---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB /A Amendment No.
  1

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2007

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:000-33149

TRANSNATIONAL AUTOMOTIVE GROUP, INC.(formerly Apache Motor Corporation)(Name of Small Business Issuer in Its Charter)

|Nevada                                                               | 76-0603927                                    
|-------------------------------------------------------------------- | ----------------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification Number)       
|                                                                     |                                               
|21800 Burbank Blvd., Suite #200                                      | (818) 961-2727                                
|Woodland Hills, CA 91367                                             | (Registrant's phone number)                   
|(Address of Principal Executive Offices)                             |                                               
|                                                                     |                                               
|Securities registered under Section 12(b) of the Act:                | None                                          
|                                                                     |                                               
|Securities registered under Section 12(g) of the Act:                | Common Stock, par value $0.001 per
      share
|                                                                     | (Title of class)                              

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities 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. (1) Yes [X] No [   ] (2) Yes [X] No [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B 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. [X]

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

Registrant's revenues for its most recent fiscal year:
$862,029

As of June 12, 2007, the aggregate market value of the voting
  and non-voting common stock held by non-affiliates 
  of the issuer was approximately $43,496,747 based on the closing trade reported
  on the NASD Over-the-Counter 
  Bulletin Board National Quotation System. Shares of common stock held by each
  officer and director and by each 
  person who owns five percent or more of the outstanding common stock have been
  excluded from this calculation 
  as such persons may be considered to be affiliated with the Company.

As of June 13, 2007, the Registrant had 40,619,987 shares of
common stock outstanding.

Transitional Small Business Disclosure Format: Yes [  
] No [X]

Documents Incorporated by Reference: None

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**EXPLANATORY
  NOTE – AMENDMENT NO. 1 TO ANNUAL REPORT**

On October 25, 2007, Transnational
  Automotive Group, Inc. (the “Company”) received correspondence from
  the Securities and Exchange Commission (the “SEC”) providing several
  comments (the “Staff Comments”) to the Company’s Form 10-KSB
  for the fiscal year ended February 28, 2007, which was filed on June 13, 2007.
  The Company hereby amends its Annual Report on Form 10-KSB for the fiscal year
  ended February 28, 2007, to remediate the matters enumerated below pursuant
  to the SEC’s Staff Comments. This Amendment No. 1 does not result in a
  restatement of the Company’s financial condition or results of operations
  for the fiscal year ended February 28, 2007.

| | 1. | The
        Staff Comments from the SEC noted that the disclosures contained in the
        annual report should indicate whether “any provisions for fuel subsidies
        have been recorded in the financial statements”. As a result, the
        financial statements of the Company have been amended to disclose the
        Company did not recognize any revenue from fuel subsidies during the fiscal
        year ended February 28, 2007.                                                                                                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 2. | The
        Staff Comments also noted that Item 8A “Controls and Procedures”
        of the Annual Report should be revised and expanded to disclose how the
        Company’s management complied with the disclosure provisions of
        Item 308 and 208T of Regulation S-B related to Internal Control Over Financial
        Reporting. As a result, the Annual Report has been amended to set forth
        the required disclosure provisions pursuant to Item 308 and 308T of Regulation
        S-B related to Internal Control Over Financial Reporting.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 3. | The
        Staff Comments also noted that the report of the Company’s predecessor
        auditor included in the Annual Report, as originally filed, made reference
        to the balance sheet as of February 28, 2006, while the Annual Report
        did not include disclosure of the balance sheet as of February 28, 2006.
        The Annual Report is being amended to exclude reference to the balance
        sheet as of February 28, 2006 in the report of the Company’s predecessor
        auditor, Pannell Kerr Forster.                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 4. | The
        Staff Comments from the SEC noted that the write-down of the excess of
        the purchase price of PAGI over the fair value of assets and liabilities
        assumed should have been recognized as an operating expense versus a non-operating
        expense, as had been reported in the statement of operations for the year
        ended February 28, 2006. The Annual Report is being amended to classify
        the write down of this goodwill as a component of operating expenses for
        the year ended February 28, 2006.         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5. | The
        Staff Comments noted that the Annual Report, as originally filed, did
        not disclose the number of shares of common stock that were excluded from
        the Company’s earnings per share calculation due to antidilution.
        The Annual Report is being amended to disclose the potentially dilutive
        shares excluded from earnings per share as required by paragraph 49 of
        Statement of Financial Accounting Standards No. 128.                                                                                           

The Staff
  Comments also contained inquiries about other disclosure items contained in
  the financial statements. These items were discussed in a letter dated November
  21, 2007 from the Company to the SEC. The explanations contained in the letter
  resolved the questions to the satisfaction of the SEC, and no changes were required
  with respect to these inquiries. A copy of the letter dated November 21, 2007
  is attached hereto.

Except as
  otherwise expressly stated, this Amendment No. 1 does not reflect any events
  occurring after the filing of the original Form 10-KSB for the fiscal year ended
  February 28, 2007.

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

FORM 10-KSB ANNUAL REPORT

FOR THE YEAR ENDED FEBRUARY 28, 2007

TABLE OF CONTENTS

|Part I     |                                                                                                                        
|---------- | -----------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                        
|ITEM 1     | Description of
      Business                                                                                          
|ITEM 2     | Description of Property                                                                                                
|ITEM 3     | Legal Proceedings                                                                                                      
|ITEM 4     | Submission of Matters to a Vote
      of Security Holders                                                              
|           |                                                                                                                        
|Part II    |                                                                                                                        
|ITEM 5     | Market for Common
      Equity and Related Stockholder Matters                                                         
|ITEM 6     | Management's Discussion and
      Analysis of Financial Condition or Plan of Operation                                 
|ITEM 7     | Financial Statements                                                                                                   
|ITEM 8     | Changes In and Disagreements
      With Accountants on Accounting and Financial Disclosure                             
|ITEM 8A    | Controls and
      Procedures                                                                                          
|ITEM 8B    | Other Information                                                                                                      
|           |                                                                                                                        
|Part III   |                                                                                                                        
|ITEM 9     | Directors, Executive
      Officers, Promoters and Control Persons; Compliance With Section 16(a) of
      the Exchange
|ITEM 10    | Executive Compensation                                                                                                 
|ITEM 11    | Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder Matters                   
|ITEM 12    | Certain Relationships and Related
      Transactions, and Director Independence                                        
|ITEM 13    | Exhibits and
      Reports on Form 8-K                                                                                 
|ITEM 14    | Principal Accountants Fees and
      Services                                                                          
|           |                                                                                                                        
|SIGNATURES |                                                                                                                        
|           |                                                                                                                        
|EX-31.1    | (Certifications required
      under Section 302 of the Sarbanes-Oxley Act of 2002)                                    
|           |                                                                                                                        
|EX-31.2    | (Certifications required
      under Section 302 of the Sarbanes-Oxley Act of 2002)                                    
|           |                                                                                                                        
|EX-32      | (Certifications required
      under Section 906 of the Sarbanes-Oxley Act of 2002)                                    

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FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-KSB (this Report) contains
certain forward-looking statements and information relating to Transnational
Automotive Group, Inc. and its wholly-owned and majority-owned subsidiaries
(TAUG). Words such as may, will, expects, anticipates, intends,
plans, believes, seeks, estimates, and should, and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. These forward-looking statements in this Report reflect the current
views of TAUG with respect to possible future events and financial performance.
Such forward-looking statements involve risks and uncertainties. We wish to
caution you that our actual results may differ significantly from the results we
discuss in our forward-looking statements. We discuss some of the risks and
uncertainties under the caption Risk Factors in Item 1 in this Report and in
our various other filings with the Securities and Exchange Commission. Our
forward-looking statements speak only as of the date of this document and the
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements to reflect events or circumstances
that occur after that date. You are advised, however, to consult any further
disclosures the Company makes on related subjects as may be detailed in the
Companys other filings made from time to time with the Securities and Exchange
Commission. The safe harbor provisions of the Private Securities Reform Act of
1995 are not available to the Company.

---

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Business Development

Transnational Automotive Group, Inc. ("The Company" or TAUG)
was incorporated April 2, 1999 in the State of Nevada as Vitaminoverrun.com
Corp. and in August 2001 changed its name to Apache Motor Corporation Inc. In
November 2005 the Company changed its name to Transnational Automotive Group,
Inc.

In 2001, the Company merged with Cambridge Creek Companies,
Ltd. (Cambridge), a Nevada corporation. Cambridge was a reporting issuer and
the Company assumed the reporting issuer status after the merger.

Effective September 12, 2001, the Company acquired all of the
outstanding shares of common stock of The Apache Motor Corp. (Apache), an
Alberta corporation, from the shareholders of Apache in exchange for an
aggregate of 440,000 shares of its common stock. The exchange was effectively a
reverse takeover of the Company by Apache in that the shareholders of Apache
became the majority shareholders of the Company. On October 24, 2003 the
principal of The Apache Motor Corp (Robert Wither) agreed to return 278,560
shares of common stock for cancellation that he had received from the Company
and the Company disposed of its shares in its subsidiary company, The Apache
Motor Corp., to Robert Wither in conjunction with the cancellation of his shares
in the Company. The Company retained the rights to the technology and returned
the shares of the subsidiary to the original owners.

In 2002, the Company completed a 5:1 forward stock split.

On May 3, 2004, the Company terminated an agreement to acquire
100% of the issued share capital of Manter Enterprises Inc. and cancelled the
533,334 shares of common stock of the Company previously issued in trust for
Manter subject to a performance agreement.

On June 7, 2004, the Company completed a 1:75 reverse stock
split. On October 14, 2005, the Company completed a 2:1 forward stock split.

On October 28, 2005 the Company issued 24,000,000 shares of
common stock to acquire 100% of the issued share capital of Parker Automotive
Group International, Inc. (PAGI). On September 18, 2006, 18,000,000 shares of
the 24,000,000 shares originally issued were returned to the Company and
cancelled. PAGI is in the business of developing a public bus transportation
system in Cameroon through its 66% owned subsidiary, Parker Transportation Inc.,
Cameroon.

The Company has used the purchase method to account for its
acquisition of PAGI, the assets and liabilities of which were as follows on
acquisition:

Fair value of net assets
      acquired:Cash
    $
    48,647Loan receivable
    
    113,100Intercompany loan
    
    11,700Accounts payable
    
    (75,018
    )Notes payable
    
    (235,000
    )(136,571
    )Purchase price
    
    (24,000
    )Excess of purchase price over
      net assets acquired
    $
    (160,571
    )


On December 22, 2005, the Government of Cameroon contributed
$1,000,000 of their $1,800,000 cash commitment under the terms of the agreement
with the Company, and transferred the remaining $800,000 cash commitments in
increments of $200,000 on September 1, 2006 and $600,000 on November 1,
2006.

On December 11, 2005 the Board of Directors of the Company
approved amendments to the Articles of Incorporation of Apache Motor Corporation
to (1) change the name to Transnational Automotive Group Inc., and (2) to
increase the number of authorized shares of common stock from 100,000,000 to
200,000,000 and to increase the number of authorized shares of preferred stock
from 20,000,000 to 100,000,000. These amendments were later approved by a
majority of the shareholders of the Company.

On January 12, 2006 the Company changed its name from Apache
Motor Corporation to Transnational Automotive Group, Inc. The

---

new stock symbol is TAMG.

On March 15, 2006, the Company began implementation of an Agreement
  with the government of the Republic of Cameroon to provide urban bus transportation
  to cities throughout the country and to provide bus transportation between the
  cities. Under the terms of the agreement, Parker Transnational Industries –
  Cameroon (“PTIC”) was established to operate the bus system. PTIC
  is owned 66% by the Company and 34% by the City of Yaoundé and the Cameroon
  Ministry of Hydrocarbons.

Business Overview

Transnational Automotive Group, Inc. is a holding company,
whose primary business is focused on acquiring, developing and providing urban
and rural mass transit systems in leading sub-Saharan countries through
partnerships established with the central governments of the respective
sponsoring nations. The Companys vision is to become a leading transportation
company on the African continent by establishing key infrastructure and
workforce development that will help facilitate the economic development and
quality of life of each respective host country. Our bus fleets provide an
efficient way for communities in need to travel and prosper. Through the
development of formidable partnerships with sponsoring governments and
integrating our managements best practices and expertise into their countries
infrastructure, our aim is to provide the citizenry of our host nations with
lower cost transportation options that will stimulate economic development by
providing more efficient and affordable transportation options.

Our current operations involve providing mass bus transit
systems operated by our subsidiaries in Cameroon, Africa. We are also in
early-stage planning for prospective operations in Ethiopia, Nigeria and
Mozambique. Unless the context otherwise requires, references to the Company,
Transnational Automotive Group, Inc. we, our or us mean Transnational
Automotive Group, Inc. and its wholly-owned and majority-owned
subsidiaries.

On October 12, 2005, we signed an agreement with the Government
  of Cameroon for TAUG to establish and exclusively manage the urban bus systems
  in Cameroon, starting with the country’s two major cities: the capital
  city of Yaoundé and the leading population and commercial center, Douala.
  Since the signing of the October 2005 agreement, we have created a wholly-owned
  subsidiary, Transnational Automotive Group – Cameroon, SA (“TAUG-C”),
  headquartered in Yaoundé. TAUG-C, through its 66%-owned intra-city transportation
  operational company, Transnational Industries – Cameroon, S.A., known
  as “LeBus,” officially commenced urban bus operations in Yaoundé
  on September 25, 2006 and is currently transporting 12,000 to 14,000 passengers
  daily, generating approximately $100,000 USD/month. LeBus started its first-phase
  operations with an initial fleet of 17 of a planned 200 buses for the Yaoundé
  metropolis, on two fully operational routes of the 25 approved bus routes.

On December 18, 2006, TAUG-C launched its 100%-owned inter-city
  transportation operating subsidiary, LeCar Transportation Corporation (SARL),
  known as “LeCar.” In its first week of operations, LeCar transported
  3,976 passengers between the cities of Yaoundé and Douala, generating
  approximately $50,000 USD in revenues. LeCar started its first-phase operations
  with an initial fleet of 11 coach buses and is currently transporting 15,000
  – 18,000 passengers monthly. Like LeBus, LeCar has received excellent
  support from the media and from Cameroon’s citizens, as indicated in the
  noteworthy success of the launch of operations. LeCar has also impressed Cameroon
  government leaders for its reliability and quality of service, and enjoys the
  support of the nation’s highest officials.

Operations

We generate revenue principally as follows:

Bus Fares  Urban City Transporation System(LeBus): The majority of our revenues from our urban
  bus transportation company, LeBus, is derived from ticket fares charged to customers.
  Ticket fares for our urban bus operations approximate .30 USD per rider. LeBus
  started its first-phase of operations with an initial fleet of 28 of a planned
  200 buses for the Yaoundé metropolis, on two fully operational routes
  of the 25 approved bus routes. These two routes are currently transporting 12,000
  to 14,000 passengers per day.

Bus Fares  Inter-City Transportation System (LeCar):
  The majority of our revenues from our inter-city bus transportation company,
  LeCar, are derived from the sale of one-way and round-trip bus fares between
  the cities of Yaoundé and Douala. LeCar is targeting the mid-market ($10-$12
  per round trip) price point. The inter-city bus transportation system commenced
  operations on December 18, 2006 with 11 coach buses.

Food and beverage: As an accommodation to our
passengers, we sell food and non-alcoholic beverages on our inter-city bus route
between Yaoundé and Douala. Sales of food and beverages represent less than 5%
of our aggregate revenue.

Postage and mail:Cameroon does not maintain any formal
or well organized postal services. To address the needs of courier services, we
have partnered with several leading express delivery companies for the transport
of mail and small freight aboard our inter-city bus

---

line, LeCar. These courier services compliment our existing bus
operations and provide an additional revenue stream at minimal additional cost
to our operations. Revenue generated from our courier services represents less
than 1% of our total revenue.

Advertising: We signed an agreement with Poseidon, a leading
  advertising firm in Cameroon, to sell advertising space on our buses to major
  companies in Cameroon. Poseidon is an affiliate of Nelson Cameroon, a leading
  branding and marketing communications firm in Cameroon. Revenue from the sale
  of advertising space comprises less than 5% of our aggregate revenue.

Market

Within Cameroon

The current weekday market for public transportation in the
city of Yaoundé is estimated at $185 million annually. The current annual
inter-city transportation market between Yaoundé and Douala (not including
routes to other cities in the country) is estimated at $33 million. Although
there are no official numbers, these markets can be expected to expand
substantially, given the increased overall economic growth Cameroon is
experiencing and projecting.

Across Sub-Saharan Africa

A number of Sub-Saharan African countries have approached TAUG
for discussions pursuant to investigating, planning and  in some cases 
beginning transportation-related operations with central or
regional/state/provincial governments and private sector partner entities. These
initial indications of interest (mainly deriving from public and private sector
observation of the Companys successful 2006 launches of urban and inter-city
bus transportation systems in Cameroon) come from a variety of African
geographies and language groups representing West, Central and East African
locations and French, English and Portuguese-speaking areas.

Other Opportunities

Concurrent with establishing and operating mass transit systems
in leading African commercial and population centers, we are also positioning
the Company for expansion into additional African markets and industry sectors,
including manufacturing and marketing sustainable bio-diesel fuels. In the
alternate energy arena, we have begun planning for production of palm oil-based
bio-fuels within palm plantations situated in both Ethiopia and Cameroon.
Beckoning markets for such bio-fuel products have been confirmed by the Company
in Greater China, India, North America and other automotive-intensive nations
and regions.

The Company has established a business development center
dedicated to exploiting various transportation, energy and other natural
resource market opportunities in the Peoples Republic of China, Greater China
and additional Asia Pacific and South Asian locations.

Business Strategy and Market Opportunity

Emerging countries that pursue political stability and a
dynamic, growth-oriented economy require a reliable, sustainable source of food,
adequate housing, readily-available medical treatment, an expanding job market
and an open system for educating children and the work-force. Progress in these
vital areas requires a sustainable, affordable and reliable transportation
infrastructure.

Establishing a sustainable mass transportation system is
capital-intensive and requires systemic technical and management expertise. The
acute need for affordable transportation infrastructure in developing countries,
coupled with the lack of financial resources and management expertise within
these countries, has created a unique opportunity for the Company.

We have developed a strategy that combines its management
knowledge of transportation and business systems with its ability to create an
infrastructure network essential to these developing countries.

Establishing and operating a sustainable transportation
infrastructure that is affordable to a population that is largely characterized
by joblessness and poverty requires:

| | 1. | Minimizing capital expenditures; and
| | -- | ------------------------------------
| | 2. | Minimizing operating costs          

Minimizing capital expenditures: There are three main
components to keeping the capital expenditures at a minimum, thereby reducing
the amount of required financing and associated costs.

| | 1. | Partnering with the Government: As part of the
      October, 2005 agreement, the Cameroon Government (Government) is
      responsible for supplying TAUG with adequate depot facilities for the
      urban bus system as well as improving the road
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| |    | network. This has enabled TAUG to reduce its capital
        needs that would have been required to purchase and then develop these
        facilities and this infrastructure. Additionally, we are in negotiations
        with the Government to allow TAUG to import the city buses into the country
        tax and duty free. This reduces the landed value of these vehicles significantly,
        as duty fees in Cameroon can be up to 60% of the underlying cost of the
        buses.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2. | Sourcing high-quality, less expensive buses from
        China: The Company has sourced quality buses from China that are significantly
        less expensive than comparable US or European vehicles.                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 3. | Seeking competitive financing: TAUG is seeking
        to keep its cost of capital at a minimum to enable the Company to use
        cash flow to help fund its growth.                                                                                                                                                                                                                                                                                                                          

Minimizing operating costs:There are three main
components to keeping operational costs as low as possible to enable TAUG to
offer competitive fares.

.

| | 1. | Negotiated tax abatements from the Government: The
        Government of Cameroon has requested that we offer a socially acceptable
        fare of 150 CFA ($0.29-30 USD) for our urban bus operations. To enable
        such a low fare, we are currently in negotiations with the Government
        to offer TAUG negotiated tax abatements and and/or subsidies, including
        but not limited to a 30 percent reduction in the cost of fuel as well
        as a waiver from Value Added Tax (VAT) on the ticket price.                                                                                                                                                                                                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 2. | Implementing technology: The Company will be
      implementing several business process automation technologies such as
      accounting, payroll and HR software tools to substantially reduce
      administrative costs. In addition, we plan to implement a smart fare
      card technology to eliminate the handling of enormous volumes of cash and
      coin, thus reducing the need for a large cashier staff and for ticket
      sellers on board the buses.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 3. | Negotiate access to natural resources such as oil
        and gas concessions: We have proposed to the Cameroon Government that
        TAUG could keep fares low or even lower – as well as being able
        to offer other special transport services to the elderly and handicapped
        and supplying dedicated school buses – if TAUG could find ways to
        finance these services with cash flow from other sources. We are currently
        in discussions with senior Cameroon Government officials to obtain “marginal”
        producing oil concessions whereby the Company would split the profits
        with the Government. TAUG would invest 50 percent of its share into urban
        bus systems to maintain or even lower the fares as well as offering special
        services such as school buses, which are high-demand needs of Cameroon’s
        economy and society.

Funding Our Business Plan

As discussed more fully in the Management's Discussion and
Analysis - Liquidity and Capital Resources section, the expenses of implementing
the Company's business plan will exceed the Company's current resources. The
Company will have to obtain additional funding through an offering of its
securities or through capital contributions from its stockholders. No
commitments to provide additional funds have been made by management or
stockholders. Accordingly, there can be no assurance that any additional funds
will be available on terms acceptable to the Company, if at all.

Intellectual Property

The nature of patent and trademark registration is very complex
and requires legal expertise. To date, no applications have been prepared to
patent any of the companys assets or concepts.

Government Regulation

There are no specific government regulations known to us, other
than standard business practice, law and conduct, which might effect us in
following our business plan. The manufacture and use of the Company's products
may be subject to regulation by one or more U.S. federal agencies, including the
Federal Trade Commission and the Environmental Protection Agency. These
activities also may be regulated by various agencies of the states, localities
and foreign countries in which consumers reside.

Numerous U.S. federal and state government agencies have
demonstrated significant activity in promoting environmental and consumer
protection and enforcing other regulatory and disclosure statutes. Additionally,
it is possible that new laws and regulations may be enacted with respect to
internal combustion engines. The adoption of such laws or regulations and the
applicability of existing laws and regulations may impair the growth of the
Company and result in a decline in the Companys prospects.

In Cameroon, the Company has incorporated three subsidiaries.
  These subsidiary companies are subject to the laws and regulations of the Republic
  of Cameroon. Additionally, Cameroon is a signatory to the Organization for the
  Harmonization of Business Law in Africa or the OHADA treaty. International business
  disputes or arbitration is conducted in the OHADA courts located in the Ivory
  Coast.

---

Employees

As of February 28, 2007, the Company had approximately 411
  employees, with over 90% of these employees involved directly in operations,
  primarily as drivers, cashiers, mechanics and bus monitors. The Company utilizes
  part-time and full-time outside consultants and contractors for operational
  purposes. We are currently preparing for the deployment of 30 new city buses
  for our urban bus operations in the second quarter of 2007. These additional
  buses will allow the Company to begin offering service on additional bus routes
  of its planned 25 city bus lines in Yaoundé, and we are actively recruiting
  additional employees to manage, drive and maintain the additions to our fleet.

Risk Factors

An investment in TAUG securities is highly speculative and extremely risky. You should carefully consider the following risks, in addition to the other information contained in this report, before deciding to invest in TAUG securities.

We have a history of losses and negative cash flows from operations.

Our cash flow may not be sufficient to satisfy our operations. For the years ended February 28, 2007 and 2006, we recorded a net loss of $8,510,719 and $1,443,380, respectively. As a result of these losses, and prior losses, we currently
have a significant working capital deficit. Furthermore, we cannot predict whether our current or prospective activities will ever generate enough revenue to be profitable. In addition, we have purchase commitments for the acquisition of 30
additional buses approximating $1,600,000. To be able to service our debt obligations and purchase commitments, we must generate significant cash flow and obtain additional debt and equity financing. If we are unable to do so or are otherwise
unable to obtain funds necessary to make required payments on our trade debt and other indebtedness, it is likely that we will not be able to continue our operations. In this event, our investors would be susceptible to loosing most if not all of
their investment in TAUG.

Our independent auditors have included a going concern paragraph in their audit opinion on our consolidated financial statements for the fiscal year ended February 28, 2007, which states that The Company has incurred a significant loss and a
large working capital deficit which together raise substantial doubt as to its ability to continue as a going concern.

We cannot predict our future capital needs and may not be able to secure additional financing.

We have an accumulated deficit of $11,071,646 at February 28,
  2007 and have been continually dependent on the funding of our working capital
  requirements through the issuance of convertible debentures, unsecured promissory
  note obligations and common stock and warrants. Additionally, we have relied
  on cash infusions from related parties to fund our capital expenditures as well
  as working capital requirements.

Our future liquidity and capital requirements will depend on numerous factors. The pace of expansion of our operations will affect our capital requirements. We may also have increased capital requirements in order to respond to competitive
pressures. In addition, we may need additional capital to fund acquisitions of complementary businesses. As we require additional capital resources, we may seek to sell debt securities or additional equity securities or obtain funding through
long-term secured promissory note obligations.

We are currently seeking additional financing to meet our
  short-term and long-term liquidity requirements, although there can be no assurances
  that such financing will be available, or if available, that it will be on terms
  acceptable to us.

Our business is difficult to evaluate because we have a limited operating history in an emerging and rapidly evolving market.

Our limited operating history and unproven track record makes it difficult to accurately assess our general prospects in the urban and rural mass transit transportation industry in Cameroon and the effectiveness of our business strategy. In
addition, we have limited meaningful historical financial data upon which to forecast future revenue, cost of revenue and operating expenses. Our future performance will also be subject to obtaining favorable subsidies and tax exonerations from the
government of Cameroon to help defray our operating expenditures. Accordingly, we cannot assure you that we will successfully implement our business strategy or that our actual future cash flows from operations will be sufficient to satisfy our debt
obligations and working capital needs. An

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investor should consider the likelihood of our future success to be speculative in light of our limited operating history, as well as the problems, limited resources, expenses, risks and complications frequently encountered by similarly situated
companies in emerging geographic markets.

To implement our business strategy, we will need to obtain additional financing. There is no assurance that adequate levels of additional financing will be available at all or on terms deemed acceptable. In addition, any additional financing will
likely result in significant dilution to our existing stockholders. If we are unable to obtain additional financing on terms that are acceptable to us, if any, we could be involuntarily required to dispose of operating assets including our buses to
make up for any shortfall in the payments due on our debt.

Our success is dependent on achieving certain economies of scale.

The successful implementation of our business model requires the acquisition of a significantly larger bus fleet and expansion of our bus lines, which will require significant capital expenditures. In the event we are unsuccessful in obtaining the
required capital necessary to finance our expansion, it would have a material and adverse affect on our revenue growth and future profitability.

Our business model is predicated upon obtaining favorable tax concessions and exonerations which are not guaranteed.

The success of our business model is predicated upon obtaining favorable tax abatements and other subsidies from the government of Cameroon in exchange for providing our city mass transit system in the city of Yaoundé. In the event we are
unable to successfully negotiate for these tax concessions and abatements, there is a great likelihood that our business model may not be able to sustain profitability.

Changes in interpretations of existing, or the adoption of new legislation, regulations or other laws could adversely affect our operations.

Our business is subject to numerous laws regulating safety procedures, equipment specifications, employment requirements, environmental procedures, insurance coverage and other operating issues. These laws are constantly subject to change. The costs
associated with complying with the adoption of new legislation, regulations or other laws could adversely affect our results of operations.

We may in the future incur impairment charges that materially adversely affect our earnings and our operating results.

Our total assets include substantial capital expenditures for our fleet of buses used in operations. In accordance with FASB Statement No. 144, on an annual basis, and more frequently as required, we assess whether indicators of impairment are
present and perform the necessary analysis to ensure the carrying value of our capitalized fleet of buses exceeds its fair value. These events or circumstances would include a significant change in business climate, including a significant,
sustained decline in an entitys market value, legal factors, operating performance indicators, competition, sale or disposition of significant assets or other factors. If future operating performance at our business does not meet expectations,
we may be required to reflect, under current applicable accounting rules, a non-cash charge to operating results for impairment of buses. The recognition of an impairment of a significant portion of our net book value would adversely affect our
results of operations and total capitalization, the effect of which could be material and could cause our stock price to decline.

Supplier Concentrations

We are dependent on a limited number of qualified suppliers of manufactured buses. This dependence could lead to delays, lost revenue or increased costs. Because we depend on a limited number of suppliers for the buses used in our operations, our
future operating results may be impacted by any number of factors including, but not limited to: an increase in the price of buses acquired in the future, the financial viability of our suppliers, the failure of our suppliers to remain in business,
or their failure to meet our quality requirements.

Dependence on Key Management Personnel

We lack the goodwill of an established business and therefore rely on individual members of current management to create business strategies and relationships and developing operating efficacies necessary for growth. Our success is substantially
dependent on the performance of our senior management and key personnel. Substantially all of our management and key employees are not bound by agreements that could prevent them from terminating their employment at any time. In addition, we do not
currently hold key personnel life insurance policies on any of our key employees. We believe that the loss of the services of any our executive officers or

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other key employees and personnel could have a material adverse
effect on our business, financial condition and results of operations.

We may have difficulty attracting and retaining qualified,
highly skilled personnel, including accounting and finance personnel.

We expect the expansion of our business to place a significant
strain on our managerial, operational and financial resources. We will be
required to expand our operational and financial systems significantly and train
and manage our work force in order to manage the expansion of our operations. We
will need to attract and retain highly qualified, technical and other personnel
to maintain and update our products and services and meet our business
objectives. Competition for such personnel is intense. We may not be successful
in attracting and retaining such qualified personnel on a timely basis, on
competitive terms, or at all. Our inability to attract and retain the necessary
technical and other personnel would have a material adverse effect on our
business, financial condition and results of operations.

In anticipation of the expected growth of our operations, we
will be required to improve existing or implement new operational and financial
systems, procedures and controls. To manage this growth, we will need to expand,
train and manage our employee base. We will also need to expand our accounting,
administrative and operations staff. There can be no assurance that our current
and planned personnel, systems, procedures and controls will be adequate to
support our future operations or that management will be able to hire, train,
retain, motivate and manage required personnel.

We are a new company with limited operating history and no
assurances can be provided that we will be able to successfully manage our
growth.

Given our brief period in operations and anticipated future
growth, there are uncertainties concerning our ability to successfully manage
the growth of our operations that is necessary to achieve profitability. Our
ability to manage our planned growth effectively will require us to enhance our
operational, financial, and management systems, expand our facilities and
equipment, and retain a skilled management team with proven skills in overseas
operations. Failure to manage our growth effectively could adversely affect our
operations.

There are inherent risks with operating internationally and,
in particular, in third world countries.

Our efforts to sell into the African markets create a number of
logistical and communications challenges. Additionally, we purchase certain
materials from international sources, and in the future we may decide to move
certain manufacturing functions to, or establish additional manufacturing
operations, international locations. Purchasing, manufacturing, and selling
products internationally expose us to various economic, political, and other
risks, including the following:

| | - | Management of a multi-national organization;                                                                  
| | - | --------------------------------------------------------------------------------------------------------------
| | - | Compliance with local laws/regulatory requirements as well
      as changes in those laws and requirements;   
| | - | Imposition of restrictions on currency conversion or the transfer
      of funds;                             
| | - | Transportation delays or interruptions and other effects of
      less developed infrastructures;             
| | - | Employment and severance issues;                                                                              
| | - | Tariffs and duties;                                                                                           
| | - | Possible employee turnover or labor unrest, including concerns
      over the unionization of our labor force;
| | - | The threat of repatriation of our operating assets and business
      operations;                             
| | - | The burdens and costs of compliance with a variety of foreign
      laws, and                                 
| | - | Political or economic instability in certain parts of the
      world                                         

Terrorism

Terrorist attacks may adversely affect our business and
operating results. The continued threat of terrorist activity and other acts of
war or hostility have created uncertainty for westerners and foreign companies
operating in Africa, which has significantly increased the political, economic
and social instability in the geographic region in which we operate. Acts of
terrorism, either domestically or abroad, could create further uncertainties and
instability. To the extent this results in disruption of our business operations
or our ability to obtain additional financing for our current and future working
capital requirements, our business, operating results and financial condition
could be adversely affected.

Impairment of Fixed Assets

The transportation network in the cities of Yaoundé and Douala
are terribly inadequate, with roads and highways requiring significant upgrades.
The inadequacy of these roads could result in the acceleration of wear and tear
of our city and inter-city

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buses, the reduction in their useful lives, and significant
operating expenditures necessary to maintain and upkeep the buses, which would
negatively impact our financial condition and the results of our operations.

Significant Estimates

We have made and continue to make a number of estimates and
assumptions relating to our consolidated financial reporting. By their nature,
estimates are subject to an inherent degree of uncertainty and, as such, actual
results may differ, and the difference may be material, from our estimates. Key
estimates and assumptions for us include reserves for depreciation, accruals for
custom duty, VAT taxes and other contingencies, and provisions for fuel
subsidies.

Competition

The inter-city bus transportation market is competitive and the
market is very sensitive to the ticket fares charged on our bus routes between
the cities of Yaoundé and Douala. There can be no assurance that the government
of Cameroon will elect to partner with other companies to provide mass transit
systems for its populace.

Internal Controls and Procedures

Through the end of February 27, 2007, our internal controls and
procedures have not been audited for compliance with Section 302 of the
Sarbanes-Oxley Act of 2002. If our internal controls are found to be
ineffective, our financial results or our stock price may be adversely
affected.

We believe that we currently have adequate internal control
procedures in place for future periods; however, if our internal controls are
found to be ineffective, our financial results or our stock price may be
adversely affected.

Risks Relating To Our Securities

Our common stock is quoted on the OTC Bulleting Board,
making it difficult to sell when desired.

Our OTC Bulleting Board listing negatively affects the
liquidity of our common stock. The market liquidity of our stock is relatively
low. There has only been a limited public market for our securities, and there
can be no assurance that an active trading market will be maintained. Although a
more active trading market may develop in the future, the limited market
liquidity for our stock may affect an investors ability to sell at a price that
is satisfactory to him or her. Therefore, no assurances can be given that a
liquid trading market will exist at the time any stockholder desires to dispose
of any shares of our common stock.

The market price for our common stock has been and may
continue to be subject to a significant degree of volatility.

The market price of our common stock has in the past and may in
the future experience significant volatility as a result of a number of factors,
many of which are outside of our control. The following is a list of the risk
factors that may affect the market price for our common stock:

- Our quarterly and annuals results of operations and ability to meet analysts
    and our own published expectations
- The amount and timing of operating costs and capital expenditures related
    to the maintenance and expansion of our businesses, operations, and infrastructure
- General economic and sociopolitical conditions both domestically and in
  Cameroon and sub-Saharan Africa
- Geopolitical events domestically or abroad such as war, threat of war or
  terrorist actions
- Recruitment or departure of key personnel
- An increase in the underlying costs of our operations including fuel and
  labor costs
- The repatriation of some or all of our assets under operation
- The cancellation of our agreements with the government of Cameroon
- The sale of substantial amounts of our common stock or other potentially
  dilutive capital transactions such as shares issued upon the exercise of
  outstanding common stock warrants

The OTCBB is a relatively unorganized, inter-dealer,
over-the-counter market that provides significantly less liquidity than NASDAQ
and the other national securities markets. The trading price of our common stock
may fluctuate significantly and, as is the case for OTCBB securities generally,
is not published in newspapers. Because we may experience a high level of
volatility in our common stock, investors should not invest in our stock unless
they are prepared to absorb a significant loss of their capital. At any given
time,

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investors may not be able to sell their shares at a price that they think is acceptable.

Penny stock abuse

The market price for our stock may suffer as a result of patterns of fraud and abuse that are prevalent for penny stocks, which are defined as any equity security having a market price (as defined) of less than $5.00 per share, or an exercise
price of less than $5.00 per share, subject to certain exceptions. These patterns of abuse include, but are not limited to the following:

- Control of the market for our common stock by one or a few broker-dealers
    that are often related to the promoter or issuer
- Manipulation in the trading price of our common stock through the prearranged matching of purchases and sales
- Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers
- Dumping of securities after prices have been artificially manipulated to higher levels, resulting in investor losses.

The trading value of our common stock is vulnerable to market fraud.

Securities traded on the OTCBB are generally more susceptible to market manipulation and/or fraud because of their low prices and because securities traded on the OTCBB have less stringent reporting requirements than securities traded under other
national exchanges.

We have not paid any cash dividends and do not anticipate paying any cash dividends in the foreseeable future.

The growth of our operations will require a significant amount of working capital and capital expenditures necessary to increase our fleet of buses and related infrastructure costs. Because of limitations in the availability of capital to fund our
operations, we do not anticipate paying cash dividends on our common shares in the foreseeable future.

A large number of common shares are issuable upon exercise of outstanding convertible debentures and warrants, which, upon exercise, would result in the substantial dilution of our common shares.

In connection with two private placement offerings, as of February 28, 2007, we had outstanding debentures that could be converted into 7,538,954 shares of common stock at an average price of .48 to .50 per share and warrants to purchase 8,789,624
common shares at a weighted average exercise price of $1.50 per share. To the extent that the warrants and convertible instruments for our common stock are converted and exercised or we issue additional convertible debentures, common stock or
warrants, the increase in the number of our outstanding shares of common stock may adversely affect the price for our common stock. This could hurt our ability to raise capital through the sale of equity securities, convertible instruments or other
long-term sources of borrowing. In the event of the exercise of these securities, you could suffer substantial dilution of your investment in terms of your percentage ownership in us as well as the book value of your common shares. Exercise of the
16,328,578 existing common shares available under the exercise of convertible debentures and warrants issued in connection with our private placement transactions would result in approximately 45% net dilution in existing shareholders
percentage ownership as well as in the book value of our common shares as of February 28, 2007.

The concentration of ownership of our common stock gives a few individuals significant control over important policy and operating decisions.

As of February 28, 2007, certain members of our officers and directors as a group collectively owned and control approximately 31% of the common stock of our company. Although senior management does not control a majority of all outstanding
shares, their collective ownership would give them a strong advantage in regards to electing board members and other matters requiring shareholder approval.  In addition, through control of the board of directors and voting power, they may be able
to control certain decisions, including decisions regarding the qualification and appointment of officers, dividend policy, access to capital (including borrowing from third-party lenders and the issuance of additional equity securities), and the
acquisition or disposition of our assets. In addition, the concentration of voting power in the hands of those individuals could have the effect of delaying or preventing a change in control of our company, even if the change in control would
benefit our stockholders. A perception in the investment community of an anti-takeover environment at our company could cause investors to value our stock lower than in the absence of such a perception.

ITEM 2. DESCRIPTION OF PROPERTY

Our corporate offices are located at 21800 Burbank Blvd., #200, Woodland Hills, California, 91367 and are leased by the Company on a month-to-month basis.

Our intra-city bus operating facilities in Yaoundé, Cameroon consist of a bus depot facility, which also houses our administrative,

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sales and maintenance departments. This bus depot facility is
used by our majority-owned intra-city transportation company, Transnational
Industries  Cameroon, S.A., known as LeBus, and has been provided to us by
the Yaoundé Urban Council, a governmental agency of Cameroon, which is also a
minority shareholder in LeBus. This facility comprises approximately 232,000
square feet of space. Through February 28, 2007, we have invested approximately
$87,000 in building improvements on the bus depot used in our operations.

Our operating facilities for our wholly-owned inter-city bus
  operational company, known as “LeCar”, are comprised of two sales
  agency facilities and an office building used by LeCar’s corporate, sales
  and administrative staff. One of LeCar’s agency facilities is situated
  on the grounds of a large hotel in Douala, Cameroon and has been leased to LeCar
  under an agreement expiring December 2008. The second agency facility is located
  in Yaoundé and comprises approximately 86,000 square feet. This agency
  facility is leased under a 20-year non-cancelable operating lease agreement,
  expiring in 2027. LeCar’s Yaoundé-based corporate and administrative
  office is comprised of approximately 5,000 square feet and is leased under an
  operating lease agreement expiring in October 2007. Through the end of our fiscal
  year ended February 28, 2007, we have invested approximately $170,000 in construction
  costs related to upgrading and refurbishing LeCar’s facilities under lease.

In addition to our operating facilities in Cameroon, we also
lease three personal residences in Yaoundé used by certain members of our senior
management and Ex-pats under operating leases expiring in various years through
2008.

ITEM 3. LEGAL PROCEEDINGS

In May 2006, we were assessed a claim approximating $461,000 in
connection with a breach of contract dispute with the owners of our sea freight
carrier and related agent, BBC Ireland (Ireland) and Global Transportation
Services, Inc. (Global), respectively. The claim arose out of an alleged
failure and delinquency to procure our first shipment of 28 buses from China to
Cameroon within the guidelines specified under the contract. In December, 2006,
we initiated settlement negotiations for these parties to withdraw their
monetary claim in exchange for contracting with Ireland and Global for our next
two sea freight shipments of buses from China to Cameroon. As of the date of the
filing of this Form 10-KSB, we have not satisfied all contractual provisions
required to settle this dead claim freight and no loss contingency has been
accrued in the accompanying consolidated financial statements as of and for the
year ended February 28, 2007. In the event we are unable to fulfill the
contractual obligations of the settlement agreement, any damage awards granted
to these parties in the event of litigation arising from this dead claim freight
could have a material adverse impact on our financial condition and results of
operations.

In the ordinary course of business, we may become a party to
legal or regulatory proceedings resulting from litigation, claims or other
disputes. There can be no assurance that one or more future actions, if they
occur, would not have a material adverse effect on the business. No accruals for
potential losses for litigation are recorded as of February 28, 2007, in
accordance with SFAS No. 5, but if circumstances develop that necessitate a loss
contingency being recorded, we will do so. We expense all legal fees for
litigation as incurred.

On March 19, 2007, one of our inter-city coach buses was
involved in a collision en route between Yaoundé and Douala that resulted in the
deaths of two passengers and injuries sustained to the surviving passengers. In
accordance with Cameroonian law, our subsidiary, LeCar, was cited with
responsibility for the collision. We maintain insurance coverage for damage
claims arising from collisions. However, we cannot determine the amount of
monetary damages in excess of amounts covered under insurance, if any, that may
be awarded to passengers involved in this collision.

Our subsidiary, LeCar, subleases an agency physically located
  on the premises of a large hotel in Douala under a two year lease term. On May
  15, 2007, we received notification from the management of the hotel to terminate
  the lease agreement and requesting that we vacate the premises. The matter has
  been referred to legal counsel and is currently in mediation. In the event the
  cease and desist demand is upheld, we would be required to record an impairment
  charge of approximately $170,000, resulting from the write off construction
  in progress and other building improvement costs expended on our agency facility.

To the knowledge of the Company’s executive management
  and directors, we are not party to any other pending legal proceeding or litigation
  and, except as described above, none of our property is the subject of a pending
  legal proceeding and the executive officers and directors know of no other threatened
  or contemplated legal proceedings or litigation.

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

No matter was submitted to a vote of security holders during
the fourth quarter of the fiscal year ended February 28, 2007.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Market Information

The Companys common stock was approved for trading on the
Over-the-Counter Bulletin Board (OTCBB) under the symbol APHC on May 11, 1998.
On June 7, 2004 the Company completed a 1:75 reverse stock split and traded
under the symbol ACHO. On January 12, 2006 the Company changed its name from
Apache Motor Corporation to Transnational Automotive Group, Inc. The new stock
symbol is TAMG.OB.

The table set forth below reflects the reported high and low
bid prices of the Common Stock for each quarter for the periods indicated as
reported by the OTCBB. Such prices are inter dealer prices without retail mark
ups, mark downs or commissions and may not represent actual transactions.

|     |  |                                             |  |  |  |  |   | Closing Bid | 
|---- |  | ------------------------------------------- |  |  |  |  | - | ----------- | 
|     |  |                                             |  |  |  |  |   | High        | 
|Year |  | Quarter                                     |  |  |  |  |   |             | 
|2007 |  | March 1, 2006 - May 31, 2006                |  |  |  |  | $ | 5.45        | 
|     |  | Jun 1, 2006 - August 31, 2006               |  |  |  |  |   | 2.32        | 
|     |  | September 1, 2006 - November 30,
      2006 |  |  |  |  |   | 1.45        | 
|     |  | December 1, 2007 - February 28, 2007        |  |  |  |  |   | 1.35        | 
|     |  |                                             |  |  |  |  |   |             | 
|2006 |  | March 1, 2005 - May 31, 2005                |  |  |  |  | $ | 0.48        | 
|     |  | Jun 1, 2005 - August 31, 2005               |  |  |  |  |   | 0.40        | 
|     |  | September 1, 2005 - November 30, 2005       |  |  |  |  |   | 0.90        | 
|     |  | December 1, 2005 - February 28,
      2006  |  |  |  |  |   | 4.00        | 

Stockholders

As of June 13, 2007, there were 40,619,987 shares of our common
stock outstanding, owned by approximately 444 holders of record.

Transfer Agent

Our transfer agent is Holladay Stock Transfer, Inc., 2939 N
67thPlace, Suite C, Scottsdale, Arizona 85251. Our transfer agents
telephone number is (480) 481-3940.

Dividend Policy

We have never declared or paid any cash dividends, and we do
not expect to pay any cash dividends in the foreseeable future. We intend to
retain and reinvest any earnings, if any are achieved, in the continued
development and operation of its business. Any payment of dividends would depend
upon the Company's pattern of growth, profitability, financial condition, and
such other factors as the Board of Directors may deem relevant.

Recent Sales of Unregistered Securities

In connection with a stock purchase agreement dated November
30, 2005, we completed a private placement of 857,145 shares of our common stock
at a purchase price of .35 per share, for gross proceeds of $300,000, which were
received in irregular installments during our fiscal year ended February 28,
2007. These shares were issued pursuant to Regulation S of the Securities and
Exchange Commission (SEC).

In a secondary Regulation S stock issuance, we sold 1,344,142
shares of our common stock at a purchase price of .50 per share for gross
proceeds of $672,071 pursuant to a stock purchase agreement dated December 3,
2005. The proceeds under this stock purchase agreement were received on various
dates during our fiscal year ended February 28, 2007.

During our fiscal year ended February 28, 2007, investors
converted $262,500 and $10,184 of convertible debt and accrued interest,
respectively, into an aggregate of 588,036 shares of our common stock.

On November 21, 2006, we issued 332,000 shares of our common
stock in exchange for the extinguishment of $83,000 of debt owed to a creditor.

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In connection with a Private Placement Memorandum to accredited
  investors dated January 17, 2007, we sold 750,000 shares of our common stock
  at a purchase price of .50 per share for aggregate proceeds of $375,000.
  As part of the private placement, the investors were issued five-year warrants
  to purchase up to an aggregate of 750,000 shares of our common stock, at a fixed
  exercise price of $1.50 per share. The warrants are not on a cash-less
  basis and holders will be required to pay us $1.50 to exercise each warrant.
  The aggregate intrinsic value of the 750,000 warrants issued in connection with
  our January 17, 2007 private placement offering was $246,029. This amount
  was calculated using the Black-Scholes pricing model with the following assumptions:
  applicable risk-free interest rate based on the current treasury-bill interest
  rate at the date of grant of 3.5%; dividend yield of 0%; volatility factors
  of the expected market price of our common stock of 203%; and an expected life
  of the warrants of five years.

In aggregate, we issued 3,871,323 shares of our common to accredited
  investors, a limited number of non-accredited investors and non-U.S. persons
  during our fiscal year ended February 28, 2007. These shares were not registered
  pursuant to exemptions provided under Regulation S (“Reg. S”) and
  Rule 506 of Regulation D (“Reg. D”) of the Securities and Exchange
  Commission.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION OR PLAN OF OPERATION

The following discussion and analysis about our financial condition
  and results of operations should be read in conjunction with the consolidated
  financial statements and the related notes. This management’s discussion
  and analysis of financial condition and results of operations contains forward-looking
  statements, the accuracy of which is subject to risks and uncertainties. Words
  such as “may”, “will”, “expects”, “anticipates”,
  “intends”, “plans”, “believes”, “seeks”,
  “estimates”, and “should”, and variations of these words
  and similar expressions, are intended to identify these forward-looking statements.
  These forward-looking statements reflect our current views with respect to possible
  future events and financial performance. All of these forward-looking statements
  involve risks and uncertainties. We wish to caution you that our actual results
  may differ significantly from the results we discuss in our forward-looking
  statements. We discuss some of the risks that could cause such differences in
  Item 1. Risk Factors in this Annual Report on Form 10-KSB. You should not unduly
  rely on these forward-looking statements. Our forward-looking statements speak
  only as of the date of this document and the Company undertakes no obligation
  to publicly release the results of any revisions to these forward-looking statements
  to reflect events or circumstances that occur after that date.

Overview

We are a public transportation company headquartered in Los
  Angeles, California with operating entities in Cameroon. Our current business
  efforts focus on establishing and operating mass bus transit systems in the
  two major cities in Cameroon: Yaoundé, the capital city of Cameroon,
  and Douala, the largest city and economic capital of Cameroon. We have partnered
  with the government of Cameroon to establish these mass transit systems. Our
  mission is to become a leading transportation provider in Cameroon and other
  sub-Saharan African countries through the operations of our urban and rural
  transportation systems.

City bus operations (LeBus)

Prior to the launch of operations, our efforts were engaged in various pre-launch activities including the establishment of a formal agreement with the government of Cameroon to provide urban transportation services in Yaoundé, the
acquisition of city buses, the hiring and training of key staff and employees including drivers, security personnel and controllers, coordination and scheduling of bus routes, and the retrofitting of buses with specialized bumpers and other
equipment.

On October 12, 2005, we signed an agreement with the Government of Cameroon for TAUG to establish and exclusively manage the urban bus systems in Cameroon, starting with the countrys two major cities: the capital city of Yaoundé and the
leading population and commercial center, Douala. This project was a national priority for the government, aimed at improving the lives of millions of Cameroonians by providing more economically favorable transportation alternatives for its
citizens.

Since the signing of the October 2005 agreement, we established
  a wholly-owned subsidiary, Transnational Automotive Group – Cameroon,
  SA (“TAUG-C”), headquartered in Yaoundé. TAUG-C, through
  its majority-owned intra-city transportation operational company, Transnational
  Industries – Cameroon, S.A., known as “LeBus” officially commenced
  urban bus operations in Yaoundé on September 25, 2006. Our urban transportation
  system is currently comprised of 28 city buses that were purchased from a manufacturer
  in China in May 2006. These buses currently service two bus lines in Yaoundé.

LeBus recognized ticket sales approximating $360,000 from the
  transport of approximately 1,279,000 passengers from the start of operations
  through the end of our fiscal year ended February 28, 2007. We anticipate that
  our ridership will increase through the introduction of complementary lines.
  Twenty-three additional route lines have been approved for the capital city.
  We are currently in the process of establishing the infrastructure and have
  commenced construction of the necessary bus facilities, including bus depot,
  in October 2006. On September 25, 2006, the Company transferred the legal status
  of its LeBus operations (f.k.a Parker Transnational Industries Cameroon, SARL)
  from a limited liability company (SARL) to a public liability company (SA) and
  formalized the corporate governance in accordance with the Protocol agreement
  between the Company and the Government of Cameroon. The Company owns a 66% interest
  in LeBus, with the remaining 34% owned by various Cameroonian governmental agencies.

On October 16, 2006, the Office of the Prime Minister of Cameroon established an exploratory committee to develop

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recommendations on providing subsidies to the Company in exchange for fixing the fare price to passengers for city bus transportation. Among the Committees recommendations included suspending VAT payments on ticket sales and providing a 30%
discount on fuel prices for the Companys bus operations. Through the date of this Annual Report on Form 10-KSB, there have been no formal subsidy or tax exoneration agreements granted by the central government of Cameroonian government and its
agencies.

On November 24, 2006, the Company entered into a purchase commitment
  agreement with Kinglong United Automotive Industry (Suzhou) Company, one of
  China’s leading bus manufacturers, for the acquisition of an additional
  60 city buses for an aggregate purchase price (excluding taxes and shipping
  costs) approximating $3,200,000. On May 2, 2007, 30 of these city buses arrived
  in Cameroon and are scheduled for deployment in late June 2007. The deployment
  of these 30 additional city buses is expected to add additional bus lines in
  Yaoundé, which should further increase our ridership in the capital city.

We continued an in-depth survey of business and technically- relevant Chinese manufacturers, suppliers and related marketing entities in the automotive (bus, truck and specialty vehicles), automotive engines and parts, auto-electronics, energy
(hydrocarbon, biofuels, alternative), and power generation which relate to the Company's model and integrated international strategies. Special focus was put on initial negotiations with entities which demonstrate fits with our plans for projects in
Africa.

Agreements-in-principle have been reached with a leading Chinese engine and generator manufacturer, a major parts producer, a prominent producer of city and inter-urban buses, and a large-scale manufacturer of truck/heavy equipment. Current efforts
are focusing on formalizing exclusive and non-exclusive marketing/sales/distribution agreements for TAUG with the engine/parts/generator manufacturer and the city/interurban bus producer.

The Company is also completing work on the establishment of
  its permanent representation office, profit center and related personnel in
  Shanghai for bus, parts and other needed procurements, exporting-importing and
  selling of selected vehicular and energy/environmental-related products in African
  and Greater China marketplace. The Company's senior management for China-based
  activities is now in place and functioning."

Inter-city bus operations (LeCar)

LeCar is the brand name given to the Companys inter-city coach bus operations in Cameroon. Through the end of our fiscal quarter ended November 30, 2006, the Company was in the completion stages of its pre-launch activities for its inter-city
bus operations by opening up a service between the capital city of Yaoundé and the business center of Douala. In preparation for the launch of the intercity bus operations, our LeCar staff were engaged in the following activities: hiring and
training of key staff and employees including 24 drivers, 24 hostesses and various other support staff that will operate the first 11 coaches; the acquisition of the first 11 inter-city buses, which arrived in the port of Douala in August, 2006;
employee training; establishment of procedures for the operations of LeCar; obtaining the necessary permits and licenses required to operate our business; planning the construction of the bus depot facility and other activities necessary to commence
the inter-city bus operations.

On December 8, 2006, the Company transferred the legal status of its wholly owned subsidiary, TAUG-C SARL to TAUG-C S.A. On December 8, 2006, the Company formed a new wholly owned subsidiary, LeCar Transportation Corporation, SARL (a.k.a. LeCar).

On December 18, 2006, LeCar officially launched its inter-city operations, transporting passengers between the capital city of Yaoundé and the business center of Douala. In its first week of operations, LeCar transported 3,976 passengers
between the cities of Yaoundé and Douala, generating approximately $50,000 USD in revenues. With an initial fleet of 11 coach buses, LeCar is currently transporting 15,000  18,000 passengers monthly. Since the launch of operations
through February 28, 2007, LeCar has transported 53,000 passengers between the cities of Yaoundé and Douala, generating approximately $448,000 in revenues.

Like LeBus, LeCar has received excellent support from the media and from Cameroons citizens, as indicated in the noteworthy success of the launch of operations. LeCar has also impressed Cameroon government leaders for its reliability and
quality of service, and enjoys the support of the nations highest officials. Once LeCar firmly establishes its Yaoundé-Douala service, we plan to expand our inter-city lines to other population centers throughout the rest of the country
and sub-region.

Application of Critical Accounting Policies

Critical accounting policies are those that are most important to the portrayal of the financial condition and results of operations, and require our managements significant judgments and estimates. The application of such critical accounting
policies fairly depicts the financial condition and results of operations for all periods presented.

Use of estimates

The consolidated financial statements include accounts of our Company and all of our wholly-owned and majority-owned

---

subsidiaries. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that we believe to be reasonable under the
circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from our estimates, and the difference could be material from these estimates.

Revenue and expense recognition

The majority of our revenue is derived from the sale of tickets for our inter-city and city bus operations. We recognize revenue from the sale of bus tickets when the transportation services have been provided. Selling, general and administrative
costs are charged to operations as incurred.

Depreciation and amortization expense

Property, buses and equipment are stated at cost and depreciated or amortized using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 5 years. Costs for capital assets not yet available for commercial use have
been capitalized as construction in progress and will be depreciated in accordance with our depreciation policies governing the underlying asset class. Assets classified as held for future use, if any, are not depreciated until they are
placed in productive service.

Impairment of long lived assets

We review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less
than the carrying value of the long-lived assets, the carrying value is reduced to the estimated fair value as measured by the discounted cash flows. We have not experienced any triggering events or changes that would indicate that the carrying
amounts of any of our assets may not be recoverable.

Income taxes

We follow the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements, and (ii) operating loss and tax credit carry forwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when, based upon managements estimates, it is more likely than not
that a portion of the deferred tax assets will not be realized in a future period. Income tax expense or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Deferred taxes have not been recognized on undistributed profits or losses of foreign subsidiaries since we consider these temporary differences to be essentially permanent in nature. Deferred taxes will be recognized when it becomes apparent that
the temporary differences will reverse in the foreseeable future. It is not practicable to determine the amount of the unrecognized deferred tax assets or liabilities.

Income taxes for our operations in Cameroon are provided for at rates applicable under Cameroonian law. In addition to income taxes on earnings, our subsidiaries operations in Cameroon are also subject to value-added taxes based on revenue
plus various other taxes that are not predicated on income. We recognize these tax obligations in the period incurred.

Financing, warrants and amortization of warrants and fair value determination

We have traditionally financed our operations through the issuance of secured capital lease obligations and unsecured promissory notes payable. Additionally, we have issued debt instruments that are convertible into our common stock, at conversion
rates at or below the fair market value of our common stock at the time of conversion, and typically include the issuance of warrants. We have recorded debt discounts in connection with these financing transactions in accordance with Emerging Issues
Task Force No. 98-5 and 00-27. Accordingly, we recognize the beneficial conversion feature embedded in the financing instruments and the fair value of the related warrants on the balance sheet as debt discount. The debt discount associated with the
warrants is amortized over the life of the underlying security. The debt discount associated with the beneficial conversion feature of the convertible debt instruments is charged to operations at the date the respective convertible debt instrument
is issued.

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Stock purchase agreements

The funding of operations has also included the issuance and
subscriptions of common stock. Proceeds received from the issuance of our common
stock are reflected as additions to common stock and additional paid-in capital.
Proceeds received from the subscription of common stock are reflected as
additions to subscribed capital.

Recent accounting pronouncements

In February 2006, FASB issued SFAS No. 155, “Accounting
  for Certain Hybrid Financial Instruments”. SFAS No. 155 amends SFAS No
  133, “Accounting for Derivative Instruments and Hedging Activities”,
  and SFAS No. 140, “Accounting for Transfers and Servicing of Financial
  Assets and Extinguishments of Liabilities”. SFAS No. 155, permits fair
  value remeasurement for any hybrid financial instrument that contains an embedded
  derivative that otherwise would require bifurcation, clarifies which interest-only
  strips and principal-only strips are not subject to the requirements of SFAS
  No. 133, establishes a requirement to evaluate interest in securitized financial
  assets to identify interests that are freestanding derivatives or that are hybrid
  financial instruments that contain an embedded derivative requiring bifurcation,
  clarifies that concentrations of credit risk in the form of subordination are
  not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
  on the qualifying special-purpose entity from holding a derivative financial
  instrument that pertains to a beneficial interest other than another derivative
  financial instrument. This statement is effective for all financial instruments
  acquired or issued after the beginning of the Company’s first fiscal year
  that begins after September 15, 2006. We believe that this statement will not
  have a significant impact on the financial statements.

In March 2006 FASB issued SFAS No. 156, Accounting for
Servicing of Financial Assets. This Statement amends SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities. This Statement:

| | 1. | Requires an entity to recognize a servicing asset or
      servicing liability each time it undertakes an obligation to service a
      financial asset by entering into a servicing contract.                                                                                                                                                                                                                                                                                                                                                                           
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2. | Requires all separately recognized servicing assets and
      servicing liabilities to be initially measured at fair value, if
      practicable.                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | Permits an entity to choose Amortization method or Fair
      value measurement method for each class of separately recognized
      servicing assets and servicing liabilities.                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 4. | At its initial adoption, permits a one-time
      reclassification of available-for-sale securities to trading securities by
      entities with recognized servicing rights, without calling into question
      the treatment of other available-for-sale securities under Statement 115,
      provided that the available-for-sale securities are identified in some
      manner as offsetting the entitys exposure to changes in fair value of
      servicing assets or servicing liabilities that a servicer elects to
      subsequently measure at fair value.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 5. | Requires separate presentation of servicing assets and
      servicing liabilities subsequently measured at fair value in the statement
      of financial position and additional disclosures for all separately
      recognized servicing assets and servicing
liabilities.                                                                                                                                                                                                                                                                                           

This Statement is effective as of the beginning of the Company’s
  first fiscal year that begins after September 15, 2006. We believe this statement
  will not have a significant impact on the financial statements

In September 2006, the FASB issued SFAS No. 157, “Fair
  Value Measurements.” This Statement clarifies the definition of fair value,
  establishes a framework for measuring fair value and expands the disclosures
  on fair value measurements. SFAS No. 157 is effective for fiscal years beginning
  after November 15, 2007. We have not determined the effect, if any, the adoption
  of this statement will have on the financial statements.

In September 2006, the FASB issued SFAS No. 158 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plansan
amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement
improves financial reporting by requiring an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. This
Statement also improves financial reporting by requiring an employer to measure
the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions. An employer with publicly traded
equity securities is required to initially recognize the funded status of a
defined benefit postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after December 15, 2006. An employer
without publicly traded equity securities is required to recognize the funded
status of a defined benefit postretirement plan and to provide the required
disclosures as of the end of the fiscal year ending after June 15, 2007.
However, an employer without publicly traded equity securities is required to
disclose the following information in the notes

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to financial statements for a fiscal year ending after December
15, 2006, but before June 16, 2007, unless it has applied the recognition
provisions of this Statement in preparing those financial statements:

| | 1. | A brief description of the provisions of this
      Statement                                       
| | -- | ----------------------------------------------------------------------------------------------------
| | 2. | The date that adoption is required                                                                  
| | 3. | The date the employer plans to adopt the recognition
      provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations
as of the date of the employers fiscal year-end statement of financial position
is effective for fiscal years ending after December 15, 2008.

We are currently evaluating the effect of this pronouncement
  on our financial statements.

RESULTS OF OPERATIONS

For the fiscal years ended February 28, 2007 and 2006

Revenue

Revenues from our operations for our fiscal year ended February
28, 2007 were $862,029 as compared with $0 revenues for the fiscal year ended
February 28, 2006. The increase in revenues over the prior year was attributed
to the commencement of our intra-city bus operations, LeBus, on September 25,
2006, and our inter-city bus operations on December 18, 2006. We had 28 and 11
city buses and coach buses, respectively, in operations during our fiscal year
ended February 28, 2007.

Cost of revenue

Cost of revenue is comprised primarily of fuel costs, direct
payroll, insurance, repairs and maintenance of buses, and depreciation expense
on buses. Cost of revenues for the year ended February 28, 2007 were $1,047,280,
or approximately 121% of revenue compared to $0 for the year ended February 28,
2006. The excess of our cost of revenue over revenue is derived from the start
up phase of our operations and not attaining the required economies of scales
through the expansion of our bus lines, which is necessary to maximize rider
ship on our inter-city and city bus lines. Additionally, we have not recognized
any government subsidies or tax exonerations that we anticipate to receive from
the central government of Cameroon and its agencies (the Government). We are
currently in discussions with the Government to negotiate tax abatements and
other subsidies that we anticipate will be provided in exchange for providing
mass transit systems in Cameroon.

Details of our cost of revenue for the years ended February 28,
2007 and 2006 follow:

|                              |   |           |  |   |      |  |  | Percentage | 
|----------------------------- | - | --------- |  | - | ---- |  |  | ---------- | 
|                              |   |           |  |   |      |  |  | Increase/  | 
|                              |   | 2007      |  |   | 2006 |  |  | Decrease   | 
|COST OF REVENUE               |   |           |  |   |      |  |  |            | 
|Compensation expenses         | $ | 146,514   |  | $ | -    |  |  | 100%       | 
|Fuel expense                  |   | 459,335   |  |   | -    |  |  | 100%       | 
|Insurance                     |   | 44,431    |  |   | -    |  |  | 100%       | 
|Maintenance and repairs       |   | 156,619   |  |   | -    |  |  | 100%       | 
|Depreciation and amortization |   | 240,381   |  |   | -    |  |  | 100%       | 
|                              | $ | 1,047,280 |  | $ | -    |  |  | 100%       | 

Operating expenses

Operating expenses for the years ended February 28, 2007 and
2006 were as follows:

---

|                                                                |   |           |  |   |           |  |  | Percentage | 
|--------------------------------------------------------------- | - | --------- |  | - | --------- |  |  | ---------- | 
|                                                                |   |           |  |   |           |  |  | Increase/  | 
|                                                                |   | 2007      |  |   | 2006      |  |  | Decrease   | 
|OPERATING EXPENSES                                              |   |           |  |   |           |  |  |            | 
|Sales and marketing                                             | $ | 211,594   |  | $ | 10,238    |  |  | 1967%      | 
|General and administrative                                      |   | 5,330,174 |  |   | 634,907   |  |  | 740%       | 
|Amalgamation and merger costs                                   |   | -         |  |   | 717,052   |  |  | -100%      | 
|Depreciation and
      amortization                             |   | 28,010    |  |   | 1,075     |  |  | 2506%      | 
|Foreign currency translation gain                               |   | 22,745    |  |   | -         |  |  | 100%       | 
|Deficiency
      in assets on acquisition of subsidiary company |   | -         |  |   | 160,571   |  |  | 100%       | 
|                                                                | $ | 5,592,523 |  | $ | 1,523,843 |  |  | 267%       | 

Sales and marketing expense consist primarily of payroll and
related expenses for personnel engaged in marketing, business development and
sales functions. It also includes advertising expenditures, promotional
expenditures and fees to marketing and public relations firms. Sales and
marketing expense increased by $201,356 for the year ended February 28, 2007, as
compared to the same period in 2006. The majority of this increase is due to
marketing and advertising expenditures incurred in the current year as a result
of the Companys pre-launch and start of operations during the current fiscal
year-end.

General and administrative expenses are comprised of office and
administration expenditures, professional and consulting fees, corporate and
administrative payroll and related payroll taxes, rent and travel costs. General
and administrative expenses increased by $4,695,267, or 740% over the previous
fiscal year. The increase in our general and administrative expenses during our
current fiscal year is attributed to costs associated with the following:

| | - | Expenses associated with the Companys formation and
      incorporation of our subsidiaries in Cameroon                                                                                                                                 
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | Costs to initiate operations in Cameroon including
      pre-launch activities of LeBus and LeCar                                                                                                                                        
| | - | Operating expenses associated with our Cameroonian
      operations including rent, office and administrative payroll and payroll
      taxes, legal and professional fees, and general office expenses.                                 
| | - | Corporate administrative costs including consulting fees
      paid to our Ex-pats and senior management, corporate payroll and payroll
      taxes, domestic and international travel costs, and professional and
      consulting fees.

During the year ended February 28, 2006, the Company engaged in
no significant operations other than organization activities and research and
development of its business plan. Most of the operating expenses incurred during
the year ended February 28, 2006 were for office and administrative and
consulting fees provided to the Company for the purpose of increasing the
Companys business presence and effort to develop its business plan.

During the year ended February 28, 2006, we incurred
amalgamation, merger and acquisition costs of $717,052 associated with our
reorganization and restructuring.

Other income (expense)

|                                                       |   |            |   |   |      |   |   | Percentage | 
|------------------------------------------------------ | - | ---------- | - | - | ---- | - | - | ---------- | 
|                                                       |   |            |   |   |      |   |   | Increase/  | 
|                                                       |   | 2007       |   |   | 2006 |   |   | Decrease   | 
|OTHER INCOME (EXPENSE)                                 |   |            |   |   |      |   |   |            | 
|Finance costs from beneficial conversion
      feature |   |            |   |   |      |   |   |            | 
|on convertible debentures                              | $ | (1,003,050 | ) | $ | -    |   | $ | 100%       | 
|Finance costs from issuance of warrants                |   | (1,461,296 | ) |   | -    |   |   | 100%       | 
|Loss on extinguishment
      of debt                   |   | (355,240   | ) |   | -    |   |   | 100%       | 
|Interest expense                                       |   | (445,922   | ) |   | (668 | ) |   | 66655%     | 
|Loss on abandonment of fixed assets                    |   | 1,662      |   |   | -    |   |   | 100%       | 
|                                                       | $ | (3,263,846 | ) | $ | (668 | ) | $ | 488500%    | 

Other income and expenses are comprised primarily of finance
costs associated with funding our operating activities. In connection with
private placement offerings to accredited investors, we raised an aggregate of
3,638,500 from the issuance of 7% convertible debentures with attached warrants.
The debentures are convertible into shares of our common stock at an exercise
price of .50 per share. For the year ended February 28, 2007, we incurred
finance costs of $1,003,050 associated with the beneficial conversion
feature

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of these convertible debentures and $1,461,296 of finance costs
from the amortization of deferred financing costs from the issuance of warrants.
The warrants are being amortized over a period of one year from the date of
issue, representing the term of the underlying debt instrument.

Interest expense is comprised of interest costs incurred on a
related party capital lease obligation and interest costs on unsecured
borrowings.

Minority interest in loss of subsidiary

|                                        |   |         |  |   |        |  |   | Percentage | 
|--------------------------------------- | - | ------- |  | - | ------ |  | - | ---------- | 
|                                        |   |         |  |   |        |  |   | Increase/  | 
|                                        |   | 2007    |  |   | 2006   |  |   | Decrease   | 
|                                        |   |         |  |   |        |  |   |            | 
|Minority interest in loss of subsidiary | $ | 530,901 |  | $ | 81,131 |  | $ | 554%       | 

Several Cameroonian governmental agencies collectively own 34%
  of our majority-owned subsidiary, Transnational Industries, Cameroon, S.A.,
  which operates our city bus transportation system, LeBus. Minority interest
  in loss of subsidiary represents these shareholders proportionate share of the
  loss from LeBus during the year ended February 28, 2007. The minority interest
  in loss of subsidiary increased by $449,770 over the prior year, resulting primarily
  from a higher overall net loss from LeBus during fiscal 2007, which was attributed
  to the pre-launch and start-up phase of operations during the current fiscal
  year.

Net loss

Our net loss for the year ended February 28, 2007 increased to
$8,510,719 or $(.20) per share, from $1,443,380 or $(.03) per share, for the
year ended February 28, 2006. The overall increase in net loss of $7,067,339, or
approximately 490% over the prior year period, is primarily due to increases in
payroll, financing costs associated with the issuance of convertible debentures,
unsecured promissory note obligations and capital lease obligations, pre-launch
costs associated with our bus transportation systems, losses resulting from the
launch of our operations in Cameroon, corporate and administrative expenses
incurred in connection with the start up of our operations, legal and
professional fees, and travel expenses.

Assets

Assets increased by $4,281,174 to $5,210,509 as of February 28,
2007, or approximately 461%, from $929,335 as of February 28, 2006. This
increase was due primarily to an increase in property, buses and equipment and
advance deposits on buses, which increased $3,212,332 and $1,402,186,
respectively, over February 28, 2007. The increase in our capital expenditures
and advance deposits on buses was related to our acquisition of 28 city and
coach buses used in our mass transit operations as well an advance deposit for
the purchase of 30 city buses that we anticipate will be placed in service
during the second quarter in 2007.

Liabilities

Total liabilities increased by $6,783,799 to $8,080,547 as of
February 28, 2007, or approximately 523%, from $1,296,748 as of February 28,
2006. This increase was due primarily to an increase in accounts payable and
accrued expenses by $2,953,546, a bank overdraft balance of $485,925 which is
include in accounts payable and accrued expenses, an outstanding capital lease
obligation of $765,622 entered into during our current fiscal year, an increase
in unsecured borrowings of $715,993, including $825,000 owed to a related party,
and $2,201,846 of outstanding convertible debentures, net of debt discount, that
were raised through a private placement offering.

Stockholders deficit

Stockholders deficit increased by $2,243,206 to $2,870,038 as
of February 28, 2007 from a deficit of $626,832 as of February 28, 2006. The
decrease in stockholders equity was primarily attributed to our net loss for
the year-ended February 28, 2007 of $8,510,719 less $6,267,513 of financing
activities that partially offset the loss.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2007, we had a net cash deficit of
approximately $485,925 compared to cash and cash equivalents of $597,640 as of
February 28, 2006, representing a decrease in our cash and cash equivalents of
$1,083,565 in comparison to the balance as of February 28, 2006. The decline in
our cash balances compared to the prior year was primarily attributed to our net
loss from

---

operations and capital expenditures for the acquisition of
buses offset by our ability to raise $3,518,000 through the issuance of
convertible debentures, $825,000 from the issuance of unsecured promissory note
obligations, and $375,000 raised from private placement offerings during the
fiscal year ended February 28, 2007. Our cash deficit has been included in
accounts payable and accrued expenses in the accompanying financial
statements.

|                              |   | February 28, |   |   | February 28, |   |   | Increase/  |  
|----------------------------- | - | ------------ | - | - | ------------ | - | - | ---------- | -
|                              |   | 2007         |   |   | 2006         |   |   | (Decrease) |  
|                              |   |              |   |   |              |   |   |            |  
|Working capital               |   |              |   |   |              |   |   |            |  
|Current assets                | $ | 1,976,753    |   | $ | 907,911      |   | $ | 1,068,842  |  
|Current
      liabilities     |   | 8,080,547    |   |   | 1,296,748    |   |   | 6,783,799  |  
|                              |   |              |   |   |              |   |   |            |  
|Working capital
      deficit | $ | (6,103,794   | ) | $ | (388,837     | ) | $ | (5,714,957 | )

Our working capital deficit at February 28, 2007 was $6,103,794
compared to $388,837 as of February 28, 2006, representing an increase of
$5,714,957. The increase in our working capital deficit as of February 28, 2007
compared to February 28, 2006 was primarily related to an increase in the
issuance of convertible debt and unsecured notes payable, an increase in
accounts and accrued expenses, and a $1,083,565 decline in cash and cash
equivalent balances as of February 28, 2007 compared to February 28, 2007.

|                                            |   | Fiscal year ended |   |   | Increase/  |  
|------------------------------------------- | - | ----------------- | - | - | ---------- | -
|                                            |   | 2007              |   |   | 2006       |  
|                                            |   |                   |   |   |            |  
|Cash flows used in operating activities     | $ | (4,198,610        | ) | $ | (1,008,469 | )
|Cash flows used in investing activities     |   | (2,374,896        | ) |   | (301,269   | )
|Cash flows provided by financing activities |   | 5,975,866         |   |   | 1,901,603  |  
|                                            |   |                   |   |   |            |  
|Net
      increase (decrease) in cash       | $ | (597,640          | ) | $ | 591,865    |  

Cash flows from operating activities

The decrease in net cash flows used in operating activities is
primarily attributed to an increase in net loss of $8,510,719 for our fiscal
year ended February 28, 2007 compared to $1,443,380 in the prior year. Net cash
used in operating activities for the fiscal year ended February 28, 2007 was
primarily due to a net loss of $8,510,719 adjusted for non-cash interest and
financing costs of $2,621,322, loss on extinguishment of debt of $355,240,
depreciation and amortization expense of $268,391, and net changes in operating
assets and liabilities of $1,606,811 and minority interest in subsidiarys loss
of $530,901. For the year ended February 28, 2006, net cash used in operating
activities was due to a net loss of 1,443,380 adjusted for net changes in
operating assets and liabilities of $434,911.

Cash flows from investing activities

Cash flows used in investing activities were primarily
attributed to $731,597 of cash used for the acquisition of buses and $1,402,186
of advance deposits on buses during the current year. Capital expenditures for
the acquisition of computer hardware and software, furniture and fixtures, and
other fixed assets for the fiscal years ended February 28, 2007 and 2006 were
$256,393 and $22,498, respectively.

Cash flows from financing activities

Net cash provided by financing activities for the year ended
  February 28, 2007 increased by $4,074,263 compared to the previous year-end.
  The increase in net cash provided by financing activities during the current
  year was primarily attributed to cash proceeds of $3,638,500 raised from the
  issuance of convertible debentures and warrants pursuant to a private placement
  offering, $1,347,071 raised from the sale of common stock issued in connection
  with stock purchase agreements and a private placement of common stock and warrants
  to accredited investors dated January 17, 2007, $924,673 raised from the issuance
  of unsecured promissory note obligations, and $800,000 of cash proceeds contributed
  by one of the minority stockholders in our subsidiary, Transnational Industries
  Cameroon. Cash flows provided by financing activities for fiscal year ended
  February 28, 2007 were offset by $1,000,000 of aggregate principal repayments
  on a capital lease obligation made to a related party.

---

The consolidated financial statements included in this Annual
Report on Form 10-KSB have been prepared assuming that we will continue as a
going concern, however, there can be no assurance that we will be able to do so.
Our recurring losses and difficulty in generating sufficient cash flow to meet
our obligations and sustain our operations raise substantial doubt about our
ability to continue as a going concern, and our consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

We have an accumulated deficit of approximately $11,071,646 as
of February 28, 2007 as well as a significant working capital deficit. Our
future operating success is dependent on our ability to generate positive cash
flows from our bus operations in Cameroon. Our ability to generate positive cash
flows is predicated on achieving certain economies of scale in our business,
which will involve the acquisition of additional buses for our operations and
additional capital investment in infrastructure, employee training and other
resources for our growth. In order to achieve this goal, we will need to raise a
significant amount of capital for the acquisition of additional buses and
related costs. Funding of our working capital deficit, current and future
operating losses, and growth of the Companys transportation operations in
Cameroon and other countries will require continuing capital investment.
Historically, we have received funding through the issuance of convertible
debentures and warrants to acquire common stock issued in connection with
private placement offerings, the issuance of common stock and subscriptions to
acquire common stock, advances received under unsecured promissory note
obligations, and the financing of the acquisition of our buses through a capital
lease obligation due to a related party trust. Our strategy is to fund our
current and anticipated future cash requirements through the issuance of
additional convertible debt instruments, common stock warrants, unsecured
borrowing arrangements and equity financing.

The Company has been able to arrange debt facilities and equity
financing to date, there can be no assurance that sufficient debt or equity
financing will continue to be available in the future or that it will be
available on terms acceptable to the Company. Failure to obtain sufficient
capital to fund current working capital requirements and future capital
expenditures necessary to grow the business would materially affect the
Company's operations in the short term and expansion strategies. The Company
will continue to explore external financing opportunities. Currently, the
Company is in negotiations with multiple parties to obtain additional financing,
and the Company will continue to explore financing opportunities with additional
parties.

As a result of the aforementioned factors and related
uncertainties, there is substantial doubt of the Company's ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments to reflect the possible effects of recoverability and classification
of assets or classification of liabilities, which may result from the inability
of the Company to continue as a going concern.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as defined in Item
  303(C) of Regulation S-B.

---

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

Our audited financial statements for the year ended February
  28, 2007, are included in a separate section of this Annual Report beginning
  on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
  ACCOUNTING AND FINANCIALDISCLOSURE

We have had no disagreements on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures with any of our accountants for the years ended February 28, 2007 and
2006. Effective December 11, 2006, Pannell Kerr Forster (registered with the
PCAOB as Smythe Ratcliffe) was dismissed as our independent auditor. Together
with the dismissal of Pannell Kerr Forster, our board of directors approved the
engagement of Kabani & Company, Inc. as our independent registered public
accounting firm for the fiscal year ended February 28, 2007 effective December
11, 2006.

ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal
  executive officer and principal financial officer have evaluated the effectiveness
  of the design and operation of our disclosure control and procedures (as defined
  in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
  as amended) as of the end of the period covered by this annual report on form
  10-KSB. Based on the evaluation of the Company's disclosure controls and procedures
  (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act
  of 1934) as of the end of the period covered by this Annual Report on Form 10-KSB,
  our chief executive officer and chief financial officer previously concluded
  that our disclosure controls and procedures are designed to ensure that the
  information we are required to disclose in the reports we file or submit under
  the Exchange Act is recorded, processed, summarized and reported within the
  time periods specified in the SEC's rules and forms and are operating in an
  effective manner. Subsequently, we determined that we had a material weakness,
  as described below, in our internal control over financial reporting. Therefore,
  in connection with filing this amended Annual Report on Form 10-KSB/A, our principal
  executive officer and principal financial officer re-evaluated the effectiveness
  of disclosure controls and procedures and each concluded that, as of the end
  of the period covered by this report, our disclosure controls and procedures
  were not effective.

**Management’s
  Report on Internal Control Over Financial Reporting (as revised)**

All internal
  control systems, no matter how well designed, have inherent limitations. Management
  does not expect that our disclosure controls and procedures or our internal
  control over financial reporting will prevent or detect all errors and fraud.
  Therefore, even those systems determined to be effective can provide only reasonable
  assurance with respect to financial statement preparation and presentation.
  Because of its inherent limitations, internal control over financial reporting
  may not prevent or detect misstatements. Projections of any evaluation of effectiveness
  to future periods are subject to the risk that controls may become inadequate
  because of changes in conditions or that the degree of compliance with the policies
  or procedures may deteriorate. Further, no evaluation of controls can provide
  absolute assurance that misstatements due to error or fraud will not occur or
  that all control issues and instances of fraud, if any, within the Company have
  been detected.

During fiscal
  year 2007, and subsequent to the original issuance of our Annual Report on Form
  10-KSB for the fiscal year ended February 28, 2007, management identified accounting
  errors in its consolidated financial statements related to the incorrect accounting
  treatment of convertible debt with warrants in conformity with 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”,
  and the failure to account for accrued interest on outstanding unsecured promissory
  notes and convertible debentures during the quarterly periods ended May 31 and
  August 31, 2006. Additionally, management identified an accounting error for
  the failure to accrue for value added taxes and custom duty fees on the Company’s
  purchase of buses during the quarterly period ended August 31, 2006.

On June 25,
  2007, our chief financial officer determined that our previously issued financial
  statements for the quarter ended May 31, 2006, included in our Quarterly Report
  on Form 10-QSB for the quarter ended May 31, 2007, and for the quarter ended
  August 31, 2006, included in our Quarterly Report on Form 10-QSB for the quarter
  ended August 31, 2007, should be restated.

Under the
  supervision and with the participation of our senior management, including the
  principal executive officer and principal financial officer, we conducted an
  evaluation of the effectiveness of the design and operation of our disclosure
  controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
  Exchange Act, as of the fiscal year ended February 28, 2006 (the “2006
  Evaluation Date”). Based on this evaluation, our principal executive officer
  and principal financial officer concluded as of the 2006 Evaluation Date that
  certain of our disclosure controls and procedures were not effective because
  of the aforementioned errors. In connection with the restatement, management
  evaluated the control failure that resulted in the aforementioned errors. As
  a result of this evaluation, management determined that a material weakness
  existed in internal control over financial reporting as of February 28, 2007.
  Specifically, management has concluded that the Company did not have adequate
  controls including management oversight related to the proper accounting treatment
  for convertible debt with warrants in conformity with generally accepted accounting
  principles. This weakness was the result of a material weakness in the design
  of internal control over financial reporting.

As a result
  of the material weakness, management of the Company, under the direction of
  its CEO and CFO, has revised their assessment of the effectiveness of internal
  control over financial reporting as of February 28, 2007. As a result of the
  revised assessment the Company’s management, including its CEO and CFO,
  concluded that its internal control over financial reporting was not effective
  as of February 28, 2007.

This Annual
  Report does not include an attestation report of the Company’s registered
  accounting firm regarding internal control over financial reporting. Management’s
  report was not subject to attestation by the Company’s public accounting
  firm pursuant to temporary rules of the Securities and Exchange Commission that
  permit the Company to provide only management’s report in this Annual
  Report.

Remediation
  Activities

After identifying
  the material weakness subsequent to the original issuance of our Annual Report
  on Form 10-KSB for the fiscal year ended February 28, 2007, management initiated
  changes to remediate the material weakness described above. We believe that,
  subsequent to February 28, 2007, we completed our remediation of the aforementioned
  material weakness in our internal control over financial reporting. The completed
  remediation measures included the implementation of appropriate controls related
  to accounting for all convertible debenture agreements with warrants that are
  within the scope of EITF 98-5 and EITF 00-27 to provide a written analysis of
  the appropriate accounting for these contracts or other arrangements and the
  review of our conclusions with qualified internal accounting personnel or third
  party accounting experts. In addition, we have provided our accounting staff
  with additional training related to generally accepted accounting principles
  and financial statement reporting matters, including procedures for identifying
  and accounting for all liabilities incurred in connection with the acquisition
  of buses used in operations, including encumbrances for Value Added Taxes and
  custom duty fees.

**Changes
  in Internal Control Over Financial Reporting**

There has not been any change
  in our internal control over financial reporting (as defined in Rule 13a-15(f)
  under the Exchange Act) during the quarter ended February 28, 2007 that have
  materially affected, or are likely to materially affect, our internal control
  over financial reporting.

ITEM 8B. OTHER INFORMATION

---

During the year ended February 28, 2007, we issued an aggregate
of 3,871,323 shares of our common to accredited investors, limited number of
non-accredited investors and non-U.S. persons. These shares were not registered
pursuant to exemptions provided under Regulation S (Reg. S) and Rule 506 of
Regulation D (Reg. D) of the Securities and Exchange Commission.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS: COMPLIANCE WITH SECTION 16A OF THE EXCHANGE ACT

The following table sets forth certain information with respect
to each of our executive officers and directors as of June 13, 2007.

|                  |  |                                                                          |  | Has Served as Director          
|----------------- |  | ------------------------------------------------------------------------ |  | --------------------------------
|Name              |  | Position and Age                                                         |  | or
      Executive Officer since
|                  |  |                                                                          |  |                                 
|Dr. Ralph Thomson |  | Chief Executive
      Officer and Chairman of the Board of Directors; 69 |  | February 15, 2006               
|                  |  |                                                                          |  |                                 
|Seid Sadat        |  | Chief Financial
      Officer and Director; 47                           |  | August 29, 2006                 
|                  |  |                                                                          |  |                                 
|David Browne      |  | In-house
      Corporate Counsel and Secretary; 51                       |  | January 2, 2007                 
|                  |  |                                                                          |  |                                 
|Don Durand        |  | President, Africa
      Operations 37                                    |  | February 15, 2006               
|                  |  |                                                                          |  |                                 
|Dr. Louis P. Shu  |  | Vice-President of
      Business Development; 51                         |  | Ooctober 28, 2006               
|                  |  |                                                                          |  |                                 
|William Jacobson  |  | Director; 60                                                             |  | February 15, 2006               
|                  |  |                                                                          |  |                                 
|Henry Huber       |  | Director; 65                                                             |  | July 17, 2006                   

Ralph J. Thomson - Dr. Thomson's career involves more
than thirty years experience in government advocacy; legislative and regulatory
activity; and international policymaking, negotiations, business management and
higher education. His career has also been devoted to partnership development,
mergers and acquisitions, strategic alliances, representation to U.S. and
foreign governments, technology transfer, trade and finance. Dr. Thomson has
been responsible for private and public sector project funding, joint ventures
and technology sales contracts totaling over $500 million in the U.S., Asia,
Europe, the Middle East and Latin America. Public sector funding and policy
activities have involved U.S. government agencies, the United Nations, the World
Bank/IMF and regional development banks. Dr. Thomson received his Bachelors
degree from the University of Utah, two Masters degrees and a Ph.D. in
international affairs, economics, law and diplomacy from the Fletcher School of
Law and Diplomacy (Tufts and Harvard Universities), with dissertation under Dr.
Henry Kissinger.

Seid Sadat - Mr. Sadat has been a professional in public
accounting for over eighteen years. He has performed a wide range of accounting
services for a diversified client base consisting of estate, manufacturing,
non-profit, retail, construction, and service organizations. He has acted as the
CFO for several companies, has extensive audit and regulatory expertise and has
been called upon to act as an expert witness. He is currently a member of the
Report Quality Monitoring Committee for the California Board of Accountancy.

David Browne  Mr. Browne, J.D., 51: Corporate Secretary
and in-house counsel since April, 2007. Mr. Browne has practiced law in
California for 27 years with an emphasis on business law and business
litigation.

Don Durand - Mr. Durand has had extensive experience
with the funding, development and operational oversight of start up companies.
From January 2001  October 2000, he was a senior account executive and director
of business development for NGRAIN Corporation, where he developed the companys
first product and helped raise $15 million in funding. From November 2003  May
2005, he co-founded and served as the chief operating officer of 3Plains
Corporation where he led the development efforts of the companys first product
and assisted with the companies fund raising activities. Prior to his work with
NGRAIN Corporation, he served for 12 years as a combat engineer with both, the
Canadian and British armies, retiring with the rank of Captain. During his
career in the military, Mr. Durand served with distinction in many complex
operations around the world in Europe, and the Middle East both as a peacekeeper
and during peace making operations; including building an aide convoy road in
central Bosnia, managing a fleet of over 100 heavy equipment vehicles fulfilling
similar roles in places such as Kuwait. Mr. Durand is a graduate of

---

the Royal Military College with a Bachelors of Engineering and
has an Executive MBA from Simon Fraser University.

Louis P. Shu - Dr. Shu is an experienced high-tech
executive with a long track record of business and product development success
in start-up companies. His venture capital background includes senior positions
at Centennial Funds and Acer Capital Corporation. He founded Weise Labs, Inc.
and co-founded Nanotech Special Interest Group in Silicon Valley. He organized
Nanotech Forum and Exhibitions in NASA, Mountain View; Tsukuba, Japan; Beijing,
China; and Taipei, Taiwan. In 2003, he received Innovative Technology Award in
the First International Nanotechnology Business Plan Contest, NanoTech 2003 +
Future, Makuhari, Japan. He was a pioneer for undersea optical fiber
communications and digital cellular technologies. In 1989, he received the
"Industry Service Award" presented by the Cellular Telecommunications Industry
Association (CTIA) and the Telecommunication Industry Association (TIA) for his
contribution to the industry and the international standards community. Earlier
positions included CTO of Galaxy Online, Inc., President of OctaliBay
Corporation, Director of Network Architecture of US West NewVector Group, Acting
Supervisor of AT&T Bell Labs. From 1978 to 1984, he earned Ph.D. in Control
Systems, MSEE in Computer Engineering, MS in Statistics/Operations Research and
MBA from Michigan State University. He was a fighter pilot with Bachelor Degree
in Aeronautical Engineering from the Air Force Academy of Taiwan. Dr. Shu has
developed and owns two patents in the advanced diesel engine field with focus on
energy saving and environmental protection.

William Jacobson -Mr. Jacobson has been president and
CEO of Atlas Mining Company since August of 1997. He has worked directly in the
mining industry for over 12 years. Mr. Jacobson also spent 15 years in the
banking industry. He graduated with a B. S. in Business Administration from the
University of Idaho in 1971 and is a member of the Northwest Mining
Association.

Henry Huber -Mr. Huber has a Masters of Education
degree, and has spent the last five years as President of his company, Uptrend
Investment Services, providing investment services to private clients.

ITEM 10. EXECUTIVE COMPENSATION

The following summary compensation tables set forth information
concerning the annual and long-term compensation for services in all capacities
for the most recent fiscal year, of those persons who were, at February 28, 2007
TAUGs executive officers whose 2007 compensation exceeded $100,000.

For the Fiscal Year Ended February 28, 2007Stock
      
      Option
      
      All OtherSalary
      
      Bonus
      
      Awards
      
      Awards
      
      Compensation
      
      TotalName and Principal
        Position
      
      ($)
      
      ($)
      
      ($)
      
      ($)
      
      ($)
      
      ($)Ralph Thomson, CEO
      
      60,000
      
      -
      
      -
      
      -
      
      120,000
      
      180,000Don Durand, COO
      
      -
      
      -
      
      -
      
      -
      
      120,000
      
      120,000


Employment Agreements

There are no employment agreements between us and Messrs.
Thomson, Sadat and Durand. On October 27, 2006, we entered into an employment
agreement with Louis Shu, our vice-president of business development. Under the
terms of the employment agreement, we agreed to compensate Mr. Shu an aggregate
of $6,000 per month comprised of $3,000 of monthly cash compensation and $3,000
of deferred compensation to be settled upon our ability to raise sufficient
capital to fund the growth of our urban transportation operations. As of
February 28, 2007, $12,000 of deferred compensation was owed to Mr. Shu, which
has been accrued and included in accounts payable and accrued expenses in the
accompanying consolidated balance sheet as of February 28, 2007.

Option Grants

No stock options were granted to any of the Companys executive
officers.

Compensation of Directors

None

---

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table sets forth as of February 28, 2007 certain
information known to the Company regarding the beneficial ownership of the
Company's common stock, and as adjusted to reflect the share ownership for (i)
each executive officer or director of the Company who beneficially owns shares;
(ii) each stockholder known to the Company to beneficially own five percent or
more of the outstanding shares of its common stock; and (iii) all executive
officers and directors as a group. The Company believes that the beneficial
owners of the common stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable.

|                                                            |  | Preferred
      Stock |  | Common
      Stock (1) | 
|----------------------------------------------------------- |  | --------------------- |  | ---------------------- | 
|                                                            |  |                       |  |                        | 
|                                                            |  | Number of             |  | Percentage of          | 
|Name and Address of
      Beneficial Owner                  |  | Shares                |  | Class                  | 
|                                                            |  |                       |  |                        | 
|Dr. Ralph Thomson (2)                                       |  | -                     |  | -                      | 
|Seid Sadat (2) (3)                                          |  | -                     |  | -                      | 
|David Browne (2)                                            |  | -                     |  | -                      | 
|Don Durand (2)                                              |  | -                     |  | -                      | 
|Dr. Louis P. Shu (2)                                        |  | -                     |  | -                      | 
|William Jacobson (2)                                        |  | -                     |  | -                      | 
|Henry Huber (2)                                             |  | -                     |  | -                      | 
|All directors and executive officers as a group (7 persons) |  | -                     |  | -                      | 
|                                                            |  |                       |  |                        | 

|* | Less than 1% of outstanding
shares.
|- | -----------------------------------

|(1) | Includes shares issuable upon conversion of debentures,
      as well as exercise of currently exercisable warrants to aquire shares to
      acquire shares, as set forth in the succeeding notes.                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                          
|(2) | Address is c/o Transnational Automotive Group, Inc.,
      21800 Burbank Blvd., Suite 200, Woodland Hills, CA 90045.                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                          
|(3) | Includes (i) 11,286,134 shares held directly, (ii)
      2,576,165 shares of common stock which may be acquired through the
      conversion of convertible notes, and (iii) 2,576,165 shares of common
      stock which may be acquired through the exercise of warrants, all of which
      are exercisable or convertible within 60 days as of February 28,
    2007.

Equity Compensation Plans

We presently do not maintain any equity compensation plans
under which shares of our common stock are authorized for issuance.

Director Independence

The Board of Directors currently consists of four directors,
  two of whom, Messrs. Jacobson and Huber are independent as defined in the NASD's
  rules for The NASDAQ Stock Market. Messrs. Thomson and Sadat are non-independent
  management directors.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
  AND DIRECTOR INDEPENDENCE

During the years ended February 28, 2007 and 2007 the Company
paid $0 and $229,985 in consulting fees to directors and officers of the
Company.

On May 15, 2006, we entered into a capital lease obligation
with Tov Trust (Tov), a trust whose trustee is Seid Sadat, our Chief Financial
Officer and director of TAUG, for the acquisition of the first shipment of 28
buses to be used in our urban transportation operations in Cameroon. Under the
terms of the lease agreement, TAUG is committed to lease payments of $200,000
per month for nine months commencing in October 2006, with total payments
aggregating $1,500,000 of principal payments and $300,000 for deferred interest.
As of February 28, 2007, $765,622 was outstanding under this lease obligation
representing $800,000 of principal payments less $34,378 of deferred interest.

As of February 28, 2007, an aggregate of $825,000 was borrowed
from Tov. These borrowings were advanced in two separate installments. The first
installment of $425,000 was borrowed on November 6, 2006 and is unsecured,
bearing interest at 10% and is due on demand. The second installment of $400,000
was advanced on February 12, 2007. Borrowings under the second advance are
unsecured, bearing interest at 40% per annum, and are due on May 12, 2007,
including unpaid interest. As of February 28, 2007, an

---

aggregate of $17,591 of accrued interest was owed to the trust
under these unsecured promissory obligations.

During the current fiscal year ended February 28, 2007, Tov
advanced TAUG an additional $1,020,000. On November 7, 2007, our Board of
Directors issued a resolution that resulted in the settlement of these advances
through the issuance of a 7% convertible debenture to the Trust. Under the terms
of the agreement, at the election of the Trustee, Tov could elect to convert
these debentures into 2,240,143 shares of common stock. We also issued Tov
warrants to purchase an additional 2,240,143 shares of common stock of Taug,
exercisable $1.50 per share. Through the end of our fiscal year ended February
28, 2007, the trustee of Tov had not exercised his conversion election on behalf
of the debentures owned by the trust. As of February 28, 2007, an aggregate of
$22,182 of accrued interest was owed to Tov under this convertible debenture.

On March 24, 2006, Our Chief Financial Officer, Seid Sadat,
advanced the Company $150,000 in connection with a private placement offering of
7% convertible debentures and stock warrants to accredited investors. Under the
terms of the subscription agreement, Mr. Sadats debentures are convertible into
336,022 shares of common stock. In connection with the subscription agreement,
Mr. Sadat was also issued warrants to acquire an additional 336,022 shares of
common stock at an exercise price of $1.50. Through the end of our fiscal year
ended February 28, 2007, Mr. Sadat had not exercised his conversion election
under the subscription agreement. As of February 28, 2007, an aggregate of
$9,963 of accrued interest was owed to Mr. Sadat under this convertible
debenture.

We entered into a consulting agreement with Magidoff Sadat &
  Gilmore, LLP (“MSG”), a professional services firm, pursuant to
  which MSG agreed to provide services to TAUG including assistance in managerial
  oversight, internal accounting and financial reporting, and advisory services.
  We agreed to pay MSG an aggregate of $472,000 for these services. As of February
  28, 2007, $485,854 was owed to MSG, which is included in accounts payable and
  accrued expenses. Seid Sadat is the managing partner of MSG and the chief financial
  officer and director of TAUG.

We believe that all of the above transactions and arrangements
were advantageous to us and were on terms no less favorable to us than could
have been obtained from unaffiliated third parties. Any future transactions will
be approved by a majority of the independent and disinterested members of our
board of directors, outside the presence of any interested director.

The Company entered into an equipment lease with a Trust for
which a trustee is also an officer of the Company (see note 4).

A wholly owned subsidiary of the Company acquired 400,000
shares of common stock from the Company for $100,000.

ITEM 13. EXHIBITS

The following exhibits are filed as part of this Annual Report.

|31.1 | Certification of C.E.O. Pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002            
|---- | -----------------------------------------------------------------------------------------------------
|     |                                                                                                      
|31.2 | Certification of C.F.O. Pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002            
|     |                                                                                                      
|32.1 | Certificate Pursuant to 18
        U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

For the years ended February 28, 2007, aggregate fees billed by
our auditors, Kabani & Company, for professional services rendered in
connection with the audit of our annual consolidated financial statements were
$60,000. For the year ended February 28, 2006, aggregate audit and audit related
services billed by our former auditors, Pannell Kerr Forster, were $50,468.

Tax Fees

For the years ended February 28, 2007 and 2006, there were no
fees billed by our current and former auditors.

Pre-Approval Policy and Procedures

We currently do not maintain a formal Audit Committee. However,
all audit and non-audit services to be performed by the Companys independent
accountant must be approved in advance by our Board of Directors. The Board of
Directors may delegate to an independent member of the Board the authority to
grant pre-approvals with respect to non-audit services.

All of the engagements and fees for the year ended February 28,
  2007 were approved by the Companys Board of Directors.

---

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

In accordance with the Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

| | TRANSNATIONAL AUTOMOTIVE GROUP, INC.
| | ------------------------------------
| |                                     
| |                                     
| |                                     
| | By:                                 
| |                                     
| |                                     

In accordance with the Exchange Act, this Report has been signed
  below by the following persons on behalf of the Registrant and in the capacities
  and on the dates indicated.

|Signature                  |  | Title                                                                       | Date              
|-------------------------- |  | --------------------------------------------------------------------------- | ------------------
|                           |  |                                                                             |                   
|/s/
      Seid Sadat       |  | Interim Chief Executive Officer, Chief Financial
      Officer and Director | May 20,
      2008
|Seid Sadat                 |  |                                                                             |                   
|                           |  |                                                                             |                   
|/s/ William
      Jacobson |  | Director                                                                    | May 20,
      2008
|William Jacobson           |  |                                                                             |                   
|                           |  |                                                                             |                   
|/s/ Henry
      Huber      |  | Director                                                                    | May 20,
      2008
|Henry Huber                |  |                                                                             |                   

26

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|                                                                                                                | Page
|--------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                |     
|Report of Kabani & Company                                                                                      | F-2 
|                                                                                                                |     
|Report of Pannell Kerr Forster                                                                                  | F-3 
|                                                                                                                |     
|Consolidated Balance Sheet as at February 28, 2007                                                              | F-4 
|                                                                                                                |     
|Consolidated Statements of Operations for the years ended
      February 28, 2007 and 2006                      | F-5 
|                                                                                                                |     
|Consolidated Statement of Changes in Stockholders
      Deficit for the Years Ended February 28, 2007 and 2006 | F-6 
|                                                                                                                |     
|Consolidated Statement of Cash Flows for the years ended
      February 28, 2007 and 2006                       | F-7 
|                                                                                                                |     
|Notes to Consolidated Financial Statements                                                                      | F-8 

F-1

---

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of 
  Transnational Automotive Group, Inc. (formerly Apache Motor Corporation) 
  Woodland Hills, California

We have audited
  the consolidated statements of operations, changes in stockholders’ equity
  (deficit) and cash flows of Transnational Automotive Group, Inc. (formerly Apache
  Motor Corporation) (a development stage company) for the year ended February
  28, 2006. These consolidated financial statements are the responsibility of
  the Company's management. Our responsibility is to express an opinion on these
  financial statements based on our audit.

We conducted our audit 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. An audit includes
  examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as evaluating
  the overall financial statement presentation. We believe that our audit provides
  a reasonable basis for our opinion.

In our opinion,
  the financial statements referred to above present fairly, in all material respects,
  the results of operations and cash flows of Transnational Automotive Group,
  Inc. (formerly Apache Motor Corporation) for the year ended February 28, 2006
  in conformity with accounting principles generally accepted in the United States
  of America.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 2 to
  the consolidated financial statements, the Company has incurred a significant
  loss for the year ended February 28, 2007 and has a working capital deficit,
  which together raise substantial doubt of its ability to continue as a going
  concern. Management's plans in regard to these matters are also described in
  Note 2. The consolidated financial statements do not include any adjustments
  that might result from the outcome of this uncertainty.

/s/ Kabani & Company, Inc. 
  Certified Public Accountants

Los Angeles, California 
  June 11, 2007

F-2

---

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of 
  Transnational Automotive Group, Inc. (formerly Apache Motor Corporation) 
  Woodland Hills, California

We have audited the consolidated balance sheet of Transnational
  Automotive Group, Inc. (formerly Apache Motor Corporation) (a development stage
  company) as at February 28, 2006, and the consolidated statements of operations,
  changes in stockholders' equity (deficit) and cash flows for the year ended
  February 28, 2006. These consolidated financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these financial statements based on our audit.

We conducted our audit in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards require
  that we plan and perform an audit to obtain reasonable assurance whether the
  financial statements are free of material misstatement. An audit includes examining,
  on a test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used
  and significant estimates made by management, as well as evaluating the overall
  financial statement presentation. We believe that our audit provides a reasonable
  basis for our opinion.

In our opinion, the financial statements referred to above present
  fairly, in all material respects, the financial position of Transnational Automotive
  Group, Inc. (formerly Apache Motor Corporation) as at February 28, 2006 and
  the results of its operations and cash flows for the year ended February 28,
  2006 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 2 to the consolidated financial statements, the Company has no revenues
  and limited capital which together raise substantial doubt as to its ability
  to continue as a going concern. The financial statements do not include any
  adjustments that might result from the outcome of this uncertainty.

/s/ "Pannell Kerr Forster" 
  Chartered Accountants 
  (registered with the PCAOB as Smythe Ratcliffe)

Vancouver, Canada 
  May 29, 2006

F-3

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

CONSOLIDATED BALANCE SHEET

FEBRUARY 28, 2007

|ASSETS                                                                              |  
|----------------------------------------------------------------------------------- | -
|CURRENT ASSETS                                                                      |  
|Accounts
      receivable, net                                                      | $
|Prepaid expenses, advances
      and deposits                                       |  
|Advance deposits
      on buses                                                     |  
|Inventory of parts, net of
      reserve for obsolescence                           |  
|Total
      current assets                                                          |  
|                                                                                    |  
|OTHER ASSETS                                                                        |  
|Property, buses & equipment                                                         |  
|                                                                                    |  
|TOTAL ASSETS                                                                        | $
|                                                                                    |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                               |  
|CURRENT LIABILITIES                                                                 |  
|Accounts payable and accrued expenses
      (including $485,854 to related parties) | $
|Obligations under
      capital lease - related party                               |  
|Notes payable                                                                       |  
|Notes payable to
      related party                                                |  
|Convertible debentures, net of debt
      discount                                  |  
|Related party convertible
      debentures, net of debt discount                    |  
|Accrued interest (including $49,736
      to related parties)                       |  
|Total
      current liabilities                                                     |  
|                                                                                    |  
|STOCKHOLDERS' DEFICIT                                                               |  
|Common stock, $.001 par value; 200,000,000
      shares authorized;                 |  
|36,557,058
      shares issued and outstanding                                      |  
|Treasury (400,000 shares owned by
      subsidiary)                                 |  
|Additional paid
      in capital                                                    |  
|Accumulated deficit                                                                 |  
|Total
      stockholders' deficit                                                   |  
|                                                                                    |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                         | $

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

F-4

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                |   | For the Years Ended February 28, |  
|--------------------------------------------------------------- | - | -------------------------------- | -
|                                                                |   | 2007                             |  
|NET REVENUE                                                     | $ | 862,029                          |  
|                                                                |   |                                  |  
|COST OF REVENUE                                                 |   | 1,047,280                        |  
|                                                                |   |                                  |  
|GROSS LOSS                                                      |   | (185,251                         | )
|                                                                |   |                                  |  
|OPERATING EXPENSES                                              |   |                                  |  
|Sales and marketing                                             |   | 211,594                          |  
|General and administrative                                      |   | 5,330,174                        |  
|Amalgamation and merger costs                                   |   | -                                |  
|Depreciation and
      amortization                             |   | 28,010                           |  
|Foreign currency translation loss                               |   | 22,745                           |  
|Deficiency
      in assets on acquisition of subsidiary company |   | -                                |  
|                                                                |   |                                  |  
|TOTAL OPERATING EXPENSES                                        |   | 5,592,523                        |  
|                                                                |   |                                  |  
|OPERATING LOSS                                                  |   | (5,777,774                       | )
|                                                                |   |                                  |  
|OTHER INCOME (EXPENSE)                                          |   |                                  |  
|Finance costs from beneficial conversion
      feature          |   |                                  |  
|on convertible
      debentures                                 |   | (1,003,050                       | )
|Finance costs from issuance of warrants                         |   | (1,461,296                       | )
|Loss on extinguishment
      of debt                            |   | (355,240                         | )
|Interest expense                                                |   | (445,922                         | )
|Other                                                           |   | 1,662                            |  
|TOTAL OTHER EXPENSE                                             |   | (3,263,846                       | )
|                                                                |   |                                  |  
|Loss before Minority
      Interest                             |   | (9,041,620                       | )
|                                                                |   |                                  |  
|Minority interest in loss of subsidiary                         |   | 530,901                          |  
|                                                                |   |                                  |  
|NET LOSS                                                        | $ | (8,510,719                       | )
|                                                                |   |                                  |  
|LOSS PER COMMON SHARE: BASIC                                    |   |                                  |  
|& DILUTED                                                       | $ | (0.20                            | )
|                                                                |   |                                  |  
|WEIGHTED AVERAGE NUMBER OF SHARES                               |   |                                  |  
|OUTSTANDING: BASIC & DILUTED                                    |   | 42,877,300                       |  

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

F-5

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

Common
      
      
      
      
      
      
      
      
      TotalCommon Stock
      
      
      Treasury
      
      
      Stock
      
      
      Additional Paid-In
      
      
      Stockholders'
      
      
      Stockholders'Shares
      
      
      Amount
      
      
      Stock
      
      
      Subscribed
      
      
      Capital
      
      
      Deficit
      
      
      DeficitBalance, February 28, 2005
      54,210,688
      
      $
      54,211
      
      $
      -
      
      $
      -
      
      $
      994,775
      
      $
      (1,117,547
      )
      $
      (68,561
      )Cancellation of shares
      (28,210,688
      )
      
      (28,211
      )
      
      -
      
      
      -
      
      
      29,452
      
      
      -
      
      
      1,241Issued to acquire subsidiary
      24,000,000
      
      
      24,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      24,000Share issuance by subsidiary
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      1,000,418
      
      
      -
      
      
      1,000,418Issued for settlement of loan from subsidiarysubsidiary
      400,000
      
      
      400
      
      
      -
      
      
      -
      
      
      99,600
      
      
      -
      
      
      100,000Shares held by subsidiary
      -
      
      
      (400
      )
      
      -
      
      
      -
      
      
      (99,600
      )
      
      -
      
      
      (100,000
      )Shares purchased by subsidiary
      -
      
      
      -
      
      
      (100,000
      )
      
      -
      
      
      -
      
      
      -
      
      
      (100,000
      )Common shares subscribed
      -
      
      
      -
      
      
      -
      
      
      100,000
      
      
      -
      
      
      -
      
      
      100,000Issued for cash
      285,715
      
      
      286
      
      
      -
      
      
      -
      
      
      99,714
      
      
      -
      
      
      100,000Subscribed for cash - not issued
      -
      
      
      400
      
      
      -
      
      
      -
      
      
      99,600
      
      
      -
      
      
      100,000Net loss
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (1,443,380
      )
      
      (1,443,380
      )Minority interest in subsidiary
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (340,550
      )
      
      -
      
      
      (340,550
      )Balance, February 28, 2006
      50,685,715
      
      
      50,686
      
      
      (100,000
      )
      
      100,000
      
      
      1,883,409
      
      
      (2,560,927
      )
      
      (626,832
      )Cancellation of shares
      (18,000,000
      )
      
      (18,000
      )
      
      -
      
      
      -
      
      
      18,000
      
      
      -
      
      
      -Issuance of common stock subscribed
      285,715
      
      
      286
      
      
      -
      
      
      (100,000
      )
      
      99,714
      
      
      -
      
      
      -Issuance of common stock for convertibleconvertible notes, including interest
      588,036
      
      
      588
      
      
      -
      
      
      -
      
      
      272,096
      
      
      -
      
      
      272,684Issuance of common stock for cash
      1,915,572
      
      
      1,915
      
      
      -
      
      
      -
      
      
      870,156
      
      
      -
      
      
      872,071Issuance of stock from privateplacement offering
      750,000
      
      
      750
      
      
      -
      
      
      -
      
      
      374,250
      
      
      -
      
      
      375,000Issuance of common stock inexchange for extinguishment of debt
      332,000
      
      
      332
      
      
      -
      
      
      -
      
      
      437,908
      
      
      -
      
      
      438,240Beneficial conversion feature relatedto issuance of convertible notes
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      1,003,050
      
      
      -
      
      
      1,003,050Issuance of warrants in connectionwith issuance of convertible notes
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      2,777,950
      
      
      -
      
      
      2,777,950Capital contributions from minorityshareholders, net of minority interest
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      528,518
      
      
      -
      
      
      528,518Net loss
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (8,510,719
      )
      
      (8,510,719
      )36,557,038
      
      $
      36,557
      
      $
      (100,000
      )
      
      -
      
      $
      8,265,051
      
      $
      (11,071,646
      )
      $
      (2,870,038
      )


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

F-6

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC. 
  CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                       |   | For the Years Ended, |  
|---------------------------------------------------------------------- | - | -------------------- | -
|                                                                       |   | 2007                 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                   |   |                      |  
|Net loss                                                               | $ | (8,510,719           | )
|Adjustments to reconcile net loss to net cash
      used               |   |                      |  
|in operating activities                                                |   |                      |  
|Non-cash interest
      expense                                        |   | 146,792              |  
|Minority interest in operations                                        |   | (530,901             | )
|Excess of liabilities
      over assets on acquisition of subsidiary   |   | -                    |  
|Depreciation and amortization
      expense                            |   | 268,391              |  
|Amortization
      of discount on convertible debentures               |   | 1,461,296            |  
|Beneficial conversion feature                                          |   | 1,003,050            |  
|Loss on extinguishment
      of debt                                   |   | 355,240              |  
|Loss on abandonment of fixed
      assets                              |   | 1,430                |  
|(Increase) decrease in:                                                |   |                      |  
|Change in operating assets
      and liabilities                       |   |                      |  
|Accounts
      receivable                                              |   | (197,620             | )
|Prepaid expenses                                                       |   | (34,260              | )
|Inventory
      of parts                                               |   | (32,416              | )
|Increase (decrease) in:                                                |   |                      |  
|Accounts
      payable and accrued expenses                            |   | 1,871,107            |  
|Net cash used in operating activities                                  |   | (4,198,610           | )
|                                                                       |   |                      |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                   |   |                      |  
|Advance depsit on
      buses                                          |   | (1,402,186           | )
|Purchase of property and equipment                                     |   | (972,710             | )
|Net
      cash used in investing activities                            |   | (2,374,896           | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                   |   |                      |  
|Proceeds from issuance
      of convertible debentures                 |   | 3,638,500            |  
|Proceeds from issuance of unsecured
      promissory notes             |   | 924,673              |  
|Capital contributions
      from minority shareholder                  |   | 800,000              |  
|Proceeds from stock subscriptions                                      |   | -                    |  
|Proceeds from issuance
      of common stock                           |   | 1,347,071            |  
|Repayment of obligations under capital
      lease                     |   | (734,378             | )
|Net
      cash provided by financing activities                        |   | 5,975,866            |  
|NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS                     |   | (597,640             | )
|CASH & CASH EQUIVALENTS AT BEGINNING OF
      PERIOD                   |   | 597,640              |  
|CASH & CASH EQUIVALENTS AT END OF PERIOD                               | $ | -                    |  
|                                                                       |   |                      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                       |   |                      |  
|Cash paid for interest                                                 | $ | 299,130              |  
|Cash paid for taxes                                                    | $ | -                    |  
|SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING
      AND                  |   |                      |  
|FINANCING ACTIVITIES                                                   |   |                      |  
|Conversion of convertible
      debentures to common stock             | $ | 272,684              |  
|Notes payable exchanged for common
      stock                         | $ | 83,000               |  
|Acquistion of buses
      through issuance of capital lease obligation | $ | 1,500,000            |  

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

F-7

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

Organization 
  Transnational Automotive Group, Inc. (the "Company") was incorporated April
  2, 1999 in the State of Nevada as Vitaminoverrun.com Corp., in August 2001 changed
  its name to Apache Motor Corporation Inc. and in November 2005 the Company changed
  its name to Transnational Automotive Group, Inc.

In 2001 the Company merged with Cambridge Creek Companies, Ltd.
  ("Cambridge"), a Nevada corporation. Cambridge was a reporting issuer and the
  Company assumed the reporting issuer status after the merger.

Effective September 12, 2001 the Company acquired all of the
  outstanding shares of common stock of The Apache Motor Corp. ("Apache"), an
  Alberta corporation, from the shareholders of Apache in exchange for an aggregate
  of 440,000 shares of its common stock. The exchange was effectively a reverse
  takeover of the Company by Apache in that the shareholders of Apache became
  the majority shareholders of the Company. On October 24, 2003 the principal
  of The Apache Motor Corp (Robert Wither) agreed to return 278,560 shares of
  common stock for cancellation that he had received from the Company and the
  Company disposed of its shares in its subsidiary company, The Apache Motor Corp.,
  to Robert Wither in conjunction with the cancellation of his shares in the Company.
  The Company retained the rights to the technology and returned the shares of
  the subsidiary to the original owners.

In 2002 the Company completed a 5:1 forward stock split.

On May 3, 2004 the Company terminated an agreement to acquire
  100% of the issued share capital of Manter Enterprises Inc. and cancelled the
  533,334 shares of common stock of the Company previously issued in trust for
  Manter subject to a performance agreement.

On June 7, 2004, the Company completed a 1:75 reverse stock split.
  On October 14, 2005 the Company completed a 2:1 forward stock split.

On October 28, 2005 the Company issued 24,000,000 shares of common
  stock to acquire 100% of the issued share capital of Parker Automotive Group
  International, Inc. (PAGI). PAGI was a development stage enterprise which endeavoured
  to develop a public bus transportation system in Cameroon through its 66% owned
  subsidiary, Parker Transportation, Inc., Cameroon. On September 18, 2006, 18,000,000
  shares of the 24,000,000 shares originally issued were returned to the Company
  and cancelled.

The Company has used the purchase method to account for its acquisition
  of PAGI, the assets and liabilities of which were as follows on acquisition:

|Fair value of net assets acquired:                |   |          |  
|------------------------------------------------- | - | -------- | -
|Cash                                              | $ | 48,647   |  
|Loan receivable                                   |   | 113,100  |  
|Intercompany loan                                 |   | 11,700   |  
|Accounts payable                                  |   | (75,018  | )
|Notes payable                                     |   | (235,000 | )
|                                                  |   | (136,571 | )
|Purchase price                                    |   | (24,000  | )
|Excess of purchase price over net assets acquired | $ | (160,571 | )

The excess
  of the purchase price over the fair value of the net assets acquired ($160,571)
  was recorded as goodwill. In accordance with SFAS No. 142, goodwill is not amortized
  but is tested for impairment at least annually. As of February 28, 2007, the
  Company impaired the entire goodwill of $160,571.

Description of Business

Transnational Automotive Group, Inc. and its wholly-owned and
  majority-owned subsidiaries (collectively referred to hereinafter as the
  Company or Taug) are engaged in the development and operations
  of mass public transportation systems in Cameroon, Africa. Its current
  operations are comprised of an intra-city bus transit system in the capital
  city of Yaoundé under the brand name, LeBus, and an inter-city bus transit
  system between Yaounde and Douala, known as LeCar. The Companys
  objective is to expand its existing transportation operations in Cameroon and
  establish, develop and operate mass transit systems in other sub-Saharan African
  nations.

F-8

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation 
  The consolidated financial statements include the accounts of the Company, Parker
  Automotive Group International, Inc. (PAGI), a Washington USA wholly
  owned subsidiary, LeCar Transportation Corporation, SARL (LeCar),
  a wholly owned Cameroon subsidiary, and Transnational Automotive Group, Cameroon,
  S.A. (Taug-C), a wholly owned Cameroon subsidiary, which owns a
  66% interest in Transnational Industries  Cameroon, S.A. (LeBus).
  Various Cameroon governmental bodies own the remaining 34% equity interest in
  LeBus. All material inter company balances and transactions have been eliminated
  in consolidation.

Use of Estimates 
  The preparation of consolidated financial statements in conformity with accounting
  principles generally accepted in the United States (U.S. generally accepted
  accounting principles) requires management to make estimates and assumptions
  that affect the amounts reported in the Companys consolidated financial
  statements and accompanying notes and disclosure of contingent assets and liabilities
  at the date of these consolidated financial statements and reported amounts
  of revenues and expenses during the reporting period. On an ongoing basis, the
  Company evaluates its estimates and judgments, which are based on historical
  and anticipated results and trends and on various other assumptions that the
  Company believes to be reasonable under the circumstances. By their nature,
  estimates are subject to an inherent degree of uncertainty and, as such, actual
  results may differ, and the difference may be material, from the Companys
  estimates.

Development Stage Activities 
  Prior to September 25, 2006, the Company was a development state company in
  accordance with Statement of Financial Accounting Standards No. 7, Accounting
  and Reporting by Development State Enterprises. The Companys corporate
  efforts through this date have been organizational, directed at acquiring its
  principal asset, raising its initial capital, developing its business plan.
  Prior to the launch of operations, the Companys efforts in Cameroon were
  focused on the cleaning-up and restoration of the primary bus depot located
  in the capital city of Yaoundé, establishing urban routes, readying roadways
  and bus stops, preparing the maintenance facility, completing administrative
  matters such as opening bank accounts, securing operating licenses, recruiting,
  screening and training administrative staff, bus drivers, mechanics and security
  personnel.

Going Concern 
  The Company is subject to various risks in connection with the operation of
  its business including, among other things, (i) losses from operations, (ii)
  social and political instability in its region of operations, (iii) changes
  in the Company's business strategy, including the inability to execute its strategy
  due to unanticipated changes in the market, (iv) various competitive factors
  that may prevent the Company from competing successfully in the marketplace,
  (v) the Company's lack of liquidity and potential ability to raise additional
  capital, and (vi) the lack of historical operations necessary to demonstrate
  the eventual profitability of its business strategy. As of February 28, 2007,
  the Company has an accumulated deficit of $11,071,646 as well as a working capital
  deficiency of $6,103,794.

As a result of the aforementioned factors and related uncertainties,
  there is substantial doubt of the Company's ability to continue as a going concern.
  The consolidated financial statements do not include any adjustments to reflect
  the possible effects of recoverability and classification of assets or classification
  of liabilities, which may result from the inability of the Company to continue
  as a going concern.

Funding of the Company's working capital deficiency, its current
  and future anticipated operating losses, and growth of the Company's transportation
  operations in Cameroon will require continuing capital investment. Historically,
  the Company has received funding through the issuance of convertible debentures
  issued in connection with private placement offerings, the issuance of common
  stock and subscriptions to acquire common stock, advances received from unsecured
  promissory note arrangements, and the financing of its acquisition of buses
  through a capital lease obligation due to a related party trust. The Company's
  strategy is to fund its current and future cash requirements through the issuance
  of additional debt instruments, current and long-term borrowing arrangements
  and additional equity financing.

The Company has been able to arrange debt facilities and equity
  financing to date, there can be no assurance that sufficient debt or equity
  financing will continue to be available in the future or that it will be available
  on terms acceptable to the Company. Failure to obtain sufficient capital to
  fund current working capital requirements and future capital expenditures necessary
  to grow the business would materially affect the Company's operations in the
  short term and expansion strategies. The Company will continue to explore external
  financing opportunities. Currently, the Company is in negotiations with multiple
  parties to obtain additional financing, and the Company will continue to explore
  financing opportunities with additional parties.

F-9

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications 
  Certain prior period amounts have been reclassified to conform to the current
  period presentation.

Foreign Currency Translation 
  All assets and liabilities
  of foreign operations included in the consolidated financial statements are
  translated at period-end exchange rates and all accounts in the consolidated
  statements of operations are translated at the average exchange rate for the
  reporting period. Stockholders’ equity accounts are translated at historical
  exchange rates. Based on the guidance provided in SFAS No. 152, “Foreign
  Currency Translation”, the Company considers the U.S. dollar to be its
  functional currency, given that the majority of all funds used in operations
  through the end of February 28, 2007 were funded in U.S. dollars. In determining
  the Company’s functional currency, management considered various factors
  and economic indicators including: 1) The majority of the Company’s operating
  expenses during the fiscal year-ended February 28, 2007 were denominated in
  US currency; 2) the Company’s acquisition financing of the buses were
  denominated in US currency; and 3) the cash flows generated by the Cameroonian
  subsidiaries’ operations were not sufficient to service the Company’s
  existing debt obligation without cash infusions from the US Parent company.

Fair Market Value of Financial Instruments 
  Statement of Financial Accounting Standards No. 107, Disclosures about
  the Fair Value of Financial Instruments, requires that the Company disclose
  estimated fair values of financial instruments. The carrying amounts reported
  in the statement of financial position for current assets and current liabilities
  qualifying as financial instruments are a reasonable estimate of fair value.

The carrying amount for current assets and liabilities are not
  materially different than fair market value because of the short term maturity
  of these financial instruments.

Cash equivalents 
  The Company considers all highly liquid debt instruments with original maturities
  of three months or less to be cash equivalents. Accounts Receivable Accounts
  receivable consist primarily of Value Added Taxes (VAT) receivable
  due from various agencies of the government of Cameroon. Accounts receivable
  also includes amounts due from the Companys outside Ad Agency, who is
  responsible for the billing and collection of fees from customers for the placement
  of advertisements on the Companys buses. Such amounts are billed when
  earned or due. The Company does not accrue finance or interest charges on outstanding
  receivable balances. The carrying amount of accounts receivable is reduced by
  a valuation allowance that reflects managements best estimate of the amounts
  that will not be collected. Management periodically reviews all delinquent accounts
  receivable balances, if any, and based on an assessment of recoverability, estimates
  the portion, if any, of the balance that will not be collected.

Credit risk 
  Financial instruments that potentially subject the Company to concentrations
  of credit risk consist principally of trade accounts receivable and uninsured
  cash deposits. Concentrations of credit risk with respect to accounts receivable
  are present given that substantially all amounts included in accounts receivable
  are due from the government of Cameroon. Repayment of these receivables is dependent
  upon the financial stability and currency of the government of Cameroon. It
  is at least reasonably possible that managements assessment of credit
  risk and the collectibility of these accounts receivable will change during
  the next reporting period.

The Company places its cash deposits with what management believes
  are high-credit quality financial institutions. At times, balances with any
  one financial institution may exceed the Federal Deposit Insurance Corporation
  (FDIC) limit of $100,000. At February 28, 2007, the Companys foreign subsidiaries
  reflected approximately $0 of cash on their financial statements. Cash held
  in foreign bank accounts is not insured by the FDIC. The following is a summary
  of the Companys cash balances held in U.S. and foreign currencies and
  before adjustment for outstanding checks and deposits in transit:

|                   |   | In Local   |  |   |                | 
|------------------ | - | ---------- |  | - | -------------- | 
|                   |   | Currency   |  |   | In U.S. Dollar | 
|U.S. Dollar        | $ | 112,591    |  |   | 112,591        | 
|Cameroonian Francs |   | 56,274,501 |  |   | 108,992        | 
|                   | $ | 56,387,092 |  | $ | 221,583        | 

Property and Equipment 
  Property and equipment is stated at cost and depreciated or amortized using
  the straight-line method over the estimated useful lives of the assets as follows:

F-10

---

TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

|Asset Description       |  | Useful Life (years)
|----------------------- |  | -------------------
|Computer equipment      |  | 3                  
|Computer software       |  | 3                  
|Furniture and equipment |  | 3 - 5              
|Buses                   |  | 3                  
|Automobile equipment    |  | 5                  

Costs for capital assets not yet available for commercial use
  have been capitalized as construction in progress and will be depreciated in
  accordance with the above guidelines once placed into service. Assets classified
  as held for future use are not depreciated until they are placed
  in productive service. Costs for repairs and maintenance are expensed as incurred.

Capital lease obligations 
  The Company capitalizes buses acquired under a lease obligation, which, by its
  terms, is equivalent to an installment purchase.

Revenue and Expense Recognition 
  Revenue is recognized when earned. The Company recognizes its revenue in accordance
  with the Securities and Exchange Commissions (SEC) Staff Accounting
  Bulletin No. 104, Revenue Recognition in Financial Statements (SAB
  104) and the American Institute of Certified Public Accountants (AICPA)
  Statement of Position (SOP) 97-2, Software Revenue Recognition,
  as amended by SOP 98-4 and SOP 98-9.

Through the
  end of the fiscal year ended February 28, 2007, the majority of the Company’s
  revenues were derived from the sale of tickets for its inter-city and city bus
  operations. The Company recognizes revenue from the sale of bus tickets when
  the transportation services have been provided. During the fiscal year ended
  February 28, 2007, the Company did not recognize any revenue for fuel subsidies
  provided by the government of Cameroon, since the Company had not, as of February
  28, 2007, formalized a subsidy agreement with the government of Cameroon and
  no subsidies were received from the government of Cameroon through February
  28, 2007.

Organization and Start Up CostsCosts of start up activities, including organization costs, are expensed
  as incurred.

Earnings (Loss) Per Share 
  Basic earnings (loss) per common share is computed by dividing net income (loss)
  available to common stockholders by the weighted-average number of common stock
  outstanding during the period. Diluted earnings (loss) per common share is computed
  by dividing the net income (loss) available to common stockholders by the weighted-average
  number of shares of common stock outstanding during the period increased to
  include the number of additional shares of common stock that would have been
  outstanding if the dilutive potential shares of common stock had been issued.
  The shares issuable upon the exercise of warrants and convertible debentures
  for the years ended February 28, 2007 and 2006, were anti-dilutional and, therefore,
  excluded from the calculation of net loss per share. The
  following potential common shares have been excluded from the computation of
  diluted net loss per share for each of the fiscal years ended February 28, 2007
  and 2006 because the effect would have been anti-dilutive:

|                                                              |  | Year ended February 28, | 
|------------------------------------------------------------- |  | ----------------------- | 
|                                                              |  | 2007                    | 
|                                                              |  |                         | 
|Shares to be issued upon conversion of convertible debentures |  | 7,538,954               | 
|Warrants granted                                              |  | 8,789,624               | 
|Total                                                         |  | 16,328,578              | 

Income Taxes 
  The Company follows the liability method of accounting for income taxes. Deferred
  income tax assets and liabilities are recognized for the future tax consequences
  of (i) temporary differences between the tax bases of assets and liabilities
  and their reported amounts in the financial statements, and (ii) operating loss
  and tax credit carry forwards for tax purposes. Deferred tax assets are reduced
  by a valuation allowance when, based upon managements estimates, it is
  more likely than not that a portion of the deferred tax assets will not be realized
  in a future period. Income tax expense or benefit is the tax payable or refundable
  for the period plus or minus the change during the period in deferred tax assets
  and liabilities.

According to the Provisional Regulations of Cameroon on Income
  Tax, the income tax rate is 38.5%

Impairment of Long-Lived Assets 
  Effective January 1, 2002, the Company adopted Statement of Financial Accounting
  Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
  Assets" ("SFAS 144"), which addresses financial accounting and reporting for
  the impairment or disposal of long-lived assets and supersedes SFAS No. 121,
  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
  to be Disposed Of," and the accounting and reporting provisions of APB Opinion
  No. 30, "Reporting the Results of Operations for a Disposal of a Segment of
  a Business."

Impairment
  of Goodwill
  Under Statement of Financial Accounting Standards (“SFAS”) No. 142,
  “Goodwill and Other Intangible Assets (“SFAS No. 142”),”
  goodwill is no longer amortized, but tested for impairment upon first adoption
  and annually, thereafter, or more frequently if events or changes in circumstances
  indicate that it might be impaired. The Company assesses goodwill for impairment
  periodically in accordance with SFAS No. 142.

F-11

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company periodically evaluates the carrying value of long-lived
  assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment
  losses to be recorded on long-lived assets used in operations when indicators
  of impairment are present and the undiscounted cash flows estimated to be generated
  by those assets are less than the assets' carrying amounts. In that event, a
  loss is recognized based on the amount by which the carrying amount exceeds
  the fair market value of the long-lived assets.

Advertising and Marketing Costs 
  The Company expenses costs of advertising and marketing as incurred. Advertising
  and marketing expense for the years ended February 28, 2007 and 2006 amounted
  to $211,594 and $10,238, respectively.

Recent Accounting pronouncements 
  In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid
  Financial Instruments. SFAS No. 155 amends SFAS No 133, Accounting
  for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting
  for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
  SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument
  that contains an embedded derivative that otherwise would require bifurcation,
  clarifies which interest-only strips and principal-only strips are not subject
  to the requirements of SFAS No. 133, establishes a requirement to evaluate interest
  in securitized financial assets to identify interests that are freestanding
  derivatives or that are hybrid financial instruments that contain an embedded
  derivative requiring bifurcation, clarifies that concentrations of credit risk
  in the form of subordination are not embedded derivatives, and amends SFAS No.
  140 to eliminate the prohibition on the qualifying special-purpose entity from
  holding a derivative financial instrument that pertains to a beneficial interest
  other than another derivative financial instrument. This statement is effective
  for all financial instruments acquired or issued after the beginning of the
  Companys first fiscal year that begins after September 15, 2006. Management
  believes that this statement will not have a significant impact on the financial
  statements.

In March 2006 FASB issued SFAS No. 156, Accounting for
  Servicing of Financial Assets. This Statement amends SFAS No. 140, Accounting
  for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
  with respect to the accounting for separately recognized servicing assets and
  servicing liabilities. This Statement:

| | 1  | Requires an entity to recognize a servicing asset or
        servicing liability each time it undertakes an obligation to service a
        financial asset by entering into a servicing contract.                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 2. | Requires all separately recognized servicing assets
        and servicing liabilities to be initially measured at fair value, if racticable.                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 3  | Permits an entity to choose Amortization method
        or Fair value measurement method for each class of separately recognized
        servicing assets and servicing liabilities.                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 4. | At its initial adoption, permits a one-time reclassification
        of available-for-sale securities to trading securities by entities with
        recognized servicing rights, without calling into question the treatment
        of other available-for-sale securities under Statement 115, provided that
        the available-for-sale securities are identified in some manner as offsetting
        the entitys exposure to changes in fair value of servicing assets
        or servicing liabilities that a servicer elects to subsequently measure
        at fair value.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 5. | Requires separate presentation of servicing assets and
        servicing liabilities subsequently measured at fair value in the statement
        of financial position and additional disclosures for all separately recognized
        servicing assets and servicing liabilities.                                                                                                                                                                                                                                                                                                   

This Statement is effective as of the beginning of the Companys
  first fiscal year that begins after September 15, 2006. Management believes
  that this statement will not have a significant impact on the financial statements

In September 2006, the FASB issued SFAS No. 157, Fair Value
  Measurements. This Statement clarifies the definition of fair value, establishes
  a framework for measuring fair value and expands the disclosures on fair value
  measurements. SFAS No. 157 is effective for fiscal years beginning after November
  15, 2007. Management has not determined the effect, if any, the adoption of
  this statement will have on the financial statements.

F-12

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

In September 2006, the FASB issued SFAS No. 158 Employers
  Accounting for Defined Benefit Pension and Other Postretirement Plansan
  amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement
  improves financial reporting by requiring an employer to recognize the overfunded
  or underfunded status of a defined benefit postretirement plan (other than a
  multiemployer plan) as an asset or liability in its statement of financial position
  and to recognize changes in that funded status in the year in which the changes
  occur through comprehensive income of a business entity or changes in unrestricted
  net assets of a not-for-profit organization. This Statement also improves financial
  reporting by requiring an employer to measure the funded status of a plan as
  of the date of its year-end statement of financial position, with limited exceptions.
  An employer with publicly traded equity securities is required to initially
  recognize the funded status of a defined benefit postretirement plan and to
  provide the required disclosures as of the end of the fiscal year ending after
  December 15, 2006. An employer without publicly traded equity securities is
  required to recognize the funded status of a defined benefit postretirement
  plan and to provide the required disclosures as of the end of the fiscal year
  ending after June 15, 2007.

However, an employer without publicly traded equity securities
  is required to disclose the following information in the notes to financial
  statements for a fiscal year ending after December 15, 2006, but before June
  16, 2007, unless it has applied the recognition provisions of this Statement
  in preparing those financial statements:

| | 1  | A brief description of the provisions of this Statement                                               
| | -- | ------------------------------------------------------------------------------------------------------
| | 2  | The date that adoption is required                                                                    
| | 3. | The date the employer plans to adopt the recognition
        provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations
  as of the date of the employers fiscal year-end statement of financial
  position is effective for fiscal years ending after December 15, 2008.

In February 2007 the FASB issued SFAS 159, "The Fair Value Option
  for Financial Assets and Financial Liabilities--Including an amendment of FASB
  Statement No. 115." The statement permits entities to choose to measure many
  financial instruments and certain other items at fair value. The objective is
  to improve financial reporting by providing entities with the opportunity to
  mitigate volatility in reported earnings caused by measuring related assets
  and liabilities differently without having to apply complex hedge accounting
  provisions. The statement is effective as of the beginning of an entity's first
  fiscal year that begins after November 15, 2007. The company is analyzing the
  potential accounting treatment.

The Companys management is currently evaluating the effect
  of this pronouncement on its financial statements.

In June 2006, the Emerging Issues Task Force (EITF) reached a
  consensus on Issue No. 06-03, How Taxes Collected from Customers and Remitted
  to Governmental Authorities Should Be Presented in the Income Statement (That
  Is, Gross versus Net Presentation (EITF 06-03). EITF 06-03 applies to
  taxes assessed by a governmental authority that are directly imposed on a revenue-producing
  transaction between a seller and a customer, and states that the presentation
  of such taxes on either a gross basis (included in revenues and costs) or on
  a net basis (excluded from revenues) is an accounting policy decision that should
  be disclosed. Additionally, for such taxes reported on a gross basis, the amount
  of such taxes should be disclosed in interim and annual financial statements
  if the amounts are significant. The provisions of EITF 06-03 are effective for
  interim and annual reporting periods beginning after December 15, 2006. The
  Company is currently evaluating the impact of the adoption of EITF 06-03 on
  the Companys financial statements.

3. ADVANCE DEPOSIT ON BUSES

As of February 28, 2007, the Company had advanced an aggregate
  of $1,680,957 to a bus manufacturer under an agreement to purchase 30 urban
  passenger buses for its urban transportation system in Yaoundé. The buses
  were acquired pursuant to a contract with King Long United Automotive Industry
  (Suzhou) Co., Ltd. (King Long) of the Peoples Republic of
  China, who manufactured the buses. Under the terms of the agreement with King
  Long, the Company is obligated to acquire an additional 30 buses for an aggregate
  purchase price of $1,600,000. As disclosed in Note 12 to the accompanying financial
  statements, the buses arrived in Cameroon on May 2, 2007 and are currently being
  retrofitted for their intended use. As of February 28, 2006, advance deposits
  on buses were $278,771, which were advances for the acquisition of the 28 buses
  currently used in operations, which were purchased from Zhonda Industrial Group.

F-13

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

4.PROPERTY, BUSES & EQUIPMENT

Property, buses and equipment consist of the following:

|                                                |   | February 28, |  
|----------------------------------------------- | - | ------------ | -
|                                                |   | 2007         |  
|Computer equipment                              | $ | 62,388       |  
|Computer software                               |   | 6,264        |  
|Furniture and equipment                         |   | 115,051      |  
|Automotive equipment                            |   | 7,030        |  
|Building improvements                           |   | 86,508       |  
|Buses used in operations                        |   | 3,059,661    |  
|                                                |   | 3,336,902    |  
|Less: accumulated depreciation and amortization |   | (274,965     | )
|                                                |   | 3,061,937    |  
|Construction in progress                        |   | 171,819      |  
|Total property and equipment                    | $ | 3,233,756    |  

Included in property, buses and equipment is $1,500,000 of capitalized
  buses used in operations, which are leased under a non-cancellable lease from
  a related party (see Note 10) and accounted for as a capital lease. As of February
  28, 2007, the accumulated depreciation on the buses used in operations under
  this capital lease was $236,932.

Depreciation and amortization expense for the fiscal years ended
  February 28, 2007 and 2006 were $268,391 and $1,075, respectively.

5.ACCOUNTS PAYABLE & ACCRUED EXPENSES

As of February 28, 2007, accounts payable and accrued expenses
  were comprised of the following:

|Accounts payable                                                             | $ | 1,464,059 | 
|---------------------------------------------------------------------------- | - | --------- | 
|Payroll liabilities                                                          |   | 247,920   | 
|Accrued expenses                                                             |   | 558,934   | 
|VAT and custom duty taxes payable to governmental agencies
      of Cameroon |   | 1,022,370 | 
|Taxes payable to governmental agencies of Cameroon                           |   | 174,763   | 
|Provision for fines and penalties                                            |   | 163,241   | 
|Total accounts payable and accrued
      expenses                            | $ | 3,631,287 | 

6. OBLIGATIONS UNDER CAPITAL LEASE

The Company is committed to lease payments of $200,000 per month
  for nine months commencing October 2006 for the acquisition of 28 buses for
  its urban and rural transportation services in Cameroon. The lease obligation
  initially consisted of $1,500,000 used for the acquisition of the related buses
  and $300,000 deferred finance charges to be written off over the term of the
  capital lease obligation and is payable to a Trust for which a director of the
  Company is a trustee. The lease expires in June 2007, when all remaining principal
  and unpaid interest under the lease obligation is due and payable.

|Remaining payments under lease obligation | $ | 800,000 |  
|----------------------------------------- | - | ------- | -
|Imputed interest                          |   | (34,378 | )
|Obligation under capital lease, net       | $ | 765,622 |  

The capital lease obligation is secured by the underlying buses.
  Total interest costs charged to operations under this lease obligation for the
  year ended February 28, 2007 was $265,622.

F-14

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. NOTES PAYABLE

The Company issued various promissory notes payable which are
  unsecured, due on demand, and bear interest at rates ranging from 7% to 8% per
  annum. As of February 28, 2007, aggregate amounts outstanding under these unsecured
  notes payable were $510,000. As of February 28, 2007, notes payable due to related
  party consists of an unsecured notes payable for $825,000 due to a Trust controlled
  by one of the officers of the Company (see Note 10).

8. CONVERTIBLE DEBENTURES

Convertible DebenturesDuring the year ended February 28, 2007, the Company raised $5,118,000 from
  the issuance of convertible debentures (convertible debentures)
  under several private placement memorandum offerings. The debentures are convertible
  into the common stock of the Company at exercise prices ranging from $.48 to
  $.50 per share. The debentures bear interest at 7% per annum and are automatically
  converted into common stock after one year from the date of issuance, unless
  converted earlier.

The Company calculated the beneficial conversion feature embedded
  in the convertible debentures in accordance with 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)
  and recorded $1,003,051 of aggregate debt discount for the year ended February
  28, 2007, which is included in additional paid-in capital in the accompanying
  consolidated balance sheet as of February 28, 2007.

Total finance costs charged to operations in connection with
  the beneficial conversion feature was $1,003,050 for the year ended February
  28, 2007.

This amount was calculated using the Black-Scholes pricing model
  with the following assumptions: applicable risk-free interest rate based on
  the current treasury-bill interest rate at the grant date of 3.5%; dividend
  yields of 0%; volatility factors of the expected market price of the Companys
  common stock of 203%; and an expected life of the warrants of one year. The
  debt discount is being amortized over one year, the life of the convertible
  debentures. Total finance costs associated with the amortization of the warrants
  was $1,461,294 for the year ended February 28, 2007. There was no finance costs
  associated with the amortization of the debt discounts for the issuance of the
  warrants for the year ended February 28, 2006.

The Company also issued to the holders of the convertible debentures
  warrants to acquire an aggregate of 8,039,624 shares of the Companys common
  stock at an exercise price of $1.50 per share. The warrants expire after the
  end of the second year from the date of issuance. In connection with these debentures,
  the Company recorded aggregate debt discount of $2,777,950 related to the fair
  of the warrants issued, which is included in additional paid-in capital in the
  accompanying consolidated balance sheet as of February 28, 2007.

The following is a schedule of aggregate number of warrants and
  shares of common stock eligible for conversion under outstanding convertible
  notes and debentures as of February 28, 2007:

|                                                     |   |              |  |   |             |  |   | Convertible | 
|---------------------------------------------------- | - | ------------ |  | - | ----------- |  | - | ----------- | 
|                                                     |   | Convertible  |  |   | Unamortized |  |   | Debentures  | 
|                                                     |   | Debentures - |  |   | Warrant     |  |   | Net of Debt | 
|                                                     |   | Gross        |  |   | Discounts   |  |   | Discount    | 
|                                                     |   |              |  |   |             |  |   |             | 
|Convertible debentures, non related parties          | $ | 2,348,500    |  | $ | 824,711     |  | $ | 1,523,789   | 
|                                                     |   |              |  |   |             |  |   |             | 
|Related party convertible debentures (Note
      10) | $ | 1,170,000    |  | $ | 491,943     |  | $ | 678,057     | 

The effective interest rate
  on aggregate convertible debentures inclusive of the amortization of the benefit
  on conversion and the amortization of the fair value of the warrants for the
  year ended February 28, 2007 was 73%.

F-15

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

9. CAPITAL TRANSACTIONS

Common stock

The Company cancelled 18,000,000 shares of common stock pursuant
  to the acquisition of PAGI. The cancellation was part of a corporate restructuring
  in the Companys ongoing efforts to provide equity for qualified interested
  parties.

Under the terms of subscription agreements for the purchase of
  the Companys common stock, Taug received an aggregate of $972,071 from
  two accredited investors during the fiscal year ended February 28, 2007. In
  aggregate, the Company issued 2,201,287 shares of common stock under these subscription
  agreements.

On November 30, 2006, the Company received $800,000 of contributed
  capital from the Chamber of Commerce, Industry, Mines and Handicraft (“CCIMA”)
  of Cameroon for the Company’s urban transportation operations in Yaoundé,
  which commenced operations in late September 2006. CCIMA is one of the Company’s
  minority shareholders in LeBus. These amounts have been reflected in the accompanying
  consolidated balance sheet as additional-paid in capital, net of minority interest
  of $271,482.

On November 21, 2006, the Company issued 332,000 shares of common
  stock in connection with the cancellation of $83,000 of indebtedness owed to
  a creditor. The Company recognized a loss of $355,240 from the extinguishment
  of debt as a result of this transaction.

During the year ended February 28, 2007, $262,500 of convertible
  debentures and $10,184 of related accrued interest (note 8) was converted into
  588,036 shares of common stock.

In connection with a Private Placement Memorandum to accredited
  investors dated January 17, 2007, the Company sold 750,000 shares of common
  stock at a purchase price of .50 per share for aggregate proceeds of $375,000.
  As part of the private placement, the investors were issued five-year warrants
  to purchase up to an aggregate of 750,000 shares of our common stock, at a fixed
  exercise price of $1.50 per share. The warrants are not on a cash-less
  basis and holders will be required to pay $1.50 to exercise each warrant.

The aggregate intrinsic value of the 750,000 warrants issued
  in connection with our January 17, 2007 private placement offering was $246,029.
  This amount was calculated using the Black-Scholes pricing model with the following
  assumptions: applicable risk-free interest rate based on the current treasury-bill
  interest rate at the date of grant of 3.5%; dividend yield of 0%; volatility
  factors of the expected market price of our common stock of 203%; and an expected
  life of the warrants of five years.

Warrants

The following schedules present a summary of the activity of
  the aggregate number of warrants issued in connection with the Companys
  private placement memorandum offerings during the fiscal year ended February
  28, 2007:

|Warrants outstanding             |   | Aggregate       |  |  | Number of | 
|-------------------------------- | - | --------------- |  |  | --------- | 
|                                 |   | Intrinsic Value |  |  | Warrants  | 
|Outstanding at February 28, 2006 | $ | -               |  |  | -         | 
|Granted                          |   | 3,023,978       |  |  | 8,789,624 | 
|Exercised                        |   | -               |  |  | -         | 
|Cancelled                        |   | -               |  |  | -         | 
|Outstanding at February 28, 2007 | $ | 3,023,978       |  |  | 8,789,624 | 

F-16

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Outstanding
        Warrants
      
      
      
      Exercisable
        WarrantsRange of
      
      
      
      Weighted Average
      
      Weighted AverageExercise
      
      
      
      Remaining
      
      Exercise
      
      
      
      Average ExercisePrice
      
      Number
      
      Contractual Life
      
      Price
      
      Number
      
      Price$ 1.50
      
      8,789,624
      
      1.8 years
      
      $ 1.50
      
      8,789,624
      
      $ 1.50


10. RELATED PARTY TRANSACTIONS

On May 15, 2006, the Company entered into a capital lease obligation
  with Tov Trust (“Tov”), a trust whose trustee is Seid Sadat, the
  Chief Financial Officer and director of TAUG, for the acquisition of the first
  shipment of 28 buses to be used in our urban transportation operations in Cameroon.
  Under the terms of the lease agreement, TAUG is committed to lease payments
  of $200,000 per month for nine months commencing in October 2006, with total
  payments aggregating $1,500,000 of principal payments and $300,000 for deferred
  interest. As of February 28, 2007, $765,622 was outstanding under this lease
  obligation representing $800,000 of principal payments less $34,378 of deferred
  interest.

As of February 28, 2007, an aggregate of $825,000 was borrowed
  from Tov. These borrowings were advanced in two separate installments. The first
  installment of $425,000 was advanced on November 6, 2006 and is unsecured, bearing
  interest at 10% and is due on demand. The second installment of $400,000 was
  advanced on February 12, 2007. Borrowings under the second advance are unsecured,
  bearing interest at 40% per annum, and are due on May 12, 2007, including unpaid
  interest. As of February 28, 2007, an aggregate of $17,591 of accrued interest
  was owed to the trust under these unsecured promissory obligations. The
  interest expense for the year ended February 28, 2007 under this related party
  obligation was $17,591.

During the current fiscal year ended February 28, 2007, Tov advanced
  TAUG an additional $1,020,000. On November 7, 2007, our Board of Directors issued
  a resolution that resulted in the settlement of these advances through the issuance
  of a 7% convertible debenture to the Trust. Under the terms of the agreement,
  at the election of the Trustee, Tov could convert these debentures into 2,240,143
  shares of common stock. We also issued Tov warrants to purchase an additional
  2,240,143 shares of common stock of TAUG, exercisable $1.50 per share. Through
  the end of our fiscal year ended February 28, 2007, the trustee of Tov had not
  exercised his conversion election on behalf of the debentures owned by the trust.
  As of February 28, 2007, an aggregate of $22,182 of accrued interest was owed
  to Tov under this convertible debenture. The
  interest expense for the year ended February 28, 2007 under this related party
  obligation was $22,182.

On March 24, 2006, Our Chief Financial Officer, Seid Sadat, advanced
  the Company $150,000 in connection with a private placement offering of 7% convertible
  debentures and stock warrants to accredited investors. Under the terms of the
  subscription agreement, Mr. Sadat’s debentures are convertible into 336,022
  shares of common stock. In connection with the subscription agreement, Mr. Sadat
  was also issued warrants to acquire an additional 336,022 shares of common stock
  at an exercise price of $1.50. Through the end of our fiscal year ended February
  28, 2007, Mr. Sadat had not exercised his conversion election under the subscription
  agreement. As of February 28, 2007, an aggregate of $9,963 of accrued interest
  was owed to Mr. Sadat under this convertible debenture. The
  interest expense for the year ended February 28, 2007 under this related party
  obligation was $9,963.

During the year ended February 28, 2007, the Company entered
  into a consulting agreement with Magidoff Sadat & Gilmore, LLP (“MSG”),
  a professional services firm, pursuant to which MSG agreed to provide services
  to TAUG including assistance in managerial oversight, internal accounting and
  financial reporting, and advisory services. The Company agreed to pay MSG an
  aggregate of $472,000 for these services through February 28, 2007. As of February
  28, 2007, $485,854 was owed to MSG, which is included in accounts payable and
  accrued expenses. Seid Sadat is the managing partner of MSG and the chief financial
  officer and director of TAUG.

F-17

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

11. INCOME TAXES

The components of the income tax provision are as follows:

|                                 |   | Year ended February 28, | 
|-------------------------------- | - | ----------------------- | 
|                                 |   | 2007                    | 
|Current:                         | $ |                         | 
|Federal                          |   | -                       | 
|State                            |   | 800                     | 
|Cameroon                         |   | -                       | 
|Total                            |   | 800                     | 
|                                 |   |                         | 
|Deferred                         |   |                         | 
|Federal                          |   | -                       | 
|State                            |   | -                       | 
|Cameroon                         |   | -                       | 
|Total                            |   | -                       | 
|Total Income
      Tax Provision |   |                         | 
|                                 | $ | 800                     | 

Significant components of deferred income taxes as of February
  28, 2007 are as follows:

|                                     |  | Year ended February 28, | 
|------------------------------------ |  | ----------------------- | 
|                                     |  | 2007                    | 
|Federal statutory rate               |  | 34%                     | 
|State tax expense net of federal tax |  | 6%                      | 
|Changes in valuation allowance       |  | (40)%                   | 
|Foreign income tax, Cameroon         |  | (38.5)%                 | 
|Change in valuation allowance        |  | 38.5%                   | 
|Tax expense at actual rate           |  | -                       | 
|                                     |  |                         | 
|                                     |  |                         | 
|Net operating losses                 |  |                         | 
|Temporary differences                |  |                         | 
|Valuation allowance                  |  |                         | 
|Net deferred tax                     |  |                         | 

Through February 28, 2007, the Company and its subsidiaries incurred
  net operating losses for tax purposes of approximately $7,248,688. The net operating
  loss carry forward for federal and state purposes may be used to reduce taxable
  income through the year 2025. Net operating loss carry forwards for the state
  of California is generally available to reduce taxable income through the year
  2011. The availability of the Companys net operating loss carry forwards
  is subject to limitation. The provision for income taxes consists of the state
  minimum tax imposed on corporations.

The gross deferred tax asset balance as of February 28, 2007
  has been offset in its entirety by a valuation allowance against the deferred
  tax asset given the uncertainty surrounding the eventual realization of the
  related deferred tax assets.

Utilization of the net operating loss carry forwards is subject
  to significant limitations imposed by the change in control rules under I.R.C.
  382, limiting its annual utilization to the value of the Company at the date
  of change in control times the federal discount rate. A significant portion
  of the NOL may expire before it can be utilized.

F-18

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

11. COMMITMENTS AND CONTINGENCIES

Officer Indemnification

Under the organizational documents, the Companys officers
  are indemnified against certain liabilities arising out of the performance of
  their duties to the Company. The Company does not maintain insurance for its
  directors and officers to insure them against liabilities arising from the performance
  of their duties required by the positions with the Company. The Companys
  maximum exposure under these arrangements is unknown as this would involve future
  claims that may be made against the Company that have not yet incurred.

Employment Agreements

On October 27, 2006, the Company entered into an employment agreement
  with its vice-president of business development. Under the terms of the agreement,
  the Company agreed to remunerate the employee cash compensation of $3,000 per
  month plus deferred compensation of $3,000 per month through the duration of
  the employment term, which expires in September 2006. The Company has accrued
  $12,000 of deferred compensation owed to this employee as of February 28, 2007,
  representing deferred compensation payable to the employee through the end of
  February 28, 2007.

Loss Contingencies

In May 2006, the Company was assessed a claim approximating $461,000
  in connection with a breach of contract dispute with its sea freight carrier
  related to the first shipment of 28 buses from China to Cameroon. The claim
  arose out of the Companys alleged failure and delinquency to procure the
  bus shipments within the terms of the underlying sea freight agreement. The
  Companys management initiated settlement negotiations with its sea freight
  carrier to withdraw their monetary claim in exchange for contracting the carrier
  for future sea freight of 60 additional buses. Subsequent to year-end, the Company
  satisfied a portion of their future commitment to the sea freight carrier in
  connection with their purchase and shipment of 30 additional buses, which were
  delivered to Cameroon on May 2, 2007.

In August 2006, the Company terminated its operating lease for
  its former corporate offices. Thereafter, the Company entered into settlement
  negotiations with its former landlord. In January 2007, the Company negotiated
  a $120,000 aggregate settlement for the lease termination, which included unpaid
  rent through August 2006 (see Note 12). On February 28, 2007, the Company negotiated
  a reduced settlement amount with its former landlord for aggregate consideration
  of $50,000 and was release from any further claims or obligations under the
  lease agreement.

Purchase Commitments

The Company is obligated under a purchase commitment agreement
  with a bus manufacturer in China and a sea freight carrier for the purchase
  and sea freight charges associated with the acquisition of 60 urban transportation
  buses for an aggregate cost of $3,200,000 plus sea freight (see Note 3). As
  of February 28, 2007, the Company had advanced the manufacturer $1,680,957 of
  cash advances to be applied against the shipment of the first 30 buses and is
  contractually obligated to pay and the sea freight carrier an aggregate of approximately
  $460,000 for sea freight costs upon delivery of the first 30 buses to Cameroon.
  On May 2, 2007, the first shipment of 30 buses was delivered to Cameroon (see
  Note 12).

Facility leases used in operations

The Company leases two agency facilities for their inter-city
  bus operations, LeCar, in the city of Yaoundé, Cameroon and an office building
  used by LeCars corporate, sales and administrative staff under non-cancellable
  operating lease agreements expiring in various years through 2027. The Company
  also leases three residential homes in Cameroon that are used by its senior
  management personnel that are leased under operating lease agreements expiring
  within one year as of the end of our fiscal year ended February 28, 2007.

F-19

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TRANSNATIONAL AUTOMOTIVE GROUP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The future minimum rental payments (exclusive of real estate
  taxes, maintenance, etc.) under the non-cancellable operating lease commitments
  areas follows:

|Fiscal year ended February 28, |   |           | 
|------------------------------ | - | --------- | 
|2008                           | $ | 134,800   | 
|2009                           |   | 134,800   | 
|2010                           |   | 116,207   | 
|2011                           |   | 116,207   | 
|2012                           |   | 116,207   | 
|2013                           |   | 1,704,369 | 
|Thereafter                     | $ | 2,322,590 | 

Rent expense charged to operations for the fiscal years ended
  February 28, 2007 and 2006 was $362,961 and $108,749, respectively.

Litigation

The Company is involved in various other legal claims and assessments.
  Management believes that these actions, either individually or in the aggregate,
  will not have a material adverse effect on the Companys results of operations
  or financial condition.

See Note 12 for litigation matters arising subsequent to year-end.

12. SUBSEQUENT EVENTS

On March 19, 2007, one of the Companys inter-city coach
  buses was involved in a collision en route between Yaoundé and Douala that
  resulted in the deaths of two passengers and injuries sustained to the surviving
  passengers. In accordance with Cameroonian law, the Companys subsidiary,
  LeCar, was cited with responsibility for the collision. The Company maintains
  insurance coverage for damage claims arising from collisions. However, management
  cannot determine the amount of monetary damages in excess of amounts covered
  under insurance, if any, that may be awarded to passengers involved in this
  accident.

On May 2, 2007, the Company received a shipment of 30 intra-city
  buses, which arrived in Cameroon and are scheduled for deployment in late June
  2007 (see Note 3).

The Companys subsidiary, LeCar, subleases an agency physically
  located on the premises of a large hotel in Douala under a two year lease term.
  On May 15, 2007, the Company received notification from the management of the
  hotel to terminate the lease agreement and vacate the premises. The matter has
  been referred to legal counsel and is currently in mediation. In the event the
  cease and desist demand is upheld, the Company would be required to record an
  impairment charge of approximately $170,000, resulting from the write off construction
  in progress and other building improvement costs incurred by the Company on
  its agency facility.

On May 21, 2007, an aggregate of 2,032,929 shares of the Companys
  common stock were issued to holders of convertible debentures under the Companys
  Private Placement Memorandum dated January 23, 2006. The shares were automatically
  converted pursuant to the expiration of each respective debenture agreement..
  Subsequent to year end, the Company raised $1,015,000 from the issuance of 2,030,000
  shares of the Companys common stock and 2,030,000 warrants available for
  issuance in connection with the Companys Private Placement Offering to
  accredited investors dates January 17, 2007.

On May 24, 2007, the Companys Board of Directors issued
  a resolution to extend the maturity date of the convertible debentures issued
  pursuant to the Private Placement Memorandum dated January 23, 2006 and to increase
  the number of shares of common stock eligible for conversion. The number of
  warrants issued to convertible debenture holders was also adjusted to equal
  the number of shares to be issued upon conversion. In connection with the Board
  Resolution, the maturity date on the warrants was extended from two years to
  five years and the conversion rate of the exercise option was reduced from $.48
  - $.50 per share to an adjusted conversion rate of $.4464 per share. The reduction
  in the conversion rate resulted in an increase of 420,183 additional warrants
  outstanding and an additional 420,183 shares of common stock eligible for conversion
  for the debenture holders.

F-20

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