**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**


(Mark
      One)





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





**For
      the quarterly period ended September 30, 2007**





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





For
      the
      transition period from ________________ to _______________





**000-51046**


(Commission
      file number)





**TRITON
      DISTRIBUTION SYSTEMS, INC.**


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





**Colorado**
            **84-1039067**(State
                or Other Jurisdiction
            (IRS
                Employerof
                Incorporation or Organization)
            Identification
                No.)




**One
      Harbor Drive, Suite 300 Sausalito, California 94965**


(Address
      of Principal Executive Offices)





**(415)
      339-4600**


(Issuer's
      Telephone Number, Including Area Code)





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





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





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: As of November 13, 2007, there were
      47,259,713 shares of common stock outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes o   No x





**TRITON
      DISTRIBUTION SYSTEMS, INC.**


**Index**





PageNumberPART
                I.
            FINANCIAL
                INFORMATION





Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheets as of September 30, 2007 (unaudited) and December
                31, 2006
                (audited)
            3Consolidated
                Statements of Operations for the three and ninemonths
                ended September 30, 2007 (unaudited), and 2006 (unaudited) and from
                inception (January 10, 2006) to September 30, 2007
                (unaudited)
            4Consolidated
                Statement of Stockholders Equity from inception(January
                10, 2006) to September 30, 2007  (unaudited)
            5Consolidated
                Statements of Cash Flows for the nine months ended September 30,
                2007
                (unaudited), and 2006 (unaudited) and the period from inception
                (January 10, 2006) to September 30, 2007 (unaudited)
            6Notes
                to Consolidated Financial Statements (unaudited)
            7Item
                2.
            Management's
                Discussion and Analysis or Plan of Operations
            22Item
                3.
            Controls
                and Procedures
            27PART
                II.OTHER
                INFORMATION
            29Item
                1.
            Legal
                Proceedings
            29Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            29Item
                3.
            Defaults
                Upon Senior Securities
            29Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            29Item
                5.
            Other
                Information
            29Item
                6.
            Exhibits
            30SIGNATURES
            31







**PART
      I – FINANCIAL INFORMATION**





**ITEM
      1.  FINANCIAL STATEMENTS**





**Triton
      Distribution Systems, Inc.**


**(a
      Development Stage Company)**


**Consolidated
      Balance Sheets**




**Sept
                30 2007**
            
            
            **Dec
                31 2006**(unaudited)**ASSETS**CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            90,886
            
            
            $
            1,944,287Other
                current assets
            
            
            175,402
            
            
            
            121,944Prepaid
                consulting
            
            
            1,709,795
            
            
            
            723,600TOTAL
                CURRENT ASSETS
            
            
            1,976,084
            
            
            
            2,789,831FURNITURE
                AND EQUIPMENT, net
            
            
            364,150
            
            
            
            350,509WEBSITE
                DEVELOPMENT COSTS, net
            
            
            9,029
            
            
            
            13,954INTELLECTUAL
                PROPERTY, net
            
            
            196,783
            
            
            
            214,672TOTAL
                ASSETS
            
            $
            2,546,046
            
            
            $
            3,368,967**LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIESDeferred
                Income
            
            $
            1,190
            
            
            $
            -Accounts
                payable
            
            
            261,696
            
            
            
            242,579Accrued
                expenses
            
            
            19,104
            
            
            
            4,514Accrued
                payroll
            
            
            53,848
            
            
            
            19,269Accrued
                lease liability
            
            
            15,964
            
            
            
            10,983Loan
                Payable, net
            
            
            1,504,110TOTAL
                CURRENT LIABILITIES
            
            
            1,855,912
            
            
            
            277,345COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS'
                EQUITYPreferred
                stock; no par value; 2,000,000 sharesauthorized;
                0 shares issued and outstandingCommon
                stock; no par value; 100,000,000 sharesauthorized;
                45,013,213 shares issued and outstandingas
                of December 31, 2006 and 47,259,713 as of September 30,
                2007
            
            
            13,611,009
            
            
            
            9,503,723Additional
                paid-in capital
            
            
            2,900,225
            
            
            
            139,979Deficit
                accumulated during the development stage
            
            
            (15,823,971
            )
            
            
            (6,552,079
            )Accumulated
                balance of other comprehensive income
            
            
            2,872TOTAL
                STOCKHOLDERS' EQUITY
            
            
            690,135
            
            
            
            3,091,623TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            2,546,046
            
            
            $
            3,368,967


3





z**Triton
      Distribution
      Systems, Inc.**


**(a
      Development Stage Company)**


**Consolidated
      Statements of Operations**






**3
                  Months**
              
              
              **3
                  Months**
              
              
              **9
                  Months**
              
              
              **9
                  Months**
              
              
              **Inception**
                **(January
                  10,****Ended**
              
              
              **Ended**
              
              
              **Ended**
              
              
              **Ended**
              
              
              **2006)
                  to****September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**
              
              
              **2007**(unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)NET
                  SALES
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -COST
                  OF SALES
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -GROSS
                  PROFIT
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -OPERATING
                  EXPENSES:Payroll
                  and related benefits
              
              
              1,293,788
              
              
              
              850,154
              
              
              
              5,592,299
              
              
              
              1,807,547
              
              
              
              8,437,265Professional
                  fees
              
              
              436,915
              
              
              
              632,996
              
              
              
              1,744,355
              
              
              
              932,950
              
              
              
              3,418,990Marketing
                  and advertising
              
              
              42,307
              
              
              
              101,930
              
              
              
              226,432
              
              
              
              204,442
              
              
              
              528,657Other
                  general and administrative expenses
              
              
              353,452
              
              
              
              644,388
              
              
              
              1,078,157
              
              
              
              1,207,796
              
              
              
              2,819,956TOTAL
                  OPERATING EXPENSES
              
              
              2,126,463
              
              
              
              2,229,468
              
              
              
              8,641,243
              
              
              
              4,152,734
              
              
              
              15,204,867LOSS
                  FROM OPERATIONS
              
              
              (2,126,463
              )
              
              
              (2,229,468
              )
              
              
              (8,641,243
              )
              
              
              (4,152,734
              )
              
              
              (15,204,867
              )OTHER
                  INCOME (EXPENSE)Interest
                  income
              
              
              3,743
              
              
              
              11,747
              
              
              
              24,235
              
              
              
              11,747
              
              
              
              66,696Interest
                  expense – related party
              
              
              (596,943
              )
              
              
              (2,281
              )
              
              
              (624,512
              )
              
              
              (30,915
              )
              
              
              (655,428
              )Loss
                  on disposal of assets
              
              
              -
              
              
              
              -
              
              
              
              (30,373
              )
              
              
              -
              
              
              
              (30,373
              )TOTAL
                  OTHER INCOME (EXPENSE)
              
              
              (593,200
              )
              
              
              9,466
              
              
              
              (630,650
              )
              
              
              (19,169
              )
              
              
              (619,105
              )LOSS
                  BEFORE PROVISION FOR INCOME TAXES
              
              
              (2,719,663
              )
              
              
              (2,220,002
              )
              
              
              (9,271,893
              )
              
              
              (4,171,903
              )
              
              
              (15,823,972
              )PROVISION
                  FOR INCOME TAXESNET
                  LOSS
              
              
              (2,719,663
              )
              
              
              (2,220,002
              )
              
              
              (9,271,893
              )
              
              
              (4,171,903
              )
              
              
              (15,823,972
              )OTHER
                  COMPREHENSIVE INCOMEForeign
                  currency translation adjustment
              
              
              22,038
              
              
              
              -
              
              
              
              2,872
              
              
              
              -
              
              
              
              2,872COMPREHENSIVE
                  LOSS
              
              $
              (2,697,625
              )
              
              $
              (2,220,002
              )
              
              $
              (9,269,021
              )
              
              $
              (4,171,903
              )
              
              $
              (15,821,100
              )NET
                  LOSS PER SHARE:BASIC
                  AND DILUTED
              
              $
              (0.06
              )
              
              $
              (0.05
              )
              
              $
              (0.20
              )
              
              $
              (0.11
              )
              
              $
              (0.37
              )WEIGHTED
                  AVERAGE SHARES OUTSTANDING:BASIC
                  AND DILUTED
              
              
              47,094,678
              
              
              
              40,945,066
              
              
              
              46,099,579
              
              
              
              37,613,578
              
              
              
              42,368,272


4


**Triton
      Distribution Systems, Inc.**


**(a
      Development Stage Company)**


**Consolidated
      Statements of Stockholders’ Equity**


**For
      the Period from Inception (January 10, 2006) to September 30,
      2007**




DeficitAccumulatedDuring
                  the
              
              
              AccumulatedAdditional
              
              
              Development
              
              
              other
              
              
              TotalCommon
                  Stock
              
              
              Paid-in
              
              
              Stage
              
              
              comprehensive
              
              
              ShareholdersShares
              
              
              Par
                  Value
              
              
              Capital
              
              
              Restated
              
              
              income
              
              
              Equity
                  (Deficit)Balance
                  at inception (January 10, 2006)
              
              
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Issuance
                  of common stock for cash and contribution of intellectual property
                  in
                  January 2006
              
              
              35,821,198
              
              
              
              338,625
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              338,625Balance
                  at June, 2006
              
              
              35,821,198
              
              
              
              338,625
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              338,625Issuance
                  of common stock in private placementfor
                  cash, net of $822,902 in commissions and expenses
              
              
              7,148,710
              
              
              
              4,924,598
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,924,598Issuance
                  of common stock to placement agent for fees
              
              
              598,029Cancellation
                  of investor shares in July 2006
              
              
              (6,218,958
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Issuance
                  of common stock in connection withtransaction
                  with Petramerica Oil, Inc. in July 2006
              
              
              2,087,910
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Repurchase
                  of shares from Petramerica Oil, Inc.stockholders
                  in July 2006
              
              
              (400,000
              )
              
              
              (400,000
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (400,000
              )Issuance
                  of shares to investor relation firms forservices
                  in July 2006
              
              
              2,238,824
              
              
              
              1,800,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,800,000Issuance
                  of common stock in private placementfor
                  cash, net of $149,500 in commissions in September 2006
              
              
              3,737,500
              
              
              
              2,840,500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,840,500Fair
                  value of employee stock compensation, as restated
              
              
              
              
              
              
              
              
              
              
              139,979
              
              
              
              
              
              
              
              
              
              
              
              139,979Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (6,552,079
              )
              
              
              
              
              
              
              (6,552,079
              )Balance
                  at December 31, 2006
              
              
              45,013,213
              
              
              
              9,503,723
              
              
              
              139,979
              
              
              
              (6,552,079
              )
              
              
              -
              
              
              
              2,951,644Issuance
                  of shares to investor relation firms forservices in
                  March 2007
              
              
              100,000
              
              
              
              171,156
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              171,156Fair
                  value of employee stock compensation, as restated
              
              
              450,132
              
              
              
              733,715
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              733,715Fair
                  value of employee stock options, as restated
              
              
              
              
              
              
              
              
              
              
              287,088
              
              
              
              
              
              
              
              
              
              
              
              287,088Foreign
                  currency translation gain (loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (16,785
              )
              
              
              (16,785
              )Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,509,674
              )
              
              
              
              
              
              
              (2,509,674
              )Balance
                  at March, 2007
              
              
              45,563,345
              
              
              
              10,408,594
              
              
              
              427,067
              
              
              
              (9,061,753
              )
              
              
              (16,785
              )
              
              
              1,757,123Issuance
                  of shares to investor relation firms for
                  services May
                    2007
              
              
              500,000
              
              
              
              1,400,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,400,000Issuance
                  of shares to investor relation firms for services June
                  2007
              
              
              500,000
              
              
              
              700,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              700,000Issuance
                  of Warrant for Short Term Loan
              
              
              -
              
              
              
              
              
              
              
              2,000,000
              
              
              
              
              
              
              
              
              
              
              
              2,000,000Fair
                  value of employee stock compensation, as restated
              
              
              410,015
              
              
              
              873,332
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              873,332Fair
                  value of employee stock options, as restated
              
              
              
              
              
              
              
              
              
              
              309,693
              
              
              
              
              
              
              
              
              
              
              
              309,693Exercise
                  of Employee Stock Options
              
              
              61,000
              
              
              
              48,800
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              48,800Foreign
                  currency translation gain(loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,381
              )
              
              
              (2,381
              )Net
                  loss June 30, 2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,042,556
              )
              
              
              
              
              
              
              (4,042,556
              )Balance
                  at June 2007
              
              
              47,034,360
              
              
              $
              13,430,726
              
              
              $
              2,736,760
              
              
              $
              (13,104,309
              )
              
              $
              (19,166
              )
              
              $
              3,044,011Fair
                  value of employee stock options
              
              
              
              
              
              
              
              
              
              
              163,465
              
              
              
              
              
              
              
              
              
              
              
              163,465Exercise
                  of Employee Stock Options
              
              
              38,478
              
              
              
              30,782
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,782Exercise
                  of Warrants
              
              
              186,875
              
              
              
              149,501
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              149,501Foreign
                  currency translation gain (loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Net
                  Loss September  30, 2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,719,663
              )
              
              
              22,038
              
              
              
              (2,697,625
              )Balance
                  at September 30, 2007
              
              
              47,259,713
              
              
              
              13,611,009
              
              
              
              2,900,225
              
              
              
              (15,823,972
              )
              
              
              2,872
              
              
              
              690,135
  5




**Triton
      Distribution Systems, Inc.**


**(a
      Development Stage Company)**


**Consolidated
      Statements of Cash Flows**





**For
                  the Nine**
              
              
              **For
                  the Nine**
              
              
              **Inception
                  (January 10,****Months
                  Ended**
              
              
              **Months
                  Ended**
              
              
              **2006)
                  to****September 30,**
              
              
              **September 30,**
              
              
              **September 30,****2007**
              
              
              **2006**
              
              
              **2007**CASH
                  FLOWS FROM OPERATING ACTIVITIES:
              
              (unaudited)
              
              
              
              
              
              (unaudited)Net
                  loss
              
              $
              (9,252,725
              )
              
              $
              (4,171,903
              )
              
              $
              (15,821,099
              )Adjustments
                  to reconcile net loss to net cash
              
              
              -
              
              
              
              -
              
              
              
              -used
                  in operating activities:
              
              
              -
              
              
              
              -
              
              
              
              -Amortization
                  of discount on note
              
              
              504,110
              
              
              
              -
              
              
              
              504,110Depreciation
                  and amortization expense
              
              
              107,562
              
              
              
              39,083
              
              
              
              180,581Amortization
                  of prepaid consulting
              
              
              1,284,961
              
              
              
              (1,292,731
              )
              
              
              561,361Loan
                  Fees
              
              
              -
              
              
              
              
              
              
              
              -Loss
                  on disposal of assets
              
              
              -
              
              
              
              -
              
              
              
              -Fair
                  value of employee stock options
              
              
              2,367,293
              
              
              
              48,774
              
              
              
              2,507,272Changes
                  in assets and liabilities
              
              
              -
              
              
              
              -
              
              
              
              -Prepaid
                  insurance
              
              
              29,576
              
              
              
              (62,991
              )
              
              
              (21,591
              )Other
                  current assets
              
              
              (83,034
              )
              
              
              (115,790
              )
              
              
              (153,811
              )Deferred
                  income
              
              
              1,190
              
              
              
              -
              
              
              
              1,190Accounts
                  payable
              
              
              19,116
              
              
              
              76,467
              
              
              
              261,696Accounts
                  payable - related party
              
              
              -
              
              
              
              -
              
              
              
              -Accrued
                  expenses
              
              
              44,100
              
              
              
              128,728
              
              
              
              67,883Accrued
                  interest - related party
              
              
              5,069
              
              
              
              -
              
              
              
              5,069Lease
                  Liability
              
              
              4,982
              
              
              
              -
              
              
              
              15,964Net
                  cash used in operating activities
              
              
              (4,967,880
              )
              
              
              (5,350,362
              )
              
              
              (11,891,374
              )-
              
              
              
              -
              
              
              
              -CASH
                  FLOWS FROM INVESTING ACTIVITIES:
              
              
              -
              
              
              
              -
              
              
              
              -Purchase
                  of furniture and equipment
              
              
              (98,389
              )
              
              
              (242,693
              )
              
              
              (492,319
              )Payment
                  for web development costs
              
              
              -
              
              
              
              (19,700
              )
              
              
              (19,700
              )Net
                  cash used in investing activities
              
              
              (98,389
              )
              
              
              (262,393
              )
              
              
              (512,019
              )-
              
              
              
              -
              
              
              
              -CASH
                  FLOWS FROM FINANCING ACTIVITIES:
              
              
              -
              
              
              
              -
              
              
              
              -Proceeds
                  from the issuance of common stock
              
              
              229,083
              
              
              
              9,265,198
              
              
              
              9,494,281Payment
                  of offering costs
              
              
              -
              
              
              
              -
              
              
              
              -Repurchase
                  of shares of common stock
              
              
              -
              
              
              
              -
              
              
              
              -Proceeds
                  from issuance of notes payable
              
              
              3,000,000
              
              
              
              1,981,867
              
              
              
              3,000,000-
                  related party
              
              
              -
              
              
              
              (1,981,867
              )
              
              
              -Repayment
                  on notes payable - related party
              
              
              -
              
              
              
              -
              
              
              
              -Net
                  cash provided by financing activities
              
              
              3,229,083
              
              
              
              9,265,198
              
              
              
              12,494,281-
              
              
              
              -
              
              
              
              -EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH
              
              
              (19,167
              )
              
              
              -
              
              
              
              (16,295
              )NET
                  DECREASE IN CASH AND
              
              
              -
              
              
              
              -
              
              
              
              -CASH
                  EQUIVALENTS
              
              
              (1,853,400
              )
              
              
              3,652,443
              
              
              
              90,889CASH
                  AND CASH EQUIVALENTS,
              
              
              -
              
              
              
              -
              
              
              
              -Beginning
                  of period
              
              
              1,944,287
              
              
              
              -
              
              
              
              -CASH
                  AND CASH EQUIVALENTS,
              
              
              -
              
              
              
              -
              
              
              
              -End
                  of period
              
              $
              90,887
              
              
              $
              3,652,443
              
              
              $
              91,669-
              
              
              
              -
              
              
              
              -SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:
              
              
              -
              
              
              
              -
              
              
              
              -Interest
                  paid
              
              $
              62,833
              
              
              $
              30,915
              
              
              $
              90,888Income
                  taxes paid
              
              
              
              
              
              $
              -
              
              
              $
              --
              
              
              
              -
              
              
              
              -Contribution
                  of intellectual property for common stock
              
              $
              238,525
              
              
              $
              238,525
              
              
              $
              238,525Issuance
                  of stock for consulting services
              
              $
              2,438,923
              
              
              $
              1,292,731
              
              
              $
              3,731,654
  6




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**


**Note
      1 - Basis of presentation, organization and significant accounting
      policies**





History





Triton
      Distributioin Systems, Inc.'s (the "Company") CEO, Gregory Lykiardopoulos,
      Triton’s CEO, was the founder of Global Reservation Systems (“GRS”). 
On May 08, 1997 GRS was incorporated in the State of California to develop
      a
      web-based interface. The web based distribution concept of GRS was developed
      by
      the Company’s CEO and other GRS management. The linear format was equal to the
      black and white DOS (Disk Operating System) display screen. GRS allowed
      travel agents to easily and economically access travel inventory provided by
      one
      of the big four Global Distribution Systems (GDSs).  A GDS is a computer
      reservations system that stores and retrieves information and conducts
      transactions related to travel. GRS’s technology utilized visual basic, a
      computer programming system developed and owned by Microsoft.





In
      1999,
      GRS launched its online travel distribution service called “Expert”. The
      original Concept was to recruit U.S. travel agents that were too small to afford
      the minimum guarantees required by the major GDSs. “Expert” provided a web
      accessible booking tool that simulated the linear format of the GDS. 
In hindsight, the timing of this launch, given the financial instability of
      smaller travel agents proved to be inopportune. By the end of 1999, the airlines
      in the United States completely eliminated the payment of commissions to travel
      agents. We believe this high-impact decision, which was designed to reduce
      costs, actually caused many travel agencies to cease operations and also
      resulted in fewer bookings for U.S. airlines.





Two
      years
      later, the United States experienced the terrorism of 9/11; we believe this
      catastrophic event only served to accelerate the financial decline of several
      major U.S.-based airlines and thousands of domestic travel agencies. Within
      this
      environment, GRS was further developing its proprietary product suite and was
      attempting to sign up individual travel agents, one at a time. Ultimately,
      GRS
      determined that the cost of attracting and maintaining smaller travel agencies
      was greater than the revenue streams that could be generated from this target
      market. After five years of trying to engineer a profitable business model,
      and
      having incurred significant operating losses and unpaid debt obligations, GRS
      went out of business in September 2004.





When
      GRS
      ceased operations, one lender held a security interest in all of the assets
      of
      GRS including its operating business, personal property and software
      technologies. In December 2005, an investor group formed TDS Acquisition, LLC,
      a
      Nevada limited liability company (“TDS LLC”), and acquired the security position
      of the secured lender for an investment of $200,000 in cash plus additional
      costs associated with the foreclosure. TDS LLC foreclosed on the inactive assets
      of GRS in January 2006 and contributed those and all other GRS assets to the
      Company in exchange for newly issued shares of the Company.  These assets
      consisted of computers, servers, furniture and fixtures, as well as the
      Intellectual property to support the online distribution of travel services.
      TDS
      LLC did not transfer any of the customers of GRS.





Starting
      January 2006, the Company commenced operations with an initial emphasis on
      Southeast Asia and intends to expand to other international locations, including
      South America and Europe. Unlike the travel industry in the United States,
      which
      is highly fragmented and decentralized, emerging countries in Asia have only
      one
      or two flagship airlines for international routes, the airlines are controlled
      by the government, their fleets have been modernized, the carriers are generally
      profitable, the travel agencies are clustered in large associations, and the
      government has considerable influence over decisions which affect bookings
      and
      the issuance of tickets to domestic and foreign travelers.




Business
      Overview




We
        believe that the web-based reservation industry can be volatile because of
        many
        factors, including the market risks (terrorism, oil price, foreign exchange,
        politics, etc.) Technology remains the key factor. Most GDS companies system
        architectures are largely based on a mainframe TPF (Transaction Processing
        Facility) framework. TPF has relatively little CPU power and is expensive.
        Additionally, we believe TDS and GDS leading companies are all facing other
        challenges due to mutations in a never ending technology progress.


Based
        on
        our internal research, we believe each system allows an operator to locate
        and
        reserve inventory which can vary from an airline seat on a particular route
        at a
        particular time; find and process fares/prices applicable to the inventory,
        and
        generate reports on transactions for accounting or marketing purposes.
        Ultimately, many vendors are avoiding GDS distribution fees of $4 and other
        related fees. However, they still need GDS facilities. By utilizing
        high-performance, lower cost open systems platforms in a service-oriented
        architecture approach, GDS companies now have affordable full browser based
        solutions. TDS is exploring such niches.
  7




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Basis
      of presentation




The
      Company complies with the SEC and the FASB recommendation to issuers to report
      on GAAP results. Therefore, the followingunaudited consolidated
      financial statements have been prepared by Triton Distribution Systems, Inc.
      (the “Company”), in accordance with accounting principles generally recognized
      in the United States of America (“US GAAP”) and pursuant to the rules and
      regulations of the Securities and Exchange Commission ("SEC").




The
      information furnished herein reflects all adjustments (consisting of normal
      recurring accruals and adjustments) which are, in the opinion of management,
      necessary to fairly present the operating results for the respective periods.
      Certain information and footnote disclosures normally present in annual
      consolidated financial statements prepared in accordance with US GAAP have
      been
      omitted pursuant to such rules and regulations. These consolidated financial
      statements should be read in conjunction with the audited financial statements
      and footnotes for the period ended December 31, 2006 included in the Company's
      Annual Report on 10-KSB filed with the SEC on April 2, 2007. The results for
      the
      period ending September 30, 2007 are not necessarily indicative of the results
      to be expected for the full year ending December 31, 2007.




Restatement




The
      Company discovered an error to previously issued financial statements for the
      first quarter ended March 31, 2007 and second quarter ended June 30,
      2007.  The company intends to restate its financial statements
      for both of these periods.  The Company has not filed the restated
      financial statements for these periods.  However, the current financial
      statements are stated as if the correction of this error had been made. 
The error related to the Company's issuance of 450,132 shares of common stock
      in
      the first quarter that were improperly reported as stock options.  An
      additional 410,015 shares of common stock were issued in the second quarter
      and
      were also improperly reported as stock options.




Quarterly
      financial information for the three month periods ending March 31, 2007 and
      June
      30, 2007, as restated, is presented below:




March
                  31, 2007
              
              
              June
                  30, 2007**As
                  Restated**Prepaid
                  compensation (asset)
              
              
              706,541
              
              
              
              -Operating
                  expenses
              
              
              2,502,084
              
              
              
              4,020,411Operating
                  loss
              
              
              2,502,084
              
              
              
              4,020,411Additional
                  paid in capital
              
              
              427,067
              
              
              
              2,736,760Common
                  stock
              
              
              10,408,594
              
              
              
              13,430,726Net
                  loss
              
              $
              2,509,674
              
              
              $
              4,042,556Net
                  loss per share
              
              $
              0.06
              
              
              $
              0.09


Quarterly
      financial information for the three month periods ending March 31, 2007 and
      June
      30, 2007, as originally reported, is presented below.




March
                  31, 2007
              
              
              June
                  30, 2007**As
                  Reported**Prepaid
                  compensation (asset)
              
              
              -
              
              
              
              -Operating
                  expenses
              
              
              3,006,064
              
              
              
              3,186,766Operating
                  loss
              
              
              3,006,064
              
              
              
              3,186,766Additional
                  paid in capital
              
              
              958,225
              
              
              
              4,014,143Common
                  stock
              
              
              9,674,879
              
              
              
              11,823,679Net
                  loss
              
              $
              3,013,655
              
              
              $
              3,208,910Net
                  loss per share
              
              $
              0.07
              
              
              $
              0.07


8


**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Organization
      and line of business





Triton
      Distribution Systems, Inc. (the “Company”) was incorporated in the State of
      Nevada on January 10, 2006.  The company entered into an exchange
      agreement (“reverse takeover”) with Petramerica Oil, Inc. (“Petra”), a publicly
      traded company. Petra was incorporated in the State of Colorado on September
      22,
      1986 for operating in the energy (oil and gas) business in the Rocky Mountain
      region. Petra has been primarily involved in raising capital and has not
      conducted any significant operations since inception. Therefore, TDS acquired
      the ownership in Petramerica. Pursuant to the exchange agreement, Petra acquired
      29,547,400 shares of TDS’ common stock - which includes the 28,800,000 shares
      issued to the founding stockholders/investors plus 5,747,400 shares sold in
      private placements less 5,000,000 investors shares that were canceled:
      (28,800,000+5,747,400) – 5,000,000= 29,547,400 - which represented all of the
      issued and outstanding shares of common stock of TDS, in exchange for 36,750,950
      shares of Petra’s common stock.  Concurrently with the closing of the
      exchange agreement TDS also purchased and retired 400,000 shares of Petra common
      stock for $400,000. Upon completion of the foregoing transactions, TDS had
      an
      aggregate of 38,438,860 shares of common stock issued and
      outstanding.





As
      a
      result of the reverse takeover, TDS stockholders own approximately 95.6%
      (36,747,550 shares) of the combined company and the directors and executive
      officers of TDS became the directors and executive officers of Petra.
      Accordingly, the transaction has been accounted for as a reverse acquisition
      of
      Petra by TDS resulting in a recapitalization of TDS rather than as a business
      combination. TDS is deemed to be the purchaser and surviving company for
      accounting purposes.





Accordingly,
      its assets and liabilities are included in the consolidated balance sheet at
      their historical book values. The consolidated statement of stockholders’ equity
      has been restated as if the above transaction took place on the first day for
      which the consolidated statement of stockholders’ equity is
      presented.  The historical cost of the net assets of Petra that were
      acquired was $0.  Pro forma information is not presented as the
      financial statements of Petra are insignificant. In addition, on August 17,
      2006, Petra changed it name to Triton Distribution Systems, Inc. (hereafter
      referred to as the “Company”).




The
      Company had adopted a December 31st year end.
      The
      Company anticipates changes in future years in the technology of reservations.
      Thereby, thinking ahead as an emerging, next generation Web-based travel
      service’s distribution company; its core business is the electronic distribution
      of travel inventory from airlines, car rental companies, hotels, tour and cruise
      operators, and other travel sellers to travel agencies and their clients on
      a
      global basis. The Company is currently a development stage company under the
      provisions of Statement of Financial Accounting Standards ("SFAS") No. 7 as
      it
      has not generated revenues for the period from January 10, 2006 (inception)
      to
      September 30, 2007 and has incurred a loss of $15,823,972 since
      inception.





Subsidiaries





(1)
            On
                December 12, 2005 the Company opened an office in Manila, Philippines.
                The
                subsidiary in the Philippines, Triton Distribution Systems Philippines
                Inc. (“Triton Philippines”), was formed on May 29, 2006 as a Philippine
                corporation (60% Filipino owned, 40% foreign owned) under the laws
                of the
                Securities and Exchange Commission of the Republic of the Philippines.
                Triton Philippines had an authorized capital stock of two million
                pesos
                (PHP) (US$40,000) divided into 20,000 shares with a par value of
                100 pesos
                per share. The original ownership group of five individuals was issued
                5,000 shares in the aggregate and included the President of the Company
                as
                a 20% owner. Thus, there remained unissued and unsubscribed shares
                of
                15,000 in the amount of 1.5 million pesos (US$30,000) available for
                subscription by foreign subscribers which was subsequently subscribed
                for
                in January of 2007 and fully paid by inward remittances that had
                occurred
                subsequent to June 2006 by the Company. To complete the process of
                establishing TDS as the majority foreign equity holder in Triton
                Philippines, the authorized capital stock of Triton Philippines was
                increased from two million Pesos (US$40,000) to thirty million Pesos
                (U$600,000) as of August 23, 2006. Under Philippine law, inward
                remittances by TDS towards the operations of its subsidiary, Triton
                Philippines, may be treated as an increase in authorized capital
                stock.
                Under this increase, the minority stockholders waived their rights
                to
                subscribe to their proportionate share in the issuance of 280,000
                shares
                of stock with total par value of Twenty Eight Million Pesos
                (US$560,000).  This resulted in the Company owning approximately
                98% of Triton Philippines and this transaction was completed in February
                2007.  The President of the Triton Philippines still currently
                owns 0.33% of Triton Philippines.





During
      the initial discovery phase of our project at Philippine Airlines we encountered
      certain internal issues that have put the project in jeopardy. As a consequence
      in order to conserve resources, we have ceased our operations in the Philippines
      until such time as Philippines Airlines can resolve their internal
      issues.  In August of 2007 the Company ceased operation in the
      Philippines and as a result its legal entity will be dissolved.


9


**TRITON
        DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007**
 **(UNAUDITED)**


(2)
            In
                September of 2006 the Company opened another office in Beijing, China.
                The
                subsidiary in China, Triton Distribution Systems (Beijing) (“Triton
                Beijing”) was formed November of 2006 as a Wholly Foreign Owned Enterprise
                under the laws and regulations of the government of the People’s Republic
                of China.  The Company is required to make a total investment in
                Triton Beijing of $250,000 U.S. Dollars (USD).  The registered
                capital of Triton Beijing is to be $175,000 USD of which 15% of this
                amount was required to be contributed within 90 days of
                formation.  The Company has complied with this requirement by
                making the initial funding in January of 2007. On February 08, 2007
                the
                Company transferred $26,250 USD as the initial deposit. The remaining
                amount ($148,750) must be contributed within 2 years of the issuance
                of
                the business license.  Triton Beijing’s business license has a
                term of 20 years that is renewable upon appropriate approval. These
                offices received their initial business licenses from the respective
                governments of the Philippines and China and we began the process
                of
                forming legal entities.





Principles
      of Consolidation





The
      accompanying consolidated financial statements include the accounts of Triton
      Distribution Systems, Inc., a Colorado corporation and its wholly owned new
      entity, Triton Distribution Systems, Inc., a Nevada corporation. In addition,
      the accounts of wholly owned Triton Distribution Systems (Beijing) and 98%
      owned
      Triton Distribution Systems, Inc.; a Philippine corporation (now closed) is
      included in the accompanying consolidated financial
      statements.  Pursuant SEC Regulation S-X, Rule 3A-02, the Company
      eliminated all inter-company accounts and transactions in
      consolidation.





Use
      of
      estimates





The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenue and
      expenses during the reporting periods. Actual results could differ from these
      estimates.





Comprehensive
      Income





SFAS
      No.
      130, Reporting Comprehensive Income, establishes standards for the reporting
      and
      display of comprehensive income, its components and accumulated balances in
      a
      full set of general purpose financial statements.  SFAS No. 130
      defines comprehensive income to include all changes in equity except those
      resulting from investments by owners and distributions to owners. Among other
      disclosures, SFAS No. 130 requires that all items that are required to be
      recognized under current accounting standards as components of comprehensive
      income be reported in financial statement that is presented with the same
      prominence as other financial statements. The Company's only current component
      of comprehensive income is the foreign currency translation
      adjustment.





Foreign
      currency translation





The
      Company’s reporting currency is the US dollar (“USD”).  The Company’s
      Chinese subsidiary’s financial records and books are maintained in its local
      currency, Renminbi (RMB), as its functional currency.  The Company’s
      former Philippines subsidiary’s financial records and books are maintained in
      its local currency, Peso (PESO), as its functional currency.  Results
      of operations and cash flow are translated at average exchange rates during
      the
      period, and assets and liabilities are translated at the unified exchange rate,
      at the end of the period. Since cash flows are translated at average translation
      rates for the period, amounts reported on the statement of cash flows will
      not
      necessarily agree with changes in the corresponding balances on the balance
      sheet.  Translation adjustments resulting from this process are
      included in accumulated other comprehensive income in the statement of
      shareholders’ equity.  Translation adjustments resulting from this
      process are included in accumulated other comprehensive income (loss) in the
      consolidated statement of stockholders’ equity and amounted to $2,872 and $0 of
      September 30, 2007 and December 31, 2006, respectively.  The balance
      sheet amounts with the exception of equity at September 30, 2007 were translated
      at 7.50 RMB to $1.00 USD for the China subsidiary.  The equity
      accounts were stated at their historical rate.  The average
      translation rates applied to income statement accounts for the three months
      ended September 30, 2007 was 7.55 RMB.




Transaction
      gains and losses that arise from exchange rate fluctuations on transactions
      denominated in a currency other than the functional currency are included in
      the
      results of operations as incurred. These amounts are immaterial to the
      consolidated financial statements.


10


**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Fair
      value of financial instruments





We
      use
      fair value as an estimate of the market value of an asset (or liability) for
      which a market price cannot be determined (usually because there is no
      established market for the asset). This is used for assets whose carrying value
      is based on mark-to-market valuations. For assets carried at historical cost,
      the fair value of the asset is not used.  Therefore, certain financial
      instruments of the Company, including cash and cash equivalents, accounts
      payable and accrued expenses, the carrying amounts approximate fair value due
      to
      their short maturities.





Cash
      and cash equivalents





Forpurposes
      of the statements
      of cash flows, the Company defines cash equivalents as all highly liquid debt
      instruments purchased with a maturity of three months or less.





Concentration
      of credit
      risk





Financial
      instruments, which potentially subject the Company to concentrations of credit
      risk, consist of cash and cash equivalents. The Company seeks to place its
      cash with high quality financial institutions and at times may exceed the FDIC
      $100,000 insurance limit. The Company has limited experience as it is a
      development stage company but does not anticipate incurring any losses related
      to this credit risk. As of September 30, 2007 the Company’s deposits in U.S.
      banks did not exceed FDIC limits.  The deposits made in foreign banks
      are not insured, and the Company has not experienced any losses in such
      accounts.  The Company has $13,747 in foreign accounts as of September 30,
      2007.





Some
      of
      the Company's operations are carried out in the People's Republic of China
      and
      the Philippines. Accordingly, the Company's business, financial condition and
      results of operations may be influenced by the political, economic and legal
      environments in the foreign countries and by the general state of the foreign
      countries’ economy. The Company's business may be influenced by changes in
      governmental policies with respect to laws and regulations, anti-inflationary
      measures, currency conversion and remittance abroad, and rates and methods
      of
      taxation, among other things.





Furniture
      and equipment





Furniture
      and equipment are stated at cost and are depreciated using the straight-line
      method over their estimated useful lives of 5-7 years. Expenditures for
      maintenance and repairs are charged to operations as incurred while renewals
      and
      betterments are capitalized. Gains and losses on disposals are included in
      the
      results of operations.





The
      estimated service lives of furniture and equipment are as follows:





Computer
                equipment
            5
                yearsSoftware
            5
                yearsOffice
                equipment
            5
                yearsFurniture
                and fixtures
            7
                yearsTenant
                improvements
            7
                years




Revenue
      recognition





The
      Company applies the guidance within SEC Staff Accounting Bulletin No. 104,
“Revenue Recognition in Financial Statements” (“SAB 104”) to determine when to
      properly recognize revenue. SAB 104 states that revenue generally is realized
      or
      realizable and earned when persuasive evidence of an arrangement exists,
      services have been rendered, the seller's price to the buyer is fixed or
      determinable and collectability is reasonably assured.





In
      order
      to simplify its business process, the Company provides electronic travel
      distribution services through its travel distribution system. These services
      are
      provided for airlines, car rental companies, hotels, tour and cruise operators,
      and other travel sellers to travel agencies and their clients: (1) the Company
      charges a fee for reservations booked through its distribution system; (2)
      revenue is recognized at the time the transactions are processed; (3) however,
      if a transaction is subsequently canceled, the transaction fee or fees must
      be
      credited or refunded; (4) therefore, revenue is recorded net of an estimated
      amount reserved to account for cancellations which may occur in a future
      months;  (5) this reserve is calculated based on industry historical
      cancellation rates and will be based on the Company's own cancellation rates
      once a sufficient history of cancellations is established; and  (6) in
      estimating the amount of future cancellations that will require a transaction
      fee to be refunded, the Company assumes that a significant percentage of
      cancellations are followed by an immediate re-booking of the transaction,
      without a net loss of revenue.




11


**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Website
      development costs





Website
      development costs are for the development of the Company's Internet website.
      These costs have been capitalized when put into service, and are being amortized
      over three years. The Company accounts for these costs in accordance with
      Emerging Issues Task Force (“EITF”) 00-2, "Accounting for Website Development
      Costs," which specifies the appropriate accounting for costs incurred in
      connection with the development and maintenance of websites.





Intangible
      assets





Since
        the
        Company is still at its development stage, its primary form of intangibles
        is
“legal intangibles”: trade secrets (e.g., customer lists), copyrights, patents,
        trademarks, and goodwill. The Company’s legal intangibles are developed
        internally. They are essentially Trademarks and goodwill. Therefore if an
        impairment has occurred, the Company must recognize a loss. An impairment
        loss
        is determined by subtracting the assets fair value from the assets’
book/carrying value.





Intellectual
      property





Intellectual
      property consists of a suite of “Expert” products for travel agents including
      ReservationExpertTM, CruiseExpertTM and TourExpertTM; “Link” products for agency
      customers including ResLinkTM, CruiseLinkTM and TourLinkTM; and “Back-Office”
agency products including IAR, TicketClientTM, ItinClientTM and
      AccountingClientTM.  All of these products were purchased by certain
      investors for $238,525 and contributed to the Company in exchange for shares
      of
      the Company’s common stock.





In
      accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the
      Company evaluates its intangible assets and other long-lived assets for
      impairment, at least on an annual basis and whenever events or changes in
      circumstances indicate that the carrying value may not be recoverable from
      its
      estimated future cash flows. Recoverability of intangible assets and other
      long-lived assets is measured by comparing their net book value to the related
      projected undiscounted cash flows from these assets, considering a number of
      factors including past operating results, budgets, economic projections, market
      trends and product development cycles. If the net book value of the asset
      exceeds the related undiscounted cash flows, the asset is considered impaired,
      and a second test is performed to measure the amount of impairment loss which
      is
      the difference between the net book value of the asset and its fair
      value.  Fair value is determined by the present value of future cash
      flows using multiple scenarios that reflect the range of possible outcomes
      and a
      risk-free rate.





Impairment
      of long-lived assets





SFAS
      No.
      144, “Accounting for the Impairment or Disposal of Long-Lived Assets”
requires that long-lived assets to be disposed of by sale,
      including those of discontinued operations, be measured at the lower
      of carrying amount or fair value less cost to
      sell, whether reported in continuing operations or in
      discontinued operations.   SFAS No. 144 broadens
      the reporting of discontinued operations to include all components of an
      entity with operations that can be distinguished from the rest of the entity
      and
      that will be eliminated from the ongoing operations of the entity in
      a disposal transaction.  SFAS No. 144 also establishes
      a "primary-asset" approach to determine the cash flow
      estimation period for a group of assets and liabilities that represents the
      unit of accounting for a long-lived asset to be held and used. The Company
      has no impairment issues to disclose.




Amortization





Amortization
      is computed using the straight-line method over the estimated useful life of
      the
      intellectual property of ten years and the Company's website of three
      years.


(1)
      Amortization expense for the Company’s Website was $1,642 for both the three
      months ended September 30, 2007 and September 30, 2006; $4,925 for the nine
      months ended September 30, 2007 and $4,104 for the nine months
      ended September 30, 2006; and $10,671 for the period from inception
      (January 10, 2006) to September 30, 2007, respectively.


(2)
      Amortization expense for Intellectual Property was $5,963 for both the three
      months ended September 30, 2007 and September 30, 2006; $17,889 for both the
      nine months ended September 30, 2007 and September 30,2006; and $41,742 for
      the
      period from inception (January 10, 2006) to September 30, 2007,
      respectively.


12


**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Stock
      based compensation




The
      Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
      No. 123R”) SFAS No. 123R requires companies to measure and recognize
      the cost of employee services received in exchange for an award of equity
      instruments based on the fair-value method (i.e., grant-date.) As of September
      30, 2007, the Company had 1,764,033employee
      stock options outstanding and 3,427,867 warrants outstanding.





Reclassifications





Certain
      reclassifications have been made to the prior period information to conform
      to
      the current period presentation.  These reclassifications have no
      effect on previously recognized net loss or cash flows.




Income
      taxes





The
      Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
      for Income Taxes." Deferred taxes are provided on the liability method whereby
      deferred tax assets are recognized for deductible temporary differences, and
      deferred tax liabilities are recognized for taxable temporary differences.
      Temporary differences are the differences between the reported amounts of assets
      and liabilities and their tax bases. Deferred tax assets are reduced by a
      valuation allowance when, in the opinion of management, it is more likely than
      not that some portion or all of the deferred tax assets will not be realized.
      Deferred tax assets and liabilities are adjusted for the effects of changes
      in
      tax laws and rates on the date of enactment.




Leases





The
      Company accounts for its leases under the provisions of SFAS No.
      13,  “ Accounting for Leases,” and subsequent amendments, which
      require that leases be evaluated and classified as operating or capital leases
      for financial reporting purposes.  The Company’s office leases are
      treated as current operating expenses.  The office leases contain
      certain rent escalation clauses over the life of the leases.  The
      total amount of rental payments due over the lease term is being charged to
      rent
      expense on a straight-line method over the term of the lease.  The
      difference between rent expense recorded and the amount paid is credited or
      charged to “accrued lease liability” on the accompanying consolidated balance
      sheet.





Loss
      per share




The
      Company reports loss per share in accordance with SFAS No. 128, "Earnings per
      Share (EPS)." Therefore, the basic loss per share is computed by dividing the
      net loss by the weighted average number of common shares available. Diluted
      loss
      per share is computed similar to basic loss per share except that the
      denominator is increased to include the number of additional common shares
      that
      would have been outstanding if the potential common shares had been issued
      and
      if the additional common shares were dilutive. There were 1,764,033employee
      stock options outstanding and 3,427,867warrants outstanding
      at
      September 30, 2007. The Company had a net loss in each period since inception.
      Therefore all outstanding employee stock options and warrants are
      anti-dilutive.


13


**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**




Recently
        issued accounting pronouncements
 
 The
        issuance of FASB Statement No. 155 “Accounting for Certain Hybrid Financial
        Instruments” and the adoption did not have a material effect on the financial
        position or results of operations of the Company. Additionally, the company
        complies with the SFAS 156 Accounting for Servicing of Financial Assets'
        for
        separately recognized servicing assets and servicing liabilities. The SFAS
        156
        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
                the initial adoption of SFAS 156, 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 entity 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. The adoption of SFAS No. 156 did not
      have
      a material effect on the financial position or results of operations of the
      Company.




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.





In
      February 2007, the Financial Accounting Standards Board issued Statement No.
      159, “Fair Value Option for Financial Assets and Liabilities – including an
      amendment of FASB Statement No. 115” (“SFAS No. 159”), which is effective for
      financial statements issued for fiscal years beginning after November 15, 2007.
      SFAS No. 159 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 Company is
      currently analyzing the effects of the new standard and its potential impact
      on
      its financial statements, if any.




**Note
      2 - Development stage company and going concern**





The
      Company is a developmental stage company formed on January 10, 2006. The Company
      is subject to risks and uncertainties, including new product development,
      actions of competitors, reliance on the knowledge and skills of its employees
      to
      be able to service customers, and availability of sufficient capital and a
      limited operating history. Accordingly, the Company presents its financial
      statements in accordance with GAAP that apply in establishing new operating
      enterprises. As a development stage enterprise, the Company discloses the
      deficit accumulated during the development stage and the accumulated statement
      of operations and cash flows from inception of the development stage to the
      date
      on the current balance sheet. Contingencies exist with respect to this matter,
      the ultimate resolution of which cannot presently be determined.


14




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**






The
      accompanying consolidated financial statements have been prepared in conformity
      with the US GAAP, which contemplates continuation of the Company as a going
      concern.  As of September 30, 2007 the Company has not generated
      revenues. It has incurred significant operating losses of $15,823,972 to date
      and has a negative cash flow from operations, which raises substantial
      doubt about its ability to continue as a going concern.





In
      view
      of these matters, realization of certain of the assets in the accompanying
      consolidated balance sheet is dependent upon continued operations of the
      Company, which in turn is dependent upon the Company's ability to meet its
      financial requirements, raise additional capital, and the success of its future
      operations. In light of the current market conditions, the Company has recently
      faced difficulties in raising necessary financing and no assurances can be
      given
      that such difficulties will not continue.





Management
      has raised additional capital and has effectuated a business combination with
      a
      public company. Management believes that this plan provides an opportunity
      for
      the Company to continue as a going concern. However, such a high financial
      leverage limits the company’s possibilities to find new lenders and/or investors
      for raising enough capital to execute the Company’s business plan.





**Note
      3 - Furniture and equipment**





The
      cost
      of furniture and equipment consisted of the following:




September
                  30, 2007
              
              
              December
                  31, 2006Computer
                  equipment
              
              $
              162,279
              
              
              $
              96,063Software
              
              
              59,082
              
              
              
              53,753Office
                  equipment
              
              
              94,274
              
              
              
              81,667Furniture
                  and fixtures
              
              
              74,924
              
              
              
              74,134Tenant
                  improvements
              
              
              101,759
              
              
              
              88,313Total
              
              
              492,319
              
              
              
              393,930Less:
                  Accumulated depreciation
              
              
              (128,169
              )
              
              
              (43,421
              )Total
              
              $
              364,150
              
              
              $
              350,509




Depreciation
      expense was $29,861 and $10,730, for the three months ended September 30, 2007
      and September 30, 2006; $113,768 and $17,090 for the nine months ended September
      30, 2007 and September 30, 2006; and $157,189 for the period from inception
      (January 10, 2006) to September 30, 2007, respectively.




**Note
      4 - Line of Credit**





In
      March
      2007, The Company entered into a Line of Credit Loan Agreement with JMW Fund,
      LLC (“*JMW*”).





The
      Loan
      Agreement provided a credit limit of $1.0 million for a six month
      term.


All
      sums
      advanced pursuant to this Loan Agreement bear interest from the date each
      advance is made until paid in full at the rate of 1% per month, simple interest
      on the first $500,000; and 1.5% per month, simple interest on the second
      $500,000.





Triton
      may prepay the principal in its entirety at any time without penalty. The funds
      from these advances will be used by Triton for operating
      expenses.  The Company paid a one-time commitment fee of $10,000 upon
      entering the Loan Agreement which was expensed immediately.  This
      agreement was replaced upon the signing of the new agreement on June 28,
      2007.





On
      June
      28, 2007, the Company issued a convertible senior note (“Convertible Note”) to
      JMW Fund LLC ($1,500,000), San Gabriel Fund LLC ($500,000), Underwood Family
      Partners, Ltd. ($500,000), and Battersea Capital, Inc ($500,000), - “Lenders” -
      for gross proceeds totaling $3,000,000 (“Total Principal
      Amount”).  This agreement replaced the March 28, 2007 agreement with
      JMW Fund LLC from which the Company borrowed $1.0 million in April 2007. That
      $1.0 million outstanding was rolled into this agreement. Of the Total Principal
      Amount, the Company was able to draw $1,000,000 by June 30, 2007, and another
      $1,000,000 was available to be drawn by July 30, 2007.  As of
      September 30, 2007, the Company has drawn down the remaining $1,000,000. The
      terms and conditions of the Convertible Note replaces the terms and conditions
      of the March 28, 2007 agreement. As of September 30, 2007, the Company had
      $3.0
      million of loans outstanding.  Interest accrues at one percent (1%)
      per month and began to accrue on July 1, 2007.  All outstanding
      principal and accrued and unpaid interest is due and payable on July 1, 2008
      (“Maturity Date”).  If the Company should suffer an event of default
      under the Note, the interest shall be one and a half percent (1.5%) during
      the
      occurrence of such event of default. The Convertible Note is senior to any
      debt
      issued by the Company, including without limitation, loans from any bank or
      institutional debt.  Lenders will file a UCC-1 or other filing to
      secure their debt.


15


**TRITON
        DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007**
 **(UNAUDITED)**


Pursuant
      to the terms of the Convertible Note, the Company is obligated to issue to
      the
      Lenders warrants exercisable for an aggregate of 2,000,000 shares of the
      Company’s common stock, no par value (“Common Stock”)
      (“Warrants”).  The Warrants are to be exercisable at $3.00 per share
      and are to expire five years from the issue date of the Warrants.  The
      Company agreed to register the shares underlying the Warrants no later than
      December 31, 2007.  The Warrants shall also be subject to a cashless
      exercise provision. The Company recorded $2,000,000 as discount on loan to
      account for value of the warrants. The discount is being amortized over the
      life
      of the loan to interest expense. For the three months ended September 30, 2007
      we amortized $504,110 to loan interest expense.




The
      Company agreed to increase the Company’s Board composition from two to five
      members as a condition precedent.  Such directors may be removed upon
      repayment of the Note.  The Company may prepay this note at any
      time.  The outstanding principal balance of the Note can be converted
      into shares of the Common Stock (“Conversion Shares”) at any time thirty (30)
      days after the date of the Note at the Lenders’ sole discretion.  The
      conversion price of the Conversion Shares is $3.00 per share (“Conversion
      Price”).  The Company is obligated to file a registration statement
      with the Securities and Exchange Commission with respect to the Conversion
      Shares and the Warrant Shares no later than December 31,
      2007.   Lenders will also enjoy “piggyback” registration rights;
      meaning that the investor has the right to register his/her unregistered stock
      when either the company or another investor initiates a registration. Since
      piggyback rights are considered inferior to demand registration rights, they
      are
      sometimes excluded from registrations in favor of investors with demand
      registration rights. This could happen when the underwriter of the registration
      determines that it will be unable to market all of the shares to be
      registered.)  If the Company should issue or sell equity securities at
      a price per share lower than the Conversion Price, other than certain
      exceptions, the Conversion Price under the Note shall be reduced to such lower
      price per share.




**Note
      5 - Notes payable - related party**





In
      February 2006 the Company entered into a revolving credit agreement with the
      Elevation Fund, West Hampton Special Situations Fund, LMU & Company,
      Battersea Capital for a maximum amount of $2,500,000. The investors, also
      shareholders, consisted of the following:





a.
            The
                Elevation Fund, LLC holds 4,394,730 shares of common
                stock;





b.
            West
                Hampton Special Situations Fund, LLC holds 4,394,730 shares of common
                stock which L. Michael Underwood is the manager of the fund and is
                a
                former director of the Company; value:
                $





c.
            LMU
                and Company - L. Michael Underwood has ownership in this company;
                and





d.
            Battersea
                Capital Inc. holds 2,104,082 shares of common
                stock.





L.
      Michael Underwood, a former director of the Company, personally holds 2,259,555
      shares of common stock.


The
      Company had outstanding various notes payable under this agreement. The notes
      accrued interest at 12% per annum. In July 2006, the Company repaid in full
      its
      notes payable totaling $1,981,867 and accrued interest of $30,915 from the
      proceeds of a private placement on April 19, 2006.





Additionally,
      the Company signed Convertible Senior Notes and issued common stock warrants
      to
      the following parties: JMW Fund (March 28, 2007); San Gabriel Fund (June 28,
      2007); Underwood Family Partners (June 28, 2007); and Battersea Capital (June
      28, 2007), for a total amount of $3,000,000.





**Note
      6 - Stockholders' equity**





The
      Company has authorized 102,000,000 shares of no par value stock. 100,000,000
      have been designated as common stock and 2,000,000 have been designated as
      preferred stock. As of September 30, 2007, the Company has 47,259,713 shares
      of
      common stock issued and outstanding. No shares of preferred stock are
      outstanding.





Upon
      the
      formation of the Company, the founding stockholders contributed $100,100 in
      cash
      and intellectual property valued at $238,525 in exchange for 35,821,198 shares
      of common stock.


16


**TRITON
        DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007**
 **(UNAUDITED)**





In
      July 2006:


(1)
      The
      Company sold a total of 7,148,710 shares of its common stock at $0.80 per share
      through a private placement offering for gross proceeds of $5,747,500.After
      commission and offering expenses, the Company received net proceeds of
      $4,924,598.  In addition, the Company issued to the placement agent
      598,029 share of common stock and issued a warrant to purchase 1,429,742 shares
      of common stock for $0.80 per share.  The warrants expire five years
      from the date of issuance.  The value of the common stock and warrants
      of $478,423 and $334,580, respectively, issued to the placement agent are
      considered additional offering cost.  The value of the warrants was
      calculated using the Black-Scholes model using the following assumptions:
      discount rate of 4.5%; volatility of 22%; dividend yield of 0%; and expected
      terms of 5 years.  The impact of recording the value of the common
      stock and warrants in the financial statements is $0 as the Company increased
      stockholders’ equity by $813,003 for the issuance of these securities and
      decreased stockholders’ equity by the same amount to record the value of these
      securities as offering costs.





(2)
      In
      connection with the private placement offering described above, the Company's
      original investors agreed to cancel an aggregate of 6,218,958 of their shares
      upon the successful completion of selling at least $5,000,000 in the private
      placement.





(3)
      In
      connection with the transaction with Petra (see Note 1), the Company repurchased
      and retired 400,000 shares of its common stock for $400,000 that were owned
      by
      certain shareholders of Petra.





(4)
      The
      Company issued to two investor relation firms a total of 2,238,824 (1,119,412
      each) shares of common stock valued at $0.80 per share.  The value of
      these shares of $1,800,000 is being amortized over the terms of the respective
      agreements.  The shares were actually issued on July 26, 2006, but the
      value of these shares is being amortized over the respective service periods
      for
      each agreement which both began on July 10, 2006 the date of the transaction
      with Petra.  As of September 30, 2007, these amounts were fully
      amortized.




In
      September 2006:


(1)
      The
      Company completed a private placement offering of 3,450,000 shares of our common
      stock to one accredited investor, Al-Deera Holding Company KSCC, for an
      aggregate purchase price of $2,760,000. After paying the commission and fees
      associated with the private placements of approximately $138,000, the Company
      received $2,622,000 from this private placement offering.





(2)
      The
      Company added another private placement offering of 287,500 shares of our common
      stock to one accredited investor, Univest Group Kuwait, for an aggregate
      purchase price of $230,000. After paying the commission and fees associated
      with
      the private placements of approximately $ 11,500, the Company received $218,500
      from this private placement offering.





(3)
      In
      connection with the above private placement offerings, the Company issued
      warrants to purchase 185,000 shares of the Company common stock for $0.80 per
      share.  The warrants expire five years from the date of
      issuance.    The value of the warrants of $43,293 issued to
      the placement agent is considered additional offering cost.  The value
      of the warrants was calculated using the Black-Scholes model using the following
      assumptions: (a) discount rate of 4.5%; (b) volatility of 22%; (c) dividend
      yield of 0%; and (d) expected terms of 5 years.  The impact of
      recording the value of the warrants in the financial statements is $0 as the
      Company increased stockholders’ equity by $43,293 for the issuance of these
      warrants and decreased stockholders’ equity by the same amount to record the
      value of these warrants as offering costs.





In
      March, 2007:


The
      Company issued to an investor relations firm a total of 100,000 shares of common
      stock valued at $1.71 per share, the closing price of the stock on the date
      of
      issuance.  The value of these shares of $171,156 is being amortized
      over the terms of the agreements.  The shares were actually issued on
      March 29, 2007, and the value of these shares is being amortized over the
      service period of the agreement which began on March 8, 2007.  As of
      September 30, 2007, the full balance has been amortized.





In
      May
      and June 2007:


The
      Company issued to two investor relations firms a total of 1,000,000 shares
      of
      common stock (500,000 shares each).  The Company valued each set of
      500,000 shares on the date of issuance based on the closing price on that
      date.  The total value of the shares issued was
      $2,100,000.  The Company recorded this amount as prepaid consulting
      and began amortizing the amount over the 2 year period of the agreement. The
      amortization expense for the three and nine months ending September 30, 2007
      amounted to $262,500 and $380,205 respectively.




17




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Stock
      Options


The
      Company recognized $163,465 and $40,793, in share-based compensation expense
      for
      the three months ended September 30, 2007 and September 30, 2006; $2,331,018
      and
      $48,774 for the nine months ended September 30, 2007 and September 30, 2006;
      and
      $2,470,997 for the period from inception (January 10, 2006) to September 30,
      2007, respectively. The impact of this share-based compensation expense on
      the
      Company's basic and diluted earnings per share was $0.00 per share. The fair
      value of our stock options was estimated using the Black-Scholes option pricing
      model.




On
      June
      12, 2006, the Company's board of directors approved the Triton Distribution
      Systems, Inc. 2006 Equity Incentive Plan (the “Plan”) that provides for the
      issuance of up to 4,300,000 shares under the Plan.




WeightedAverageOptions
              
              
              ExerciseOutstanding
              
              
              PriceOutstanding,
                  January 10, 2006
              
              
              -
              
              
              $
              -Granted
              
              
              2,690,325
              
              
              $
              1.70Forfeited
              
              
              826,814
              
              
              $
              1.75Exercised
              
              
              99,478
              
              
              $
              0.80Outstanding,
                  September 30, 2007
              
              
              1,764,033
              
              
              $
              1.77




As
      of
      September 30, 2007, 805,569 options have vested.





For
      options granted, the weighted-average fair value of such options was $1.70
      and
      at September 30, 2007 the weighted average remaining contractual life of options
      outstanding is 9.0 years. For all options granted, the exercise price was
      equal to the market price of the Company's stock at the date of grant. All
      the
      options expire in 2017.





As
      of
      September 30, 2007, there was $1,268,205 of total unrecognized compensation
      cost
      related to non-vested options granted under the plan. That cost is expected
      to
      be recognized over the 3 year life of the options.





The
      assumptions used in calculating the fair value of options granted using the
      Black-Scholes option- pricing model are as follows: For Options
      Granted


18




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**






Prior
                  to July 14, 2006
              Risk-free
                  interest rate
              4.50%Expected
                  life of the options
              3.00
                  yearsExpected
                  volatility
              22%Expected
                  dividend yield
              0For
                  options Granted
              Risk-free
                  interest rate
              4.50%December
                  01, 2006
              Expected
                  life of the options
              3.00
                  yearsExpected
                  volatility
              86%Expected
                  dividend yield
              0For
                  options Granted
              Risk-free
                  interest rate
              4.50%March
                  02, 2007
              Expected
                  life of the options
              3.00
                  yearsExpected
                  volatility
              121%Expected
                  dividend yield
              0For
                  options Granted
              Risk-free
                  interest rate
              4.75%June
                  11, 2007
              Expected
                  life of the options
              3.00
                  yearsExpected
                  volatility
              164%Expected
                  dividend yield
              0




For
      the
      options granted prior to July 14, 2006 no public market existed for the
      Company’s stock therefore, the expected volatility was based on the volatility
      of a competitor’s common stock that is publicly traded. For options issued
      subsequent to July 14, 2006 the Company computed its volatility based on the
      Company’s stock price data.





Warrants


In
      connection with the private placement offerings and convertible debt obtained
      described above the Company issued warrants to a placement agent, finder, and
      lenders.





Below
      is
      a summary of the warrant activity:





**Warrants
                Outstanding**
            
            
            **Weighted
                Average Exercise Price**Outstanding,
                January 10, 2006
            
            
            -
            
            
            
            -Granted
            
            
            1,614,742
            
            
            $
            0.80Forfeited
            
            
            -
            
            
            
            -Exercised
            
            
            186,875
            
            
            
            -Outstanding,
                December 31, 2006
            
            
            1,427,867
            
            
            $
            0.80Outstanding,
                September 30, 2007
            
            
            -
            
            
            
            -Granted
            
            
            2,000,000
            
            
            $
            3.00Forfeited
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Outstanding,
                September 30, 2007
            
            
            2,000,000
            
            
            $
            3.00


As
        of
        September 30, 2007, all of the warrants had vested and will expire in
        2012.  The value of the warrants has been recorded as a discount to
        the note payable and will be amortized over the term of the note dated June
        28,
        2007.


19




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**




**Note
      7 - Income taxes**





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial statement purposes
      and
      the amounts used for income tax purposes. Significant components of the
      Company's deferred tax assets and liabilities are as follows:





September
                30, 2007
            
            
            December
                30, 2006Deferred
                tax assets:Federal
                net operating loss
            
            $
            3,357,129
            
            
            $
            1,637,961State
                net operating loss
            
            
            964,630
            
            
            
            470,648Equity
                compensation
            
            
            1,959,797
            
            
            
            486,551Total
                deferred tax assets
            
            
            6,281,556
            
            
            
            2,595,160Less
                valuation allowance
            
            
            (6,281,556
            )
            
            
            (2,595,160
            )Total
            
            $
            -
            
            
            $
            -








At
      September 30, 2007, the Company had federal and state net operating loss ("NOL")
      carry forwards of $3,357,129 and $964,630 respectively. Federal NOLs could,
      if
      unused, expire in 2021. State NOLs, if unused, could expire in
      2011.





The
      valuation allowance increased by $978,267 and $52,758 for the three months
      ended
      September 30, 2007 and September 30, 2006.  The total valuation
      allowance is $768,252 and $1,213,493 for the nine months ended September 30,
      2007 and September 30, 2006, and $2,361,962 for the period from inception
      (January 10, 2006) to September 30, 2007, respectively.





The
      Company has provided a 100% valuation allowance****on the
      deferred tax assets at September 30, 2007 to reduce such asset to zero, since
      there is no assurance that the Company will generate future taxable income
      to
      utilize such asset. Management will review this valuation allowance requirement
      periodically and make adjustments as warranted.





The
      reconciliation of the effective income tax rate to the federal statutory rate
      for the period from inception (January 10, 2006) to September 30, 2007 is as
      follows:





Federal
                income tax rate
            
            
            (34.0%)State
                tax, net of federal benefit
            
            
            (6.0%)Equity
                compensation
            
            
            12.4%)Non-deductible
                items
            
            
            0.2%Increase
                in valuation allowance
            
            
            27.4%Effective
                income tax rate
            
            
            0.0%





**Note
      8 - Commitments and contingencies**





Employment
      agreement


In
      July 2006, the Company entered into a three-year employment agreement with
      its CEO, Gregory Lykiardopoulos to be effective as of February 2006 pursuant
      to
      which Mr. Lykiardopoulos will receive an annual base salary of $250,000 and
      other compensation to be determined by the Board of Directors. In addition
      to
      Mr. Lykiardopoulos is entitled to receive additional shares of common stock
      if
      certain profitability requirements are met. These shares will be issued from
      existing shares held by the original investors in the Company. No new shares
      will be issued pertaining to this agreement and accordingly, there is no
      accounting affect for this transaction.


20




**TRITON
      DISTRIBUTION SYSTEMS, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





Contracts


In
      order
      to obtain and distribute travel products, the Company has entered into
      agreements with travel sellers and telecommunications service and infrastructure
      providers.  All of these agreements may be terminated by either party
      on 30 days written notice to the other.  Each agreement provides for
      the payment by travel sellers of customary travel commissions to the Company’s
      travel agent buyers and to the Company.  All of the agreements are
      non-exclusive to the Company.  There are no minimums or required
      monthly obligations for any of these agreements.





Leases


Monthly
      leases are due the first day of the month. In order to avoid fees for late
      payments, the company pre-pays its rent. The Company leases office space in
      an
      office building in Sausalito, California under an operating lease agreement
      that
      expires in May 2010. The lease provides for current monthly lease payments
      of
      $25,553 which increase over the term of the lease. The Company also leases
      office space in Beijing, China and Amsterdam that expire November 2009,
      September 2008 and January 2009, respectively. The lease on the Company's office
      in Manila, Philippines expired. The Company has no plans to renew the
      lease.





Future
      minimum lease payments under non-cancelable operating leases with initial or
      remaining terms of one year or more are as follows:


Operating
                LeasesPeriod
                  ending September 30,2008
              
              $
              391,9892009
              
              
              324,8252010
              
              
              220,204




The
      Company incurred rent expense of $107,089 and $76,669 for the three months
      ended
      September 30, 2007 and September 30, 2006, $340,019; and $243,255 for the nine
      months ended September 30, 2007 and September 30, 2006; and $660,943 for the
      period from inception (January 10, 2006) to September 30, 2007,
      respectively.





**Note
      9 - Related parties**





In
      addition to the note payable
      discussed in Note 5, the Company had certain transactions with a related
      party.  As of
      September 30, 2007, the Company recognizes the following related party
      transactions: (1)The
      Company owes $560 to Gregory Lykiardopoulos. Gregory Lykiardopoulos is the
      current CEO and major shareholder of the Company. (2) A former director of
      the
      Company, Stephen Garland, is also an owner of 373,137 shares of common
      stock.





**Note
      10 – Supplemental cash flow information**





During
      the period from inception (January 10, 2006) to September 30, 2007, the Company
      issued 1) 598,029 shares of common stock to the placement agent for commissions
      related to the July 2006 private placement; 2) issued 1,429,742 warrants to
      the
      placement agent for commissions related to the July 2006 private placement;
      3)
      issued 185,000 warrants to the placement agent for commissions related to the
      September 2006 private placement; 4) issued 3,338,824 shares of common stock
      to
      three investment relations firms for services valued at $4,071,156; 5) issued
      3,550,472 options to employees and took a charge of $2,470,997 related to the
      vesting of the fair value of these options; and 6) issued 2,000,000 warrants
      in
      conjunction with a convertible note and recorded $2,000,000 as a discount on
      the
      convertible note payable.


21


**Item
      2.** **Management's Discussion and Analysis (MDA) or Plan of
      Operations**




**General**





A
      forward-looking statement predicts, projects, or uses future events as
      expectations or possibilities. In other words, forward-looking statements are
      not based on historical fact.  Therefore, the Company disclaims that: (1)
      any instance of our forward-looking statement found in the material is only
      true
      at the time it was written, and (2) the company is under no obligation to update
      such written statements if conditions change or that unexpected occurrences
      happen to affect the statement afterwards. Such forward-looking statements,
      however, are generally identifiable by the use of certain prescribed words,
      Sentences and phrases are forward-looking statements when they include any
      tense
      from present to future or similar inflection and contain words, such as
“probable,” “possible,” “continue,” "believe," "estimate," "anticipate," "plan,"
      "predict," "may," "hope," "can," "will," "should," “shall,” “could, "expect,"
      "intend," "is designed to," "with the intent," "potential," or similar terms.
      Variations of these terms, or the negative of these terms, may indicate
      forward-looking statements, but their absence does not mean that a statement
      is
      not forward looking. The forward-looking statements specified in the following
      information have been complied by our management and are considered by
      management to be reasonable.  Our future operating results, however, are
      impossible to predict and no representation, guaranty or warranty is to be
      inferred from those forward-looking statements.





The
      assumptions used for purposes of the forward-looking statements specified in
      the
      following information represent estimates of future events and are subject
      to
      uncertainty as to possible changes in economic, legislative, industry and other
      circumstances.  As a result, the identification and interpretation of data
      and other information and their use in developing and selecting assumptions
      from
      and among reasonable alternatives require the exercise of
      judgment.





To
      the
      extent that the assumed events do not occur, the outcome may vary substantially
      from anticipated or projected results, and accordingly, no opinion is expressed
      on the achievability of these forward-looking statements.  No assurance can
      be given that any of the assumptions relating to the forward-looking statements
      specified in the following information are accurate, and we assume no obligation
      to update any such forward-looking statements.





We
      have
      incurred operating losses since inception in January 10, 2006 until the date
      hereof. We have also consumed significant cash and other financial resources,
      and presently have minimal liquidity. In response to these conditions, we have
      focused all of our efforts on near term revenue opportunities to achieve
      break-even operating results.  In addition, we intend to pursue
      outside debt and equity sources of financing that can provide Triton with a
      longer term source of capital and generally improve its balance sheet and
      financial stability.





We
      are in
      a very precarious cash position. As of September 30, 2007, we had an aggregate
      cash balance of $90,886. We currently depend on funds raised from financing
      activities to continue operations. If we continue generating losses on
      operations, it will become increasingly difficult to execute our plan of
      operations. Our ability to sustain operations through fiscal 2007 is predicated
      upon certain  critical assumptions, including (i) that our efforts to
      accelerate sales activities are successful, (ii) that we are able to meet our
      development schedule (iii) that we will not incur
      additional  unplanned expenditures in fiscal 2007,  (iv)
      that we will be successful in our pursuit of outside debt or equity financing,
      and (v) that we will not incur unexpected significant cash outlays during any
      period of fiscal 2007. We have recently faced difficulties in raising financing
      under current market conditions and no assurances can be given that we will
      not
      continue to face such difficulties in the future.





**Overview**





We
      are an
      emerging, next generation Web-based travel distribution service company. 
Our core business is the electronic distribution of travel inventory from
      airlines, car rental companies, hotels, tour and cruise operators, and other
      travel sellers to travel agencies and their clients on a global
      basis.





We
      commenced operations in January 2006 with an initial emphasis on Southeast
      Asia
      and intend to expand to other international locations, including South America
      and Europe.  Unlike the travel industry in the United States, which is
      highly fragmented and decentralized, emerging countries in Asia have only one
      or
      two flagship airlines for international routes, the airlines are controlled
      by
      the government, the travel agencies are clustered in large associations, and
      the
      government has considerable influence over decisions which affect bookings
      and
      the issuance of tickets to domestic and foreign travelers. In order to explore
      these markets, in August 2006 and in September 2006 we have opened offices
      in
      the Philippines and in China, respectively.  These offices received
      their approval from the respective governments of the Philippines and China
      to
      be formed as subsidiaries of the Company.  These offices were
      specifically formed by us to expand our business into the Philippines and
      China.





During
      the initial discovery phase of our project at Philippine Airlines we encountered
      certain internal issues that have put the project in jeopardy. As a consequence
      in order to conserve resources, we have ceased our operations in the Philippines
      until such time as Philippines Airlines can resolve their internal
      issues.  In August of 2007 the Company ceased operation in the
      Philippines and as a result its legal entity was dissolved.





During
      the quarter ended September 30, 2007, we completed several improvements to
      our
      agent booking application, “ReservationExpertTM”. Most notably we added Carnival
      Cruise to CruiseExpertTM, designed, tested and launched the “Triton Wizard” a
      simplified online booking process for new agents, developed the functional
      specifications and design of the booking engine for Red Dragon ExpressTM and
      completed the online payment processes and merchant account connections for
      ReservationExpertTM.


22


**Critical
      Accounting Policy and Estimates**





Our
      Management's Discussion and Analysis or Plan of Operations section discusses
      our
      financial statements, which have been prepared in accordance with accounting
      principles generally accepted in the United States of America. The preparation
      of the financial statements requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. On an on-going basis, management evaluates
      its estimates and judgments, including those related to revenue recognition,
      recoverability of intangible assets, and contingencies and litigation.
      Management bases its estimates and judgments on historical experience and on
      various other factors that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying value of assets and liabilities that are not readily apparent
      from
      other sources.





Actual
      results may differ from these estimates under different assumptions or
      conditions. The most significant accounting estimates inherent in the
      preparation of our consolidated financial statements include estimates as to
      the
      appropriate carrying value of certain assets and liabilities which are not
      readily apparent from other sources, primarily the valuation of intangible
      assets.





The
      methods, estimates and judgments we use in applying these most critical
      accounting policies have a significant impact on the results we report in our
      consolidated financial statements.





***Intangible
      Assets***




The
      determination of the fair value of certain acquired assets is subjective in
      nature and often involves the use of significant estimates and assumptions.
      Determining the fair values and useful lives of intangible assets especially
      requires the exercise of judgment. While there are a number of different
      generally accepted valuation methods to estimate the value of intangible assets
      acquired, we have valued our intangible assets based on the historical purchase
      price.  All of our intellectual property was purchased by certain investors
      for $238,525 and contributed to us in exchange for shares of our common
      stock.  In accordance with SFAS No. 142, “Goodwill and Other Intangible
      Assets,” we evaluate our intangible assets and other long-lived assets for
      impairment, at least on an annual basis and whenever events or changes in
      circumstances indicate that the carrying value may not be recoverable from
      our
      estimated future cash flows. Recoverability of intangible assets and other
      long-lived assets is measured by comparing their net book value to the related
      projected undiscounted cash flows from these assets, considering a number of
      factors including past operating results, budgets, economic projections, market
      trends and product development cycles. If the net book value of the asset
      exceeds the related undiscounted cash flows, the asset is considered impaired
      and a second test is performed to measure the amount of impairment loss which
      is
      the difference between the net book value of the asset and its fair
      value.  Fair value is determined by the present value of future cash
      flows using multiple scenarios that reflect the range of possible outcomes
      and a
      risk-free rate. Amortization is computed using the straight-line method over
      the
      estimated useful life of the intellectual property of 10
      years.





***Revenue
      Recognition***




We
      apply
      the guidance within SEC Staff Accounting Bulletin No. 104, “Revenue
      Recognition in Financial Statements” (“SAB 104”) to determine when to properly
      recognize revenue. SAB 104 states that revenue generally is realized or
      realizable and earned when persuasive evidence of an arrangement exists,
      services have been rendered, the seller's price to the buyer is fixed or
      determinable and collectability is reasonably assured.




We
      provide electronic travel distribution services through our travel distribution
      system. These services are provided for airlines, car rental companies, hotels,
      tour and cruise operators and other travel sellers to travel agencies and their
      clients. We charge a fee for reservations booked through our distribution
      system. Revenue is recognized at the time the transactions are processed.
      However, if a transaction is subsequently canceled, the transaction fee or
      fees
      must be credited or refunded. Therefore, revenue is recorded net of an estimated
      amount reserved to account for cancellations which may occur in a future month.
      This reserve is calculated based on industry historical cancellation rates
      and
      will be based on our own cancellation rates once a sufficient history of
      cancellations is established.  In estimating the amount of future
      cancellations that will require a transaction fee to be refunded, we assume
      that
      a significant percentage of cancellations are followed by an immediate
      re-booking of the transaction, without a net loss of revenue. In the event
      we
      cannot reasonably rely on industry averages prior to establishing a cancellation
      history of our own, we will defer revenue recognition until management is
      satisfied all contingencies have been removed.




23





***Stock
        Based Compensation***
  We
          adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
          No. 123R”). SFAS No. 123R requires companies to measure and recognize
          the cost of employee services received in exchange for an award of equity
          instruments based on the grant-date fair value. SFAS No. 123R eliminates
          the ability to account for the award of these instruments under the intrinsic
          value method prescribed by APB Opinion No. 25, Accounting for Stock Issued
          to Employees, and allowed under the original provisions of SFAS
          No. 123.  In determining the fair value of employee stock options
          we will periodically evaluate the stock option exercise behavior of our
          employees and determine the best estimate of the expected term of stock
          options.  Due to the limited history of our company, for all options
          granted in 2006 and 2007 we have estimated that the expected term of the
          employee options to be 3 years.  At the time the first round of stock
          options were granted in 2006, we were not a publicly traded company, and
          therefore the expected volatility of our stock was based on the historical
          volatility of public companies in our industry.  The expected
          volatility used to estimate the fair value of our employee options was
          22%.
          During the second and third rounds of stock options granted later in the
          year,
          we based the historical volatility on our own company stock.  The
          expected volatility used to estimate the fair value of the second and third
          rounds of employee options was 86% and 121% respectively. The expected
          volatility used for employee options granted during the quarter ended June
          30,
          2007 was 164% and was computed based on our own company stock.


**Liquidity
      and Capital Resources**




We
      had
      cash and cash equivalents of $90,886 at September 30, 2007. Our total current
      assets at September 30, 2007 were $1,976,084. We have incurred operating losses
      since inception in January 10, 2006 and during this period we have also consumed
      significant cash and other financial resources, and presently have minimal
      liquidity. In response to these conditions, we have focused our development
      resources on improving our ReservationExpertTM product in an effort to get or
      distribution channel operational. Additionally we have targeted the travel
      vendor opportunities which we feel are in greatest demand in our agency
      distribution network. The objective of bringing these vendors on line during
      our
      quarter ending September 30, 2007 is to generate agency bookings and to
      accelerate adoption of our ReservationExpertTM booking engine. Our goal is to
      achieve a positive cash flow during our quarter ending December 31, 2007.
      Meanwhile, we currently depend on funds raised from financing activities to
      continue our operations. We are considering outside debt and equity sources
      of
      financing that can provide Triton with a longer term source of capital and
      generally improve its balance sheet and financial stability.





We
      are in
      a very precarious cash position. As of September 30, 2007, we had an aggregate
      cash balance of $90,886.  We currently depend on funds raised from
      financing activities to continue our operations. Our ability to sustain
      operations through fiscal 2007 is predicated upon certain critical assumptions,
      including (i) that our efforts accelerate sales activities are successful,
      (ii)
      that we are able to meet our development schedule (iii) that we will not incur
      additional unplanned expenditures in fiscal 2007, (iv) that we will be
      successful in our pursuit of outside debt or equity financing, and (v) that
      we
      will not incur unexpected significant cash outlays during any period of fiscal
      2007.  Based on our current cash positions, it is likely that we will
      be required to raise additional funds within the next quarter in order to
      maintain our operations. However, we have recently experienced difficulties
      in
      raising financing under current market conditions and no assurances can be
      given
      that we will not continue to face such difficulties in the future.





Therefore,
      our ability to sustain operations through fiscal 2007 is predicated upon certain
      critical assumptions, including (i) that our efforts accelerate sales activities
      are successful, (ii) that we are able to meet our development schedule (iii)
      that we will not incur additional unplanned expenditures in fiscal 2007, (iv)
      that we will be successful, not withstanding current financing difficulties,
      in
      our pursuit of outside debt or equity financing, and (v) that we will not incur
      unexpected significant cash outlays during any period of fiscal
      2007.  Based on our current cash positions, it is likely that we will
      be required to raise additional funds within the next 12 months in order to
      maintain our operations.




Our
      total
      current liabilities were $1,855,913, exclusive of the non cash discount on
      the
      notes for the warrants, at September 30, 2007, which consists of a loan of
      $1,504,110, accounts payable of $261,696, accrued expenses of $19,105, accrued
      payroll of $53,848, deferred lease liability of $15,964 and other liabilities
      of
      $1,190.





During
      the period from inception (January 10, 2006) to September 30, 2007, we used
      $12,394,703 and $512,019 of cash in our operating and investing activities,
      respectively, and we received $12,998,391 from our financing
      activities.




During
      the three months ended September 30, 2007, we used $2,213,308 and $91,773 of
      cash in our operating and investing activities, respectively, and generated
      $1,684,393 cash from our financing activities. We have financed our operations
      primarily through cash generated from notes payable issued to related parties
      and from the sale of shares of our common stock.


24




During
        the nine months ended September 30, 2007, we used $5,471,128 and $98,389
        of cash
        in our operating and investing activities, respectively, and generated
        $3,733,193 cash from our financing activities. We have financed our operations
        primarily through cash generated from notes payable issued to related parties
        and from the sale of shares of our common stock.
 
 On
        June
        28, 2007, the Company issued a convertible senior note (“Convertible Note”) to
        JMW Fund LLC, San Gabriel Fund LLC, Underwood Family Partners, Ltd., and
        Battersea Capital, Inc (“Lenders”) for gross proceeds totaling $3,000,000
        (“Total Principal Amount”).  Of the Total Principal Amount, the
        Company was able to draw $1,000,000 by September 30, 2007, and another
        $1,000,000 may be drawn by July 30, 2007.  The terms and conditions of
        the Convertible Note replaces the terms and conditions of a promissory note
        issued by the Company to the Lenders on March 28, 2007 for gross proceeds
        of
        $1,000,000.  The Company drew down $1.0 million of the available $1.0
        million on June 28, 2007. This agreement replaced the prior agreement with
        the
        JMW Fund LLC from which the company borrowed $1,000,000 in April
        2007.  The April agreement was canceled and the $1,000,000 outstanding
        was included in this agreement.  As of September 30, 2007, the Company
        had $3,000,000 of loans outstanding.
 
 Interest
        accrues at one percent (1%) per month and began to accrue on July 1,
        2007.  All outstanding principal and accrued and unpaid interest is
        due and payable on July 1, 2008 (“Maturity Date”).  If the Company
        should suffer an Event of Default under the Note, the Interest shall be one
        and
        a half percent (1.5%) per month during the occurrence of the Event of
        Default.
 
 The
        Convertible Note is senior to any debt issued to the Company, including without
        limitation, loans to any bank or institutional debt.  Lenders will
        file a UCC-1 or other filing to secure their debt.
 
 Pursuant
        to the terms of the Convertible Note, the Company is obligated to issue to
        the
        Lenders warrants exercisable for an aggregate of 2,000,000 shares of the
        Company’s common stock, no par value (“Warrants”).  The Warrants are
        to be exercisable at $3.00 per share and are to expire five years from the
        issue
        date of the Warrants.  The Company agreed to register the shares
        underlying the Warrants no later than December 31, 2007.  The Warrants
        shall also be subject to a cashless exercise provision. The Company recorded
        a
        $2,000,000 as discount on loan to account for value of the
        warrants.


The
      Company agreed to increase the Company’s Board composition from two to five
      members as a condition precedent.  The first two members were
      respectively, (1) Gregory Lykiardopoulos, Chairman and CEO and (2) Khaled Magdy
      El-Marsafy.





As
      of
      September 30, 2007 the Company has five persons as Directors of the Company:
      (1)
      Gregory Lykiardopoulos, Chairman and CEO; (2) Khaled Magdy El-Marsafy; (3)
      Hideo
      Ito; (4) Adrie Reinders; (5) Joseph McCann, Jr..




On
      November 12, 2007 Khaled Magdy El-Marsafy resigned
      from his position as a member of the Board of Directors as a result of other
      personal and professional commitments.





Such
      directors may be removed upon repayment of the Note.  The Company may
      prepay this note at any time.  The outstanding principal balance of
      the Note can be converted into shares of Common Stock (“Conversion Shares”) at
      any time thirty (30) days after the date of the Note at the Lenders’ sole
      discretion.  The conversion price of the Conversion Shares is $3.00
      per share (“Conversion Price”).  The Company is obligated to file a
      registration statement with the Securities and Exchange Commission with respect
      to the Conversion Shares and the Warrant Shares no later than December 31,
      2007.  Lenders will also enjoy “piggyback” registration
      rights.  If the Company should issue or sell equity securities at a
      price per share lower than the Conversion Price, other than subject to certain
      exceptions, the Conversion Price under the Note shall be reduced to such lower
      price per share.





In
      March
      2007, the Company entered into a Line of Credit Loan Agreement with JMW Fund,
      LLC (“JMW”).





The
      Loan
      Agreement provides that Triton may borrow an amount up to a credit limit of
      $1.0
      million for a six month term. Upon entering the Loan Agreement and execution
      of
      the requisite promissory notes, JMW shall deposit the first advance of $500,000;
      JMW shall deposit the second advance of $500,000 no later than April 20, 2007.
      All sums advanced pursuant to this Loan Agreement shall bear interest from
      the
      date each advance is made until paid in full at the rate of 1% per month, simple
      interest on the first $500,000; and 1.5% per month, simple interest on the
      second $500,000. Triton may prepay the principal in entirety at any time without
      penalty. The funds from these advances were used by Triton for operating
      expenses. This agreement was replaced upon the signing of the new agreement
      on
      June 28, 2007.





The
      Company paid a one-time commitment fee of $10,000 upon entering the Loan
      Agreement.


25





In
      September 2006, we completed a private placement offering of 3,450,000 shares
      of
      our common stock to one accredited investor, Al-Deera Holding Company KSCC,
      for
      an aggregate purchase price of $2,760,000. After paying the commission and
      fees
      associated with the private placements of approximately $138,000, we received
      approximately $2,622,000 from this private placement offering.





In
      September 2006, we completed a private placement offering of 287,500 shares
      of
      our common stock to one accredited investor, Univest Group Kuwait, for an
      aggregate purchase price of $230,000. After paying the commission and fees
      associated with the private placements of approximately $11,500, we received
      approximately $218,500 from this private placement offering.





In
      July
      2006, we sold 5,747,500 shares of our common stock for gross proceeds of
      $5,747,500 in a private placement.  After paying the commission and fees
      associated with the private placements of approximately $813,000 and repaying
      the notes payable and accrued interest to investors of approximately $2,013,000,
      we received approximately $2,921,500 from this private placement.




In
      July
      2006, we completed a reverse acquisition transaction with Triton.  In
      accordance with the terms of the Share Exchange Agreement, we issued and
      exchanged 36,750,950 shares of our common stock for all 29,547,500 issued and
      outstanding shares of Triton common stock.  After the merger transaction,
      the stockholders of Triton own approximately 95% of our issued and outstanding
      shares and the management and board of directors of Triton were appointed as
      officers and two of our directors.  The exchange of shares has been
      accounted for as a reverse acquisition under the purchase method of accounting
      since the stockholders of Triton obtained control of us.  Accordingly, the
      exchange of shares of the two companies has been recorded as a recapitalization
      of Triton, with Triton being treated as the continuing entity. Accordingly,
      Triton's assets and liabilities are included in the balance sheet at their
      historical book values and the results of operations of Triton have been
      presented for the comparative prior period.




In
      February 2006, we entered into a revolving credit agreement with certain of
      our
      investors for a maximum amount of $2,500,000. In July 2006, the Company
      repaid in full all amounts owing under the revolving credit agreement of
      $1,981,867 in principal and $30,915 of accrued interest from the proceeds of
      the
      private placement.


**Results
      of Operations**




**Revenue**




We
      generated no revenue from our inception to September 30, 2007.




**Operating
      Expenses**





Our
      operating expenses from inception to September 30, 2007 were $15,821,100 which
      consisted of payroll and related benefits of $ 8,437,265, professional fees
      of
      $3,418,990, marketing and advertising of $528,657 and other general and
      administrative expenses of $2,827,671. Since inception in January of 2006 the
      majority of our payroll and related benefits expenses have been related to
      the
      development of our core application, our agent booking application
“ReservationExpertTM” and acquiring vendors of travel related inventory. In March
      of this year after the initial release of ReservationExpertTM we began signing up
      agents in an effort to get feedback on the usability of the product. Since
      that
      time we have completed the majority of the improvements our agent network has
      made us aware of. Most of our professional fees were incurred as part of the
      loan agreement closed in June of 2007 and the private placement and reverse
      merger completed in July of 2006 and the associated investor relations firms
      which assisted us.





Our
      operating expenses for the three months ended September 30, 2007 were $2,126,463
      which consisted of payroll and related benefits of $1,293,788; professional
      fees
      of $436,915; marketing and advertising expenses of $42,307 and other general
      and
      administrative expenses of $353,452 as compared to the three months ended
      September 30, 2006 of $2,229,468 which consisted of payroll and related benefits
      of $850,154; professional fees of $632,996; marketing and advertising of
      $101,930 and other general and administrative expenses of $644,388.





Our
      operating expenses for the nine months ended September 30, 2007 were $8,641,243
      which consisted of payroll and related benefits of $5,592,299 professional
      fees
      of $1,744,355, marketing and advertising expenses of $226,432 and other general
      and administrative expenses of $1,085,872 as compared to the nine months ended
      September 30, 2006 of $4,152,734 which consisted of payroll and related benefits
      of $1,807,547 professional fees of $932,950; marketing and advertising expenses
      of $204,442 and other general and administrative expenses of
      $1,207,796.





Interest
      expense from inception to September 30, 2007 was $655,428 which consisted of
      interest accrued all the loans for a total of $665,497; and interest expenses
      $10,069.





26


Interest
        expense for the three months ended September 30, 2007 and September 30, 2006
        was
        $596,943 and $2,281 respectively, which consisted of interest accrued on
        the
        notes payable and respectively $0 interest income for the same
        period.
 
 Interest
        expense for the nine months ended September 30, 2007 and September 30, 2006
        was
        $624,512 and $30,915 respectively, which consisted of interest accrued on
        the
        notes payable to related parties of $634,581; and interest expenses
        $10,069.
 
 **Our
        Plan of Operation**
  Market
        Segment:
 
 We
        began
        operations in the United States with our primary source of travel content
        being
        provided by Galileo, one of the three largest global distribution services
        for
        airline reservation in the world. Subsequently our expansion has been
        geographically driven with a focus on acquiring unique local travel content
        which through agreement could be distributed on a global basis to our business
        to business network using ReservationExpertTM.  Subsequent to its
        initial release in March of 2007, ReservationExpertTM has undergone several
        improvements based on Agent/User feedback including the recently released
        booking wizards.
 
 On
        August
        21, 2007 we released the CruiseExpertTM, followed by our Red Dragon ExpressTM web
        travel portal to China on October 9, 2007. The Red Dragon ExpressTM includes an
        agency booking tool for Chinese travel products.
 
 Our
        hub:
 
 In
        the
        Pacific Rim, we initially developed relationships with various domestic air
        carriers, consolidators, tour operators and agencies in China, Malaysia and
        the
        Philippines. During the first half of 2007, we opened offices in the Philippines
        and in China.  After receiving the appropriate approval from the
        respective governments and regulatory authorities we formed subsidiaries
        of the
        Company in the Philippines and China.  These subsidiaries were
        specifically formed for the Company to execute on signed travel distribution
        agreements with travel providers related to country-specific partners and
        travel
        vendors.  Our objective is to provide local partners our product suite
        and management expertise, to assist them in developing the market at the
        local
        level and delivering their content on a global basis through our distribution
        network. In July 2007 we signed an agreement to develop and host Philippine
        Airlines’ “Swing-a-Round” tour product and convert all of their call centers to
        ReservationExpertTM before the end of September 2007. During the initial
        diligence phases, internal issues at Philippine Airlines have put the project
        in
        jeopardy. As a consequence, in order to conserve resources, we have ceased
        our
        operations in the Philippines until such time as their internal issues have
        been
        resolved.


Expanding
      our Network:


We
      set up
      our tier one customer support operations at our headquarters in Sausalito,
      California and established remote customer support and sales operations in
      Manila, Philippines, and Beijing, China.  Pending resolution of the
      internal issues at Philippine Airlines we have ceased our customer
      support  and sales operations in the Philippines. After establishing a
      presence in Asia, in February of 2007 we began to focus on our distribution
      network by marketing our products to travel agencies and travel inventory
      vendors in the United States. Since that time we have issued more than 450
      unique user I.D.s to our distribution network. These unique I.D.s provide access
      to approximately 10,000 individual agents in the United States. Additionally,
      we
      have completed a direct links with Carnival Cruise lines and Gulliver’s Travel
      during our quarter ending September 30, 2007. The aforementioned will
      dramatically increase the content available to agents using our
      network.





Europe
      and Middle-East:


We
      have
      also established marketing agreements in Europe and the Middle
      East.  With respect to operations in Europe and the Middle-East we
      have signed agreements with several regional travel agencies and established
      direct links to several low-cost and established air carriers and hotels which
      should become productive during our quarter ending December 31,
      2007.  Additionally we began the second phase of the trial with a
      major European corporate travel agency during the quarter ending September
      30,
      2007.  If successful we would deploy a private labeled version of
      ReservationExpertTM before the end of our quarter ending March 31,
      2008.





Forecast:


Management
      attempt to provide realistic information concerning potential future performance
      based on the information it has about its products and customers, intentions
      with consideration given to the risks and uncertainties in the Travel
      Reservation industry. However we can make no guarantees about future performance
      of our business and therefore the reader should be cautious when evaluating
      future performance.





27




We
      expect
      to begin realizing reportable segment revenue from our European and United
      States operations during the quarter ending December 31, 2007.





We
      anticipate that we will incur additional $2.0 million of expenditures to achieve
      these milestones.  If the milestones are achieved then it is possible
      that we will realize a positive cash flow sometime during the quarter ending
      December 31, 2007.****However these expectations are based on
      our customers deploying our product in a timely fashion and will be affected
      by
      the booking patterns of their customers. To date we do not have enough
      historical booking data to accurately predict what their performance might
      be.





**Employees**




Our
      employee head count was 48 as of September 30, 2007.




**Off-Balance
      Sheet Arrangements**




There
      are
      no off balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to investors.




**Item
      3.** **Controls and Procedures**




**Disclosure
      Controls and Procedures**





***Audit
      Committee***. Our audit committee reports to the board regarding the
      appointment of our independent auditors, the scope and results of our annual
      audits, compliance with our accounting and financial policies and management’s
      procedures and policies relatively to the adequacy of our internal accounting
      controls.





As
      of the
      date of this quarterly report, our audit committee consists of Adrie Reinders,
      Jay McCann and Khaled Magdy El-Marsafy. Mr. Khaled Magdy El-Marsafy,
      resigned from our Audit Committee on November 12, 2007,





(a)
      Evaluation of disclosure controls and procedures. As of the end of the period
      covered by this report, we carried out an evaluation, under the supervision
      and
      with the participation of our management, including our Chief Executive Officer
      and Chief Financial Officer, 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 Securities Exchange Act of 1934, as amended. Based upon
      that
      evaluation, our Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures lacked sufficient personnel and
      systems to perform adequately as of the end of the applicable period to
      ensure that the information required to be disclosed by us in reports that
      we
      file or submit under the Exchange Act (i) is recorded, processed, summarized
      and
      reported within the time periods specified in Securities and Exchange Commission
      rules and forms and (ii) is accumulated and communicated to our management,
      including our Chief Executive Officer and Chief Financial Officer, as
      appropriate to allow timely decisions regarding required
      disclosures




(b)
      Changes in internal controls over financial reporting. There was no change
      in
      our internal control over financial reporting during our most recent fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.




**Internal
      Control Over Financial Reporting**




There
      has
      been no change in our internal control over financial reporting that occurred
      during our last fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.


28





**Part
      II.** **OTHER INFORMATION**





**Item
      1.** **Legal Proceedings**





As
      of
      September 30, 2007 the Company is under legal proceedings with the following
      persons: Terry Byers, Arthur Griggs,  & Jeff
      Wheaton  vs. Triton Distribution Systems Inc., et. al., (Superior
      Court, Marin County, Case No.  CV072075). Plaintiff filed suit on May
      4, 2007, against the Company, GRSNetwork Inc., a California Corporation,
      Internet Travel Technologies, Inc, a California Corporation and Gregory
      Lykiardopoulos.





The
      suit
      alleges causes of action for back wages, breach of contract and age
      discrimination. As of the date of this report, the Company has not been properly
      served with a summons or complaint in the matter. The Company denies the
      plaintiff’s claims and intends to vigorously defend against them if such
      complaint is properly served on the Company.





**Item
      2.** **Unregistered Sales of Equity Securities and Use of
      Proceeds**




In
      July
      2006 we acquired all of the outstanding common stock of Triton Distribution
      Systems, Inc. for 36,750,950 shares of our common stock pursuant to a Share
      Exchange Agreement with Triton and its stockholders.




In
      July
      2006 we issued an aggregate of 7,148,710 shares of our common stock to a group
      of 230 accredited investors through Brookstreet Securities Corporation, as
      Placement Agent, at $.80 per share pursuant to the exemption provided by Section
      4(2) of the Act and Rule 506 of Regulation D promulgated thereunder.  The
      shares were offered solely to accredited investors, no form of general
      advertising was used, and all investors took the shares as an investment and
      not
      with the intent to distribute and all shares were issued with a restrictive
      legend thereon. As additional consideration for acting as our Placement Agent,
      we issued to Brookstreet warrants to acquire 1,429,742 shares of our common
      stock at $.80 per share and also issued to it 598,029 shares for investment
      banking consulting services valued at $.80 per share.




In
      July
      2006 we issued 1,119,412 shares each valued at $.80 per share to Capital Group
      Communications, Inc. and Livestrong Venture Capital Partners, Inc. for investor
      relations services pursuant to the exemption provided by Section 4(2) of the
      Act.





In
      September 2006 we issued 3,450,000 and 287,500 shares of our common stock to
      two
      accredited Kuwaiti corporate investors, pursuant to the exemption provided
      by
      Section 4(2) of the Act, for $.80 per share and paid a finder's fee of 185,000
      common stock purchase warrants. The warrants are exercisable at $.80 per share
      until September 18, 2007.  Both investors took the common stock for
      investment purposes and not with the intent to distribute and the certificates
      were issued with a restrictive legend thereon.





On
      May 5,
      2007 we issued 500,000 shares when our stock price was valued at $2.15 per
      share
      to Capital Group Communications, Inc for investor relations services pursuant
      to
      the exemption provided by Section 4(2) of the Act.





On
      June
      27, 2007 we issued 500,000 shares when our stock price was valued at $1.08
      per
      share to Livestrong Venture Capital Partners, Inc. for investor relations
      services pursuant to the exemption provided by Section 4(2) of the
      Act.





**Item
      3.** **Defaults Upon Senior Securities**





None.





**Item
      4.** **Submission of Matters to a Vote of Security
      Holders**




None.





**Item
      5.** **Other Information**





Not
      applicable




29





**Item
      6.** **Exhibits**





Exhibits




**Number**
            **Exhibit**3.1
            Articles
                of Incorporation (1)3.2
            Bylaws
                (1)10.1
            Line
                of Credit Loan Agreement dated March 28, 2007, by and between JMW
                Fund,
              LLC
                and Triton Distribution Systems, Inc. (1)31.1
            Certification
                of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 193431.2
            Certification
                of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 193432
            Certification
                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002




(1)
      Previously filed.


30




**SIGNATURES**





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






TRITON
                DISTRIBUTION SYSTEMS, INC.November
                14, 2007
            By:
            /s/ Gregory
                LykiardopoulosGregory
                Lykiardopoulos
              Chief
                Executive Officer




31