**UNITED
        STATES**
 **Securities
        and Exchange Commission**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-KSB**
  x
              ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        fiscal year ended June 30, 2008
 
 o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        transition period from _________________ to __________________
 
 Commission
        File No. 000-15260
 
 **Element
        21 Golf Company**
 (Name
        of
        Small Business Issuer in its Charter)
 
 Delaware
              
              88-0218411(State or Other Jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer I.D. No.)
 
 **200
        Queens Quay East, Unit #1, Toronto, Ontario, Canada, M5A
        4K9**
 (Address
        of Principal Executive Offices)
 
 Registrant’s
        Telephone Number: **416-362-2121**
 
 Not
        Applicable
 (Former
        name and former address, if changed since last Report)
 
 Securities
        Registered under Section 12(b) of the Exchange Act: None.
 
 Securities
        Registered under Section 12(g) of the Exchange Act: Common Stock, one-cent
        ($0.01) Par Value
 
 Check
        whether the issuer is not required to give reports pursuant to Section 13
        or
        15(d) of the Exchange Act. o
 
 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
 
 Check
        if
        disclosure of delinquent filers in response to Item 405 of Regulation S-B
        is not
        contained in this form, and no disclosure will be contained, to the best
        of
        Registrant’s knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10- KSB or any amendment
        to
        this Form 10-KSB. 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
 
 Issuer’s
        revenues for its most recent fiscal year: June 30, 2008 =
        $1,841,370
 
 As
        of
        September 21, 2008 there were approximately 1,037,549 **** shares
        of
        our common voting stock held by non-affiliates having a market value of
        approximately $726,000 on such date. Without asserting that any director
        or
        executive officer of the issuer, or the beneficial owner of more than five
        percent of the issuer’s common stock, is an affiliate, the shares of which they
        are the beneficial owners have been deemed to be owned by affiliates solely
        for
        this calculation.
 
 As
        of
        September 21, 2008, there were 7,480,984 **** shares
        of
        common stock of the Issuer outstanding.
  
  **Element
        21 Golf Company**
 
 **10-KSB
        for the Year Ended June 30, 2008**
 
 **Table
        of Contents**
 
 **PART
                  I**ITEM
                  1.
              DESCRIPTION
                  OF BUSINESS
              3ITEM
                  2.
              DESCRIPTION
                  OF PROPERTY
              11ITEM
                  3.
              LEGAL
                  PROCEEDINGS
              11ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              11**PART
                  II**ITEM
                  5.
              MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
              12ITEM
                  6.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              14ITEM
                  7.
              FINANCIAL
                  STATEMENTS
              19ITEM
                  8.
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE
              19ITEM
                  8A
              CONTROLS
                  AND PROCEDURES
              19ITEM
                  8B
              OTHER
                  INFORMATION
              19**PART
                  III**ITEM
                  9.
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                  SECTION
                  16(a) OF THE EXCHANGE ACT
              20ITEM
                  10.
              EXECUTIVE
                  COMPENSATION
              21ITEM
                  11.
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER MATTERS
              23ITEM
                  12.
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              24ITEM
                  13
              EXHIBITS
              25ITEM
                  14.
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              26SIGNATURES
              27FINANCIAL
                  STATEMENTS
              F-1
  Page
            2
  **PART
        I**
 
 **CAUTIONARY
        STATEMENT REGARDING FORWARD-LOOKING INFORMATION**
 
 Under
        the
        Private Securities Litigation Reform Act of 1995, companies are provided
        with a
“safe harbor” for making forward-looking statements about the potential risks
        and rewards of their strategies. Forward-looking statements often include
        the
        words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar
        expressions. In this Form 10-KSB, forward-looking statements also
        include:
 
 ·
              statements
                  about our business plans;
 ·
              statements
                  about the potential for the development and public acceptance of
                  new
                  products;
 ·
              estimates
                  of future financial performance;
 ·
              predictions
                  of national or international economic, political or market
                  conditions;
 ·
              statements
                  regarding other factors that could affect our future operations
                  or
                  financial position; and
 ·
              other
                  statements that are not matters of historical
                  fact.
 
 These
        statements may be found under “Management’s Discussion and Analysis or Plan of
        Operations” and “Description of Business” as well as in this Form 10-KSB
        generally. Our ability to achieve our goals depends on many known and unknown
        risks and uncertainties, including changes in general economic and business
        conditions. These factors could cause our actual performance and results
        to
        differ materially from those described or implied in forward-looking
        statements.
 
 These
        forward-looking statements speak only as of the date of this Form 10-KSB.
        We
        believe it is in the best interest of our investors to use forward-looking
        statements in discussing future events. However, we are not required to,
        and you
        should not rely on us to, revise or update these statements or any factors
        that
        may affect actual results, whether as a result of new information, future
        events
        or otherwise. You should carefully review the risk factors described in other
        documents we file from time to time with the Securities and Exchange Commission,
        and also review our Quarterly Reports on Form 10-QSB.
 
 **ITEM
        1.**  **DESCRIPTION
        OF BUSINESS**
 
 **Business
        Development.**
 
 Element
        21 Golf Company (the “Company,” “Element 21,” “we,” “us” or terms of similar
        meaning) was originally formed as OIA, Inc., a Delaware corporation, in 1986.
        In
        1992, the Company changed its name to Biorelease Corp., and was engaged in
        the
        business of biotechnology from 1992 through 1995. From mid-1995 through
        September, 2001, the Company sponsored a number of early-stage ventures.
        In June
        2001, the Company changed its name from Biorelease Corp. to BRL Holdings,
        Inc.
 
 In
        September, 2002, we acquired 100% of the outstanding common stock of Element
        21
        Golf Company, a Delaware corporation (“Element 21”), in exchange for 2,123,621
        restricted shares of our common stock (“the Acquisition”). We also converted
        options to acquire 321,600 shares of Element 21 common stock into options
        to
        acquire 321,600 shares of our common stock. This Acquisition was accounted
        for
        as a “reverse” acquisition using the purchase method of accounting, since the
        shareholders of Element 21 owned a majority of the outstanding stock of our
        Company immediately following the Acquisition. Following the Acquisition,
        we
        changed our name to Element 21 Golf Company.
 
 Element
        21 was formed on September 18, 2002 to acquire partially-developed golf
        technology and to design, develop and bring to market golf club shafts and
        golf
        heads made from a patented scandium alloy exclusively licensed to the Company
        (the “E21 Alloy”). The active ingredient in the E21 Alloy is Scandium, which is
        element number 21 in the Periodic Table of Elements. E21 Alloy shafts are
        believed to exhibit properties that out-perform titanium with a higher
        strength-to-weight ratio of up to 25% and a specific density advantage of
        55%.
        The E21 Alloy is lighter, stronger and more cost effective than titanium.
        This
        advanced metal technology was originally developed in the 1970’s in the former
        Soviet Union for military applications. Scandium alloys have been used in
        intercontinental ballistic missiles, jet aircraft, the Mir space station
        and
        most recently, in the International Space Station.
 
 In
        September, 2002, Element 21 acquired from Dr. Nataliya Hearn, our current
        Chief
        Executive Officer, and David Sindalovsky, a consultant to the Company (the
        “Assignors”), the exclusive right to use, produce and sell the E21 Alloy for
        golf club shafts and golf heads. Although these rights do not cover all mixes
        of
        scandium alloy, the Company believes that any scandium alloy outside the
        range
        of its patent-protected rights cannot be used to produce golf club shafts
        or
        heads in an economically feasible manner. Upon completion of the Acquisition,
        the previous officers and directors of the Company resigned.
 
 The
        Company is commercializing scandium’s use in the golf industry with a line of
        golf shafts and clubs. During the past two years, the Company has developed
        an
        updated and improved product line using proprietary materials and production
        techniques, including drivers, irons, hybrids, shafts and golf
        bags.
  Page
            3
  In
        June,
        2007 the Company began an expansion into recreational fishing equipment.
        On June
        21, 2007, the Company entered into a non-exclusive, world-wide patent license
        with Advanced Light Alloys Corporation (Advanced) by which Element 21 was
        licensed by Advanced to make, use, and sell fishing equipment utilizing certain
        of Advanced’s patents. The Company is obligated to pay a 20% royalty based on
        the net selling price of all fishing products. Advanced is a Barbados
        corporation that is wholly owned by Mr. David Sindalovsky, the chief engineer
        and a consultant to the Company.
 
 Element
        21 currently has fully developed two sporting goods product lines: (1) Golf
        equipment and (2) Fishing products.
  **Recent
        Events**
 
 On
        April
        25, 2008, in conjunction with a 1 for 20 reverse split of the Company’s common
        stock, the Company also changed its ticker symbol to ETGF.OB.
 
 In
        May
        2008, the Company signed a three year licensing agreement with Kanata Shaft
        Company, LLC (“Kanata”). The Company granted Kanata the exclusive right to
        market and distribute the Company’s golf shafts in the United States and Kanata
        agreed to purchase a minimum of $4,120,000 scandium shafts over the term
        of the
        contract.
 
 During
        fiscal 2008, the Company terminated Bill Dey’s employment, the Company’s former
        COO. Concurrent with this development, the Company agreed to extend the
        expiration date of 300,000 warrants held by Mr. Dey until July 15, 2008.
        On June
        24, 2008, Mr. Dey exercised 100,000 warrants and purchased a like number
        of
        shares, the remainder have since expired unexercised.
 
 **Golf
        Equipment**
 
 The
        Company has developed its second generation of golf clubs that further refines
        the application of Scandium metal alloy to the sport. Advances have been
        made in
        various aspects of the club head design and manufacturing
        processes.
 
 The
        product line available for sale now includes shafts, drivers, irons and hybrid
        clubs as well as golf bags. All clubs have been approved by the USGA as
        conforming to the rules of golf.
 
 With
        the
        introduction of its EMC 2 Driver,
        the Company now believes it has a sufficiently broad line of products to
        enter
        mainstream competition at the retail level. The EMC 2 Driver
        has been tested by independent laboratories and found to outperform the most
        popular drivers by a significant margin. In fact, in recent robotic testing,
        Element 21’s EMC2 Scandium driver outperformed the top three selling Titanium
        drivers in the market place in both distance and accuracy. In off-center,
        heel
        and toe hits, EMC2 recorded an average carry dispersion of 8 feet, beating the
        competition by an unprecedented 263%, 288% and 338%, respectively. During
        distance testing the longest drive of the day was 274 yards recorded by EMC2, 29
        yards longer than one of its competitors' longest drives.
 
 In
        April,
        2008, Element 21 Golf launched a national infomercial campaign promoting
        the
        revolutionary technology and performance of its line of cutting edge hybrids.
        The infomercial was hosted by multiple PGA Tour winner and commentator Roger
        Maltbie, renowned golf instructor Rick Smith, and former PGA Tour regular
        and TV
        host Frank Nobilo. The response to the infomercial was immediate. Sales of
        the
        Element 21 Hybrid clubs increased by over 750% in the month of April as a
        result
        of this brief but successful campaign.
 
 In
        June
        2008, Element 21 signed a multi-year agreement with Kanata Shaft Company
        LLC, in
        Ohio whereby Kanata has committed to aggregate orders of $4.1 million over
        its
        term, and gives Kanata exclusive rights to distribute Element 21 Scandium
        SCTM
shafts in the USA.
 
 Key
        retailers continue to include:
 ·
              PGA
                  Tour Super Stores - Georgia, Texas, Arizona and South
                  Carolina
 ·
              Golfers'
                  Warehouse - Connecticut, Massachusetts and Rhode
                  Island
 ·
              Edwin
                  Watts - Florida
 ·
              Golfsmith
                  - Texas and Online
 
 **The
        Golf Industry**
 
 As
        reported by Golf Datatech, the golf industry is a $60 billion market.
        Approximately $5.5 billion each year is spent on golf equipment, with roughly
        half of that coming from the key U.S. market. Metal woods alone account for
        $1
        billion in annual sales.
 
 The
        explosion of oversized clubs in 1992, titanium clubs in 1995, and multi-metal
        undersized clubs has proven that innovative designs and new materials promising
        improved performance are quickly embraced by the consumer and offer tremendous
        marketing advantages for the innovating companies. Companies such as Adams
        (with
        its patented Tight Lies ® fairway
        woods grew from $2 million in sales to over $100 million between 1995 and
        1997.
  Page
            4
  However,
        since the introduction of titanium, there have been no significant introductions
        of new materials into the golf equipment market. Advances in shaft
        design/composition have been refinements of existing technology. It is common
        knowledge within the community of golf professionals that the most important
        part of the performance of any club is the shaft, and the easiest way to
        improve
        performance is with a better shaft quality.
 
 From
        a
        retail perspective, there are 2,000 golf-only stores as listed by The National
        Golf Foundation’s Directory of Golf Retailers: Off-Course Golf Retail Stores in
        the U.S. This does not include on-course stores for which The NGF has over
        16,000 listed golf courses in the U.S. Additionally, there are a significant
        number of multi-line Sporting Goods stores such as Dick’s and Sport Authority
        that carry golf equipment.
 
 **Scandium
        Metal Alloy**
 
 Element
        21’s proprietary Scandium metal alloy golf products have outstanding potential
        in the industry based on the following factors:
 
 ·
              The
                  results of player and robotic testing indicate Scandium’s improved
                  performance over leading titanium, steel and graphite clubs and
                  shafts,
                  providing increased distance and less dispersion. In essence, this
                  allows
                  longer more accurate results, which are impossible to achieve with
                  current
                  metals and manufacturing
                  techniques.
 ·
              Unique
                  features of Scandium metal alloy that can be engineered to provide
                  Element
                  21’s trademarked ShockBlok benefits, reduced vibration and a softer,
                  more
                  forgiving feel upon impact. This can translate into real world
                  benefits in
                  terms of reduced strain on the musculoskeletal system - a real
                  concern of
                  professional and avid amateur
                  players.
 ·
              55%
                  reduced density and 25% specific strength advantage over titanium
                  alloys.
 ·
              Scandium
                  is softer than titanium providing superior feel and workability
                  for the
                  player.
 ·
              Scandium
                  is lower in cost and easier to fabricate than
                  titanium.
 ·
              75%
                  reduced density compared to stainless
                  steel.
 ·
              Significant
                  cost and performance advantages over composite materials such as
                  graphite.
 ·
              Excellent
                  Fatigue Resistance.
 ·
              Weldable.
 ·
              Extremely
                  high consistency of manufacture to extremely tight tolerances.
                  This
                  feature, particularly in golf shafts, is of utmost importance in
                  providing
                  a set of clubs that play consistently, one to the
                  other.
 ·
              Historically,
                  many popular golf brands have achieved success based on new performance
                  related features introduced to the game, such as Callaway’s introduction
                  of Titanium. The superior performance of Scandium metal alloy provides
                  just such a performance improvement, which can easily be translated
                  into
                  benefits that are meaningful to
                  consumers.
 
 The
        market for golf shafts was estimated by Golfdatatech to be close to 30 million
        units in the US and 60 million units worldwide. Golfdatatech estimates that
        the
        size of the market for high performance premium shafts that the Company’s
        Scandium shafts will initially be targeting represents approximately 27 million
        units worldwide.
 
 On
        average, based on the robotic testing conducted by the Golf Labs, San Diego
        and
        player testing, the Element 21 Scandium Alloy shaft registered substantially
        longer distance than any other shaft it tested against, in some cases by
        as much
        as 16 yards at identical swing speeds, using identical 6 iron heads for the
        test.
 
 **ShockBlok** **TM**
 
 Concurrent
        with the development of the overall shaft design, the Company has developed
        a
        shock absorbing system under the trademark ShockBlok which redirects shaft
        vibration back into the club head, generating an added energy kick for extra
        distance and reducing the amount of vibration transfer to the player's hands.
        Golfing has a negative effect on the body. High shock energy transferred
        by the
        steel shafts to the player’s hands during a round of golf creates fatigue. For
        frequent golfers, this can lead to stress injuries to a player’s hands, wrist,
        elbows or shoulders, much like ‘tennis elbow’. According to an analysis
        commissioned by a consultant to the Company, Dr. Howard Butler, along with
        two
        orthopedic physicians, during a typical round of golf, the extra energy
        transmitted to the hands of a golfer using steel shafts is 300% higher than
        Scandium shafts. Over the last 5 years of consumer and Tour player testing,
        the
        Company’s experience has shown that most users of its shafts would immediately
        notice the superior shock absorption and that Scandium also contributes to
        a
        measurably superior feel as compared with steel and graphite clubs.
 
 The
        Company has completed the design and engineering process for a full line
        of
        clubs, from drivers to putters. Design improvements are being made to streamline
        mass production of the various golf components. Production models of these
        various clubs have now undergone testing and production tooling has been
        completed, and the products are currently in inventory.
 
 Perhaps
        the most significant achievement in terms of business milestones is the
        Company’s recent introduction of its Scandium metal alloy driver. The new EMC
        driver utilizes a proprietary Multi-Material, Scandium Cup Face (MMSCF)
        technology, which capitalizes on the unique properties of Element 21's Scandium
        Alloy and maximizes the drivers Moment of Inertia (MOI). In June 2008, the
        USGA
        added the Element 21 Scandium driver to its list of the drivers that conform
        to
        the rules of golf, a critical component for success of the
        club.
  Page
            5
  In
        2007,
        the Company introduced a new line of game improvement irons named EMC. The
        irons
        were featured in major golf publications, including Golf Digest Magazine
        naming
        Element 21 EMC Scandium Irons as “revolutionary”.
 
 EMC
        hybrids are instantly recognizable much like their big brother driver, due
        to
        their unique design features that include a louvered effect on the crown
        plate
        of the club. This creates a corrugated effect providing additional strength
        to
        the club head design and allows more freedom to move weight to strategic
        points
        within the sole of the club head to improve distance and accuracy.
 
 **Raw
        Material Supply**
 
 The
        raw
        material that goes into the production of Scandium comes from scandium oxide,
        which has about 60% scandium metal content. Scandium oxide is used in the
        production of a “master alloy,” which is then added to nine other metals and
        other alloy ingredients to create a concentration of approximately 0.001% -
        10.00 % scandium in the final alloy used in products. This is known as Scandium,
        which has the technical advantages needed for production of high performance
        equipment for sports, transportation, military and aerospace applications
        and is
        the subject of the Assignors’ patents.
 
 **Fishing
        Products**
 
 On
        June
        21, 2007, Element 21 Golf Company entered into a non-exclusive, world-wide
        Patent License with Advanced Light Alloys Corporation aka ALA Corporation
        by
        which Advanced licensed Element 21 to make, use, and sell a line of fishing
        equipment utilizing certain of Advanced’s patents.
 
 The
        Company hired fishing rod designer, Ken Whiting to bring his fishing rod
        designs
        to market. Mr. Whiting is responsible for the creation of several new rod
        lines
        to be marketed under the Element 21 Fishing brand as well as running the
        day to
        day operations of the new tackle division.
 
 Mr.
        Whiting’s initial designs comprise the ‘carrot stick’ design in both casting and
        spinning rod variations. The CARROT STIXTM Casting Rod measures 6’9" with a
        parabolic action and is used for crankbaits, top water and spinner baits
        and
        jerk baits. The CARROT STIXTM Spinning Rod prototype is a 6'7" medium action
        spinning rod. Ideal for tubes, worms, grubs, and small crank baits, etc.,
        this
        rod is also used for walleye fishing.
 
 Today,
        Element 21’s CARROT STIXTM represents the latest in cutting edge technology. Nano
        level Cellulose Bio-Fibers are extracted from carrots, processed into a super
        high strength epoxy matrix and then this matrix is molded around a thin walled
        ultra high modulus graphite skeleton. When the two materials bond they create
        what we believe to be the finest rod blank ever made, unparalleled in is
        light
        weight, sensitivity, strength and performance.
 
 Another
        first for CARROT STIXTM is that a Finite Element Analysis (FEA) program was used
        to design the blank. By using FEA, we have been able to identify and remove
“Hot
        Spots”, or areas in the blanks that show a high propensity for breakage. This
        allows for the creation of a blank that is evenly stressed when loaded, thereby
        reducing its potential for failure. The blank is bonded to a fully exposed
        grip,
        for full contact with the rod. This set up is found on both spinning and
        casting
        models.
 
 Each
        CARROT STIXTM is hand made using the highest quality components and meticulous
        attention to detail. The butts on each are also finished off with a removable
        anodized Scandium butt cap, providing easy access to the rod’s weight port and
        allowing for personalized balancing to your own individual specs. Add new
        Caxin
        Lite guides with TiCH inserts, frames and our “Maximum Exposure” split reel
        seats and you will have one of the finest competition rods ever
        built.
 
 At
        the
        2007 ICAST show, the Company won a trifecta of awards:
 ·
              Best
                  Freshwater Rod;
 ·
              Best
                  Saltwater Rod;
 ·
              Overall
                  Best Product In Show.
 
 In
        addition to the original Carrot StixTM, the Company has developed the Boyd
        Duckett Classic Gold Professional Series Carrot StixTM rod. Co-designed by Boyd
        Duckett, 37th Bassmaster Classic World Champion and our own Ken
        Whiting.
 
 In
        the
        summer of 2008, Element 21 re-appeared at the 2008 ICast show with a full
        line
        of fishing rods, each developed with a nano-Bio-fiber technology blank. The
        original product line was developed with 15 separate SKUs and has now increased
        to 89 SKUs.
 
 In
        early
        2008, Element 21 engaged 3 of the industry’s Sales Representation Agencies
        (Dunkin and Lewis, Inc., Donaldson and Associates, Inc. and Tim Bailey and
        Associates, Inc.). Taken in combination with the company’s internal sales team,
        these sales groups began providing representation to the entire US (including
        Alaska and Hawaii) as well as all of Canada. As such, market demand was largely
        increased and in the 6 months of market penetration, Element 21 has recorded
        over $1.4 million dollars, in fishing rod sales.
  Page
            6
  The
        Company has also contracted with 2007 Bassmaster Classic Champion Boyd Duckett
        to endorse Element 21 Fishing equipment. Duckett will be involved in field
        testing all of Element 21's new rod lines, as well as providing technical
        assistance with other forms of advertising that Element 21 will be pursuing
        throughout the coming year. In addition, Duckett will act as pro staff manager
        and will be actively involved in the selection of Element 21’s pro staff. Our
        pro staffers currently include the following:
 
 1)
              Henry
                  Wazczuk, with over 25 years on TV, and a media distributor across
                  Canada
                  and the USA, Henry is the host of the popular*Fins
                  and Skins*,
                  and*Fishing
                  the Flats*series;
 2)
              Russ
                  Lane - a widely recognized celebrity angler with media exposure
                  on all
                  major networks, Russ has achieved over ten Top 20 finishes in the
                  industry’s most prestigious fishing
                  competitions;
 3)
              Jeff
                  Reynolds - a skilled angler with general celebrity status, Jeff
                  has
                  accomplished over twenty-five Top 20 finishes in his
                  career;
 4)
              Peter
                  Savoia, 2003 Canadian Classic Champion, and 2ndplace winner of the 2007 Bass Pro Shops Lake Simcoe Open;
                  and
 5)
              Gaspare
                  Costabile - with several appearances of sports networks, such as
                  TSN, WFN,
                  FOX Sports South, SUN Sports, Sportsman’s Channel, MEN TV, and numerous
                  Global National airings, Gaspare is the winner of the 1997 Canadian
                  Open
                  and 1996 Canadian Chevy Mariner Classic, 2ndplace finishes in the Bass Pro Shops Lake Simcoe Open and 2004
                  B.A.S.S.
                  Tour Lake Erie, and 3rdplace laureate of the 2003 B.A.S.S. Tour Lake Erie
                  championships.
 
 The
        Company is presently in the processing of initiating production of the new
        rod
        SKUs.
 
 **Sales
        and Marketing**
 
 Our
        product development effort has provided the Company with several sales and
        marketing options. These options include the sale of shafts and components
        to
        other original equipment manufacturers (OEMs) and to custom club fitters,
        in
        addition to the sale of Drivers, irons and hybrids via traditional retail
        distribution channels. Technology Licensing -- limited licenses to off-shore
        golf component manufacturers, is another viable sales development
        strategy.
 
 Currently,
        Scandium shafts are available to club makers and fabricators through the
        Professional Golf Management Company (“PGMC”) distribution channels and several
        catalogues and web sites, including high profile participants such as
        Golfsmith.
 
 The
        retail sales team is making progress in developing traditional retail channels
        in North America, including high profile retail chains such as PGA Tour Super
        Stores, Golfers' Warehouse, Nevada Bob’s, and Edwin Watts. The Company
        anticipates that these efforts will accelerate with the addition of the
        EMC 2 Driver
        to the product line,
 
 As
        part
        of its sales initiative, the Company established a new call-in and customer
        service center, full assembly facilities, warehousing, and shipping and
        receiving capabilities. All business data generated is integrated into a
        comprehensive computerized tracking / database management solution. This
        integrated system provides access to key information specific to running
        large-scale operations tailored to our needs as a sports equipment company.
        The
        Company has created a very cost-effective solution that will be highly scalable
        in order to manage future growth.
 
 The
        Company has created promotional support to increase brand awareness and
        reinforce the unique nature of its proprietary Carrot StixTM and Scandium Metal
        Alloy clubs and shafts. Items of support include the following:
 
 1.
              **Endorsement
                  Contracts**in
                  both Golf and Fishing, engaging some of the top names in each industry
                  (Boyd Duckett, Russ Lane, Jeff Reynolds, Henry Wazczuk, Roger Maltbie,
                  Rick, Smith, Frank Nobilo, among
                  others)
 
 2.
              **TV
                  advertising**through the airing of infomercials, Direct Response ad campaigns
                  on the
                  Golf Channel, fishing ads on several national networks as well
                  as targeted
                  fishing ads on the Outdoor Network and World Fishing Network, among
                  others.
 
 3.
              **TV
                  programming**with long-standing programs for both fishing and golf equipment.
                  Such
                  programs include*Fins
                  and Skins, Fishing the Flats, The Reel Road Trip*,
                  among others. These offerings will be expanded through the World
                  Fishing
                  Network in the coming season.
 
 4.
              **Print**-
                  Professional Golf Association (“PGA”) Print Program**:**PGA Magazine (www.PGAmagazine.com), with a circulation of over
                  45,000 top
                  PGA professionals in North America, featured a double page spread
                  and
                  Interactive CD-ROM insert in the June 2007 edition, which gave
                  PGA
                  professionals the opportunity to take part in the multi-level Stock
                  Incentive Program, as part of the introduction of Element 21 Scandium
                  golf
                  equipment to the golf industry. Element 21 has decided to act upon
                  the
                  continued success of this campaign with PGA magazine for extensive
                  print
                  representation in publications (both printed and electronic) and
                  in-person
                  representation at all PGA sponsored/organized events. This program
                  will
                  take effect over the course of the next 12 months. In addition,
                  Element
                  21’s Fishing division has published full page ads in many of the
                  industry’s best known publications in both the United States and
                  Canada.
  Page
            7
  5.
              **Email
                  Campaigns:**At
                  several strategic points in the market cycle of each industry,
                  Element 21
                  has undertaken a widespread email marketing campaign, sending recipients
                  a
                  listing of specials as well as product information for the company’s award
                  winning lineup. These broadcasts are coupled with special landing
                  pages to
                  enhance the customers’ experience and provide them with more
                  information.
 
 6.
              **Golf
                  Shot Around the World:**The most successful endeavor was the launch of an Element 21 golf
                  ball
                  into orbit by Russian cosmonaut Mikhail Tyurin. On the eve of
                  Thanksgiving, November 22nd,
                  2006, at approximately 7:57 pm EST, Mikhail Tyurin successfully
                  hit a golf
                  ball off of the orbiting International Space Station, 220 miles
                  above the
                  earth, using an Element 21 gold-plated 5 iron. Billed as the world’s
                  longest drive, the golf ball continues to orbit
                  earth.
 
 The
        world’s longest drive garnered incredible attention around the world, generating
        millions of website hits worldwide, widespread television coverage and editorial
        coverage in over 100 major newspapers and magazines. Interest was particularly
        high within the golf industry, and was extremely successful in raising the
        Company’s profile.
 
 The
        Company received the received the prestigious ING (International Network
        of Golf
        Writers Association) Industry Honors Award for the Best PR/Campaign Event
        in
        2006 in recognition of the Element 21 sponsored Golf Shot Around The World.
        ING
        is a non-profit, media-based networking organization whose mission is to
        bring
        golf media together with representatives from all walks of the golf industry
        to
        discuss issues, exchange information and improve communication.
 
 7.
              **Demo
                  Days:**The Company participated in roughly 3 dozen demo days in the early
                  part of
                  the 2007 season. These demo days were held at large retail outlets
                  such as
                  Nevada Bob’s and PGA Tour Superstores, and important green grass (on
                  course PGA shops) locations across the nation, as well as very
                  successful
                  participation at the Orlando PGA show, the premier PGA golf equipment
                  event of the year. The Demo Day campaign has continued into 2008
                  with
                  excellent results. The program has provided golfers around the
                  country the
                  chance to test the cutting edge Element 21 product and feel the
                  difference
                  for themselves.
 
 8.
              **Consumer
                  Product Test promotion:**This past season, consumers were given the opportunity to test
                  the
                  performance of Element 21’s scandium metal alloy clubs by purchasing an
                  Element 21 6 iron at an introductory price of only $59.95 plus
                  shipping
                  and handling. The $59.95 price tag came with a money back guarantee,
                  or
                  could be used towards a purchase of the complete EMC2set of irons.
 
 9.
              **PGA
                  Tour Presence:**The PGA tour represents the pinnacle of achievement in golf. Equipment
                  manufacturers spend tens of millions of dollars in endorsements
                  to have
                  the top ‘names’ use their equipment. On the other hand, the tour pros need
                  equipment they have complete confidence in to perform at their
                  peak. The
                  Company sponsors a tour van and has a Company representative available
                  at
                  many of the PGA tour events.
 
 The
        result is that Element 21 shafted clubs are now being played on all three
        men's
        Professional Golf Tours. Several players on the Nationwide, PGA and Champions
        Tours have requested that their clubs be fitted with Element 21 Scandium
        Alloy
        shafts since the beginning of the 2007 season. Included in this mix are a
        3-time
        US Ryder Cup Team Member and former US Ryder Cup Team Captain, and an 11-time
        winner on the PGA Tour, with 97 career Top 10 Finishes to his credit. One
        of the
        top ten ranked players in the world has also switched to Element 21's Scandium
        shafts. This player ranks high up on the PGA money list, and is one of the
        most
        recognizable names in golf. As of August 2008, he had a total of 74 PGA tour
        Top
        3 finishes, including three major championships. **** He
        also
        has amassed over $60 million in PGA Tour winnings during his illustrious
        career.
 
 **Operations
        and Management**
 
 Element
        21 is currently preparing to make an official name change from Element 21
        Golf
        Company to Element 21 Sports. The new name is meant to reflect the
        multi-divisional nature of the company and its activities as well as allow
        for
        future product and industry expansion.
 
 Through
        strategic relationships the Company has been able to create vertical
        integration, which includes material sourcing, alloying, and proprietary
        manufacturing paths for production of semi-finished and finished golf
        components, engineering, design, and sales.
 
 The
        licensed manufacturing partners of the Company include:
 1.
              Yunan
                  Aluminum, which is in the business of manufacturing precision tubing
                  for
                  outdoor recreation and sporting
                  markets;
 2.
              OT-A
                  Golf, which is one of the largest golf club manufacturers in the
                  world,
                  specializing in high end golf clubs, manufacturer for the top end
                  OEMs
                  such as Nike; and
 3.
              Sino,
                  manufacturer of OEM golf equipment specializing in golf clubs manufactured
                  under license for some of the leading brand names in golf. Pursuant
                  to the
                  Company’s exclusive manufacturing agreement with its manufacturing
                  partners, the Company provides the raw materials from which the
                  manufacturers are trained and educated to produce the scandium
                  line of
                  clubs under the Element 21 brand
                  name.
  Page
            8
  In
        order
        to sustain and better service the great demand for its products, Element
        21
        utilizes the services of Professional Marketing Associates (PMA), a fulfillment
        warehouse based in Arizona. To that end, the company transferred its entire
        inventory to this location where it has set up specialized computer systems
        that
        track all transactions. This system further allows to company to measure
        trends
        and align future projections and development.
 
 In
        conjunction with moving fulfillment services to PMA, Element 21 has setup
        a
        partnership through which PMA undertakes all of its club assembly. Scandium
        technology is cutting-edge and requires special treatment and training. To
        that
        end, the company has expended resources to ensure that a suitable and
        quality-assured assembly facility is available for its products.
 
 To
        handle
        the interest Element 21 products have received, the company has setup a
        partnership with Professional Golf Telesales (PGT), a call centre in Ohio
        specifically dedicated to the sales and marketing of golf and fishing products.
        All infomercial and direct response television campaigns are routed to this
        professional and well-trained center. Data links have been created linking
        Element 21, PGT, and PMA to produce maximum communication and
        efficiency.
 
 In
        addition, the company has re-developed its e-commerce website, providing
        greater
        functionality and automatic verifications. As such, customers can now log
        on to
        the Element 21 Sports website ( www.e21sports.com )
        and
        purchase equipment through the online store with security assured and hassle
        eliminated. All Element 21 internet sales orders are automatically linked
        to the
        shipping warehouse and are shipped from the warehouse within 48 hours of
        approved payment.
 
 To
        date,
        the Company is operating with three full time employees and a number of
        strategic consultants. The combination of key employees and consulting staff
        significantly reduces overhead and is advantageous because it allows the
        Company
        to avoid having large marketing, administrative and development organizations
        in
        order to be responsive to fluctuations in the marketplace that have plagued
        other start-up golf companies. Our consultants include:
 
 §
              Nataliya
                  Hearn, PhD, is the company’s Chief Executive Officer and President, and is
                  based in Toronto, Canada, overseeing the Company’s financing, operations,
                  and engineering.
 
 §
              John
                  Grippo, who was appointed as the Company’s Chief Financial Officer in
                  March, 2006, has over 15 years experience as a CFO for public and
                  private
                  companies ranging in size up to $250 million in annual
                  revenues.
 
 §
              Michael
                  McDevitt, VP of Sales, was brought on in 2006. Mr. McDevitt has
                  over 18
                  years of sales, marketing, operations and customer service experience
                  in the sporting industry.
 
 §
              Ken
                  Whiting, Senior Vice President of Product Development, is a fishing
                  rod
                  designer in the industry today. He has designed fishing products
                  and is
                  now devoting his time to the Element 21 Carrot StixTM product
                  line.
 
 **Corporate
        Finance**
 
 During
        the latest fiscal year, one investor and one former officer exercised warrants,
        the investor for $150,000 and the officer for $100,000, for a total of $250,000
        resulting in the issuance of 150,000 common shares. In June 30, 2008, the
        Company also consummated a sale of 70,000 shares of common stock to an existing
        investor for $200,000.
 
 The
        Company borrowed $1,000,000 from an existing investor in February, 2008 under
        a
        term loan agreement. The loan was unsecured with annual interest of 10%.
        The
        loan was repaid in May, 2008 and a new loan of $825,000 was extended to the
        Company under the same terms.
 
 The
        Board
        of Directors approved a contract for Dr. Nataliya Hearn, PHD., President.
        Under
        the terms of this contract, Dr. Hearn has the option of cash compensation
        of
        $15,000 or the equivalent of $20,000 in common stock warrants per month.
        Dr.
        Hearn has a three year contract that expires December 31, 2010. In addition,
        she
        receives a bonus of 100,000 options each year priced at $1.60 per share in
        2008
        and 2009 and $3.20 per share in 2010 on January 1 of each year. During fiscal
        2008, Dr. Hearn elected not to take any cash compensation, only non-cash
        in the
        form of warrants. The Board of Directors also approved a contract for Mr.
        David
        Sindalovsky, Chief Engineer. Under the terms of the agreement, Mr. Sindalovsky
        is compensated 200,000 common shares per year. Mr. Sindalovsky has a one
        year
        contract that expires September 15, 2009. In addition, the Board of Directors
        approved a contract for Mr. John Grippo, Chief Financial Officer. Under the
        terms of this contract, Mr. Grippo receives cash compensation of $4,500 plus
        the
        equivalent of $7,500 in restricted common stock per month. Mr. Grippo’s contract
        expires December 31, 2009.
 
 On
        April
        1, 2008, the Company agreed to settle all obligations due to Dr. Bruce Reeves,
        Assuretec Systems, Inc., Assuretec Holdings, Inc., Robertson Financial Advisors,
        LLC and RT Robertson Consultants, Inc. The Company issued 100,000 common
        shares
        with a fair value of $240,000 in return for full settlement.
  Page
            9
 
 **Status
        of Any Publicly Announced New Product or Service**
 
 The
        Company’s website, at *www.e21sports.com*  *,* contains
        its press releases and financial reports as well as independent test results
        of
        the Company’s shafts and rods against the leading high-performance products in
        the world. For additional information or earlier press releases go to any
        website’s financial bulletin board for Element 21 Golf Company (OTCBB
        ETGF).
 
 **Competitive
        Business Conditions**
  The
        Company’s competitors include all major manufacturers of golf clubs, shafts and
        related equipment, as well as fishing tackle manufacturers. Many of these
        competitors currently have greater resources, marketing capabilities and
        name
        recognition. However, the Company believes that it would be impossible for
        a
        competitor to use scandium alloys in golf club or nano-Bio-fiber technology
        in
        fishing rods production without infringing on the US patents exclusively
        licensed to Element 21. The marketing and branding of Scandium and Carrot
        StixTM
has also received a high volume of world-wide media coverage.
 
 **Patents,
        Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor
        Contracts**
 
 The
        Company does not hold direct title to any patents. However, when it acquired
        Element 21, it acquired the exclusive right to use, produce and sell a specified
        range of Scandium alloy for golf club shafts and golf heads. Although these
        rights do not cover all mixes of Scandium alloy, the Company believes that
        any
        scandium alloy outside the range of its patent protected rights cannot be
        used
        to produce golf club shafts or heads in an economically feasible manner.
        The
        golf applications under these patent rights acquired by us in the Element
        21
        Acquisition are U. S. Patent Nos. 5,597,529 issued on January 28, 1997, and
        5,620,662, issued on April 15, 1997, initially filed by Ashurst Technologies,
        Inc. and acquired on January 7, 2001 by Nataliya Hearn and David
        Sindalovsky.
 
 On
        June
        21, 2007, the Company entered into a non-exclusive, world-wide patent license
        with Advanced Light Alloys Corporation (Advanced) by which Element 21 was
        licensed by Advanced to make, use, and sell fishing equipment utilizing certain
        of Advanced’s patents. The Company is obligated to pay a 20% royalty based on
        the net selling price of all fishing products. Advanced is a Barbados
        corporation that is wholly owned by Mr. David Sindalovsky, the chief engineer
        and a consultant to the Company.
 
 **Research
        and Development**
 
 During
        the fiscal years ended 2008 and 2007 there were no research and development
        costs incurred by the Company. To date, the Company has relied on its
        consultants and their existing infrastructure to develop its initial products
        and has reflected these costs as operating costs.
 
 **Effects
        of Existing or Probable Governmental Regulations**
 
 ***Penny
        Stock***
 
 Our
        common stock is considered “penny stock” as defined in Rule 3a51-1 of the
        Securities and Exchange Commission (“SEC”). Penny stocks are
        stocks:
 ·
              with
                  a price of less than five dollars per
                  share;
 ·
              that
                  are not traded on a “recognized” national
                  exchange;
 ·
              whose
                  prices are not quoted on the NASDAQ automated quotation system;
                  or
 ·
              in
                  issuers with net tangible assets less than $2,000,000, if the issuer
                  has
                  been in continuous operation for at least three years, or $5,000,000,
                  if
                  in continuous operation for less than three years, or with average
                  revenues of less than $6,000,000 for the last three
                  years.
 
 Section
        15(g) of the Exchange Act and Rule 15g-2 of the Securities and Exchange
        Commission require broker/dealers dealing in penny stocks to provide potential
        investors with a document disclosing the risks of penny stocks and to obtain
        a
        manually signed and dated written receipt of the document before making any
        transaction in a penny stock for the investor’s account. You are urged to obtain
        and read this disclosure carefully before purchasing any of our
        shares.
 
 Rule
        15g-9 of the Securities and Exchange Commission requires broker/dealers in
        penny
        stocks to approve the account of any investor for transactions in these stocks
        before selling any penny stock to that investor. This procedure requires
        the
        broker/dealer to:
 
 ·
              get
                  information about the investor’s financial situation, investment
                  experience and investment goals;
 ·
              reasonably
                  determine, based on that information, that transactions in penny
                  stocks
                  are suitable for the investor and that the investor can evaluate
                  the risks
                  of penny stock transactions;
  Page
            10
  ·
              provide
                  the investor with a written statement setting forth the basis on
                  which the
                  broker/dealer made his or her determination;
                  and
 ·
              receive
                  a signed and dated copy of the statement from the investor, confirming
                  that it accurately reflects the investors’ financial situation, investment
                  experience and investment goals.
 
 Compliance
        with these requirements may make it harder for our stockholders to resell
        their
        shares.
 
 You
        may
        read and copy any materials filed with the SEC at the SEC’s Public Reference
        Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
        information on the operation of the Public Reference Room by calling the
        SEC at
        1-800-SEC-0330. The SEC maintains an internet site that contains reports,
        proxy
        and information statements, and other information regarding issuers that
        file
        electronically with the SEC at *www.sec.gov*  ** .
 
 **ITEM
        2.****DESCRIPTION
        OF PROPERTY**
 The
        Company’s offices are located at 200 Queens Quay East, Unit #1, Toronto, Canada.
        The space is leased from Queens Quay Investments, Inc. pursuant to a three
        year
        lease ending in April, 2009. The lease calls for monthly payments of $1,927
        plus
        GST for finished offices measuring a total of approximately 1,927 square
        feet.
 
 In
        order
        to have a presence in the US, the Company also shares office space in Jersey
        City, New Jersey for which it pays $250 per month in rent under a month to
        month
        agreement.
 
 The
        Company’s inventory is currently managed by Professional Marketing Associates
“PMA”), located in Tempe Arizona. PMA provides complete assembly facilities,
        warehousing, and shipping and receiving capabilities.
 
 **ITEM
        3.**  **LEGAL
        PROCEEDINGS**
 
 We
        are
        not a party to any pending legal proceedings, our property is not the subject
        of
        a pending legal proceeding and to the knowledge of our management, and no
        proceedings are presently contemplated against us by any federal, state or
        local
        governmental agency.
 
 Further,
        to the knowledge of our management, no director or executive officer is party
        to
        any action in which any has an interest adverse to us.
 
 **ITEM
        4.**  **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None
  Page
            11
  **PART
        II**
 
 **ITEM
        5.****MARKET
        FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**
 
 **Market
        Information**
 
 There
        has
        never been any established trading market for our shares of common stock
        and
        there is no assurance that a trading market will develop. Our common stock
        is
        presently quoted on the Over-the-Counter Bulletin Board (“OTCBB”) of the
        National Association of Securities Dealers under the symbol “ETGF” as reflected
        below. No assurance can be given that any market for our common stock will
        develop in the future or be maintained. If an established trading market
        ever
        develops in the future, the sale of our common stock pursuant to Rule 144
        of the
        Securities and Exchange Commission, or otherwise, by members of our management
        or others may have a substantial adverse impact on any such market.
 
 The
        range
        of high and low bid quotations for our common stock during each of the last
        two
        fiscal years and the most recent interim quarter is shown below. Prices shown
        in
        the table below (reflective of the 1 for 20 reverse split effective April
        25,
        2008) represent inter-dealer quotations, without adjustment for retail markup,
        markdown, or commission, and do not necessarily represent actual
        transactions.
  **High**
              
              **Low****Fiscal
                  Year Ended June 30, 2007**First
                  Quarter
              
              $
              4.00
              
              $
              3.20Second
                  Quarter
              
              $
              5.00
              
              $
              3.40Third
                  Quarter
              
              $
              4.00
              
              $
              3.20Fourth
                  Quarter
              
              $
              3.80
              
              $
              2.80**Fiscal
                  Year Ended June 30, 2008**First
                  Quarter
              
              $
              5.00
              
              $
              2.40Second
                  Quarter
              
              $
              4.40
              
              $
              3.00Third
                  Quarter
              
              $
              3.40
              
              $
              2.40Fourth
                  Quarter
              
              $
              3.00
              
              $
              1.40**Interim
                  Period Ended September 21, 2008**
              
              $
              1.20
              
              $
              0.60
 
 **Holders**
 
 The
        number of record holders of our common stock as of September 21, 2008 was
        approximately 1969.
 
 **Dividends
        and Stock Splits**
 
 At
        a
        Special Meeting of the Company’s stockholders on May 8, 2006, the stockholders
        approved a resolution unanimously adopted by the Board of Directors to authorize
        a series of 19 separate amendments to the Company's Certificate of Incorporation
        in order to effect a reverse stock split of the outstanding shares of the
        Company's common stock at each ratio of a minimum of 1 for 2, a maximum of
        1 for
        20, and at a ratio equal to 1 for each whole number between 2 and 20. The
        Board
        of Directors was thereby given the discretion to unilaterally determine an
        appropriate stock split ratio within a range of 1 for 2 and 1 for 20 and
        to give
        effect to the corresponding amendment of the Company's Certificate of
        Incorporation which effects such stock split and to abandon each other amendment
        adopted relating to the reverse stock split. On April 25, 2008, a reverse
        split
        of 1 for 20 was effected and all share and per share data reflected in this
        Annual Report has been retroactively restated to reflect this reverse stock
        split.
 
 We
        have
        not paid any cash dividends on our common stock, and it is not anticipated
        that
        any cash dividends will be paid in the foreseeable future. The Board of
        Directors intends to follow a policy of using retained earnings, if any,
        to
        finance our growth. The declaration and payment of dividends in the future
        will
        be determined by the Board of Directors in light of conditions then existing,
        including our earnings, if any, financial condition, capital requirements
        and
        other factors.
 
 **Recent
        Sales of Unregistered Securities**
 
 In
        February 2006, the Company issued a warrant to purchase 50,000 shares of
        the
        Company's common stock at a price of $0.20 as part of the Company's repayment
        of
        outstanding indebtedness to a creditor of the company. The warrants vested
        immediately and are exercisable for a three year period from the date of
        issuance.
  Page
            12
  Between
        January 17 and March 6, 2006, the Company issued 10% Convertible Promissory
        Notes in the aggregate principal face amount of $540,000 to 15 individual
        investors. Each such investor also received three separate warrants (a warrant
        exercisable for one year, a warrant exercisable for two years, and a warrant
        exercisable for three years) to purchase shares of the Company's common stock
        entitling the investor to invest an amount equal to the investor’s investment in
        the Notes in additional shares of the Company's common stock subject to certain
        price adjustments. The Notes mature one year after issuance and accrue interest
        at an annual interest rate equal to 10% per annum, payable at maturity. During
        the year ended June 30, 2007, notes totaling $75,000 plus accrued interest
        of
        $7,500 were converted into 24,265 shares of common stock and two $20,000
        notes
        and all related warrants were cancelled and the proceeds returned to the
        investors. $225,000 of the notes matured and was paid, along with the requisite
        accrued interest of 10% per annum and the original one year warrants expired
        without being exercised. The remaining $200,000 of notes was extended to
        July
        15, 2007, including the rights to convert the note and the one year warrant.
        Shortly before June 30, 2007, the holder of this note gave up all his warrants
        in return for early repayment of the note.
  Between
        May 5 and June 29, 2006, the Company issued 10% Convertible Promissory Notes
        in
        the aggregate principal face amount of $623,000 to 16 individual investors
        (the
“$623,000 Notes”). Each such investor also received warrants, exercisable for
        one year, to purchase shares of the Company's common stock entitling the
        investor to invest an amount equal to 150% of the investor’s investment in the
        Notes in additional shares of the Company's common stock subject to certain
        price adjustments. The Notes mature one year after issuance and accrue interest
        at an annual interest rate equal to 10% per annum, payable at maturity. During
        the year ended June 30, 2007, notes totaling $300,000 in principal plus $30,000
        in accrued interest were converted into 110,000 shares of common stock. During
        the month of July, 2006, the Company issued additional 10% Convertible
        Promissory Notes in the aggregate principal face amount of $180,000 to 6
        additional investors. The terms of the notes and warrants are identical to
        the
        $623,000 Notes.
 
 In
        February 2006 the Company issued an aggregate of 2,113,556 shares of newly
        designated Series A Convertible Preferred Stock in order to settle outstanding
        debts owed to officers and consultants of the Company (a portion of which
        were
        unpaid consulting fees) in the aggregate amount of $2,113,556. The shares
        of
        Series A Convertible Preferred Stock are convertible at the option of the
        holder
        at any time after issuance. Each share of Series A Convertible Preferred
        Stock
        is convertible into that number of shares of common stock of the Company
        as is
        equal to the original issue price of shares of Series A Convertible Preferred
        Stock, or $1.00, divided by the conversion price which is equal to $5.10
        and is
        subject to adjustment in certain cases. Each share of Series A Convertible
        Preferred Stock carries with it the right to fifty votes.
 
 On
        July
        31, 2006, the Company sold an aggregate of 117,646 shares of Series B
        Convertible Preferred Stock (the “Series B Preferred Stock”) and issued warrants
        to purchase an aggregate of 882,353 shares of common stock for an aggregate
        purchase price of $2,000,000. The Company paid 15% commissions to Futon
        Investment Ltd. in connection with its issuance of shares of Series B Preferred
        Stock and the accompanying warrants. The shares of Series B Preferred Stock
        are
        convertible into shares of Common Stock at the election of the Purchasers.
        Each
        share of Series B Preferred Stock is initially convertible into 5 shares
        of
        Common Stock, with such conversion ratio subject to adjustment in the event
        of
        dilutive issuances, stock splits, combinations, certain dividends and
        distributions, and mergers, reorganizations or other similar recapitalization
        events. The warrants may be exercised in whole or in part for shares of Common
        Stock upon payment by the Purchasers of the applicable exercise price in
        cash
        prior to the expiration of the warrants on January 31, 2009. On November
        30,
        2007 the Company sold an aggregate of 117,646 shares of Series B Convertible
        Preferred Stock (the “Series B Preferred Stock”) and issued warrants to purchase
        an aggregate of 882,353 shares of common stock for an aggregate purchase
        price
        of $2,000,000. The terms of the Series B Preferred Stock and the warrants
        were
        identical to the sale on July 31, 2006.
 
 Between
        June 5, 2007 and June 10, 2007, the Company entered into Subscription Agreements
        with four individuals, each of whom is an accredited investor, pursuant to
        which
        the Company agreed to sell an aggregate of 117,824 shares of the Company’s
        common stock, par value $0.20 per share. The price per share under the
        Subscription Agreements is $3.40. Each Investor also received a warrant to
        purchase shares of the Company’s common stock in an amount up to the number of
        shares purchased. The exercise price of each warrant is $3.80 and expires
        on May
        31, 2008. The Company has granted the investors piggyback registration rights
        (subject to certain limitations).
 On
        June
        15, 2007, the Company consummated a $2,000,000 equity financing by entering
        into
        two Series B Preferred Stock Subscription Agreements (each a “Series B
        Subscription Agreement” and collectively the “Series B Subscription Agreements”)
        with each of Vladamir Goryunov and Clearline Capital, LLC (each a “Purchaser”
and collectively, the “Purchasers”). Each Series B Subscription Agreement
        provides for the sale by the Company to the applicable Purchaser 58,824 shares
        of the Company’s Series B Convertible Preferred Stock, par value $0.10 per share
        (the “Series B Preferred Stock”), and warrants to purchase an aggregate of
        294,120 shares of the Company’s Common Stock, $.01 par value per share, in
        exchange for and in consideration of an aggregate investment by each of the
        Purchasers of $1 million in cash.
 
 All
        of
        the above securities issuances were made upon reliance on the exemption from
        the
        Securities Act registration requirements contained in Section 4(2) of the
        Securities Act of 1933 and pursuant to Regulation D promulgated
        thereunder.
  Page
            13
 
 **Securities
        Authorized for Issuance Under Equity Compensation Plans**
 Equity Compensation Plan InformationPlan Category
                
                Number of Securities to
                  be Issued Upon
                  Exercise of Outstanding
                  Options, Warrants and
                  Rights
                
                Weighted-Average
                  Exercise Price of
                  Outstanding Options,
                  Warrants and Rights
                
                Number of Securities
                  Remaining Available
                  for Future Issuance
                  under Equity
                  Compensation Plans
                  (Excluding Securities
                  Reflected in Column )*Equity
                    compensation plans approved by security holders
                
                
                
                
                
                0
                
                
                
                
                
                N/A
                
                
                
                
                
                N/AEquity
                    compensation plans not approved by security holders
                
                
                
                
                
                1,025,342
                
                $
                1.36
                
                
                1,025,342
                
                $
                0.68
                
                
                1,020,000Total
                
                
                
                
                
                1,025,342
                
                $
                1.36
                
                
                1,025,342
                
                $
                0.68
                
                
                1,020,000
  *
        At
        September 21, 2008
  **ITEM
        6.**  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
 
 **Overview**
 
 Through
        July 2007, the Company was able to secure funding from several sources in
        the
        aggregate amount of approximately $7 million. These financings allowed the
        Company to develop distribution channels for its products. The Company has
        established a sales structure with internal and field sales representatives,
        who
        manage current sales and have been actively building the foundation of sales
        and
        distribution systems for the Company’s products. To date, for its golf products,
        the Company has introduced them through retailers, green grass (on course
        PGA
        shops) sales, golf shows, catalogue sales, web-sales, and PGMC and their
        shaft
        distribution sale channels The Company needs to increase consumer awareness
        of
        the scandium advantages in golf, in order to increase the demand for its
        sales.
        In order to accomplish these goals, the Company has entered a number of
        endorsement contracts and completed the production of an infomercial featuring
        the Company’s hybrid clubs which began airing on the Golf Channel in early
        summer, 2008. The Company launched its fishing line in December, 2007 and
        has
        experienced significant initial demand for this product. The first fishing
        product developed was focused on various freshwater specialty rods and the
        Company currently intends to expand that line as well as venturing into
        saltwater rods in fiscal 2009.
 
 **Fiscal
        2008 Compared to Fiscal 2007**
 
 During
        fiscal year 2008, we had $1,841,370 in revenues as compared to $228,599 in
        revenues during fiscal year 2007. The increase in revenues was primarily
        a
        result of the launch of the fishing line in fiscal year 2008. During fiscal
        year
        2008, our costs of sales were **** $1,478,968
        compared to $191,628 for the prior year. During fiscal year 2008, our general
        and administrative costs were $5,610,015. These general and administrative
        costs
        primarily consist of marketing costs, including trade shows, legal and
        accounting expenses necessary to maintain the Company’s reporting requirements
        to be a publicly traded entity, and consulting fees which was satisfied
        primarily through the issuance of our common stock. During fiscal 2007, general
        and administrative expenses aggregated $7,127,430 and consisted primarily
        of
        similar expenses. The decrease in general and administrative expenses in
        fiscal
        2008 from 2007 was primarily due to the reduction in the number of consultants
        utilized by the company as well as a decrease in the stock price for those
        consultants paid in common shares. Additionally, the marketing costs associated
        with the launch of the golf ball into the Earth’s orbit in November 2006, and
        print media advertising in various golf magazines significantly increased
        the
        Company’s marketing expenses in fiscal 2007, which expenses were not incurred in
        fiscal year 2008 . Net
        loss
        for fiscal 2008 was $2,855,341 ($0.44 per share) as compared to a net loss
        of
        $4,002,650 ($0.73 per share before the effect of the preferred stock dividend)
        for fiscal 2007. The decrease in the net loss is largely attributable to
        the
        increased gross margin from increased revenue, lower selling, general and
        administrative expenses and a decrease in the amount of interest expense
        related
        to the term loans issued in 2006 and 2007 offset by lower non-cash derivative
        income adjustments in 2008 related to lower stock prices and expiring
        warrants.
 
 **Liquidity
        and Capital Resources**
 
 From
        our
        inception through the end of fiscal year 2008, our primary source of funds
        has
        been the proceeds from private offerings of our common stock and advances
        from
        Dr. Hearn, other consultants, related parties and loans from stockholders.
          The Company’s need to obtain capital from outside investors is expected
        to continue until we are able to achieve profitable operations, if ever.
        There
        is no assurance that management will be successful in fulfilling all or any
        element of its plans. The failure to achieve these plans will have a material
        adverse effect on our Company’s financial position, results of operations and
        ability to continue as a going concern. As noted in our auditor’s report dated
        September 29, 2008, there is substantial doubt about our Company’s ability to
        continue as a going concern.
  Page
            14
  During
        fiscal 2008, we utilized $1,477,309 in cash for our operations compared to
        having utilized $3,994,796 for operations in fiscal 2007. The decrease was
        due
        primarily to lowered spending on sales and marketing as well as the derivative
        liability revaluation. For fiscal 2008, funds generated from financing sources
        aggregated $575,406 compared to $5,556,519 generated in fiscal 2007. During
        fiscal 2008, the Company received $450,000 from the sale of common stock
        and
        warrants, and a net amount of $825,000 in proceeds from a short-term loan,
        while
        repaying $475,000 in convertible notes, versus receiving $6,000,000, $400,600
        and $180,000, respectively, in fiscal 2007 from the issuance of preferred
        stock,
        common stock and convertible notes offset by repayments of $493,000 in
        convertible notes. The Company incurred $78,673 in fixed asset purchases
        in
        fiscal 2008 compared to $73,764 in fiscal 2007.
  **Recent
        Accounting Pronouncements affecting the Company**
 
 In
        October 2006, the FASB issued SFAS No. 157, *“Fair
        Value Measurements”* ,
        which
        provides guidance for using fair value to measure assets and liabilities.
        The
        pronouncement clarifies (1) the extent to which companies measure assets
        and liabilities at fair value; (2) the information used to measure fair
        value; and (3) the effect that fair value measurements have on earnings.
        SFAS No. 157 will apply whenever another standard requires (or
        permits) assets or liabilities to be measured at fair value.
        SFAS No. 157 is effective for the Company as of July 1, 2008. Our
        adoption of SFAS 157 is not expected to have a material impact on our results
        of
        operations or financial position.
 
 In
        February 2007, the FASB issued SFAS No. 159, *“The
        Fair Value Option for Financial Assets and Financial Liabilities Including
        an
        Amendment of FASB Statement No. 115”* .
        SFAS No. 159 permits entities to choose to measure many financial
        instruments and certain other items at fair value that are not currently
        required to be measured at fair value. This statement also establishes
        presentation and disclosure requirements designed to facilitate comparisons
        between entities that choose different measurement attributes for similar
        types
        of assets and liabilities. SFAS No. 159 is effective for fiscal years
        beginning after November 15, 2007. Our adoption of SFAS 159 is not expected
        to have a material impact on our results of operations or financial
        position.
 
 In
        March
        2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
        Instruments and Hedging Activities. The new standard is intended to improve
        financial reporting about derivative instruments and hedging activities by
        requiring enhanced disclosures to enable investors to better understand their
        effects on an entity’s financial position, financial performance, and cash
        flows. It is effective for financial statements issued for fiscal years and
        interim periods beginning after November 15, 2008, with early application
        encouraged. Our adoption of SFAS 161 is not expected to have a material impact
        on our results of operations or financial position.
 
 In
        May
        2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
        Accounting Principles”. The new standard is intended to improve financial
        reporting by identifying a consistent framework, or hierarchy, for selecting
        accounting principles to be used in preparing financial statements that are
        presented in conformity with U.S. generally accepted accounting principles
        (GAAP) for nongovernmental entities. Prior to the issuance of SFAS 162, GAAP
        hierarchy was defined in the American Institute of Certified Public Accountants
        (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present
        Fairly in Conformity With Generally Accepted Accounting Principles. SFAS
        162 is
        effective 60 days following the SEC’s approval of the Public Company Accounting
        Oversight Board Auditing amendments to AU Section 411, The Meaning of Present
        Fairly in Conformity with Generally Accepted Accounting Principles. Our adoption
        of SFAS 162 is not expected to have a material impact on our results of
        operations or financial position.
 
 **Critical
        Accounting Policies**
 
 The
        Company’s discussion and analysis of its financial condition and results of
        operations are based upon the Company’s consolidated financial statements, which
        have been prepared in accordance with accounting principles generally accepted
        in the United States. The preparation of these consolidated financial statements
        requires the Company to make estimates and judgments that affect the reported
        amounts of assets, liabilities, revenues and expenses and related disclosure
        of
        contingent assets and liabilities. The Company bases its estimates on historical
        experience and on various other assumptions that are believed to be reasonable
        under the circumstances, the results of which form the basis for making
        judgments about the carrying values of assets and liabilities that are not
        readily apparent from other sources. Actual results may differ from these
        estimates under different assumptions or conditions.
 
 The
        Company believes the following critical accounting policies affect its more
        significant judgments and estimates used in the preparation of its consolidated
        financial statements.
 
 ***Stock-Based
        Compensation:***
 
 The
        Company accounts for stock-based employee compensation arrangements in
        accordance with the provisions of *Statement
        of Financial Accounting Standards No* .
        123(R),
        Shared-Based Payments (FAS 123(R)). Under FAS 123(R), compensation cost is
        calculated on the date of the grant using the Black Scholes-Merton
        option-pricing formula. The compensation expense is then amortized over the
        vesting period. The Company uses the Black-Scholes-Merton option-pricing
        formula
        in determining the fair value of the Company’s options at the grant date and
        applies judgment in estimating the key assumptions that are critical to the
        model such as the expected term, volatility and forfeiture rate of an option.
        The Company’s estimate of these key assumptions is based on historical
        information and judgment regarding market factors and trends. If actual results
        are not consistent with the Company’s assumptions and judgments used in
        estimating the key assumptions, the Company may be required to record additional
        compensation or income tax expense, which could have a material impact on
        the
        Company’s financial position and results of operations.
  Page
            15
  ***Allowance
        for Doubtful Accounts:***
 
 The
        Company maintains allowances for doubtful accounts for estimated losses
        resulting from the inability of its customers to make required payments.
        If the
        financial condition of the Company’s customers were to deteriorate, resulting in
        an impairment of their ability to make payments, additional allowances may
        be
        required, which would be charged against earnings.
 
 ***Income
        Taxes***
 
 As
        part
        of the process of preparing our consolidated financial statements, we are
        required to estimate our income taxes in each of the jurisdictions in which
        we
        operate.  This process involves estimating the actual current tax
        liabilities together with assessing temporary differences resulting from
        differing treatment of items for tax and accounting purposes.  These
        differences result in deferred tax assets and liabilities, which are included
        within the consolidated balance sheet.  The most significant tax assets are
        available net operating loss carryforwards. .  We must then assess the
        likelihood that the deferred tax assets will be recovered from future taxable
        income and, to the extent we believe that recovery is not likely, a valuation
        allowance must be established.  To the extent we establish a valuation
        allowance or increase or decrease this allowance in a period, the impact
        will be
        included in the tax provision in the statement of operations.  Significant
        management judgment is required to determine our provision for income taxes
        and
        the recoverability of the deferred tax asset.  It is based on our estimates
        of future taxable income by jurisdiction in which we operate and the period
        over
        which the deferred tax assets will be recoverable.  In the event that
        actual results differ from these estimates or we adjust these estimates in
        future periods, a valuation allowance may need to be established which could
        result in a tax provision equal to the carrying value of the deferred tax
        assets.
 
 ***Property
        and Equipment***
 
 We
        record
        property and equipment at cost and depreciate that cost over the estimated
        useful life of the asset on a straight-line basis. Ordinary maintenance and
        repairs are expensed as incurred and improvements that significantly increase
        the useful life of property and equipment are capitalized.
 
 We
        test
        property and equipment for impairment whenever events or changes in
        circumstances indicate that the carrying value of an asset may not be
        recoverable. Recoverability of assets to be held and used is measured by
        a
        comparison of the carrying amount of the asset to future net cash flows expected
        to be generated by the asset. If such assets are deemed to be impaired, the
        impairment to be recognized is measured by the amount by which the carrying
        amount of the assets exceeds the fair value of the assets based on the projected
        net cash flows discounted at a rate commensurate with the risk of the
        assets.
 
 **Risk**  **Factors**
 
 ***We
        have a limited operating history and a history of substantial operating losses
        and we may not be able to continue our business.***
 
 We
        have a
        history of substantial operating losses and an accumulated deficit of
        $24,070,567 as of June 30, 2008 and negative working capital of $960,821.
        For
        the year ended June 30, 2008, our net loss was $2,855,341. We have historically
        experienced cash flow difficulties primarily because our expenses have exceeded
        our revenues. We expect to incur additional operating losses for the immediate
        near future. These factors, among others, raise significant doubt about our
        ability to continue as a going concern. If we are unable to generate sufficient
        revenue from our operations to pay expenses or we are unable to obtain
        additional financing on commercially reasonable terms, our business, financial
        condition and results of operations will be materially and adversely
        affected.
 
 ***We
        will need additional financing in order to continue our operations which
        we may
        not be able to raise.***
 
 We
        will
        require additional capital to finance our future operations.  We can
        provide no assurance that we will obtain additional financing sufficient
        to meet
        our future needs on commercially reasonable terms or otherwise.  If we
        are unable to obtain the necessary financing, our business, operating results
        and financial condition will be materially and adversely affected.
 
 ***We
        have only three employees and our success is dependent on our ability to
        retain
        and attract consultants to operate our business and there is no assurance
        that
        we can do so.***
 
 As
        discussed earlier, as of June 30, 2008, we have three employees and utilize
        the
        services of consultants.  Our consultants are bound by non-compete
        provisions; however, they are not otherwise prohibited from terminating their
        consulting relationship with the Company. The loss of the knowledge and
        management and industry expertise of any of these key consultants could have
        a
        material adverse impact on our future prospects, in particular Dr. Hearn
        and
        David Sindalovsky, who have played a key role in developing scandium technology
        for golf applications. Once we are sufficiently capitalized, we will need
        to
        recruit new executive managers and hire employees to help us execute our
        business strategy and help manage the growth of our business. Our business
        could
        suffer if we were unable to attract and retain additional highly skilled
        personnel or if we were to lose any key personnel and not be able to find
        appropriate replacements in a timely manner.
  Page
            16
  ***Our
        performance depends on market acceptance of our products and we cannot be
        sure
        that our products are commercially viable.***
 
 We
        expect
        to derive a substantial portion of our future revenues from the sales of
        Element
        21 alloy golf shafts that are only now entering the initial marketing phase.
        Although we believe our products and technologies will be commercially viable,
        these are new and untested products.  If markets for our products fail
        to develop further, develop more slowly than expected or are subject to
        substantial competition, our business, financial condition and results of
        operations will be materially and adversely affected.
 
 ***We
        depend on strategic marketing relationships and if we fail to maintain or
        establish them, our business plan may not succeed.***
 
 We
        expect
        our future marketing efforts will focus in part on developing business
        relationships with distributors that will market our products to their
        customers. The success of our business depends on selling our products and
        technologies to a large number of distributors and retail
        customers.
 
 ***Competition
        from traditional golf equipment providers may increase and we may not be
        able to
        adequately compete.***
 
 The
        market for golf shafts is highly competitive.  There are a number of
        other established providers that have greater resources, including more
        extensive research and development, marketing and capital than we do and
        also
        have greater name recognition and market presence.  These competitors
        could reduce their prices and thereby decrease the demand for our products
        and
        technologies.  We expect competition to intensify in the future, which
        could also result in price reductions, fewer customer and lower gross
        margins.
 
 ***Rapidly
        changing technology and substantial competition may adversely affect our
        business.***
 
 Our
        business is subject to rapid changes in technology.  We can provide no
        assurances that research and development by competitors will not render our
        technology obsolete or uncompetitive.  We compete with a number of
        companies that have technologies and products similar to those offered by
        us and
        have greater resources, including more extensive research and development,
        marketing and capital than we do.  If our technology is rendered
        obsolete or we are unable to compete effectively, our business, operating
        results and financial condition will be materially and adversely
        affected.
 
 ***Litigation
        concerning intellectual property could adversely affect our
        business.***
 
 We
        rely
        on a combination of trade secrets, trademark law, contractual provisions,
        confidentiality agreements and certain technology and security measures to
        protect our trademarks, license, proprietary technology and
        know-how.  However, we can provide no assurance that competitors will
        not infringe upon our rights in our intellectual property or that competitors
        will not similarly make claims against us for infringement.  If we are
        required to be involved in litigation involving intellectual property rights,
        our business, operating results and financial condition will be materially
        and
        adversely affected.
 
 It
        is
        possible that third parties might claim infringement by us with respect to
        past,
        current or future technologies.  We expect that participants in our
        markets will increasingly be subject to infringement claims as the number
        of
        services and competitors in our industry grows.  Any claims, whether
        meritorious or not, could be time-consuming, result in costly litigation
        and
        could cause service upgrade delays or require us to enter into royalty or
        licensing agreements.  These royalty or licensing agreements might not
        be available on commercially reasonable terms or at all.
 
 ***Defects
        in our products may adversely affect our business.***
 
 Complex
        technologies such as the technologies developed by us may contain defects
        when
        introduced and also when updates and new products are released. Our introduction
        of technology with defects or quality problems may result in adverse publicity,
        product returns, reduced orders, uncollectible or delayed accounts receivable,
        product redevelopment costs, loss of or delay in market acceptance of our
        products or claims by customers or others against us. Such problems or claims
        may have a material and adverse effect on our business, financial condition
        and
        results of operations.
 
 ***The
        inability to obtain a sufficient amount of scandium or of scandium alloy
        would
        adversely affect our business.***
 
 Although
        we currently believe that we will continue to be able to have access to
        sufficient amounts of scandium or scandium alloy at feasible prices, there
        is no
        assurance of this, and any failure to be able to obtain a sufficient supply
        of
        scandium at reasonable prices would have a material adverse affect on our
        business.
  Page
            17
  ***The
        large number of shares eligible for public sale could cause our stock price
        to
        decline.***
 
 The
        market price of our common stock could decline as a result of the resale
        of the
        shares of common stock issuable upon conversion of our Series A Preferred
        Stock,
        Series B Preferred Stock and any outstanding convertible promissory notes
        and
        the exercise of outstanding warrants or the perception that these sales could
        occur. These sales also might make it more difficult for us to sell equity
        securities in the future at a time and price that we deem appropriate. The
        conversion of these securities into common stock will also result in substantial
        dilution of the interests of our current stockholders.
 
 ***Our
        stock price can be extremely volatile.***
 
 Our
        common stock is traded on the OTC Bulletin Board. There can be no assurance
        that
        an active public market will continue for the common stock, or that the market
        price for the common stock will not decline below its current price. Such
        price
        may be influenced by many factors, including, but not limited to, investor
        perception of us and our industry and general economic and market conditions.
        The trading price of the common stock could be subject to wide fluctuations
        in
        response to announcements of our business developments or our competitors,
        quarterly variations in operating results, and other events or factors. In
        addition, stock markets have experienced extreme price volatility in recent
        years. This volatility has had a substantial effect on the market prices
        of
        companies, at times for reasons unrelated to their operating performance.
        Such
        broad market fluctuations may adversely affect the price of our common
        stock.
 
 ***Trading
        on the OTC Bulletin Board may be sporadic because it is not a stock exchange,
        and stockholders may have difficulty reselling their
        shares***.
 
 Our
        common stock is quoted on the OTC Bulletin Board. Trading in stock quoted
        on the
        OTC Bulletin Board is often thin and characterized by wide fluctuations in
        trading prices, due to many factors that may have little to do with our
        operations or business prospects. Moreover, the OTC Bulletin Board is not
        a
        stock exchange, and trading of securities on the OTC Bulletin Board is often
        more sporadic than the trading of securities listed on the NASDAQ
        SmallCap.
 
 ***If
        we fail to remain current on our reporting requirements, we could be removed
        from the OTC Bulletin Board which would limit the ability of broker-dealers
        to
        sell our securities and the ability of stockholders to sell their securities
        in
        the secondary market.***
 
 Companies
        trading on the OTC Bulletin Board, such as us, must be reporting issuers
        under
        Section 12 of the Securities Exchange Act of 1934, as amended, and must be
        current in their reports under Section 13, in order to maintain price quotation
        privileges on the OTC Bulletin Board. If we fail to remain current on our
        reporting requirements, shares of our common stock could be removed from
        the OTC
        Bulletin Board. As a result, the market liquidity for our securities could
        be
        severely adversely affected by limiting the ability of broker-dealers to
        sell
        our securities and the ability of stockholders to sell their securities in
        the
        secondary market.
 
 ***Our
        common stock is subject to the “penny stock” rules of the SEC and the trading
        market in our securities is limited, which makes transactions in our stock
        cumbersome and may reduce the value of an investment in our
        stock.***
 
 The
        Securities and Exchange Commission has adopted Rule 15g-9 which establishes
        the
        definition of a “penny stock,” for the purposes relevant to us, as any equity
        security that has a market price of less than $5.00 per share or with an
        exercise price of less than $5.00 per share, subject to certain exceptions.
        For
        any transaction involving a penny stock, unless exempt, the rules require
        that a
        broker or dealer approve a person's account for transactions in penny stocks
        and
        the broker or dealer receive from the investor a written agreement to the
        transaction, setting forth the identity and quantity of the penny stock to
        be
        purchased.
 
 In
        order
        to approve a person's account for transactions in penny stocks, the broker
        or
        dealer must obtain financial information and investment experience objectives
        of
        the person and make a reasonable determination that the transactions in penny
        stocks are suitable for that person and the person has sufficient knowledge
        and
        experience in financial matters to be capable of evaluating the risks of
        transactions in penny stocks.
 
 The
        broker or dealer must also deliver, prior to any transaction in a penny stock,
        a
        disclosure schedule prescribed by the Commission relating to the penny stock
        market, which, in highlight form sets forth the basis on which the broker
        or
        dealer made the suitability determination and that the broker or dealer received
        a signed, written agreement from the investor prior to the
        transaction.
 
 Generally,
        brokers may be less willing to execute transactions in securities subject
        to the
“penny stock” rules. This may make it more difficult for investors to dispose of
        our common stock and cause a decline in the market value of our
        stock.
 
 Disclosure
        also has to be made about the risks of investing in penny stocks in both
        public
        offerings and in secondary trading and about the commissions payable to both
        the
        broker-dealer and the registered representative, current quotations for the
        securities and the rights and remedies available to an investor in cases
        of
        fraud in penny stock transactions. Finally, monthly statements have to be
        sent
        disclosing recent price information for the penny stock held in the account
        and
        information on the limited market in penny stocks.
  Page
            18
  ***We
        do not expect to pay dividends on our common stock.***
 
 We
        have
        not declared dividends on our common stock since our incorporation and we
        have
        no present intention of paying dividends on our common stock. The Company
        is
        prohibited from paying dividends on common stock as long as there are any
        unpaid
        accrued dividends due to the Series B Convertible Stock
        shareholders.
 
 **MANY
        OF THESE RISKS AND UNCERTAINTIES ARE OUTSIDE OF OUR CONTROL AND ARE DIFFICULT
        FOR US TO FORECAST. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
        OR
        IMPLIED IN THE FORWARD-LOOKING STATEMENTS.**
 
 **ITEM
        7**  **FINANCIAL
        STATEMENTS**
 
 The
        Consolidated Financial Statements and schedules that constitute Item 7 are
        attached at the end of this Annual Report on Form 10-KSB.
 
 **ITEM
        8.****CHANGES
        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 None
 
 **ITEM
        8A.****CONTROLS
        AND PROCEDURES**
 
 ***Disclosure
        Controls and Procedures***
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed by the Company and its
        subsidiary in the reports it files or submits under the Securities Exchange
        Act
        of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported
        within the time periods specified by the Commission’s rules and forms.
        Disclosure controls and procedures include, without limitation, controls
        and
        procedures designed to provide reasonable assurance that information required
        to
        be disclosed the Company in the reports it files or submits under the Exchange
        Act is accumulated and communicated to management, including the Chief Executive
        Officer and Chief Financial Officer, as appropriate, to allow timely decisions
        regarding required disclosure. Based on their evaluation as of June 30, 2008,
        our management, including the Chief Executive Officer and Chief Financial
        Officer, have concluded that our disclosure controls and procedures (as defined
        in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) were
        effective..
 
 ***Management’s
        Annual Report on Internal Control Over Financial
        Reporting***
 Our
        management, including the Chief Executive Officer and Chief Financial Officer
        are responsible for establishing and maintaining an adequate system of internal
        control over financial reporting, as such term is defined in Exchange Act
        Rules
        13a -15(f) and 15d-15(f). Our internal control system was designed to provide
        reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of financial statements for external purposes, in accordance
        with
        accounting principles generally accepted in the United States of America.
        All
        internal control systems, no matter how well designed, have inherent
        limitations. Because of these inherent limitations, internal control over
        financial reporting may not prevent or detect all misstatements. Our management,
        including the Chief Executive Officer and Chief Financial Officer, have
        conducted an evaluation of the effectiveness of its internal control over
        financial reporting as of June 30, 2008 based on the framework in Internal
        Control - Integrated Framework issued by the Committee of Sponsoring
        Organizations of the Treadway Commission. Based on our evaluation under the
        criteria set forth in Internal Control - Integrated Framework, our management
        concluded that our internal control over financial reporting was effective
        as of
        June 30, 2008.
 
 ***Attestation
        Report of the Registered Public Accounting Firm***
 This
        annual report does not include an attestation report from our registered
        independent public accounting firm, regarding internal control over financial
        reporting. Management’s report was not subject to attestation pursuant to
        temporary rules of the SEC that permits the Company to provide only management’s
        report.
 
 ***Changes
        in Internal Control over Financial Reporting***
 There
        were no changes in our internal controls over financial reporting during
        our
        last fiscal quarter that have materially affected, or are reasonably likely
        to
        materially affect, our internal control over financial reporting.
  **ITEM
        8B.**  **OTHER
        INFORMATION**
 
 None.
  Page
            19
  **PART
        III**
 
 **ITEM
        9.**  **DIRECTORS,
        EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
        16(a)
        OF THE EXCHANGE ACT**
 
 Identification
        of Directors and Executive Officers
 
 The
        following table sets forth the names and the nature of all positions and
        offices
        held by all directors and executive officers of our Company for the fiscal
        year
        ended June 30, 2008, all of whom are consultants to the Company and not
        employees, and the period or periods during which each such director or
        executive officer has served in his or her respective positions.
  **Name**
              
              **Age**
              
              **Position with the Company**
              
              **Date of Election or Designation**Nataliya
                  Hearn, Ph.D.
              
              41
              
              Chairman,
                  President, CEO and Director
              
              October
                  4, 2002John
                  Grippo
              
              52
              
              CFO
              
              March
                  1, 2006Sergei
                  Bedzouik,Ph.D
              
              51
              
              Director
              
              Jan
                  20, 2007Mary
                  Bryan
              
              56
              
              Director
              
              March
                  15, 2007Benton
                  Wilcoxon
              
              58
              
              Director
              
              June
                  22, 2007
 
 **Term
        of Office**
 
 The
        term
        of office of the current Directors shall continue until the annual meeting
        of
        our stockholders, which is scheduled in accordance with the direction of
        the
        Board of Directors. The annual meeting of our Board of Directors immediately
        follows the annual meeting of our stockholders, at which officers for the
        coming
        year are elected.
 
 **Business
        Experience**
 
 Dr.
        Nataliya Hearn, Ph.D., P.Eng. — Chairman, President and CEO
 Dr.
        Hearn
        has extensive experience in technology transfer, evaluation and acquisitions.
        Dr. Hearn has been responsible for the development, design and production
        of the
        Element 21 high performance golf products. Dr. Hearn has been able to attract
        the current team of experts to take the company to the next level of its
        growth.
        Dr. Hearn holds a Ph.D. in Civil Engineering from University of Cambridge
        and is
        a registered professional engineer.
 
 Benton
        Wilcoxon – Director
 Mr.
        Wilcoxon specializes in the business development, structuring and
        commercialization of advanced technologies, new materials and processes.
        He is
        Chairman and Chief Executive Officer of Composite Technology Corporation,
        an
        Irvine, CA public company that develops, manufactures and sells high performance
        electrical transmission and renewable energy generation products. Mr. Wilcoxon
        is a Director and Chief Technology Consultant of Magnesium Alloy Corporation,
        a
        Canadian company, with cost-effective Russian and Ukrainian magnesium processing
        technologies. He was also one of the founders of Ashurst Technology Corporation
        in 1991, and was instrumental in bringing Scandium alloys to Western
        markets.
 
 Mary
        Bryan – Director
 Ms.
        Bryan
        brings to Element 21 a multi-faceted 30 year background in the golf industry.
        Her experience includes 25 years on the LPGA and Senior LPGA Tours, TV/radio
        golf announcing on major networks, and teaching and conducting golf clinics
        in
        the U.S. and around the world. She has served as a tour representative for
        various companies and has been involved in numerous charity golf fundraisers.
        Ms. Bryan also has experience with public speaking and working with the media.
        Ms. Bryan has performed over 300 golf telecasts for CBS, NBC and ESPN and
        was
        the first woman to cover a men’s major golf event. Ms. Bryan currently is a
        consultant for Links Magazine and Bob Betterton Sports Marketing, and is
        a
        representative for State Farm Insurance. Her teaching experience includes
        the
        position of Administrator and Teacher at Carol Mann Golf Schools for Golf
        Magazine and as Assistant Golf Professional at Paradise Hills Country Club
        in
        Albuquerque NM.
 
 Dr.
        Sergei Bedziouk—Director
 Dr.
        Beziouk has a long and distinguished scientific career, working within the
        Aerospace and advanced science arenas. Dr. Beziouk has 10 years international
        experience in marketing, business development, contract negotiations at senior
        governmental levels as a Commercial & External Relations Director of the
        Space Centre. Additionally, he has acted as the exclusive representative
        of
        major Russian corporations in North America and a number of Swedish and Finnish
        companies that operate in Russia. His background also includes over a decade
        of
        experience as a specialist in the Astronaut Office of the Rocket Space
        Corporation Energia.
 
 John
        Grippo – Chief Financial Officer
 John
        Grippo, CPA brings over 15 years experience as CFO for public and private
        companies focused on the manufacturing, distribution and financial services
        industries ranging in size up to $250 million in revenue. John is a financial
        consultant to several small to medium sized companies, including functioning
        as
        a part time chief financial officer. John graduated from the University of
        Florida, is certified by the state of Connecticut and is a member of the
        New
        York State Society of Certified Public Accountants.
  Page
            20





**Audit
      Committee**




The
      Board
      of Directors serves as the Company’s audit committee. Currently none of the
      Company’s directors qualifies as a “financial expert” pursuant to Item 401 of
      Regulation S-B. The Company has not sought to add a director to its board who
      qualifies as a “financial expert” because although the Company believes it would
      be desirable to have a financial expert on its audit committee, the costs of
      retaining such an expert would be prohibitive, given the Company’s resources at
      this time.





**Compliance
      with Section 16(a) of the Exchange Act**




Each
      of
      the executive officers and directors of the Company were delinquent in filing
      a
      form 3 and/or 4 during the fiscal year.




**Code
      of Ethics**




The
      Company has not yet adopted a code of ethics for its principal executive
      officer, principal financial officer, principal accounting officer or controller
      due to the small number of executive officers involved with the Company and
      due
      to the fact that the Company operates primarily through strategic consultants.
      The Board of Directors will continue to evaluate, from time to time, whether
      a
      code of ethics should be developed and adopted.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth in summary form the compensation of the Company’s
      current Chief Executive Officer and each other executive officer that received
      total salary and bonus exceeding $100,000 since its inception (“Named Executive
      Officers”).




**Summary
      Compensation Table**




The
      following table sets forth the aggregate executive compensation paid by our
      Company for services rendered during the periods indicated (each person is
      referred to in this Item 10 as a “Named Executive Officer”).





**SUMMARY
      COMPENSATION TABLE**





**Long-Term Compensation****Annual Compensation**
            
            **Awards**
            
            **Payouts****(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)**
            
            **(e)**
            
            **(f)**
            
            **(g)**
            
            **(h)**
            
            **(i)****Name and Principal**
              **Position**
            
            **Years of**
              **Periods**
              **Ended**
            
            **$**
              **Salary**
            
            **$**
              **Bonus**
            
            **Other**
              **Annual**
              **Compensation**
            
            **Restricted**
              **Stock**
              **Awards $**
            
            **Option/**
              **SAR’s #**
            
            **LTIP**
              **Payouts**
              **$**
            
            **All Other**
              **Compensation**Nataliya
                Hearn, PhD,
            
            
            06/30/08
            
            
            249,942
            
            
            498,644
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0President,
                CEO and
            
            
            06/30/07
            
            
            255,592
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Director
                (1)
            
            
            06/30/06
            
            
            122,945
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Jim
                Morin, Treasurer and
            
            
            06/30/08
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Secretary
                (2)
            
            
            06/30/07
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            006/30/06
            
            
            125,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0John
                Grippo, Chief
            
            
            06/30/08
            
            
            144,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Financial
                Officer (3)
            
            
            06/30/07
            
            
            141,250
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            006/30/06
            
            
            122,945
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Bill
                Dey, Chief
            
            
            06/30/08
            
            
            247,607
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Operating
                Officer (4)
            
            
            06/30/07
            
            
            469,431
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            006/30/06
            
            
            250,617
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0David
                Sindalovsky
            
            
            06/30/08
            
            
            585,647
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Consultant
                (5)
            
            
            06/30/07
            
            
            730,110
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            006/30/06
            
            
            556,258
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0


Page
          21





(1)
            Nataliya
                Hearn serves as the CEO and President of the Company. In 2008, the
                Company
                granted Dr. Hearn options to purchase 200,000 common shares at a
                purchase
                price of $1.60 per share. Ms. Hearn began serving as an executive
                officer
                of the Company on October 4, 2002. Beginning January 1, 2006, at
                Ms.
                Hearn’s election, she may opt to receive monthly either $15,000 cash
                compensation or $20,000 in warrants at a purchase price of $0.20
                per
                share. Ms. Hearn earned $0, $45,000 and $0 in cash compensation for
                the
                years ended June 30, 2006, 2007 and 2008, respectively. Ms Hearn
                received
                30,822, 56,233 and 122,117 warrants at a purchase price of $0.20
                per share
                valued at $122,945, $185,592 and $249,942 for the years ended June
                30,
                2006, 2007 and 2008, respectively, and 30,304 warrants at a purchase
                price
                of $0.20 per share earned between June 30, 2008 and the issue date
                of this
                Form 10KSB.




(2)
            Mr.
                Morin resigned as an officer of the Company on July 31, 2006. Mr.
                Morin
                received 125,000 shares Series A Convertible Preferred Stock of the
                Company valued at $1 per share in exchange for services rendered
                to the
                Company.




(3)
            Mr.
                Grippo was hired as an executive officer on March 1, 2006. Mr. Grippo
                earned $15,000, $43,500 and $54,000 in cash and $46,875, $97,750
                and
                $90,000 in restricted stock for the years ended June 30, 2006, 2007
                and
                2008, respectively.


(4)
            Mr.
                Dey served as the Company’s Chief Operating Officer from January 2006
                until his termination in November 2007. Mr. Dey was granted 200,000
                and
                100,000 warrants at purchase prices of $1.00 and $1.60, respectively.
                The
                total value of these warrants is $649,156 and was partially amortized
                over
                Mr. Dey’s employment period.(5)
            Mr.
                Sindalovsky was hired as an outside consultant for material sourcing,
                manufacturing, engineering and the Company’s relationship with strategic
                partners in Asia and Russia. Mr. Sindalovsky was granted 100,000,
                200,000
                and 200,000 in restricted shares of common stock for the years ended
                June
                30, 2006, 2007 and 2008, respectively and 100,000 warrants at a purchase
                price of $1.60 per share vesting immediately and expiring in four
                years
                during the year ended June 30,
                2006.




Except
      as
      indicated above, no cash compensation, deferred compensation or long-term
      incentive plan awards were issued or granted to our Company’s management during
      the years ended June 30, 2008, or 2007, or the period ending on the date of
      this
      Annual Report. Further, except as indicated above, no member of our Company’s
      management has been granted any option or stock appreciation right; accordingly,
      no tables relating to such items have been included within this
      Item.




**Compensation
      Committee**




The
      Board
      of Directors serves as the Company’s compensation committee. The Company expects
      to nominate a Compensation Committee in the near future.




**Compensation
      of Directors**




There
      are
      no standard arrangements pursuant to which our Company’s directors are
      compensated for any services provided as director. No additional amounts are
      payable to our Company’s directors for committee participation or special
      assignments.




**Termination
      of Employment and Change of Control Arrangement**




Except
      for the Company’s Agreements with Dr. Hearn and Mr. Grippo, copies of which are
      attached hereto as Exhibits 10.8 and 10.9, respectively,, as well as the
      employment agreement with Mr. Sindalovsky (as described earlier), there are
      no
      compensatory plans or arrangements, including payments to be received from
      our
      Company, with respect to any person named in the Summary Compensation Table
      set
      out above which would in any way result in payments to any such person because
      of his or her resignation, retirement or other termination of such person’s
      consulting relationship with our Company or our subsidiaries, or any change
      in
      control of our Company, or a change in the person’s responsibilities following a
      change in control of our Company.


Page
          22





**ITEM
      11**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AD RELATED STOCKHOLDER
      MATTERS**





**(a)
      Security Ownership of Certain Beneficial Owners.**




All
      tables as of September 21, 2008.




**Title of Class**
            
            **Name and Address of**
              **Beneficial Owner**
            
            **Amount and Nature**
              **of Beneficial Owner**
            
            **Percent of Class**(3)Common
                Stock, par value $0.01 per share
            
            
            Clearline
                  Capital LLC
                86
                  Clearview Lane
                New
                  Canaan, CT 06840
            
            
            1,617,652
            (1)
            
            15.5
            %Vladimir
                Goryunov
              Alderstasse
                31
              Zurich
                8008,Switzerland
            
            
            1,700,152
            (2)
            
            16.3
            %Series
                A Convertible Preferred Stock, par value $0.001 per share
            
            
            Nataliya
                Hearn(4)
            
            
            1,221,910
            
            
            58
            %ASA
                Commerce
              1/2 Bolshaya Polyanka Unit 12
              Moscow
            
            
            891,646
            
            
            42
            %Series
                B Convertible Preferred Stock, par value $0.10 per share
            
            
            Clearline
                Capital LLC
              86
                Clearview Lane
              New
                Canaan, CT 06840
            
            
            117,648
            
            
            40
            %Vladimir
                Goryunov
              Alderstasse
                31,
              Zurich
                8008,Switzerland
            
            
            176,471
            
            
            60
            %




(1)
            Includes
                735,239 shares of Common Stock upon the exercise of 735,295 outstanding
                warrants held by the holder. Includes 588,239 shares of Common Stock
                issuable upon the conversion of the 117,648 shares of Series B Convertible
                Preferred Stock held by the holder.Includes
                294,118 shares of Common Stock.(2)
            Includes
                735,239 shares of Common Stock upon the exercise of 735,295 outstanding
                warrants held by the holder. Includes 882,357 shares of Common Stock
                issuable upon the conversion of the 176,471 shares of Series B Convertible
                Preferred Stock held by the holder.Includes
                82,500 shares of Common Stock.(3)
            Calculated
                based on 7,480,984 of Common Stock outstanding as of September 20,
                2008
                plus an aggregate of 2,941,186 shares of Common Stock issuable to
                Clearline Capital LLC and Vladimir Goryunov as described
                above.(4)
            Address
                is c/o Element 21 Golf Company, 200 Queens Quay East, Unit #1, Toronto,
                Ontario, Canada, M5A 4K9





**(b)
      Security Ownership of Management.**Except
      as indicated in the footnotes below, each person has sole voting and dispositive
      power over the shares indicated.





Title of Class
            
            Name and Address of
              Beneficial Owner
            
            Amount and Nature
              of Beneficial Owner
            
            Percent of Class (3)Common
                Stock, par value $0.01 per share
            
            
            Nataliya
                Hearn, Ph.D., President,
              Chief
                Executive Officer and Director (2)
            
            
            928,209
            (1)
            
            11.3
            %John
                Grippo
              Chief
                Financial Officer (2)
            
            
            87,605
            
            
            1.1
            %Mary
                Bryan
              Director
                (2)
            
            
            4,234
            
            
            *
            %Dr.
                Sergey Bedziouk
              Director
                (2)
            
            
            17,500
            
            
            *
            %Benton
                Wilcoxon
              Director
                (2)
            
            
            0
            
            
            0
            %All
                Officers, Directors as a Group (5 Persons)
            
            1,037,549
            
            
            12.6
            %


Page
          23


(1)
        Includes 239,590 shares of Common Stock issuable upon the conversion of
      1,221,910 shares of Series A Convertible Preferred Stock held by the holder.
      Includes 439,476 shares of Common Stock issuable upon the exercise of 439,476
      warrants granted. Includes 50,000 shares issuable upon exercise of 50,000
      warrants received in settlement of debt.




(2)
        Address is c/o Element 21 Golf Company, 200 Queens Quay East, Unit #1,
      Toronto, Ontario, Canada, M5A 4K9




(3)
      Calculated based on 7,480,984 shares of Common Stock outstanding as of September
      21, 2008 plus an aggregate of 729,066 shares of Common Stock issuable upon
      the
      exercise of granted warrants and the conversion of outstanding shares of Series
      A Convertible Preferred Stock as described above.




*
 
      Less than 1%.





**Changes
      in Control**




Two
      stockholders, Clearline Capital LLC and Vladimir Goryunov, as a group,
      beneficially own over 29% of our common stock. As a result, they may be able
      to
      control our company and direct our affairs, including the election of directors
      and approval of significant corporate transactions. This concentration of
      ownership may also delay, defer or prevent a change in control of our company,
      and make some transactions more difficult or impossible without their support.
      These transactions might include proxy contests, tender offers, open market
      purchase programs or other share purchases that could give our shareholders
      the
      opportunity to realize a premium over the then prevailing market price of our
      common stock. As a result, this concentration of ownership could depress our
      stock price. In addition, the holders of the Series B Convertible Preferred
      Stock have the right to approve certain transactions and certain issues of
      securities including but not limited to certain mergers, acquisitions,
      liquidations, sales of equity securities that are senior to the Series B
      convertible Preferred Stock or the issuance of debt instruments in excess of
      $1,000,000.




Currently,
      no known change of control is anticipated.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





**Transactions
      with Management and Others**




During
      the year ended June 30, 2008 the Company incurred a royalty expense of $240,531
      for the sale of fishing equipment. The royalty is calculated as 20% of the
      net
      selling price of fishing products sold by the Company and any sub licensee.
      The
      royalty is payable to Advanced Light Alloys Corporation, a Barbados corporation
      that is wholly-owned by David Sindalovsky, a consultant to the Company. The
      Company is obligated to pay Mr. Sindalovsky a minimum of $100,000 in royalties
      for fishing product for the period June 1, 2007 to May 31, 2008. The Company
      has
      not paid any royalties to date to Advance Light Alloys Corporation.





The
      Company purchased $760,294 in inventory from VM Midday, Inc., a company owned
      by
      the spouse of John Grippo, the Company’s Chief Financial Officer. VM Midday,
      Inc. earned $4,300 in fees from providing this service. See also Note
      3(c).


Page
          24





**ITEM
      13**  **EXHIBITS**





Exhibit No.
            
            Exhibit
                Description3(i)(1)
            
            Amended
                Certificate of Incorporation of the Company, incorporated herein
                by
                reference to the Company’s   Registration Statement on Form S-1, as
                amended, File No. 33-43976 filed on November 14, 1991.3(i)(2)
            
            Certificate
                of Amendment to Amended Certificate of Incorporation of the Company,
                incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K
                dated May 12, 2006.3(i)(3)
            
            Certificate
                of the Powers, Designations, Preferences and Rights of the Series
                A
                Convertible Preferred Stock, $0.10 par value per share, incorporated
                herein by reference to Exhibit 4.1 to the Company’s Form 8-K dated
                February 24, 2006.3(i)(4)
            
            Certificate
                of the Powers, Designations, Preferences and Rights of the Series
                B
                Convertible Preferred Stock, $0.10 par value per share, incorporated
                herein by reference to Exhibit 3(i) to the Company’s Form 8-K dated August
                3, 2006.3(i)(5)
            
            Certificate
                of the Powers, Designations, Preferences and Rights of the Series
                B
                Convertible Preferred Stock, $0.10 par value per share, incorporated
                herein by reference to Exhibit 3(i) to 3(iix9x1) to the Company’s Form 8-K
                dated June 18, 2007.3(ii)(1)
            
            Amended
                and Restated Bylaws of the Company, incorporated herein by reference
                to
                the Company’s   Registration Statement on Form S-1, as amended,
                File No. 33-43976 filed on November 14, 1991.3(ii)(2)
            
            Certificate
                of Amendment to the Certificate of Incorporation of the Company to
                effectuate a 1 for 20 reverse stock split of the Company’s issued and
                outstanding shares of common stock, incorporated herein by reference
                to
                the Company’s  Form 8-K dated April 24, 2008.4.1
            
            Form
                of Element 21 Golf Company 10% Convertible Promissory Note, incorporated
                herein by reference to Exhibit 4.2 to the Company’s Form 8-K dated
                February 24, 2006.4.2
            
            Element
                21 Golf Company 10% Convertible Promissory Note issued to Oleg Muzyrya
                ,
                incorporated herein by reference to Exhibit 4.3 to the Company’s Form 8-K
                dated February 24, 2006.4.3
            
            Common
                Stock Purchase Warrant, incorporated herein by reference to Exhibit
                4.4 to
                the Company’s Form 8-K dated February 24, 2006.4.4
            
            Form
                of Element 21 Golf Company 10% Convertible Promissory Note, incorporated
                herein by reference to Exhibit 4.1 to the Company’s Form 8-K dated May 23,
                2006.4.5
            
            Common
                Stock Purchase Warrant, incorporated herein by reference to Exhibit
                4.2 to
                the Company’s Form 8-K dated May 23, 2006.4.6
            
            Form
                of Warrant for Purchase of 3,750,000 Shares of Common Stock dated
                July 31,
                2006, incorporated herein by reference to Exhibit 4.1 to the Company’s
                Form 8-K dated August 3, 2006.4.7
            
            Form
                of Warrant for Purchase of 5,073,530 Shares of Common Stock dated
                July 31,
                2006, incorporated herein by reference to Exhibit 4.2 to the Company’s
                Form 8-K dated August 3, 2006.4.8
            
            Form
                of Warrant for Purchase of 3,750,000 Shares of Common Stock dated
                July 31,
                2006, incorporated herein by reference to Exhibit 4.1 to the Company’s
                Form 8-K dated December 1, 2006.4.9
            
            Form
                of Warrant for Purchase of 5,073,530 Shares of Common Stock dated
                July 31,
                2006, incorporated herein by reference to Exhibit 4.2 to the Company’s
                Form 8-K dated December 1, 2006.4.10
            
            Common
                Stock Purchase Warrant, incorporated herein by reference to Exhibit
                4.1 to
                the Company’s Form 8-K dated June 18, 2006.4.11
            
            Form
                of Warrant for Purchase of 5,882,400 Shares of Common Stock dated
                June 15,
                2007, incorporated herein by reference to Exhibit 4.2 to the Company’s
                Form 8-K dated June 18, 2007.


Page
            25




10.1
            
            Series
                A Convertible Preferred Stock Exchange Agreement and Acknowledgement
                dated
                as of February 22, 2006, incorporated herein by reference to Exhibit
                10.1
                to the Company’s Form 8-K dated February 24, 2006.10.2
            
            Element
                21 Golf Company 2006 Equity Incentive Plan, incorporated herein by
                reference to Annex C to the Company’s Proxy Statement Pursuant to Section
                14(a) of the Securities Exchange Act of 1934 filed on April 7,
                2006.10.3
            
            Form
                of Subscription Agreement for Shares of Series B Convertible Preferred
                Stock dated as of July 31, 2006, incorporated herein by reference
                to
                Exhibit 10.1 to the Company’s Form 8-K dated August 3,
                2006.10.4
            
            Form
                of Subscription Agreement for Shares of Series B Convertible Preferred
                Stock dated as of November 30, 2006, incorporated herein by reference
                to
                Exhibit 10.1 to the Company’s Form 8-K dated August 3,
                2006.10.5
            
            Form
                of Subscription Agreement for Shares of Series B Convertible Preferred
                Stock dated as of June 15, 2007, incorporated herein by reference
                to
                Exhibit 10.2 to the Company’s Form 8-K dated June 18,
                2007.10.6
            
            Form
                of Subscription Agreement for Shares of Common Stock dated as of
                June,
                2007, incorporated herein by reference to Exhibit 10.1 to the Company’s
                Form 8-K dated June 18, 2007.10.7
            
            License
                Agreement with Advanced Light Alloys Corporation dated as of June
                21, 2007
                incorporated by reference to exhibit 10.1 to the Company’s Form 10KSB
                dated June 21, 200710.8
            
            Consulting
                Agreement with Nataliya Hearn dated as of January 4, 2006 incorporated
                by
                reference to exhibit 10.4 to the Company’s Form 10KSB dated October 13,
                200610.9
            
            Consulting
                Agreement with John Grippo dated as of November 10, 2005 incorporated
                by
                reference to exhibit 10.5 to the Company’s Form 10KSB dated October 13,
                200631
            
            Rule
                13a-14(a)/15a-14(a) Certifications of Chief Executive Officer and
                Chief
                Financial Officer.32
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





**Audit
      Fees**




Lazar
      Levine and Felix LLP (“LLF”) is the Company’s independent auditors. Audit and
      review fees for the years ended June 30, 2008 and 2007 aggregated $104,000and
      $83,010, respectively. LLF was hired effective October 27, 2004.




**Audit-Related
      Fees**




For
      the
      years ended June 30, 2008 and 2007, the Company was billed $0 and $0,
      respectively, for fees related to a registration statement.




**Tax
      Fees**




For
      the
      years ended June 30, 2008 and 2007, LLF did not provide any tax
      services.




**All
      Other Fees**




For
      the
      years ended June 30, 2008 and 2007, the Company was not billed for products
      and
      services other than those described above.




**Audit
      Committee Pre-Approval Policies**




The
      Board
      of Directors, which is performing the equivalent functions of an audit
      committee, has pre-approved all audit services provided by the independent
      auditors, and the compensation, fees and terms for such services. No permitted
      non-audit services were provided or approved by the Board of
      Directors.


Page
          26


**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, hereunto duly authorized.





**ELEMENT
                21 GOLF COMPANY**Date:
                September 29, 2008
            By:
            /s/
                Nataliya HearnNataliya
                Hearn, Ph.D.President
                and Chairperson




Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      Report has been signed below by the following persons on behalf of the
      Registrant and in the capacities and on the dates indicated:





Date:
                September 29, 2008
            By:
            /s/Nataliya HearnNataliya Hearn, Ph.D.President, Chief Executive Officer and ChairpersonDate: September 29, 2008
            By:
            /s/ Serguei BedzioukSerguei BedzioukDirectorDate: September 29, 2008
            By:
            /s/ Mary BryanMary BryanDirectorDate: September 29, 2008
            By:
            /s/ Benton WilcoxonBenton WilcoxonDirectorDate: September 29, 2008
            By
            /s/ John GrippoJohn GrippoChief Financial Officer


Page
          27





**ELEMENT 21 GOLF COMPANY AND SUBSIDIARY**





**INDEX**





PageReport of Registered Independent Public Accounting Firm
            F-2Consolidated
                Balance Sheets as of June 30, 2008 and 2007
            F-3Consolidated
                Statements of Operations For The Years Ended June 30, 2008 and
                2007
            F-4Consolidated
                Statement of Changes of Shareholders’ Deficit For The Years Ended June 30,
                2008 and 2007
            F-5Consolidated
                Statements of Cash Flows For The Years Ended June 30, 2008 and
                2007
            F-6Notes
                to Consolidated Financial Statements
            F-7


Page
          F - 1


**REPORT
      OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM**





To
      the
      Shareholders and Board of Directors


Element
      21 Golf Company


Toronto,
      Canada





We
      have
      audited the accompanying consolidated balance sheets of Element 21 Golf Company
      and subsidiary, (the “Company”) as of June 30, 2008 and 2007 and the
      consolidated statements of operations, shareholders’ deficit and cash flows for
      the two years in the period ended June 30, 2008. These consolidated financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no opinion. An audit also includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements, assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable basis
      for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Element 21
      Golf
      Company and subsidiary as of June 30, 2008 and 2007 and the results of its
      operations and its cash flows for the years then ended, in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 1(b), the
      Company’s recurring losses from operations and its dependency on future
      financing raise substantial doubt about its ability to continue as a going
      concern. Management’s plans concerning these matters are also discussed in Note
      1(b). The consolidated financial statements do not include any adjustments
      that
      might result from the outcome of these uncertainties.




**LAZAR
                LEVINE & FELIX LLP**




New
      York,
      New York


September
      29, 2008


Page
          F - 2







**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**


**JUNE
      30, 2008 AND 2007**





2008
            
            2007**-
                ASSETS -****CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            770,602
            
            $
            1,751,178Accounts
                receivable - net of allowance for doubtful accounts of $42,000 and
                $15,000
                at June 30, 2008 and 2007, respectively
            
            
            471,006
            
            
            123,155Inventories
            
            
            1,556,788
            
            
            921,820Prepaid
                expenses and other current assets
            
            
            46,615
            
            
            158,147**TOTAL
                CURRENT ASSETS**
            
            
            2,845,011
            
            
            2,954,300**FIXED
                ASSETS – NET**
            
            
            101,255
            
            
            244,234**TOTAL
                ASSETS**
            
            $
            2,946,266
            
            $
            3,198,534**-
                LIABILITIES AND SHAREHOLDERS’ DEFICIT -****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            945,230
            
            $
            271,008Accrued
                expenses – compensation
            
            
            1,857,598
            
            
            473,391Deferred
                revenue
            
            
            60,720
            
            
            17,300Current
                loan payable – shareholder
            
            
            825,000
            
            
            -Convertible
                notes
            
            
            -
            
            
            475,000Derivative
                liability
            
            
            117,284
            
            
            2,386,011**TOTAL
                CURRENT LIABILITIES**
            
            
            3,805,832
            
            
            3,622,710**LONG-TERM
                LIABILITIES:**Accounts
                payable - related parties
            
            
            242,076
            
            
            482,076Loans
                and advances – officer
            
            
            110,412
            
            
            95,006**TOTAL
                LONG-TERM LIABILITIES**
            
            
            352,488
            
            
            577,082**COMMITMENTS
                AND CONTINGENCIES****SHAREHOLDERS’
                DEFICIT:**Preferred
                stock, $.10 par value, authorized 2,447,000 shares, no shares issued
                and
                outstanding
            
            
            **-**
            
            
            -Series
                A Convertible Preferred stock, $.001 par value, authorized 2,200,000
                shares, 2,113,556 shares issued and outstanding
            
            
            2,114
            
            
            2,114Series
                B Convertible Preferred stock, $.10 par value, authorized 353,000
                shares,
                294,126 and 352,946 shares issued and outstanding at June 30, 2008
                and
                2007, respectively
            
            
            29,413
            
            
            35,295Common
                stock, $.01 par value; 300,000,000 shares authorized, 7,256,088 and
                5,944,996 shares issued and outstanding at June 30, 2008 and 2007,
                respectively
            
            
            72,561
            
            
            59,450Additional
                paid-in capital
            
            
            22,754,425
            
            
            20,117,109Accumulated
                deficit
            
            
            (24,070,567
            )
            
            (21,215,226
            )**TOTAL
                SHAREHOLDERS’ DEFICIT**
            
            
            (1,212,054
            )
            
            (1,001,258
            )**TOTAL
                LIABILITIES AND SHAREHOLDERS’ DEFICIT**
            
            $
            2,946,266
            
            $
            3,198,534





See
      notes
      to consolidated financial statements.


Page
          F - 3





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED JUNE 30, 2008 AND 2007**





Year
                Ended June 30,2008
            
            2007**REVENUES**
            
            $
            1,841,370
            
            $
            228,599**COSTS
                OF SALES**
            
            
            1,478,968
            
            
            191,628**GROSS
                PROFIT**
            
            
            362,402
            
            
            36,971**GENERAL
                AND ADMINISTRATIVE EXPENSES**
            
            
            5,610,015
            
            
            7,127,430**LOSS
                FROM OPERATIONS**
            
            
            (5,247,613
            )
            
            (7,090,459
            )**OTHER
                INCOME (EXPENSE):**Interest
                expense
            
            
            (34,315
            )
            
            (1,299,290
            )Derivative
                income
            
            
            2,411,711
            
            
            4,250,442Interest
                income and other income (expense), net
            
            
            14,876
            
            
            136,6572,392,272
            
            
            3,087,809**LOSS
                BEFORE PROVISION FOR INCOME TAXES**
            
            
            (2,855,341
            )
            
            (4,002,650
            )Provision
                for income taxes
            
            
            -
            
            
            -**NET
                LOSS**
            
            
            (2,855,341
            )
            
            (4,002,650
            )Accretion
                of preferred stock dividend
            
            
            -
            
            
            (4,167,256
            )**LOSS
                APPLICABLE TO COMMON STOCKHOLDERS**
            
            $
            (2,855,341
            )
            $
            (8,169,906
            )Basic
                and diluted weighted average shares
            
            
            6,445,582
            
            
            5,514,743Basic
                and diluted loss per share
            
            **$**
            (0.44
            )
            $
            (1.48
            )




See
      notes
      to consolidated financial statements.


Page
          F - 4





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT**


**FOR
      THE YEARS ENDED JUNE 30, 2008 AND 2007**





**Series
                A Convertible Preferred Stock**
            
            **Series
                B Convertible Preferred Stock**
            
            **Shares**
            
            **Common Stock**
            
            **Additional
                Paid-In Capital**
            
            **Accumulated
                Deficit**
            
            **Total Shareholders’
                Equity (Deficit)**Balance,
                June 30, 2006
            
            $
            2,114
            
            $
            -
            
            
            4,982,391
            
            $
            49,824
            
            $
            14,400,447
            
            $
            (17,212,576
            )
            $
            (2,760,191
            )Sale
                of Preferred shares
            
            
            -
            
            
            35,295
            
            
            -
            
            
            -
            
            
            5,964,705
            
            
            -
            
            
            6,000,000Deemed
                dividend
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,167,256
            )
            
            -
            
            
            (4,167,256
            )Expenses
                related to sale of Preferred shares
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (500,000
            )
            
            -
            
            
            (500,000
            )Issuance
                of common stock for converted Bridge loans including
                interest
            
            
            -
            
            
            -
            
            
            134,265
            
            
            1,343
            
            
            411,157
            
            
            -
            
            
            412,500Beneficial
                conversion feature of Bridge I loan
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            73,678
            
            
            -
            
            
            73,678Unamortized
                loan discount
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (290,625
            )
            
            -
            
            
            (290,625
            )Sale
                of unregistered shares
            
            
            -
            
            
            -
            
            
            117,824
            
            
            1,178
            
            
            399,422
            
            
            -
            
            
            400,600Issuance
                of common stock for services
            
            
            -
            
            
            -
            
            
            710,516
            
            
            7,105
            
            
            2,573,423
            
            
            -
            
            
            2,580,528Compensatory
                warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,252,158
            
            
            -
            
            
            1,252,158Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,002,650
            )
            
            (4,002,650
            )Balance,
                June 30, 2007
            
            
            2,114
            
            
            35,295
            
            
            5,944,996
            
            
            59,450
            
            
            20,117,109
            
            
            (21,215,226
            )
            
            (1,001,258
            )Exercise
                of warrants
            
            
            -
            
            
            -
            
            
            150,000
            
            
            1,500
            
            
            248,500
            
            
            -
            
            
            250,000Conversion
                of debt to common stock
            
            
            -
            
            
            -
            
            
            100,000
            
            
            1,000
            
            
            239,000
            
            
            -
            
            
            240,000Conversion
                of Preferred B shares to Common Stock
            
            
            -
            
            
            (5,882
            )
            
            294,118
            
            
            2,941
            
            
            2,941
            
            
            -
            
            
            -Issuance
                of common stock for services
            
            
            -
            
            
            -
            
            
            696,974
            
            
            6,970
            
            
            1,947,575
            
            
            -
            
            
            1,954,545Sale
                of common stock
            
            
            -
            
            
            -
            
            
            70,000
            
            
            700
            
            
            199,300
            
            
            -
            
            
            200,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,855,341
            )
            
            (2,855,341
            )Balance
                June 30, 2008
            
            $
            2,114
            
            $
            29,413
            
            
            7,256,088
            
            $
            72,561
            
            $
            22,754,425
            
            $
            (24,070,567
            )
            $
            (1,212,054
            )




See
      notes
      to consolidated financial statements.


Page
          F - 5





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED JUNE 30, 2008 AND 2007**





2008
            
            2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (2,855,341
            )
            $
            (4,002,650
            )Adjustments
                to reconcile net loss to net cash (used in) provided by operating
                activities:Compensatory
                common stock
            
            
            2,582,355
            
            
            1,971,840Compensatory
                warrants
            
            
            789,400
            
            
            1,252,158Interest
            
            
            -
            
            
            1,050,930Bad
                debt provision
            
            
            27,000
            
            
            15,000Depreciation
                and amortization
            
            
            221,651
            
            
            340,060Amortization
                of debt discount
            
            
            -
            
            
            523,794Excess
                derivative liability (income) expense
            
            
            (2,288,227
            )
            
            (4,250,442
            )Changes
                in:
            
            
            -
            
            
            -Accounts
                receivable
            
            
            (374,851
            )
            
            (126,161
            )Inventories
            
            
            (634,968
            )
            
            (793,438
            )Prepaid
                expenses and other current assets
            
            
            111,532
            
            
            (140,240
            )Accounts
                payable
            
            
            575,730
            
            
            674,222Accrued
                expenses
            
            
            352,240
            
            
            (579,934
            )Accrued
                interest
            
            
            (27,250
            )
            
            52,765Deferred
                revenue
            
            
            43,420
            
            
            17,300Net
                cash (used in) operating activities
            
            
            (1,477,309
            )
            
            (3,994,796
            )**CASH
                FLOW FROM INVESTING ACTIVITIES:**Purchase
                of capital assets
            
            
            (78,673
            )
            
            (73,764
            )Net
                cash (used in) investing activities
            
            
            (78,673
            )
            
            (73,764
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Repayments
                to related parties
            
            
            (224,594
            )
            
            (9,156
            )Proceeds
                from exercise of warrants and sale of common stock
            
            
            450,000
            
            
            400,600Proceeds
                from convertible debt
            
            
            -
            
            
            180,000Proceeds
                from short-term loans
            
            
            1,825,000
            
            
            -Repayments
                of short-term loans
            
            
            (1,000,000
            )
            
            -(Repayment)
                of convertible debt
            
            
            (475,000
            )
            
            (493,000
            )Expenses
                related to sale of preferred shares
            
            
            -
            
            
            (500,000
            )Proceeds
                from sale of preferred shares
            
            
            -
            
            
            6,000,000Loan
                proceeds from (repayments to) shareholders
            
            
            -
            
            
            (21,925
            )Net
                cash provided from financing activities
            
            
            575,406
            
            
            5,556,519**NET
                (DECREASE) INCREASE IN CASH**
            
            
            (980,576
            )
            
            1,487,959**CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR**
            
            
            1,751,178
            
            
            263,219**CASH
                AND CASH EQUIVALENTS, END OF YEAR**
            
            $
            770,602
            
            $
            1,751,178**SUPPLEMENTAL
                CASH FLOW INFORMATION:**Interest
                paid
            
            $
            26,786
            
            $
            88,311Income
                taxes paid
            
            $
            -
            
            $
            -Issuance
                of stock to settle accrued expenses – related party
            
            $
            465,947
            
            $
            606,688Conversion
                of debt and accrued interest to common stock
            
            $
            240,000
            
            $
            412,500Compensatory
                stock and warrants
            
            $
            3,371,754
            
            $
            3,223,998Preferred
                stock dividend
            
            $
            -
            
            $
            4,167,256Beneficial
                conversion feature on converted notes
            
            $
            -
            
            $
            73,678Loan
                discount on converted notes
            
            $
            -
            
            $
            290,625




See
      notes
      to consolidated financial statements.


Page
          F - 6




**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**





**NOTE 1 -**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES:**





***(a)***
            ***Organization
                and Basis of
                Presentation:***





In
      September of 2002, BRL Holdings, Inc. (“BRL”) acquired Element 21 Technologies,
      Inc. (“Technologies”) under an Amended and Restated Agreement (the “Agreement”)
      wherein BRL issued 106,181 shares of its common stock to shareholders of
      Technologies and assumed Technologies’ obligations under option agreements
      allowing for the purchase of 16,080 additional shares of common stock.
      Technologies was a development stage company formed to design, develop and
      market Element 21 alloy golf clubs. This acquisition was accounted for as a
      reverse acquisition using the purchase method of accounting, as the shareholders
      of Technologies assumed control immediately following the
      acquisition.





In
      October 2003, BRL Holdings, Inc. changed its name to Element 21 Golf Company
      (the “Company”).





Upon
      the
      closing of the Technologies acquisition, as discussed above, the Company
      reported as a development stage enterprise effective September 17, 2002. During
      fiscal year 2005, the Company commenced active operations and began reporting
      revenues during the last quarter of the year





In
      May
      2007, the Board of Directors adopted resolutions approving an amendment and
      a
      majority of shareholders also approved amending the Company’s Certificate of
      Incorporation to increase the number of authorized shares of capital stock
      to
      300,000,000 shares of common stock and 5,000,000 shares of preferred
      stock.





On
      April
      25, 2008, the Company effected a 1 for 20 reverse stock split. All share and
      per
      share amounts in this report have been retroactively restated to reflect the
      1
      for 20 reverse split.





***(b)***  ***Going
      Concern:***





These
      financial statements have been presented on the basis that the Company is a
      going concern, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. The Company’s
      subsidiary is inactive and is not expected to produce revenues or generate
      cash. During the last quarter of fiscal year 2005, the Company commenced sales
      of its products and has begun generating revenues. However, as of June 30,
      2008,
      the Company continues to have negative working capital of $960,821, an
      accumulated deficit of $24,070,567, a total shareholders’ deficit of $1,212,054
      and for the year ended June 30, 2008 incurred a net loss of $2,855,341, all
      of
      which raise substantial doubt about the Company’s ability to continue as a going
      concern.





Managements’
      plans for the Company include more aggressive marketing, raising additional
      capital and other strategies designed to optimize shareholder value. However,
      no
      assurance can be made that management will be successful in fulfilling all
      components of its plan. The failure to achieve these plans will have a material
      adverse effect on the Company’s financial position, results of operations and
      ability to continue as a going concern.





***(c)***
            ***Principles
                of Consolidation:***





The
      accompanying consolidated financial statements include the accounts of the
      company and its wholly owned subsidiary (Element 21 Golf Company - Canada).
      All
      significant inter-company accounts and transactions have been
      eliminated.





***(d)***
            ***Use
                of Estimates:***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.


Page
          F - 7





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE 1 -**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (Continued):**





***(e)***
            ***Fair
                Value of Financial
                Instruments:***





The
      Company’s financial instruments consist of cash, accounts receivable, accounts
      payable, accrued expenses, notes payable and derivative instruments. The
      carrying value of all instruments approximates their fair value, due to their
      short-term nature.





***(f)***
            ***Cash
                and Cash Equivalents:***





For
      purposes of the statements of cash flows, the Company considers all highly
      liquid investments purchased with a remaining maturity of three months or less
      to be cash equivalents.





***(g)***
            ***Inventories:***





Inventories,
      which consist primarily of goods held for resale, are stated at the lower of
      cost (first-in, first-out method) or market and are comprised as
      follows:





2008
            
            2007Finished
                goods
            
            $
            943,485
            
            $
            681,387Components
            
            
            613,303
            
            
            240,433Total
            
            $
            1,556,788
            
            $
            921,820




***(h)***
            ***Accounts
                Receivable and Bad
                Debts:***





The
      Company provides an allowance for doubtful accounts equal to the estimated
      uncollectible amounts. The Company’s estimate is based on a review of the
      current status of trade receivables. It is reasonably possible that the
      Company’s estimate of the allowance for doubtful accounts may
      change.




***(i)***
            ***Fixed
                Assets and
                Depreciation:***





Fixed
      assets are recorded at cost. Expenditures for major additions and improvements
      are capitalized and minor replacements, maintenance and repairs are expensed
      as
      incurred. Depreciation is provided over the estimated useful lives of the
      related assets using the straight-line method for financial statement purposes.
      Leasehold improvements are amortized over the lesser of its economic life
      or the term of the respective lease. The estimated useful lives are as
      follows:




Furniture
                and fixtures
            
            
            5
                yearsTransportation
                equipment
            
            
            5
                yearsComputer
                equipment
            
            
            3
                yearsOffice
                equipment
            
            
            5
                yearsTools
                and dies
            
            
            2
                yearsLeasehold
                improvements
            
            
            3
                years





***(j)***
            ***Revenue
                Recognition:***





The
      Company recognizes revenue in accordance with the Securities and Exchange
      Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).
      Under SAB 104, revenue is recognized when there is persuasive evidence of an
      arrangement, delivery has occurred or services have been rendered, the sales
      price is determinable, and collectability is reasonably assured. Revenues from
      product sales are recognized when title passes to customers, which is when
      goods
      are shipped. Cash received from product shipped to third-party sales
      representatives where title has not passed to a customer is reflected as
      deferred revenue.


Page
          F - 8







**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      1 -**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued):**





***(k)***
            ***Income
                Taxes:***





Deferred
      income taxes are recognized for the tax consequences in future years for
      differences between the tax bases of assets and liabilities and their financial
      reporting amounts at each year-end based on enacted tax laws and statutory
      tax
      rates applicable to the periods in which the differences are expected to affect
      taxable income. Valuation allowances are established when necessary to reduce
      deferred tax assets to the amount expected to be realized. Income tax expense
      is
      the tax incurred for the period and the change during the period of deferred
      tax
      assets and liabilities.





***(l)***
            ***Stock-Based
                Compensation:***





The
      Company accounts for equity instruments issued to non-employees in accordance
      with the provisions of SFAS No. 123R and Emerging Issues Task Force (“EITF”) No.
      96-18, “Accounting for Equity Instruments That Are Issued to Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services.”





***(m)***
            ***Net
                Loss Per Common
                Share:***





The
      following weighted average shares were used for the computation of basic and
      diluted loss per share:





For the years ended June 30,2008
            
            2007Basic
            
            
            6,445,582
            
            
            5,514,743Diluted
            
            
            6,445,582
            
            
            5,514,743





Basic
      loss per common share is computed by dividing the net loss applicable to common
      shareholders by the weighted average number of common shares outstanding during
      the period. Diluted loss per common share reflects the potential from the
      exercise or conversion of other securities into Common Stock, but only if
      dilutive. Diluted loss per share for the years ended June 30, 2008 and 2007
      is
      the same as basic loss per share, since the effects of the calculation were
      anti-dilutive due to the fact that the Company incurred losses for all periods
      presented. The following securities, presented on a common share equivalent
      basis, have been excluded from the diluted per share computation since their
      effect was anti-dilutive.





For the years ended June 30,2008
            
            2007Stock
                options
            
            
            160
            
            
            640Warrants
            
            
            2,483,581
            
            
            3,778,612Preferred
                stock
            
            
            1,885,016
            
            
            2,179,133





***(n)***
            ***Advertising
                costs:***





Advertising
      costs are recognized when incurred. For the years ended June 20, 2008 and 2007,
      advertising costs were approximately $235,000 and $163,000,
      respectively.


Page
          F - 9


**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      1 -**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued):**




***(o)***
            ***Recent
                Accounting Pronouncements Affecting the
                Company:***





In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements”* , which
      provides guidance for using fair value to measure assets and liabilities. The
      pronouncement clarifies (1) the extent to which companies measure assets
      and liabilities at fair value; (2) the information used to measure fair
      value; and (3) the effect that fair value measurements have on earnings.
      SFAS No. 157 will apply whenever another standard requires (or
      permits) assets or liabilities to be measured at fair value.
      SFAS No. 157 is effective for the Company as of July 1, 2008. Our
      adoption of SFAS 157 is not expected to have a material impact on our results
      of
      operations or financial position.





In
      February 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities Including
      an
      Amendment of FASB Statement No. 115”* .
      SFAS No. 159 permits entities to choose to measure many financial
      instruments and certain other items at fair value that are not currently
      required to be measured at fair value. This statement also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between entities that choose different measurement attributes for similar types
      of assets and liabilities. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007. Our adoption of SFAS 159 is not expected
      to have a material impact on our results of operations or financial
      position.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations”, which replaces SFAS No 141. The statement retains the purchase
      method of accounting for acquisitions, but requires a number of changes,
      including changes in the way assets and liabilities are recognized in the
      purchase accounting. It also changes the recognition of assets acquired and
      liabilities assumed arising from contingencies, requires the capitalization
      of
      in-process research and development at fair value, and requires the expensing
      of
      acquisition-related costs as incurred. SFAS No. 141R is effective
      for 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. The Company will adopt this Statement in fiscal year 2009 and its
      effects on future periods will depend on the nature and significance of any
      acquisitions subject to this Statement.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements-an Amendment of ARB No.
      51* SFAS
      160 establishes accounting and reporting standards pertaining to ownership
      interests in subsidiaries held by parties other than the parent, the amount
      of
      net income attributable to the parent and to the noncontrolling interest,
      changes in a parent’s ownership interest, and the valuation of any retained
      noncontrolling equity investment when a subsidiary is
      deconsolidated.  This statement also establishes disclosure
      requirements that clearly identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners.  SFAS 160 is
      effective for fiscal years beginning on or after December 15,
      2008.  The adoption of SFAS 160 is not currently expected to have a
      material effect on the Company’s consolidated financial position, results of
      operations, or cash flows.





In
      March
      2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
      Instruments and Hedging Activities. The new standard is intended to improve
      financial reporting about derivative instruments and hedging activities by
      requiring enhanced disclosures to enable investors to better understand their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. Our adoption of SFAS 161 is not expected to have a material impact
      on our results of operations or financial position.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles”. The new standard is intended to improve financial
      reporting by identifying a consistent framework, or hierarchy, for selecting
      accounting principles to be used in preparing financial statements that are
      presented in conformity with U.S. generally accepted accounting principles
      (GAAP) for nongovernmental entities. Prior to the issuance of SFAS 162, GAAP
      hierarchy was defined in the American Institute of Certified Public Accountants
      (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present
      Fairly in Conformity With Generally Accepted Accounting Principles. SFAS 162
      is
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board Auditing amendments to AU Section 411, The Meaning of Present
      Fairly in Conformity with Generally Accepted Accounting Principles. Our adoption
      of SFAS 162 is not expected to have a material impact on our results of
      operations or financial position.


Page
          F - 10




**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**





**NOTE
      2 -**  **FIXED
      ASSETS:**





Fixed
      assets consist of the following:




2008
            
            2007Furniture
                and fixtures
            
            $
            22,523
            
            $
            10,184Transportation
                equipment
            
            
            18,126
            
            
            -Computer
                equipment
            
            
            20,215
            
            
            18,720Tools
                and dies
            
            
            739,628
            
            
            694,113Leasehold
                improvements
            
            
            28,326
            
            
            27,128Office
                equipment
            
            
            6,600
            
            
            6,600835,418
            
            
            756,745Less:
                accumulated depreciation and amortization
            
            
            734,163
            
            
            512,511$
            101,255
            
            $
            244,234





Depreciation
      expense for the fiscal 2008 and 2007 years aggregated $221,651 and $340,060,
      respectively.





**NOTE
      3 -**  **RELATED
      PARTY TRANSACTIONS:**





***(a)***
            ***Accounts
                Payable - Related
                Parties:***





On
      April
      1, 2008, the Company agreed to settle all obligations due to Dr. Bruce Reeves,
      Assuretec Systems, Inc., Assuretec Holdings, Inc., Robertson Financial Advisors,
      LLC and RT Robertson Consultants, Inc. These obligations related to services
      rendered prior to June 30, 2005. The Company issued 100,000 common shares with
      a
      fair value of $240,000 in return for full settlement of any and all liabilities.
      The $242,076 balance outstanding at June 30, 2008 are due to former officers
      of
      the Company from advances made or services provided with no formal repayment
      terms.





***(b)***
            ***Loans
                and Advances -
                Officer:***





Loans
      and
      advances received from an officer is on a non-interest bearing basis and the
      officer has agreed to not demand payment during the next fiscal
      year.





***(c)***
            ***Accounts
                payable:***





Included
      in accounts payable as of June 30, 2008 and 2007 is approximately $44,000 and
      $0, respectively, due to an officer and shareholder Also included in accounts
      payable as of June 30, 2008 and 2007 is $535,596 and $0, respectively, owed
      to a
      company owned by the spouse of the Company’s Chief Financial Officer for
      inventory purchases.





***(d)***
            ***Accrued
                expenses:***





Included
      in accrued expenses as of June 30, 2008 and 2007 is approximately $1,476,000
      and
      $398,000, respectively, of compensation accrued for our officers and related
      parties. Substantially all of this liability is due to be paid in Company common
      stock. Also included in accrued expenses as of June 30, 2008 is $240,531 for
      royalties that is due to Advanced Light Alloys Corporation, a Barbados
      corporation that is wholly owned by David Sindalovsky, a consultant to the
      Company.





***(d)***
            ***Current
                loan payable –
shareholder:***





In
      February 7, 2008, a shareholder made a loan to the Company of $1 million in
      the
      form of an unsecured promissory note with stated interest of 10%; such note
      was
      paid in full, including interest of $25,000, on May 27, 2008. The Company
      entered into a new unsecured promissory note of $825,000 on May 27, 2008 with
      a
      stated interest rate of 10% and a repayment date of November 1, 2008. The loan
      agreement contains default provisions.


Page
          F - 11





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      4 -**  **CONVERTIBLE
      NOTES:**





*Bridge
      I Financing:*




Between
      January 17 and March 6, 2006, the Company issued 10% Convertible Promissory
      Notes in the aggregate principal face amount of $540,000 to 15 individual
      investors. With respect to notes totaling $340,000 (the “$340,000 Notes”), each
      such investor also received three separate warrants (a warrant exercisable
      for
      one year, a warrant exercisable for two years, and a warrant exercisable for
      three years) to purchase shares of the Company's common stock up to an amount
      equal to the initial investment in the Notes at an exercise price to be
      determined based on a twenty day trading average of shares of the Company’s
      Common Stock prior to the date of exercise or from and after the date of an
      equity financing of at least $5.0 million (the “Equity Financing”) completed
      within 12 months. With respect to one note for $200,000 (the “$200,000 Note”),
      the investor received 3,529,413 warrants (1/3 warrants exercisable for one
      year,
      1/3 warrants exercisable for two years, and the remaining 1/3 warrants
      exercisable for three years) with similar terms, except that the warrants are
      exercisable at an exercise price which is fixed at $3.40 per share. All of
      these
      warrants are subject to certain anti-dilution price adjustments. The $340,000
      Notes and the $200,000 Note mature one year after issuance and accrue interest
      at an annual interest rate equal to 10% per annum, payable at maturity. All
      the
      notes and interest are convertible, at the option of the investor, into shares
      of Company’s Common Stock under the same terms and conditions as the
      warrants.




During
      the year ended June 30, 2007, two notes totaling $75,000 (and $7,500 in related
      accrued interest) were converted into 485,294 shares of common stock. As a
      result, the Company charged the remaining balance of $40,625 of unamortized
      discount to the notes to additional paid-in capital**.**In order
      to induce the note holders to convert their notes into stock, the Company
      offered certain incentives, which included piggy back registration rights for
      the warrants, payment in full of all interest and an extension of the warrant
      expiration terms by approximately seven months. As a result of the extension
      of
      the warrant expiration date, the Company recorded an additional $122,215 in
      derivative expense in fiscal 2007. In addition, two $20,000 notes were cancelled
      during the year ended June 30, 2007 and the proceeds were returned to the
      investor and all entries related to the recording of the note were reversed,
      including $33,549 of derivative liability and all accrued interest. During
      the
      year ended June 30, 2007, the remaining $225,000 face value of the $340,000
      Notes matured and was paid, along with the requisite accrued interest of 10%
      per
      annum, and the original one year warrants had expired without being exercised.
      In January 2007 the $200,000 Note matured, however, the holder requested, and
      the Company granted a six month extension to exercise the conversion of the
      one
      year warrants and the note. The Company granted the extension of the maturity
      date on the note to July 15, 2007 without interest. In June 2007, the holder
      requested an early payment of the note and in return agreed to the cancellation
      of all the warrants, to which the Company agreed effective immediately. The
      Company terminated the related warrants in June 2007 and recorded the
      termination as derivative income. In July 2007, subsequent to the balance sheet
      date the Company paid the $200,000 Note and accrued interest of
      $20,000.





As
      of
      June 30, 2008, all of the remaining unexpired warrants (three year) related
      to
      the $340,000 Notes financing that were not converted were revalued and the
      liability was adjusted to approximately $22,000. The terms of the warrants
      issued for the $340,000 Notes resulted in the Company losing control over the
      number of shares to be issued (the “tainting feature”). As such, all warrants
      and embedded derivatives, if any, related to convertible notes and preferred
      shares issued subsequently would be affected by this tainting feature and would
      default to being recorded as derivative liability and not equity. As of June
      30,
      2008 the Company revalued the warrants using the Black Scholes option-pricing
      model with the following assumptions: an expected life equal to the contractual
      term of the conversion option or warrants, as the case may be; no dividends;
      a
      risk free rate of return of 2.05% and volatility of 65.22%. Volatility is based
      upon the historical volatility of the Company’s stock price.





As
      of
      June 30, 2008, the warrants related to the $75,000 of converted notes were
      revalued and the liability was adjusted to approximately $2,000. As of June
      30,
      2008 the Company revalued the warrants using the Black Scholes option-pricing
      model with the following assumptions: an expected life equal to the contractual
      term of the conversion option or warrants, as the case may be; no dividends;
      a
      risk free rate of return ranging from 1.45% to 2.30% and volatility of 65.22%
      (range in rates of return is due to the terms of the remaining warrants).
      Volatility is based upon the historical volatility of the Company’s stock
      price.


Page
          F - 12





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      4
      -**  **CONVERTIBLE
      NOTES (Continued):**





*Bridge
      II Financing:*




Between
      May 5 and June 30, 2006, the Company issued additional 10% Convertible
      Promissory Notes in the aggregate principal face amount of $623,000 to 16
      individual investors (the “$623,000 Notes”). Each such investor also received
      warrants, exercisable for one year, to purchase shares of the Company's common
      stock up to 150% of the investor’s initial investment in the $623,000 Notes at
      an exercise price equal to the lesser of (i) $3.50, or (ii) the ten day trading
      average of shares of the Company’s Common Stock prior to the date of exercise.
      All of these warrants are subject to certain anti-dilution price adjustments.
      The $623,000 Notes mature one year after issuance and accrue interest at an
      annual interest rate equal to 10% per annum, payable at maturity. The notes
      and
      interest are convertible, at the option of the investor, into shares of the
      Company’s Common Stock under the same terms and conditions as the
      warrants.


In
      July,
      2006, the Company issued additional 10% Convertible Promissory Notes in the
      aggregate principal face amount of $180,000 to 6 additional investors (the
      “$180,000 Notes”). The terms of the notes and warrants are identical to the
      $623,000 Notes.





The
      Company has accounted for the above convertible notes and warrants as follows:
      under the provisions of Statement of Financial Accounting Standards No. 133,
      Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133")
      an
      embedded conversion option should be bifurcated and accounted for separately
      as
      a derivative instrument, unless the specific requirements for equity
      classification of the embedded conversion option, as stated in EITF 00-19:
      Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company's Own Stock (“EITF 00-19”) are met. EITF 00-19 provides
      that an equity classification is appropriate if the settlement criteria set
      forth therein for such classification are met and that the additional conditions
      necessary for equity classification, set forth therein, are also met. Warrants
      are freestanding derivatives and need to be similarly analyzed under EITF 00-19
      to determine if equity classification is appropriate.





The
      Company determined that the conversion option of the notes was required to
      be
      bifurcated and accounted for as a derivative. The warrants were also required
      to
      be recorded and accounted for as a derivative due to the same tainting feature
      as the Bridge I Financing and as a result of this tainting feature, the terms
      of
      the Bridge II Financing also resulted in similar accounting
      treatment.




The
      conversion option and the warrants in respect of the Bridge II Financing
      ($623,000 Notes), were initially valued at approximately $559,800 and $373,200,
      respectively. The combined liability was restricted to the value of the proceeds
      of $623,000 and has been recorded as discount to the convertible notes with
      a
      corresponding credit to warrant liability, respectively, on a pro-rata basis.
      The discount of $623,000 is accreted on a straight-line basis over the maturity
      period of the notes. The liabilities for the conversion option and the warrants
      were adjusted to zero as of June 30, 2007 as the conversion option of the notes
      and the warrant stock purchase option expired.




The
      conversion option and the warrants with respect to the Bridge II Financing
      ($180,000 Notes) were initially valued at a combined approximate amount of
      $178,400, which has been recorded as a discount to the convertible notes with
      a
      corresponding credit to a derivative liability. The discount is being accreted
      on a straight-line basis over the maturity period of the notes. The liabilities
      for the conversion option on the notes and the warrants were adjusted to zero
      as
      of June 30, 2008 as the conversion option of the notes and the warrant stock
      purchase option expired.


During
      the year ended June 30, 2007, notes totaling $300,000 (principal) plus $30,000
      in accrued interest of the Bridge II financing $623,000 Notes, were converted
      into 110,000 shares of common stock. As a result of the conversion, the Company
      charged additional paid-in capital for $250,000 as the remaining unamortized
      discount on the notes and reversed derivative expense of approximately $150,700
      related to the conversion option. In order to induce the note holders to convert
      their notes into stock, the Company offered certain incentives, which included
      registration rights for the warrants, payment in full of all interest and an
      extension of the warrant expiration term by approximately three months. As
      a
      result of the extension of the warrant expiration date and setting of the
      conversion rate, the Company recorded an additional derivative expense of
      approximately $42,600 in fiscal 2007.




As
      of
      June 30, 2008, as all of the remaining Bridge II financing warrants issued
      had
      expired and the derivative liability was adjusted to zero.


Page
          F - 13





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**





**NOTE
      5
      -**  **PREFERRED
      SHARES:**





***Series
      A Convertible Preferred Stock:***





In
      February 2006, the Company issued a total of 2,113,556 shares of newly
      designated Series A Convertible Preferred Stock in order to settle outstanding
      debts owed to officers and consultants of the Company (a portion of which were
      for unpaid consulting fees) in the aggregate amount of $2,113,556. The shares
      of
      Series A Convertible Preferred Stock are convertible at the option of the
      holder, at any time after issuance. Each share of Series A Convertible Preferred
      Stock is convertible into that number of shares of common stock of the Company
      as is equal to the Original Issue Price of shares of Series A Convertible
      Preferred Stock, or $1.00, by the Conversion Price which is initially equal
      to
      $5.10 and is subject to adjustment in certain cases. Each share of Series A
      Convertible Preferred Stock carries with it the right to one thousand
      votes.





***Series
      B Convertible Preferred Stock:***





On
      July
      31, 2006 (the “Initial Closing Date”), the Company agreed to a $4 million equity
      financing by entering into two Series B Convertible Preferred Stock Subscription
      Agreements (each a “Subscription Agreement” and collectively the “Subscription
      Agreements”) with two investors (each a “Purchaser” and collectively, the
“Purchasers”). Each Subscription Agreement provides for the sale by the Company
      to the applicable Purchaser of 117,648 shares of the Company’s Series B
      Convertible Preferred Stock, par value $0.10 per share (the “Series B1 Preferred
      Stock”), and warrants to purchase an aggregate of 882,353 shares of the
      Company’s common stock, in exchange for and in consideration of an aggregate
      investment by each Purchaser of $2 million in cash (each Purchaser’s “Investment
      Amount”), which amount is to be invested by each Purchaser in two equal $1
      million installments, the first of which occurred on the Initial Closing Date
      and the second of which occurred on November 30, 2006 (the “Subsequent Closing
      Date”).





On
      the
      Initial Closing Date, each Purchaser invested $1 million in the Company in
      return for 58,824 shares of Series B Preferred Stock and two warrants (the
      terms
      of which are more fully described below) to purchase an aggregate of 441,177
      shares of common stock. The Subscription Agreements obligated each Purchaser
      to
      invest the remaining $1 million of its Investment Amount (the “Additional
      Investment Amount”) in the Company no later than November 30, 2006, subject only
      to the Company converting at least 80% of the aggregate outstanding principal
      amount evidenced by those certain convertible promissory notes issued by the
      Company between February 2006 and July 31, 2006 (collectively, the “Promissory
      Notes”) into shares of common stock prior to the Subsequent Closing Date. On
      October 31, 2006, both Purchasers had agreed to waive any conditions to the
      Subsequent Closing. On the Subsequent Closing Date, in exchange for each
      Purchaser’s Additional Investment Amount, the Company issued to each Purchaser
      an additional 58,824 shares of Series B Preferred Stock and two additional
      warrants (the terms of which are more fully described below) to purchase an
      aggregate of an additional 441,177 shares of common stock.





On
      the
      Initial Closing Date, the Company granted each Purchaser (i) one warrant to
      purchase 187,500 shares of common stock at an exercise price of $4.40 per share
      in the event the warrant is exercised on or prior to July 31, 2007, and $5.60
      per share in the event the warrant is exercised on or after August 1, 2007,
      and
      (ii) one warrant to purchase 253,677 shares of common stock at an exercise
      price
      of $5.60 per share (each an “Initial Warrant”, and collectively, the “Initial
      Warrants”). On the Subsequent Closing Date, the Company granted each Purchaser
      (i) one additional warrant to purchase 187,500 shares of common stock at an
      exercise price of $4.40 per share in the event the warrant is exercised on
      or
      prior to July 31, 2007, which increases to $5.60 per share in the event the
      warrant is exercised on or after August 1, 2007, and (ii) one additional warrant
      to purchase 253,677 shares of common stock at an exercise price of $5.60 per
      share (each a “Subsequent Warrant”, collectively, the “Subsequent Warrants” and
      collectively with the Initial Warrants, the “Warrants”). The Warrants expire on
      January 31, 2009. The exercise prices of the Warrants are subject to adjustment
      in the event of certain dilutive issuances, stock dividends, stock splits,
      share
      combinations or other similar recapitalization events. The Warrants may only
      be
      exercised by the payment of the applicable exercise price to the Company in
      cash, no cashless exercise is permitted. The terms of the Initial Warrants
      and
      the Subsequent Warrants are identical.


Page
          F - 14





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      5 -**  **PREFERRED
      SHARES (Continued):**





***Series
      B Convertible Preferred Stock (Continued):***





On
      June
      15, 2007, the Company consummated a $2,000,000 equity financing by entering
      into
      two additional Series B Convertible Preferred Stock Subscription Agreements
      (each a “Series B Subscription Agreement” and collectively the “Series B
      Subscription Agreements”) with two purchasers (each a “Purchaser” and
      collectively, the “Purchasers”). Each Series B Subscription Agreement provides
      for the sale by the Company to the applicable Purchaser 58,824 shares of the
      Company’s Series B Convertible Preferred Stock, par value $0.10 per share (the
“Additional Series B Preferred Stock”), and warrants to purchase an aggregate of
      294,120 shares of the Company’s Common Stock, $.01 par value per share, in
      exchange for and in consideration of an aggregate investment by each of the
      Purchasers of $1 million in cash.





On
      the
      Closing Date, each Purchaser invested $1 million in the Company in return for
      58,824 shares of Additional Series B Preferred Stock and warrants (the terms
      of
      which are identical to the Series B Convertible Preferred Stock described above)
      to purchase an aggregate of 294,120 shares of Common Stock. The Company granted
      each Purchaser one warrant to purchase 294,120 shares of common stock at an
      exercise price of $3.80 per share. The Warrants expired on May 31, 2008. The
      exercise prices of the warrants are subject to adjustment in the event of
      certain dilutive issuances, stock dividends, stock splits, share combinations
      or
      other similar recapitalization events. The warrants may only be exercised by
      the
      payment of the applicable exercise price to the Company in cash, no cashless
      exercise is permitted.





The
      Company has evaluated the Series B Preferred Stock to determine if there are
      any
      embedded derivatives and determined that the Series B Preferred Stock is more
      akin to equity than debt as it is not redeemable and carries voting rights.
      As
      such the Series B Preferred Stock is considered perpetual and the option to
      convert into shares of Company’s Common Stock is clearly and closely related to
      the host contract i.e. Series B Preferred Stock and therefore need not be
      separated. The warrants associated with the issuance of the Series B Preferred
      Stock have been determined to be a liability due to the tainting feature of
      the
      warrants issued with Bridge I and Bridge II Financings. The warrant issuance
      has
      been valued at $3,879 as of June 30, 2008 using the Black Scholes method. The
      value of the warrants had been recorded as a dividend with a corresponding
      discount to the Series B Preferred. The Series B Preferred Stock is evaluated
      further under EITF 98-5: Accounting for Convertible Securities with Beneficial
      Conversion Features or Contingently Adjustable Conversion Ratios, (“EITF 98-5”)
      and EITF 00-27: Application of Issue No. 98-5 to Certain Convertible
      Instruments, (“EITF 00-27”) to determine if there is any beneficial conversion
      feature associated with the conversion. The Company calculated the beneficial
      conversion to be zero as the conversion price equaled or exceeded the stock
      price on the date of the agreement.




The
      Series B Preferred Stock has a conditional 4% dividend attached. The Company
      has
      no obligation to pay a dividend except in certain circumstances. The conditional
      dividend obligation only accrues on the anniversary of each issuance whether
      the
      Board of Directors declares a dividend payment or not. The Preferred Stock
      dividend has a priority over junior equity issuances upon the occurrence of
      a
      liquidating event. Additionally, no dividends may be paid to holders of common
      stock unless all cumulative Preferred Stock dividends have been paid. As of
      June
      30, 2008, the accrual of dividends based on the anniversary date totaled
      $200,000. If dividends were instead earned based on the accrual date of June
      30,
      2008 versus the anniversary dates, then an additional $86,667 in dividends
      would
      have been earned in the year ended June 30, 2008. In addition, the holders
      of
      the Series B Convertible Preferred Stock have the right to approve certain
      transactions and certain issues of securities including but not limited to
      certain mergers, acquisitions, liquidations, sales of equity securities that
      are
      senior to the Series B convertible Preferred Stock or the issuance of debt
      instruments in excess of $1,000,000.





In
      January, 2008, the Company received a request from a Series B Preferred Stock
      shareholder to convert 58,823 shares to 294,118 common shares. The effective
      date of the conversion was January 31, 2008.





Page
          F - 15





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**





**NOTE
      6 -**  **SHAREHOLDERS’
      EQUITY/STOCK OPTION PLANS:**





During
      fiscal 2007, the Company issued 710,516 shares of common stock for consulting
      and legal services and in settlement of liabilities. The value recorded was
      based on the market price at the time of issuance and aggregated
      $2,580,528.





During
      fiscal 2008, the Company issued 696,974 shares of its common stock to various
      consultants for marketing and investor relations services provided. Such shares
      were valued at the market price as of the date of issuance, aggregating
      $1,954,545.





During
      the latest fiscal year, one investor and one former officer exercised warrants,
      the investor for $150,000 and the officer for $100,000, for a total of $250,000
      and 150,000 common shares. In addition, , the Company consummated a sale of
      70,000 shares of common stock to an investor for $200,000.





In
      February 2006, the Company issued a warrant to purchase 50,000 shares of the
      Company’s common stock at a price of $0.20 as part of the Company’s repayment of
      outstanding indebtedness to a creditor of the company. The warrant vested
      immediately and is exercisable for a three year period from the date of
      issuance. As of June 30, 2008, the warrant was revalued and the derivative
      liability was adjusted to approximately $66,000. As of June 30, 2008 the Company
      revalued the warrant under the Black Scholes option-pricing model with the
      following assumptions: an expected life equal to the contractual term of the
      warrant, as the case may be; no dividends; a risk free rate of return of 2.05%
      and volatility of 65.22%.





As
      of
      June 30, 2008 there are two stock option plans in effect; the 1992 Directors'
      Stock Option Plan (Directors' Plan) and the 1992 Stock Option Plan (Option
      Plan). There are no stock options outstanding under the Option Plan. No stock
      options have been granted under either the Director’s Plan or the Option Plan
      since 2002. The Directors' Plan allows for the grant of options to purchase
      up
      to 12,500 shares of the Company’s common stock at an exercise price no less than
      the stock market price at the date of grant. Options granted under this Plan
      vest immediately and expire 10 years from the date of grant. The Option Plan
      allows for the grant of options to employees to purchase up to 10% of the issued
      and outstanding shares of the Company, not to exceed 50,000 shares, at an
      exercise price equal to the stock’s market price at the date of grant. The Board
      sets vesting and expiration dates. The Company has not granted any options
      under
      either of these plans during the two years ended June 30, 2008.





The
      following table summarizes information about stock options outstanding, all
      of
      which were granted under the Directors’ Plan and are exercisable:




Outstanding
                as of June 30, 2006
            
            
            640Granted
            
            
            -Expired
            
            
            (480
            )Outstanding
                as of June 30, 2007
            
            
            160Granted
            
            
            -Expired
            
            
            -Outstanding
                and exercisable as of June 30, 2008
            
            
            160




Exercise
      prices of the outstanding options are as follows:





Exercise Prices
            
            Number of Options$
            25.00
            
            
            80$
            12.50
            
            
            80160





In
      addition to the Director’s Plan options, during 1996 the Company issued 400
      non plan options with an exercise price of $22.60 which expired on December
      31,
      2007.


Page
          F - 16




**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**





**NOTE
      7 -**  **INCOME
      TAXES:**





Effective
      July 1, 2007, the Company adopted the provisions of FASB Interpretation No.
      48
      (“FIN 48”), “Accounting for Uncertainty in Income Taxes — An Interpretation of
      FASB Statement No. 109.” FIN 48 provides detailed guidance for the financial
      statement recognition, measurement and disclosure of uncertain tax positions
      recognized in the financial statements in accordance with SFAS No. 109. Tax
      positions must meet a “more-likely-than-not” recognition threshold at the
      effective date to be recognized upon the adoption of FIN 48 and in subsequent
      periods. Upon the adoption of FIN 48, the Company had no unrecognized tax
      benefits. During the years ended June 30, 2008 and 2007, the Company recognized
      no adjustments for uncertain tax benefits.




The
      Company recognizes interest and penalties, if any, related to uncertain tax
      positions in selling, general and administrative expenses. No interest and
      penalties related to uncertain tax positions were accrued at June 30,
      2008.




Income
      taxes are computed using the asset and liability method of accounting. Under
      the
      asset and liability method, a deferred tax asset or liability is recognized
      for
      estimated future tax effects attributable to temporary differences and
      carryforwards. The measurement of deferred income tax assets is adjusted by
      a
      valuation allowance, if necessary, to recognize future tax benefits only to
      the
      extent, based on available evidence, it is more likely than not that such
      benefits will be realized. The Company’s deferred tax assets were fully reserved
      at June 30, 2008 and June 30, 2007.




The
      tax
      years 1996 through 2007 remain open to examination by the major taxing
      jurisdictions in which the Company operates. The Company expects no material
      changes to unrecognized tax positions within the next twelve
      months.




As
      of
      June 30, 2008 the Company has federal net operating loss carryforwards of
      approximately $15.8 million available to offset taxable income through the
      year
      2028. As the Company is based in Canada, there are no material state net
      operating loss carryforwards.




The
      Company has now filed all of its outstanding federal and state tax returns
      for
      all tax years through June 30, 2006 but has not yet filed its returns for the
      year ended June 30, 2007. Management intends to cure this deficiency as soon
      as
      possible and expects there will be no federal tax liability (based on continued
      losses) for this delinquent year. Deferred tax assets and liabilities consist
      of
      the following as of June 30:





2008
            
            2007**Deferred
                tax assets:**Net
                operating loss carry forwards
            
            $
            5,500,000
            
            $
            4,500,000Less
                valuation allowance
            
            
            (5,500,000
            )
            
            (4,500,000
            )Net deferred tax asset
            
            $
            -
            
            $
            -





The
      approximate $971,000 and $1,361,000 income tax benefit for the years ended
      June
      30, 2008 and 2007, respectively, have been offset by a corresponding deferred
      tax asset valuation allowance increase.  Accordingly, no provision
      (benefit) from income taxes has been reported in the consolidated statement
      of
      operations for the years ended June 30, 2008 and 2007




**NOTE
      8 -**  **COMMITMENTS:**




*(a)*
            *Operating
                Lease:*





In
      April
      2006, the Company entered into a three-year lease for office space in Toronto,
      Canada, with a monthly payment of $1,927 plus applicable taxes. Rent expense
      (including taxes) for the years ended June 30, 2008 and 2007 aggregated $43,494
      and $39,461, respectively. In addition, the Company rents office space on a
      month to month basis in New Jersey for which it pays $250 per month. Future
      annual minimum lease payments, including taxes, are as follows:





Fiscal
                2009
            
            $
            33,745


Page
          F - 17





**ELEMENT
      21 GOLF COMPANY AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**YEARS
      ENDED JUNE 30, 2008 AND 2007**




**NOTE
      8 -**  **COMMITMENTS
      (Continued):**





*(b)*
            *Royalty
                agreement:*





On
      June
      21, 2007, the Company signed a licensing agreement with Advanced Light Alloys
      Corporation for the licensing of scandium patents for fishing equipment
      applications. The Company has agreed to pay a 20% royalty on the net sales
      derived from fishing related products. The minimum annual royalty amount due
      under this agreement is $100,000. The agreement expires coterminous with the
      patent expirations, which expire June 2014. The agreement may be terminated
      by
      the Company in May of each year. See also Note 9.





*(c)*
            *Employment
                contracts:*





The
      Board
      of Directors approved a contract for Dr. Nataliya Hearn, PHD., President. Under
      the terms of this contract, Dr. Hearn has the option of cash compensation of
      $15,000 or the equivalent of $20,000 in common stock warrants per month. Dr.
      Hearn has a three year contract that expires December 31, 2010. In addition,
      she
      receives a bonus of 100,000 options each year priced at $1.60 per share in
      2008
      and 2009 and $3.20 per share in 2010 on January 1 of each year. During fiscal
      2008, Dr. Hearn elected not to take any cash compensation, only non-cash in
      the
      form of warrants. The Board of Directors approved a contract for Mr. David
      Sindalovsky, Chief Engineer. Under the terms of the agreement, Mr. Sindalovsky
      is compensated 200,000 common shares per year. Mr. Sindalovsky has a one year
      contract that expires September 15, 2009. The Board of Directors also approved
      a
      contract for Mr. John Grippo, Chief Financial Officer. Under the terms of this
      contract, Mr. Grippo receives cash compensation of $4,500 plus the equivalent
      of
      $7,500 in common stock per month. Mr. Grippo’s contract expires December 31,
      2009.





**NOTE
      9 -**  **RELATED
      PARTY TRANSACTIONS:**





During
      the year ended June 30, 2008 the Company incurred a royalty expense of $240,531
      for the sale of fishing equipment. The royalty is calculated as 20% of the
      net
      selling price of fishing products sold by the Company and any sub licensee.
      The
      royalty is payable to Advanced Light Alloys Corporation, a Barbados corporation
      that is wholly-owned by David Sindalovsky, a consultant to the Company. The
      Company has not paid any royalties to date to Advance Light Alloys Corporation.
      See also Notes 3(d) and 8(b).





The
      Company purchased $760,294 in inventory from VM Midday, Inc., a company owned
      by
      the spouse of John Grippo, the Company’s Chief Financial Officer. VM Midday,
      Inc. earned $4,300 in fees from providing this service. See also Note
      3(c).








**NOTE
      10 -         MAJOR CUSTOMERS AND
      SUPPLIERS:**





For
      the
      fiscal year ended June 30, 2008, the Company purchased approximately 56% of
      its
      inventory purchases from two vendors. The accounts payable to these vendors
      aggregated approximately $544,000 as of June 30, 2008.





For
      the
      fiscal year ended June 30, 2007, the Company purchased approximately 87 % of
      its
      inventory purchases from two vendors. The accounts payable to these vendors
      aggregated approximately $4,000 as of June 30, 2007.




For
      the
      fiscal year ended June 30, 2008, the Company had approximately 34% of its
      revenues from two customers. The accounts receivable from these customers
      aggregated approximately $264,000 as of June 30, 2008.





For
      the
      fiscal year ended June 30, 2007, the Company had approximately 41% of its
      revenues from three customers. The accounts receivable from these customers
      aggregated approximately $28,000 as of June 30, 2007





**NOTE
      11 -         SUBSEQUENT
      EVENT:**





In
      September, 2008, the Company filed a Registration Statement on Form S-8 for
      1.5
      million common shares to be issued to consultants and
      employees.


Page
          F - 18