares
            
            
            PriceOutstanding
      at June 30, 2007
            
            
            3,546,507
            
            
            $
            1.80Granted
            
            
            1,323,822
            
            
            
            1.21Exercised
            
            
            -
            
            
            
            -Canceled
      / forfeited
            
            
            (164,697
            )
            
            
            2.35Outstanding
      at March 31, 2008
            
            
            4,705,632
            
            
            $
            1.62Exercisable
      at March 31, 2008
            
            
            1,841,003
            
            
            $
            2.11




12
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





The
following schedule summarizes stock option information as of March 31,
2008:





Options Outstanding
            
            
            Options ExercisableRange of Exercise Price
            
            
            Number of Options
    Outstanding
            
            
            Weighted Average Exercise
    Price
            
            
            Average Remaining Contractual Life
      (Yrs)
            
            
            Number of Options
    Exercisable
            
            
            Weighted Average Exercise
    Price$
            1.00
      - 1.80
            
            
            
            4,406,694
            
            
            $
            1.29
            
            
            
            7
            
            
            
            1,550,205
            
            
            $
            1.283.20
      - 5.40
            
            
            
            185,386
            
            
            
            4.11
            
            
            
            3
            
            
            
            177,258
            
            
            
            4.1310.00
      - 15.00
            
            
            
            108,450
            
            
            
            10.00
            
            
            
            2
            
            
            
            108,540
            
            
            
            10.0017.00
      - 20.00
            
            
            
            5,102
            
            
            
            17.00
            
            
            
            2
            
            
            
            5,000
            
            
            
            17.004,705,632
            
            
            $
            1.62
            
            
            
            
            
            
            
            1,841,003
            
            
            $
            2.11








Note
8 – Warrants





The
Company has issued warrants for purchase of its common stock to investors and
service providers in connection with its financing activities. The activity for
the nine months ended March 31, 2008, and the principal terms of the warrants
are summarized below:


Shares
            
            
            Weighted Average Exercise
    PriceOutstanding
      at June 30, 2007
            
            
            2,250,884
            
            
            $
            5.90Granted
            
            
            1,040,000
            
            
            
            0.60Exercised
            
            
            -
            
            
            
            -Canceled
      / forfeited
            
            
            (1,483,006
            )
            
            
            2.94Outstanding
      at March 31, 2008
            
            
            1,807,878
            
            
            $
            5.27




The
following schedule summarizes warrant information as of March 31,
2008:








Range of Exercise Price
            
            
            Number of Warrants
    Outstanding
            
            
            Weighted Average Exercise
    Price
            
            Exercisable Through$
            0.60
            
            
            
            1,040,000
            
            
            $
            0.60
            
            June
      2008 - February 20125.00
      - 5.40
            
            
            
            407,963
            
            
            
            5.18
            
            July
      2008 - July 20106.20
            
            
            
            7,500
            
            
            
            6.20
            
            August
      200816.20
      - 20.00
            
            
            
            352,415
            
            
            
            19.14
            
            August
      2009 - October 20101,807,878
            
            
            $
            5.27




13
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Note
9 – Common Stock and Preferred Stock





During
November 2007, the Company executed a migratory merger effectively relocating
the Company’s state of incorporation from Utah to Nevada. The accompanying
financial statements have been retroactively restated to reflect the merger
including the change from no par value common stock to $0.0001 par value common
stock.





Common
Stock:





In
February 2008, the Company issued 2,000,000 shares of common stock valued at
$3,600,000 as partial consideration for the purchase of certain
software.





For the
nine months ended March 31, 2008, the Company sold 3,783,334 shares of common
stock at an average price of approximately $0.68 per share and received gross
proceeds of $2,590,000.





Also
during the nine months ended March 31, 2008, a note holder converted $280,000
into 466,667 common shares, and the Company issued 1,400,000 shares of common
stock, with a fair value of $1,460,000, in exchange for professional
services.





In
conjunction with the resignation of Doug Cole, former Executive Vice President,
on September 5, 2007, the Company issued 166,667 shares of common stock, at a
fair value of $1.00 per share, for consideration of $166,667 in lieu
of compensation that would have otherwise been owed to Mr. Cole under a
three-year employment agreement entered on February 1, 2006.





Preferred
Stock:





In March
2008, the Company issued 250,000 Series A preferred shares to Laurus as
consideration for the overadvance under the Company’s line of credit agreement.
The Series A preferred are convertible into common shares at $1.60 per
share.





During
April 2007, the Company executed an agreement to exchange 2,800,000 Series B
preferred shares for the return of 2,800,000 Series A preferred shares. The
Series A preferred shares bear 7% per annum cumulative dividends and are
convertible into common shares at $1.60 per share.  The Series B
preferred shares bear 7% cumulative dividends and are convertible into common
shares at $0.60 per share.  The Series A and Series B shares are
non-voting.  Dividends accrued but not paid on the Series A and B
shares totaled $492,917 as of March 31, 2008.





Note
10 – Comprehensive Loss





The
components of comprehensive loss are as follows:





Three
      months ended
            
            
            Nine
      months endedMarch 31,
            
            
            March 31,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      loss
            
            $
            (2,810,600
            )
            
            $
            (2,211,453
            )
            
            $
            (9,072,570
            )
            
            $
            (13,372,790
            )Foreign
      currency translation gain (loss)
            
            
            (6,080
            )
            
            
            (3,746
            )
            
            
            (10,192
            )
            
            
            (11,631
            )Comprehensive
      loss
            
            $
            (2,816,680
            )
            
            $
            (2,215,199
            )
            
            $
            (9,082,762
            )
            
            $
            (13,384,421
            )




14
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





Note
11 – Commitments and Contingencies





In the
ordinary course of business, TWL Corporation or its subsidiaries may be named a
party to various claims and/or legal proceedings.  Neither TWL
Corporation nor its subsidiaries have been named in and are not aware of any
matters which will result, either individually or in the aggregate, in a
material adverse effect upon their financial condition or results of
operations.





Note
12 – Recent Accounting Pronouncements





In July
2007, we adopted the Financial Accounting Standards Board (“FASB”)Interpretation No. 48,Accounting for
Uncertainty in Income Taxes–an Interpretation
of FASB Statement No. 109(“FIN 48”). This interpretation clarifies the
accounting for uncertainty in income taxes recognized in a Company’s financial statements. FIN 48 requires companies
to determine whether it is “more likely than not”that a taxprovision will be sustained upon
examination by the appropriate taxing authorities before any part of the benefit
can be recorded in the financial statements. It also provides guidance on the
recognition, measurement and classification of income tax uncertainties, along
with any related interest and penalties. We did not recognize any adjustments to
our financial statements as a result of our implementationof FIN 48.





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, Fair Value
Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. SFAS 157 does not require any new fair value measurements, but
provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. SFAS 157 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007. However, on February 12, 2008, the FASB issued FASB
Staff Position (“FSP”) FAS 157-2 which delays the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). This FSP defers the effective date of SFAS 157 to
fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years for items within the scope of this FSP. Effective July 1, 2008, the
Company will adopt SFAS 157 except as it applies to those nonfinancial assets
and nonfinancial liabilities as noted in FSP FAS 157-2. The partial adoption of
SFAS 157 will not have a material effect on the Company’s financial position,
results of operations or cash flows.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for
Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value and establishes presentation and disclosure requirements designed
to facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. Unrealized gains and
losses on items for which the fair value option has been elected are reported in
earnings at each subsequent reporting date. SFAS 159 is effective for fiscal
years beginning after December 15, 2007. The Company is currently evaluating the
impact of adopting SFAS 159 on its consolidated financial
statements.





Note
13 – Subsequent Events





In April
2008, the Company announced the layoff of 43 full-time employees and 5 part-time
employees effective April 14, 2008. The layoff was the result of the Company’s
comprehensive restructuring effort as part of its overall profitability recovery
plan.





In April
2008, the Company entered into a debt financing transaction with TIGP, a related
party, in which the Company issued $500,000 of convertible debentures. The
debentures mature in April 2012, bear interest at a rate of 15% per annum, and
are convertible into common stock at $0.60 per share. The notes are secured by
all of the Company’s assets (in junior position to Laurus), as well as the
assets of its wholly-owned subsidiary, TWL Knowledge Group, Inc.





15
 Table of Contents





TWL
Corporation and Subsidiaries


Notes
to Consolidated Financial Statements


March
31, 2008


(unaudited)





In April
2008, the Company issued 400,000 shares of common stock, at a price of $1.00 per
share, to investors for cash.





In May
2008, the Company announced the resignations of Douglas Cole, William Jobe, and
David Batstone from the Board of Directors. The Company also announced the
appointment of Mary Losty to the Board of Directors.




In May
2008, the Company announced the appointment of Laird Cagan as Chairman of the
Board of Directors, Phyllis Farragut as Chief Executive Officer, Daniel Hammett
as President and Dennis Cagan as Vice Chairman.





16
 Table of Contents





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS





Our
fiscal year ends June 30.  The following discussion analyzes the
historical financial condition and results of operations of the Company and
should be read in conjunction with our historical financial statements and notes
thereto, and Management’s
Discussion and Analysis of Financial Condition and Results of Operations
presented in our Annual Report on Form 10-KSB for the fiscal year ended June 30,
2007.





Forward-Looking
Statements





This
report contains “forward-looking statements” intended to qualify for the safe
harbors from liability established by the Private Securities Litigation Reform
Act of 1995. Statements included in this quarterly report that are not
historical facts (including any statements concerning plans and objectives of
management for future operations or economic performance, or assumptions or
forecasts related thereto), including, without limitation, the information set
forth in Management’s
Discussion and Analysis of Financial Condition and Results of Operations,
are forward-looking statements. These statements can be identified by the use of
forward-looking terminology including “may,” “believe,” “expect,” “intend,”
“anticipate,” “estimate,” “continue,” “project,” “plan,” or other similar words.
These statements discuss future expectations, contain projections of results of
operations or of financial condition, or state other “forward-looking”
information. We and our representatives may from time to time make other oral or
written statements that are also forward-looking statements.





Such
forward-looking statements are subject to various risks and uncertainties that
could cause actual results to differ materially from those anticipated as of the
date of this report. Although we believe that the expectations reflected in
these forward-looking statements are based on reasonable assumptions, no
assurance can be given that these expectations will prove to be correct.
Important factors that could cause our actual results to differ materially from
the expectations reflected in these forward-looking statements include, among
other things, those set forth in the Risk Factors section of the Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2007, and those set forth from
time to time in our filings with the Securities and Exchange Commission (“SEC”),
which are available through the Press Releases link at www.twlk.com and through
the SEC’s Electronic Data Gathering and Retrieval System (“EDGAR”) at
http://www.sec.gov.





All
forward-looking statements included in this report are based on information
available to us on the date of this report. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements contained
throughout this report.





Overview





We are a
publicly held global learning company with geographic locations in the United
States and Australia. We specialize in providing technology-enabled learning and
certification solutions for corporations, organizations, and individuals in
multiple global industries. Historically, we have focused our marketing on
medium to large businesses and organizations that wish to provide workplace
training and certification to their employees in a cost effective and efficient
manner.





In
February 2008, we entered into an agreement to purchase software owned by
Divergent Entertainment, Inc. (DEI) from Daniel Hammett (Mr. Hammett), the sole
shareholder of DEI. This purchase will provide the Company with both a new
product (first product release is anticipated to be in May 2008) as well as an
important new delivery platform that is anticipated to augment the Company’s
current online LMS, satellite television, and media (DVD, VHS) distribution
technologies.





The new
delivery platform is an advanced PC-based simulation software application
specifically designed to deliver professional quality and performance in skills
training, practice and testing, in a quasi-virtual reality environment, at a
reasonable price. The initial product to be launched using this cutting-edge
technology is planned to be Firefighter: Everybody Goes
HomeTM. This
PC-based simulation product will simulate drills and real-life firefighting
scenarios.  The Company anticipates that such training in a safe,
PC-based environment will not only augment firefighters’ live training
exercises, but will also reduce live training time, expense and
injury.  The Company anticipates that Firefighter: Everybody Goes
HomeTM will be a valuable complement to its current firefighter training
products offered through the Company’s Fire & Emergency Training
Network.





17
 Table of Contents





Revenues





TWL
derives its revenues primarily from service-related contracts, including
operations and maintenance services and a variety of technical assistance
services. The Company’s revenue consists of four main categories –
Subscription, Single Event, Production, and Other. Subscription revenue is
generated from contracts with customers who receive products or services for a
specified time period.  Subscription products include satellite
subscriptions, monthly videotape subscriptions, monthly CD-ROM subscriptions,
Internet subscriptions, and training-on-demand subscriptions (tape library).
Single event revenue involves the sale of products (videotapes, CD-ROM’s, etc.)
to customers on a non-subscription basis. Production revenue is generated from
live events or specialized production work performed for a customer, including
use of studios, taping and editing services. Other revenue is derived primarily
from service income which includes rents received on the sublease of unused
space within our facility as well as charges to our customers for
subcontractors, tape duplication, and the use of our transponder.





Costs
and expenses





Costs and
expenses consist of costs specifically associated with client programs and other
operational expenses.  The main categories of costs and expenses
follow.  Royalty, printing, delivery and communications costs include
production costs, transponder lease and product development
costs.  Salaries and benefits are generally the largest component of
expenses, and include compensation, benefits and payroll taxes of the TWL
employee base.  Selling, general and administrative, excluding
salaries and benefits, costs are comprised of such expenses as professional
fees, utilities, maintenance and repairs, insurance, personal and real property
taxes, travel and lodging, marketing and general administrative costs.
Depreciation expense is generally computed by applying the straight-line method
over the estimated useful lives of assets, which consists of three to seven
years for furniture and fixtures. Amortization expense for leasehold
improvements and assets held under capital leases is computed using the
straight-line method over the remaining lease term or the estimated useful life
of the asset, whichever is shorter, ranging from three to seven
years.





Other
income (expense)





Other
income (expense) consists of the sum of interest expense (including related
party), income (loss) in non-consolidated affiliate, loss on refinancing of
debt, and other income.  Interest expense includes interest
expense and amortization of debt issuance costs associated with ourindebtedness under notes payableand credit lineobligations. Income (loss) in
non-consolidated affiliate relates to a 50%-owned joint venture in which we have
significant influence and therefore record our proportionate share of equity
income or losses.  We entered into the joint venture agreement in
November 2006, with operations beginning in February 2007. Loss on refinancing
of debt relates to the fiscal 2007 write-off of debt discount on the Palisades
convertible debt instrument in connection with the Laurus financing offset by
gains recognized on the forfeiture of warrants.





Results
of Operations





The
following table summarizes the financial results of the Company for the three
and nine months ended March 31, 2008 and 2007:




Three
      months ended
            
            
            
            
            
            
            
            
            Nine
      months endedMarch 31,
            
            
            2008-2007
            
            
            March 31,
            
            
            2008-20072008
            
            
            2007
            
            
            Change
            
            
            Percent
            
            
            2008
            
            
            2007
            
            
            Change
            
            
            PercentRevenues,
      net
            
            $
            5,440,928
            
            
            $
            5,532,675
            
            
            $
            (91,747
            )
            
            
            -2
            %
            
            $
            16,901,650
            
            
            $
            18,653,925
            
            
            $
            (1,752,275
            )
            
            
            -9
            %Cost
      and expenses
            
            
            7,445,891
            
            
            
            6,849,863
            
            
            
            596,028
            
            
            
            9
            %
            
            
            23,608,030
            
            
            
            24,785,577
            
            
            
            (1,177,547
            )
            
            
            -5
            %Other
      income (expense)
            
            
            (805,637
            )
            
            
            (894,265
            )
            
            
            88,628
            
            
            
            -10
            %
            
            
            (2,366,190
            )
            
            
            (7,241,138
            )
            
            
            4,874,948
            
            
            
            -67
            %Net
      loss
            
            $
            (2,810,600
            )
            
            $
            (2,211,453
            )
            
            $
            (599,147
            )
            
            
            27
            %
            
            $
            (9,072,570
            )
            
            $
            (13,372,790
            )
            
            $
            4,300,220
            
            
            
            -32
            %





18
 Table of Contents





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





Revenues, net. Revenues, net
were $5,440,928 for the three months ended March 31, 2008 compared to $5,532,675
for the three months ended March 31, 2007, a decrease of $91,747, or 2%,
primarily attributable to a decrease in single event revenue.





Single
event revenue decreased $118,656, or 7%, to $1,560,337 for the three months
ended March 31, 2008 compared to $1,678,993 for the three months ended March 31,
2007. This decrease was primarily attributable to budgetary constraints during
2008 of several large repeat customers that resulted in lower safety product
sales when compared to the prior year.There was also a slight decrease in
demand for private security training.





Cost and expenses. Cost and
expenses were $7,445,891 for the three months ended March 31, 2008 compared to
$6,849,863 for the three months ended March 31, 2007, an increase of $596,028,
or 9%. Increases in royalty, printing, delivery and communications costs as well
as selling, general and administrative costs, excluding salaries and benefits,
were partially offset by a decrease in salaries and benefits.





Royalty,
printing, delivery and communication costs increased $830,010, or 92%, to
$1,728,972 for the three months ended March 31, 2008 compared to $898,962 for
the three months ended March 31, 2007. This increase was primarily attributable
to higher royalties paid for third party sales and higher printing costs
associated with single event sales.





Selling,
general and administrative, excluding salaries and benefits, increased $557,709,
or 79%, to $1,260,596 for the three months ended March 31, 2008 compared to
$702,887 for the three months ended March 31, 2007. This increase was primarily
attributable to an increase in third party consulting costs for accounting
related matters as well as additional legal fees for trade vendor matters. The
remaining increase was due to incremental increases in property taxes and
insurance.





Salaries
and benefits decreased $838,644, or 17%, to $4,162,687 for the three months
ended March 31, 2008 compared to $5,001,331 for the three months ended March 31,
2007, due in large part to the reduction in work force that took place in late
September 2007.





Other income
(expense).  Net other expensedecreased $88,628, or
10%, to $805,637 for the three months ended March 31, 2008 compared to $894,265
for the three months ended March 31, 2007. This decrease was primarily
attributable to an improvement in the loss from non-consolidated affiliate which
was partially offset by an increase in interest expense.





For the
three months ended March 31, 2008, we recognized income in the non-consolidated
affiliate of $28,679 compared to a loss of $226,690 recognized for the three
months ended March 31, 2007. As a result, we experienced a $255,369 improvement
in income from the non-consolidated affiliate when compared to the prior period.
This change was driven by the timing of a reduction in joint venture agreement
costs during the three months ended March 31, 2008 compared to the prior
period.





Interest
expense, net (including related party) increased $183,608, or 28%, to $851,183
for the three months ended March 31, 2008 compared to $667,575 for the three
months ended March 31, 2007. The increase was attributable to the larger
outstanding notes payable balance as of March 31, 2008 as compared to March 31,
2007.





19
 Table of Contents





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





Revenues, net. Revenues, net
were $16,901,650 for the nine months ended March 31, 2008 compared to
$18,653,925 for the nine months ended March 31, 2007, a decrease of $1,752,275,
or 9%.  Decreases in subscription, single event and production revenue
were partially offset by an increase in other revenue.





Subscription
revenue decreased $398,949, or 5%, to $7,935,263 for the nine months ended March
31, 2008 compared to $8,334,212 for the nine months ended March 31, 2007. This
decrease was primarily the result of lower renewal rates for our healthcare and
government customers.





Single
event revenue decreased $1,687,854, or 24%, to $5,233,035 for the nine months
ended March 31, 2008 compared to $6,920,889 for the nine months ended March 31,
2007. This decrease was driven by two factors. First, several large one-time
sales occurred during the latter part of 2006 which did not continue during 2007
and 2008. Second, several of our large repeat customers experienced budgetary
constraints during the latter part of 2007 that continued into 2008, and as a
result, demand for safety products from these customers was lower during the
nine months ended March 31, 2008 when compared to the prior period.





Production
revenue decreased $105,834, or 7%, to $1,468,052 for the nine months ended March
31, 2008 compared to $1,573,886 for the nine months ended March 31, 2007. This
decrease was attributable to lower studio rental revenue due to fewer third
party inquiries and a decrease in the seasonal volume of studio bookings for
educational and advertising programs.





Other
revenue increased $440,362, or 24%, to $2,265,300 for the nine months ended
March 31, 2008 compared to $1,824,938 for the nine months ended March 31, 2007.
This increase was primarily attributable to an agreement to sponsor a seminar
for one of our customers. Revenue from this event was approximately $343,000
during fiscal 2008 with no corresponding transaction in the prior
period.





Cost and expenses. Cost and
expenses were $23,608,030 for the nine months ended March 31, 2008 compared to
$24,785,577 for the nine months ended March 31, 2007, a decrease of $1,177,547,
or 5%. Decreases in the amortization of program inventory and salaries and
benefits were partially offset by increases in royalty, printing, delivery and
communication costs as well as selling, general and administrative, excluding
salaries and benefits.





During
fiscal 2007, the Company recognized expense of $2,142,145 for the complete
amortization of previously unamortized program inventory. There was no
corresponding write-off during fiscal 2008.





Salaries
and benefits decreased $704,570, or 5%, to $12,967,104 for the nine months ended
March 31, 2008 compared to $13,671,674 for the nine months ended March 31, 2007.
This decrease was primarily attributable to the reduction in work force that
took place in late September 2007.





Royalty,
printing, delivery and communication costs increased $391,982, or 10%, to
$4,265,311 for the nine months ended March 31, 2008 compared to $3,873,329 for
the nine months ended March 31, 2007. This increase was due to increased
communication costs for internet and broadcast operations as well as higher
royalties paid for third party product sales.





Selling,
general and administrative, excluding salaries and benefits, increased
$1,136,667, or 26%, to $5,487,768 for the nine months ended March 31, 2008
compared to $4,351,101 for the nine months ended March 31, 2007. This increase
was primarily attributable to approximately $1,250,000 in expenses incurred
during the current period to consultants who provided the Company with investor
communications and public relations with existing shareholders, brokers,
dealers, and other investment professionals. In addition, the consultants
assisted the Company in raising capital and enhancing the market recognition of
the Company. This increase was partially offset by a decrease in overhead and
support costs related to the reduction in work force that took place in
September 2007.





Other income
(expense).  Net other expensedecreased $4,874,948, or
67%, to $2,366,190 for the nine months ended March 31, 2008 compared to
$7,241,138 for the nine months ended March 31, 2007, primarily the result of
several significant items which occurred in the prior period for which there was
no corresponding amount in the comparable current period.





20
 Table of Contents





Net
interest expense decreased $3,147,723, or 57%, to $2,339,544 for the nine months
ended March 31, 2008 compared to $5,487,267 for the nine months ended March 31,
2007. The most significant portion of this decrease was attributable to the
recording of $3,725,166 of debt discount on a note payable in September 2006.
This discount represented a beneficial conversion feature on the note payable
which was expensed as the note became due. This decrease was partially offset by
an increase in interest expense (including related party but excluding the debt
discount noted above) of $577,443 due to increased notes payable
balances.





The loss
on refinancing of debt relates to preferred stock issued to Palisades to
subordinate its convertible debt security interest to Laurus. The preferred
stock was valued at $1,960,000 and was recorded in July 2006 as a debt discount
and expensed immediately as the debt was due currently. This was partially
offset by a gain on the forfeiture of warrants by Palisades of
$326,160.





Liquidity
and Capital Resources





The
Company’s working capital needs have historically been satisfied through
financing activities including private loans, third-party and related-party
debt, and raising capital through equity investments from accredited investors.
Historically, the primary uses of cash for TWL have been working capital
requirements and the repayment of debt obligations.





Since
inception, TWL has incurred significant net losses from operations, with an
accumulated deficit as of March 31, 2008 of $88,710,773. Currently, we do not
have an established source of revenues sufficient to cover our operating costs
to allow us to continue as a going concern.  We cannot be certain that
our existing sources of cash will be adequate to meet our liquidity
requirements.  To meet our present and future liquidity requirements,
we are continuing to seek additional funding through private placements,
conversion of outstanding loans and payables into common stock, collections on
accounts receivable, and through additional acquisitions that have sufficient
cash flow to fund subsidiary operations.  There can be no assurance
that we will be successful in obtaining more debt and/or equity financing in the
future or that our results of operations will materially improve in either the
short- or the long-term. If we fail to obtain such financing and improve our
results of operations, we will be unable to meet our obligations as they become
due.  This raises substantial doubt about our ability to continue as a
going concern.





As of
March 31, 2008, TWL had cash and cash equivalents of $471,573, and working
capital (measured by current assets less current liabilities) was a deficit of
$20,180,303.





During
the quarter, the Company raised $1,860,000 through the issuance of equity and
subordinated debt. The proceeds were used for general working capital purposes.
Due to the seasonality of our business, we will continue to require additional
third party investments to support its short term working capital
needs.





As a
professional services organization, we are not capital
intensive.  Historically, capital expenditures have been for
computer-aided instruction, accounting and project management information
systems, and general-purpose computer equipment to accommodate our growth.
However, during the quarter, we entered into an agreement to purchase software
which will provide the Company with both a new product (first product release is
anticipated to be in May 2008) as well as an important new delivery platform
that is anticipated to augment the Company’s current online LMS, satellite
television, and media (DVD, VHS) distribution technologies.





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





Net cash
used in operating activities totaled $3,117,050 for the nine months ended March
31, 2008, an increase of $1,184,894 compared to the prior
period.  This increase was driven by a reduction in non-cash operating
charges of $4,627,478 and a $1,973,963 change in accounts payable and accrued
expenses, both when comparing the fiscal 2008 change to that of the prior
period. The change in accounts payable and accrued expenses was attributed to
liabilities generally remaining stable in fiscal 2008 by utilizing the cash from
the equity and debt issuances to pay vendor and other obligations, whereas in
fiscal 2007, vendor and other obligations were extended due to cash constraints.
Partially offsetting these two items was a $4,300,220 improvement in net loss in
2008 as well as an improvement of $951,192 in the collection of accounts
receivable during fiscal 2008 as compared to fiscal 2007, driven by the
Company’s effort to reduce the amount of aged customer account balances during
fiscal 2008.





21
 Table of Contents





Net cash
used in investing activities totaled $95,006 for the nine months ended March 31,
2008, as compared to $28,137 used during the nine months ended March 31, 2007.
This is attributable to capital expenditures in the normal course of
business.




Net cash
provided by financing activities totaled $2,335,232 for the nine months ended
March 31, 2008, a decrease of $828,726 compared to the prior period. Net
repayments on the line of credit totaled $253,403 for the nine months ended
March 31, 2008 as compared to net borrowings of $1,200,000 during the prior
period. In addition, borrowings under notes payable arrangements decreased
$1,945,342 to $1,560,000 in fiscal 2008 from $3,505,342 in fiscal 2007. The
decreases in draws on the line of credit and new notes payable issuances were
the result of the availability of cash through the sale of common stock, which
generated gross proceeds of $2,590,000 in fiscal 2008. There were no issuances
of common stock in the comparable period in fiscal 2007.




Off
Balance Sheet Arrangements





We do not
have any off balance sheet arrangements that will have a current or future
effect on our financial condition, revenues, operating results, liquidity or
capital expenditures.





ITEM 3.  CONTROLS AND PROCEDURES





(a)  Management’s Evaluation
of Disclosure Controls and Procedures





We
maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that are designed to ensure that information required to be disclosed by
us in reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating our disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how
well conceived and operated, can provide only reasonable assurance of achieving
the desired control objectives, and we necessarily are required to apply our
judgment in evaluating the cost-benefit relationship of possible
disclosure  controls and procedures.





Our Chief
Executive Officer and Chief Financial Officer, together with other members of
management, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2008 and concluded that the
disclosure controls and procedures were effective.





(b)  Changes In Internal
Control over Financial Reporting





There
were no changes in our internal control over financial reporting that occurred
during the quarter ended March 31, 2008 that have materially affected, or
are reasonable likely to materially affect, our internal control over financial
reporting.





22
 Table of Contents




PART
II






OTHER
INFORMATION




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





Issuance
of Unregistered Securities





In
February 2008, the Company issued 2,000,000 shares of common stock valued at
$3,600,000 as partial consideration for the purchase of certain
software.





In March
2008, the Company issued 800,000 shares of common stock, at a price of $1.00 per
share, to investors in exchange for cash.




All of
the above offerings and sales were deemed to be exempt under rule 506 of
Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of TWL Corporation or executive
officers of TWL Corporation and transfer was restricted by TWL Corporation in
accordance with the requirements of the Securities Act of 1933. In addition to
representations by the above-referenced persons, we have made independent
determinations that all of the above-referenced persons were accredited or
sophisticated investors, and that they were capable of analyzing the merits and
risks of their investment, and that they understood the speculative nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.





Purchases
of Equity Securities by the Issuer and Affiliated Purchasers





None.








ITEM 6.  EXHIBITS





The
following exhibits are filed herewith:





31.1
            Certification
      of Periodic Financial Reports by Phyllis Farragut, the Company’s Chief
      Executive Officer, in satisfaction of Section 302 of the Sarbanes-Oxley
      Act of 2002. *





31.2
            Certification
      of Periodic Financial Reports by Patrick R. Quinn, the Company’s Chief
      Financial Officer, in satisfaction of Section 302 of the Sarbanes-Oxley
      Act of 2002. *





32.1
            Certification
      of Periodic Financial Reports by Phyllis Farragut, the Company’s Chief
      Executive Officer, in satisfaction of Section 906 of the Sarbanes-Oxley
      Act of 2002 and 18 U.S.C. Section 1350.
*





32.2
            Certification
      of Periodic Financial Reports by Patrick R. Quinn, the Company’s Chief
      Financial Officer, in satisfaction of Section 906 of the Sarbanes-Oxley
      Act of 2002 and 18 U.S.C. Section 1350.
*





* Filed
Herewith





23
 Table of Contents





SIGNATURES





In
accordance with the requirements of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.







TWL
      CORPORATIONMay
      15, 2008
            By:
            /s/ Phyllis
      Farragut
              Phyllis
      Farragut
              Chief
      Executive OfficerMay
      15, 2008
            By:
            /s/
      Patrick
      R. Quinn
              Patrick
      R. Quinn
              Chief
      Financial Officer







24