**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **Washington,
          D.C. 20549**
 
 **FORM
          10-Q**
 (Mark
          One)
 
 x
                Quarterly
                    report pursuant to Section 13 or 15(d) of the Securities Exchange
                    Act of
                    1934
 For
          the
          quarterly period ended May 31, 2008
 or
 
 o
                Transition
                    report pursuant Section 13 or 15(d) of the Securities Exchange
                    Act of
                    1934
 For
          the
          transition period from ____________ to ______________
 
 Commission
          file number 000-32847
 
 **TITAN
          GLOBAL HOLDINGS, INC.**
 (Exact
          name of registrant as specified in its charter)
 
 **Utah**
                **87-0433444**(State
                    or other jurisdiction of incorporation or organization)
                (IRS
                    Employer Identification No.)
 
 **1700
          Jay Ell Drive, Suite 200**
 **Richardson,
          Texas 75081**
 (Address
          of principal executive offices) (Zip Code)
 
 **(972)
          470-9100**
 (Registrant’s
          telephone number, including area code)
 
 Indicate
          by check mark whether the registrant (1) has filed all reports required
          to be
          filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
          the
          preceding 12 months (or for such shorter period that the registrant was
          required
          to file such reports), and (2) has been subject to such filing requirements
          for
          the past 90 days. Yes o No x
 
 Indicate
          by check march whether the registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer. See definition of “accelerated
          filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
          one):
 Large
                      accelerated filero
                  Accelerated
                      filero
                  Non-accelerated
                      filerx
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act). Yes o No x
 
 As
          of
          July 15, 2008 the Company had 53,430,652 shares
          of its par value $0.001 common stock outstanding.
  
 
 **TITAN
          GLOBAL HOLDINGS, INC.**
 **TABLE
          OF CONTENTS**
 
 Page**PART
                    I.**
                **FINANCIAL
                    INFORMATION**Item
                    1.
                Unaudited
                    Consolidated Financial Statements
                4Item
                    2.
                Management's
                    Discussion and Analysis of Financial Condition and Results of
                    Operations
                32Item
                    3.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                49Item
                    4.
                Controls
                    and Procedures
                50**PART
                    II.**
                **OTHER
                    INFORMATION**Item
                    1.
                Legal
                    Proceedings
                51Item
                    1A.
                Risk
                    Factors
                54Item
                    2.
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                61Item
                    3.
                Defaults
                    Upon Senior Securities
                61Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                61Item
                    5.
                Other
                    information
                61Item
                    6.
                Exhibits
                61Signatures
                62
  2
  **STATEMENT
          REGARDING THIS REPORT**
 
 **FORWARD-LOOKING
          INFORMATION**
 
 Statements
          in this report concerning the future sales, expenses, profitability, financial
          resources, product mix, market demand, product development and other statements
          in this report concerning the future results of operations, financial condition,
          and business of Titan Global Holdings, Inc. are "forward-looking" statements
          as
          defined in the Securities Act of 1933 and Securities Exchange Act of 1934.
          Investors are cautioned that the Company's actual results in the future
          may
          differ materially from those projected in the forward-looking statements
          due to
          risks and uncertainties that exist in the Company's operations and business
          environment, including competition, need for increased acceptance of products,
          ability to continue to develop and extend our brand identity, ability to
          anticipate and adapt to a competitive market, ability to effectively manage
          rapidly expanding operations, amount and timing of operating costs and
          capital
          expenditures relating to expansion of our business, operations and
          infrastructure, ability to provide superior customer service, dependence
          upon
          key personnel and the like. The Company's most recent filings with the
          Securities and Exchange Commission, including Form 10-KSB, contain additional
          information concerning many of these risk factors, and copies of these
          filings
          are available from the Company upon request and without charge.
  3
  **Titan
          Global Holdings, Inc.**
 **Unaudited
          Consolidated Balance Sheets**
 **(In
          thousands, except common stock share data)**
 
 **May
                    31,**
                
                **August
                    31,****2008**
                
                **2007****ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                2,999
                
                $
                1,190Restricted
                    cash and short-term investments
                
                
                617
                
                
                750Accounts
                    receivable, trade (less allowance for doubtful accounts of $15,736
                    and
                    $2,940 and allowance for sales returns of $3,672 and $888,
                    respectively)
                
                
                10,875
                
                
                12,699Universal
                    service fund fees recoverable
                
                
                -
                
                
                1,406Inventory,
                    net
                
                
                13,556
                
                
                1,663Prepaid
                    expenses and other current assets
                
                
                1,945
                
                
                2,015Assets
                    of discontinued operations, current
                
                
                4,680
                
                
                -Total
                    current assets
                
                
                34,672
                
                
                19,723Equipment
                    and improvements, net
                
                
                15,185
                
                
                2,326Definite-lived
                    intangible assets, net
                
                
                4,444
                
                
                16,989Goodwill
                    and indefinite-lived intangible assets
                
                
                17,848
                
                
                6,661Capitalized
                    loan fees, net
                
                
                898
                
                
                412Other
                    assets
                
                
                170
                
                
                305Assets
                    of discontinued operations, non-current
                
                
                4,389
                
                
                -Total
                    assets
                
                $
                77,606
                
                $
                46,416**LIABILITIES
                    AND STOCKHOLDERS' DEFICIT**Current
                    liabilities:Accounts
                    payable - trade
                
                $
                33,333
                
                $
                21,049Accrued
                    liabilities
                
                
                6,848
                
                
                2,911Deferred
                    revenue
                
                
                -
                
                
                12,009Related
                    party - notes payable
                
                
                1,736
                
                
                -Short-term
                    notes payable
                
                
                426
                
                
                72Current
                    portion of long-term debt
                
                
                3,067
                
                
                3,432Seller-Financed
                    Note
                
                
                3,570
                
                
                -Liabilities
                    of discontinued operations, current
                
                
                12,454
                
                
                -Total
                    current liabilities
                
                
                61,434
                
                
                39,473Lines
                    of credit
                
                
                31,247
                
                
                11,677Long-term
                    seller-financed note, net of discount of $0 and $122,
                    respectively
                
                
                -
                
                
                1,301Redeemable,
                    convertible preferred stock, preference in liquidation of $12,435
                    and
                    $4,743, respectively
                
                
                12,090
                
                
                4,743Long-term
                    debt, net of discount of $4,383 and $713, respectively
                
                
                8,516
                
                
                4,112Long-term
                    derivative liabilities
                
                
                9,115
                
                
                15,142Other
                    long-term liabilities
                
                
                2,549
                
                
                116Liabilities
                    of discontinued operations, non-current
                
                
                8,841
                
                
                -Total
                    liabilities
                
                
                133,792
                
                
                76,564Stockholders'
                    deficit:Common
                    stock-$0.001 par value; 950,000,000 shares authorized; 54,754,809
                    and
                    50,244,378 shares issued; 53,430,652 and 49,157,071 outstanding,
                    respectively
                
                
                55
                
                
                50Additional
                    paid-in capital
                
                
                30,830
                
                
                21,968Accumulated
                    deficit
                
                
                (85,357
                )
                
                (50,700
                )Treasury
                    stock, at cost, 1,324,157 and 1,087,307 shares,
                    respectively
                
                
                (1,714
                )
                
                (1,466
                )Total
                    stockholders' deficit
                
                
                (56,186
                )
                
                (30,148
                )Total
                    liabilities and stockholders' deficit
                
                $
                77,606
                
                $
                46,416
 
 The
          accompanying notes form an integral part of the consolidated financial
          statements.
  4
  **Titan
          Global Holdings, Inc.**
 **Unaudited
          Consolidated Statements of Operations**
 **(In
          thousands, except share and per share amounts)**
 
 **Three Months Ended**
                
                **Nine Months Ended****5/31/2008**
                
                **5/31/2007**
                
                **5/31/2008**
                
                **5/31/2007**Sales
                    - Energy division
                
                $
                120,336
                
                $
                -
                
                $
                312,881
                
                $
                -Sales
                    - Communications division
                
                
                42
                
                
                24,627
                
                
                34,897
                
                
                80,138Sales
                    - Electronics and homeland security division
                
                
                6,977
                
                
                6,174
                
                
                22,168
                
                
                16,726Sales
                    - Global brands division
                
                
                957
                
                
                -
                
                
                2,358
                
                
                -Total
                    sales
                
                
                128,312
                
                
                30,801
                
                
                372,304
                
                
                96,864Cost
                    of sales - Energy division
                
                
                113,687
                
                
                -
                
                
                296,738
                
                
                -Cost
                    of sales - Communications division
                
                
                20
                
                
                15,742
                
                
                24,392
                
                
                64,333Cost
                    of sales - Electronics and homeland security division
                
                
                7,094
                
                
                5,826
                
                
                21,379
                
                
                16,014Cost
                    of sales - Global brands division
                
                
                640
                
                
                -
                
                
                1,981
                
                
                -Total
                    cost of sales
                
                
                121,441
                
                
                21,568
                
                
                344,490
                
                
                80,3476,871
                
                
                9,233
                
                
                27,814
                
                
                16,517Operating
                    expenses:Sales
                    and marketing
                
                
                593
                
                
                406
                
                
                1,859
                
                
                1,481General
                    and administrative expenses
                
                
                10,388
                
                
                3,210
                
                
                30,135
                
                
                8,055Bad
                    debt expense
                
                
                1,071
                
                
                2,008
                
                
                9,869
                
                
                2,130Impairment
                    of intangibles
                
                
                -
                
                
                -
                
                
                14,572
                
                
                -Amortization
                    of intangibles
                
                
                494
                
                
                1,369
                
                
                2,452
                
                
                4,038Loss
                    from operations
                
                
                (5,675
                )
                
                2,240
                
                
                (31,073
                )
                
                813Other
                    income (expenses):Other
                    income
                
                
                402
                
                
                22
                
                
                1,583
                
                
                43Interest
                    expense
                
                
                (2,075
                )
                
                (953
                )
                
                (5,716
                )
                
                (3,184
                )Gain
                    on disposal of assets
                
                
                (25
                )
                
                -
                
                
                2,004
                
                
                -Gain
                    (loss) on value of derivative instruments
                
                
                1,247
                
                
                3,462
                
                
                10,999
                
                
                (4,630
                )Gain
                    on extinguishment of debt
                
                
                -
                
                
                -
                
                
                -
                
                
                7,790Income
                    (loss) before income taxes
                
                
                (6,126
                )
                
                4,771
                
                
                (22,203
                )
                
                832Provision
                    for income taxes
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    income (loss) from continuing operations
                
                
                (6,126
                )
                
                4,771
                
                
                (22,203
                )
                
                832Loss
                    from discontinued operations
                
                
                (1,139
                )
                
                -
                
                
                (12,454
                )
                
                -Net
                    income (loss)
                
                $
                (7,265
                )
                $
                4,771
                
                $
                (34,657
                )
                $
                832Accrual
                    of preferred stock dividend
                
                
                (34
                )
                
                (34
                )
                
                (101
                )
                
                (101
                )Net
                    income (loss) applicable to common stockholders
                
                $
                (7,299
                )
                $
                4,737
                
                $
                (34,758
                )
                $
                731Net
                    income (loss) applicable to common stockholders per share:BasicContinuing
                    operations
                
                $
                (0.11
                )
                $
                0.10
                
                $
                (0.42
                )
                $
                0.02Discontinued
                    operations
                
                
                (0.02
                )
                
                -
                
                
                (0.24
                )
                
                -Net
                    income (loss)
                
                $
                (0.13
                )
                $
                0.10
                
                $
                (0.66
                )
                $
                0.02DilutedContinuing
                    operations
                
                $
                (0.11
                )
                $
                0.03
                
                $
                (0.42
                )
                $
                0.01Discontinued
                    operations
                
                
                (0.02
                )
                
                -
                
                
                (0.24
                )
                
                -Net
                    income (loss)
                
                $
                (0.13
                )
                $
                0.03
                
                $
                (0.66
                )
                $
                (0.08
                )Number
                    of weighted-average common shares outstanding:Basic
                
                
                53,430,652
                
                
                49,113,900
                
                
                52,503,890
                
                
                49,121,801Diluted
                
                
                53,430,652
                
                
                59,935,688
                
                
                52,503,890
                
                
                49,848,417
 
 The
          accompanying notes form an integral part of the consolidated financial
          statements.
  5
  **Titan
          Global Holdings, Inc.**
 **Unaudited
          Consolidated Statements of Cash Flows**
 **(In
          thousands)**
 
 **Nine Months Ended****5/31/2008**
                
                **5/31/2007**Cash
                    flows from operating activities:Net
                    income (loss) from continuing operations
                
                $
                (22,203
                )
                $
                832Adjustments
                    to reconcile net income (loss) to net cash (used in) generated
                    by
                    operating activities:Depreciation
                
                
                3,084
                
                
                578Bad
                    debt and sales return allowances
                
                
                12,693
                
                
                2,137Gain
                    on disposal of assets
                
                
                (2,004
                )
                
                -Non-cash
                    compensation
                
                
                (33
                )
                
                187Non-cash
                    asset retirement obligation accretion expense
                
                
                68
                
                
                6Non-cash
                    interest expense
                
                
                1,425
                
                
                344Amortization
                    of debt discounts and bank fees
                
                
                289
                
                
                444Amortization
                    of intangibles
                
                
                2,452
                
                
                4,038Goodwill
                    and intangible assets impairment charge
                
                
                14,572
                
                
                -Loss
                    (gain) on fair value of derivative liabilities
                
                
                (10,999
                )
                
                4,630Gain
                    on debt extinguishment
                
                
                -
                
                
                (7,790
                )Warrants
                    issued for services
                
                
                -
                
                
                621Changes
                    in operating assets and liabilities, net of effects of
                    acquisitions:Accounts
                    receivable
                
                
                (1,581
                )
                
                (3,618
                )Inventory
                
                
                689
                
                
                283Prepaid
                    expenses and other current assets
                
                
                1,147
                
                
                (130
                )Other
                    assets
                
                
                (16
                )
                
                3Universal
                    service fund fee recoverable
                
                
                1,406
                
                
                (638
                )Federal
                    excise tax recoverable
                
                
                -
                
                
                (243
                )Accounts
                    payable and accrued liabilities
                
                
                952
                
                
                8,412Deferred
                    revenue
                
                
                (12,009
                )
                
                -Other
                    liabilities
                
                
                (624
                )
                
                -Total
                    adjustments
                
                
                11,511
                
                
                9,264Net
                    cash (used in) generated by operating activities of continuing
                    operations
                
                
                (10,692
                )
                
                10,096Net
                    cash generated by operating activities of discontinued
                    operations
                
                
                844
                
                
                -Net
                    cash (used in) generated by operating activities
                
                
                (9,848
                )
                
                10,096Cash
                    flows from investing activities:Equipment
                    and improvements expenditures
                
                
                (1,161
                )
                
                (407
                )Cash
                    provided by investment to collateralize obligation
                
                
                133
                
                
                -Cash
                    paid to sellers of Appco
                
                
                (30,000
                )
                
                -Cash
                    provided by acquisitions
                
                
                3,784
                
                
                -Proceeds
                    from sale of fixed assets
                
                
                79
                
                
                -Net
                    cash used in investing activities of continuing operations
                
                
                (27,165
                )
                
                (407
                )Net
                    cash provided by investing activities of discontinued
                    operations
                
                
                32
                
                
                -Net
                    cash used in investing activities
                
                
                (27,133
                )
                
                (407
                )Cash
                    flows from financing activities:Proceeds
                    from issuance of common stock
                
                
                5,000
                
                
                -Proceeds
                    from sale leaseback transaction
                
                
                15,000
                
                
                -Proceeds
                    from related party notes
                
                
                1,736
                
                
                -Proceeds
                    from issuance of long-term debt
                
                
                15,000
                
                
                7,484Proceeds
                    from lines of credit, net of repayments
                
                
                11,608
                
                
                (3,188
                )Payments
                    on long-term debt
                
                
                (7,655
                )
                
                (13,205
                )Capitalized
                    loan fees
                
                
                (775
                )
                
                (684
                )Purchase
                    of treasury stock
                
                
                (248
                )
                
                (109
                )Net
                    cash provided by (used in) financing activities of continuing
                    operations
                
                
                39,666
                
                
                (9,702
                )Net
                    cash used in financing activities of discontinued
                    operations
                
                
                (687
                )
                
                -Net
                    cash provided by (used in) financing activities
                
                
                38,979
                
                
                (9,702
                )
  6
  **Titan
          Global Holdings, Inc.**
 **Unaudited
          Consolidated Statements of Cash Flows Continued**
 **(In
          thousands)**
  **Nine
                    Months Ended****5/31/2008**
                
                **5/31/2007**Net
                    increase (decrease) in cash and cash equivalents
                
                $
                1,998
                
                $
                (13
                )Cash
                    and cash equivalents at beginning of period including cash of
                    discontinued
                    operations
                
                
                1,190
                
                
                1,401Cash
                    and cash equivalents at end of period including cash of discontinued
                    operations
                
                $
                3,188
                
                $
                1,388Cash
                    and cash equivalents at end of period of discontinued
                    operations
                
                $
                189
                
                $
                -Cash
                    and cash equivalents at end of period of continuing
                    operations
                
                $
                2,999
                
                $
                1,388**Supplemental
                    disclosures of cash flow information:**Interest
                    Paid
                
                $
                1,994
                
                $
                2,385Income
                    Tax Paid
                
                $
                -
                
                $
                -Non-cash
                    activities:Issuance
                    of redeemable preferred stock for acquisition of note
                    receivable
                
                $
                7,245
                
                $
                -Issuance
                    of common stock for capitalized debt costs
                
                $
                -
                
                $
                15Net
                    assets acquired through asset purchase agreement
                
                $
                -
                
                $
                3,401Issuance
                    of common stock for acquisition of note receivable
                
                $
                4,000
                
                $
                -Issuance
                    of common stock for reducing redeemable preferred stock
                
                $
                -
                
                $
                253Issuance
                    of common stock to Chief Executive Officer
                
                $
                -
                
                $
                305Issuance
                    of common stock in connection with lender credit facility
                
                $
                -
                
                $
                505Property
                    transferred in sale leaseback transaction
                
                $
                15,000
                
                $
                -
 
 The
          accompanying notes form an integral part of the consolidated financial
          statements.
  7
  **TITAN
          GLOBAL HOLDINGS, INC.**
 **NOTES
          TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Amounts
          in thousands, except share and per share amounts)**
 
 ***Note
          1 - Basis of Presentation and Nature of Business***
 
 **Basis
          of Presentation**
 
 The
          accompanying unaudited consolidated financial statements of Titan Global
          Holdings, Inc. and its subsidiaries, (“Titan”, “We” or the “Company”), have been
          prepared in accordance with U.S. generally accepted accounting principles
          for
          interim financial information and with the instructions to Form 10-Q pursuant
          to
          the rules and regulations of the Securities and Exchange Commission.
          Accordingly, they do not include all of the information and footnotes required
          by U.S. generally accepted accounting principles for complete financial
          statements. In the opinion of management, all adjustments considered necessary
          for a fair presentation are included herein. Operating results for the
          three-month and nine-month period ended May 31, 2008 are not indicative
          of the
          results that may be expected for the fiscal year ending August 31, 2008.
          These
          unaudited consolidated financial statements should be read in conjunction
          with
          the consolidated financial statements and the notes thereto included in
          the
          Company’s Annual Report to Shareholders on Form 10-KSB for the fiscal year ended
          August 31, 2007 as filed with the Securities and Exchange Commission on
          November
          29, 2007. All significant intercompany accounts and transactions have been
          eliminated in preparation of the consolidated financial statements. All
          amounts
          referenced below are stated in thousands except shares and per share amounts
          unless otherwise noted.
 
 The
          preparation of unaudited consolidated financial statements in conformity
          with
          accounting principles generally accepted in the United States of America
          requires management to make estimates and assumptions that affect the reported
          amounts of assets and liabilities and disclosure of contingent assets and
          liabilities at the date of the consolidated financial statements and the
          reported amounts of revenue and expenses during the reporting period. Actual
          results could differ from those estimates. Such estimates relate primarily
          to
          the estimated lives of equipment and improvements, reserves for accounts
          receivable and inventory, allocation of purchase price for acquisitions,
          impairment of intangible assets, valuation of derivatives, fair value of
          equity
          instruments issued and sales returns.
  **Nature
          of Business**
 
 *Organization:*
 
 The
          Company was formed on March 1, 1985 as a Utah corporation. In August, 2002,
          the
          Company acquired Titan West in a merger transaction with a subsidiary of
          the
          Company. Prior to this merger, the Company had no active business operations.
          On
          November 4, 2005, the name of the corporation was changed from Ventures-National
          Incorporated to its present name.
 
 *Nature
          of Operations:*
 
 The
          Company operates in four market segments - (i) Titan Global Energy Group,
          (ii)
          Titan Communications (iii) Titan Global Brands, and (iv) Titan Electronics
          and
          Homeland Security.
 
 Energy
          Segment
 
 The
          Company, through its Appalachian Oil Company (“Appco”) subsidiary is a petroleum
          distributor in the Southeastern United States. The operations include retail
          convenience stores and wholesale petroleum distribution. As of May 31,
          2008, the
          retail division operated 54 convenience store locations in Tennessee, Kentucky,
          and Virginia, offering merchandise, foodservice, motor fuel and other services
          and the wholesale petroleum distribution division provided liquid motor
          fuel
          products for 170 accounts located in Tennessee, Kentucky, Virginia and
          North
          Carolina. We believe Appco’s unique retail/wholesale business model, scale, and
          merchandise offerings, combined with selected acquisition opportunities,
          position Appco for ongoing growth in sales higher margins. Appco is expanding
          the offerings of biofuels products such as E10 (90% petroleum, 10% ethanol),
          E85
          (15% petroleum and 85% ethanol) and biodiesel to create a pre-eminent integrated
          distribution model leveraging renewable energy sources.
  8
  Communications
          Segment
  The
          Company, through its Planet Direct (f/k/a Pinless, Inc.) subsidiary, provides
          prepaid international phone cards, and prior to February 2008, its Oblio
          Telecom
          (“Oblio”), Titan Wireless and StartTalk subsidiaries, provided prepaid
          international phone cards and prepaid wireless services. The communications
          division creates and distributes prepaid offerings that provide first and
          second
          generation Americans efficient means to complete international calls and
          to
          maintain wireless services. These prepaid communications products are sold
          directly to wholesale distributors in all 50 United States and Puerto
          Rico.
  During
          the three months ended February, 2008, the Company’s communications division
          experienced a significant decrease in sales and collections of outstanding
          accounts receivable. Many of the long-standing distributors of Oblio’s products
          stopped placing orders for new product and stopped sending payments for
          previously placed orders. While management is vigorously pursuing legal
          action
          against many of these customers, the extended collection process has
          significantly disrupted the operating cash flow cycle of the prepaid
          international long distance portion of the Company’s communication’s division.
          These issues along with losses experienced in its network operations have
          resulted in the Company ceasing to do business as Oblio in the prepaid
          international long distance market. As such the Company evaluated the division’s
          goodwill and other intangible assets for impairment based on changes in
          the
          business model. Based on the determination of management, the Company impaired
          all of the goodwill and certain intangible assets of Oblio as of November
          30,
          2007.
 
 Simultaneously,
          the Company determined to cease the distribution of code division multiple
          access “CDMA” prepaid wireless handsets and the related airtime through its
          subsidiary Titan Wireless RM, Inc, due to the increasing capital requirements
          associated with the business model at Titan Wireless, the Company’s wireless
          operating subsidiary. As such, the Company evaluated goodwill and other
          assets
          for impairment based on changes in its business model. Accordingly, the
          Company
          incurred an impairment charge of $14,572 related to the write-off of all
          the
          goodwill and intangible assets of Oblio and Titan Wireless during the three
          months ended November 30, 2007. On January 25, 2008, substantially all
          of the
          operating assets of the wireless related activities of the communications
          division were sold in an Asset Purchase Agreement to Boomerang Wireless,
          Inc.
          The purchase price was $1,000 (net of $737 release of liability) consisting
          of a
          $1,000 promissory note, a release of liability for asserted salary and
          bonus
          claims of $737 and the assumption of certain liabilities.
 
 In
          February 2008, the Company created Titan Communications, Inc. (“Titan
          Communications”) and began operations in the Company’s Pinless Inc. subsidiary
          as Planet Direct Inc., entered into strategic relationships with several
          prepaid
          international long distance telecommunications providers and began establishing
          relationships with new distributors.
 
 In
          addition, the Company’s Titan Communications subsidiary is creating a new VOIP
          based platform to terminate international long distance telecommunication
          services to serve the prepaid international long distance calling card
          industry
          as well as provide wholesale termination to other telecommunications companies.
          Titan Communications has yet to derive any revenue from its newly created
          VOIP
          platform. Titan Communications is in the process of purchasing hardware,
          programming software and establishing a network of service providers
          facilitating the operation of the platform.
 
 Global
          Brands Segment
 
 The
          Company has two subsidiaries in its Global Brands segment, USA Detergents
          (“USAD”) (see additional discussion in Note 2) and Titan Apparel, Inc. (“TAPP”)
          (see additional discussion in Note 2). USAD is headquartered in North Brunswick,
          New Jersey and is a manufacturer and distributor of value-branded home
          care
          products that leverages brand extensions and licensing agreements with
          consumer
          product conglomerates. As discussed in Note 15, the Company determined
          that it
          was not feasible to fund the operations of USAD and is no longer operating
          this
          subsidiary.
 
 In
          connection with the formation of our Global Brands division and the related
          acquisition of USA Detergents on October 16, 2007, goodwill in the amount
          of
          $6,569 was established as of the acquisition date as part of the purchase
          price
          allocation. During the three months ended February 29, 2008, the Company
          evaluated the working capital requirements of USAD and determined that
          it was
          not feasible to fund the operations of USAD. During the due diligence phase
          of
          the acquisition of USAD and prior to acquisition, the Company made certain
          assumptions regarding the working capital necessary to revitalize the core
          business of USAD. During the execution phase of the post-acquisition
          reorganization plan, the Company was unable to successfully negotiate work
          out
          payment plans with key suppliers. As such, management determined to cease
          operations in its current structure. Accordingly, the Company incurred
          an
          impairment charge for $6,569 of goodwill related to the USAD acquisition
          in the
          three months ended November 30, 2007.
  9
  TAPP
          is
          headquartered in Santa Barbara, California and is an owner of several footwear
          brands and the Global Feet retail store chain and an authorized footwear
          marketer. TAPP designs, develops and markets stylish footwear for men,
          women and
          children.
 
 Electronics
          and Homeland Security Segment
  The
          Company, through its Titan East, Titan Electronics and Titan Nexus subsidiaries,
          manufactures printed circuit boards for quick-turn, prototype market and
          the
          defense supplier markets. The Company’s printed circuit boards serve as the
          foundation in many electronic products used in telecommunications, medical
          devices, automotive, military applications, aviation components, networking
          and
          computer equipment. The Company's time sensitive and high quality manufacturing
          services enable its customers to shorten the time it takes them to get
          their
          products from the research and development phase to the production phase,
          thus
          increasing their competitive position. Additionally, Titan East serves
          military
          and defense industry customers that are required via regulation to purchase
          printed circuit boards from companies that hold certain certifications
          from the
          United States Department of Defense. Titan PCB East currently has military
          certifications 31032 and 55110.
 
 On
          May
          20, 2008, the Company entered into an Asset Purchase Agreement with Denis
          McCarthy dba Time Sensitive Circuits to sell substantially all of the assets
          of
          Titan East. The purchase price required no cash to be paid to the Company,
          but
          called for the infusion of $300 of working capital by the purchaser and
          the
          assumption of certain liabilities including accounts payable, a portion
          of the
          Greystone revolving credit facility approximating $1,100 and approximately
          $268
          of the Greystone term debt. As of July 15, 2008, this transaction has not
          been
          completed. See additional discussion in Note 2.
 
 *Liquidity:*
 
 As
          of May
          31, 2008, the Company had a working capital deficit of $26,762 including
          current
          assets and current liabilities from discontinued operations, a working
          capital
          deficit of $18,988 excluding current assets and current liabilities from
          discontinued operations, a stockholders’ deficit of $56,186 and an accumulated
          deficit of $85,357. The Company incurred a net loss of $34,657 and used
          cash
          from continuing operations of $10,692 for the nine months ended May 31,
          2008.
          The Company is also past due on a significant amount of trade payables
          and is
          not making payments on certain outstanding debt because of its current
          cash flow
          constraints.
 
 The
          Company’s principal sources of liquidity are the existing cash and cash
          equivalents, cash generated from operations and cash available from borrowings
          under the revolving credit facility and from related parties. The Company
          may
          also generate liquidity from future offerings of debt and/or equity. As
          of May
          31, 2008, the Company had a total of $2,999 in unrestricted cash and cash
          equivalents. As of May 31, 2008, the Company also had restricted cash and
          cash
          equivalents and short-term investments of $617 that included funds to
          collateralize fuel bonds issued by a surety for Appco.
 
 Since
          December 2007, the Company made significant cost reductions in the
          communications division and the global brands division. In the communications
          division, the Company reduced staffing in the Richardson, Texas facility
          in
          connection with retooling the business; focusing on selling prepaid
          international calling cards that terminate on the networks of third parties.
          In
          addition, staff reductions were made when the wireless related assets were
          sold
          on January 25, 2008. Staff reductions were made in the global brands division
          in
          North Brunswick, New Jersey when our USAD operations were closed. We have
          realized lower general and administrative expenses in those divisions with
          the
          intent of reducing the negative operating cash flow of these segments and
          our
          business as we redefine those operations through new business ventures,
          modified
          operating structures, sale to a third party, or liquidation. In the instances
          where business liquidation is considered necessary by management, our senior
          lender will in most cases receive the majority of the proceeds from liquidation.
          While the trade accounts payable and related accrued expenses for the
          communications division have been recorded at the full amount of the amounts
          owed, management intends to negotiate with many of the unsecured creditors
          and
          attempt to settle these liabilities for less than face value. For the operations
          of our USAD subsidiary, a bankruptcy trustee has been appointed and is
          working
          through the process of an orderly liquidation of the assets to satisfy
          USAD’s
          obligations. As management determines and has an understanding of the ultimate
          settlement amount of the associated liabilities of USAD, liquidation accounting
          rules will prevail and liabilities will be recorded at their anticipated
          settlement amounts. Given the recent cost containment measures implemented
          during the nine months ended May 31, 2008, management believes that our
          existing
          cash and investments, liquidity available under our revolving credit facility,
          ability to utilize term debt financing, ability to raise capital from the
          equity
          markets, ability to obtain funding from certain significant stockholders
          and or
          other related parties and cash flows from our remaining operations, namely
          the
          Energy segment, will be sufficient to meet our operating and capital
          requirements through at least the next twelve months. However, if we are
          not
          successful in continuing to reduce our costs and improve our related cash
          flows,
          it may be necessary to raise additional capital that may be dilutive to
          existing
          shareholders.
  10


****** ***Note
      2 – Acquisitions and Divestitures***





*Acquisition
      of Appalachian Oil Company*





The
      Company formed Titan Global Energy Group to acquire and manage complementary
      energy sector assets. On September 17, 2007, the Company completed the
      acquisition of all of the issued and outstanding shares of capital stock of
      Appalachian Oil Company, Inc. (“Appco”), a corporation formed under the laws of
      Tennessee, from the James R. Maclean Revocable Trust, Sara G. Maclean, the
      Linda
      R. Maclean Irrevocable Trust and Jeffrey H. Benedict. The Company’s results of
      operations for the nine months ended May 31, 2008 include Appco’s results from
      the purchase date to the end of the reporting period. The purchase price paid
      for the shares under the Appco stock purchase agreement, as amended, was $30,000
      in cash, of which $1,000 will be escrowed for 18 months following the closing
      of
      the acquisition in order to secure the Company’s potential claims against the
      Appco sellers for any breach of their representations, warranties and covenants
      under the stock purchase agreement. In addition, the Company incurred $1,947
      in
      closing costs related to the acquisition.





Appco
      is
      headquartered in Blountville, Tennessee and is primarily engaged in the
      distribution of petroleum fuels in eastern Tennessee, southwestern Virginia,
      eastern Kentucky, western North Carolina and southern West Virginia and in
      the
      operation of retail convenience stores in some of those regions. Appco is a
      part
      of the Titan Energy division.





The
      acquisition was accounted for as a purchase. The purchase price allocated to
      the
      acquired assets and assumed liabilities were determined using management
      estimates based on a model developed by a professional valuation group. The
      Company has allocated the purchase price as follows:





Cash
            
            $
            5,719Investment
                securities
            
            
            2,597Accounts
                receivable
            
            
            5,545Inventory
            
            
            7,888Real
                estate and fixed assets
            
            
            27,434Definte
                lived intangible assets
            
            
            900Goodwill
            
            
            7,177Indefinite-lived
                intangible assets
            
            
            2,100Other
                assets
            
            
            681Accounts
                payable
            
            
            (16,969
            )Notes
                payable
            
            
            (9,177
            )Other
                liabilities
            
            
            (1,948
            )Purchase
                price
            
            $
            31,947




11





The
      sources of funding for the purchase price were as follows:





Sources
                of funds for closing:Cash
            
            $
            2,092Investment
                securities
            
            
            2,481Greystone
                revolving debt facility
            
            
            14,909Yorkville
                Advisors proceeds from sale of real estate
            
            
            15,000Greystone
                term loan
            
            
            5,000Accounts
                payable
            
            
            750Retirement
                of notes payable
            
            
            (8,285
            )Purchase
                price
            
            $
            31,947




*Sale
      and Leaseback of Real Estate*





Immediately
      following the closing of the acquisition of Appco on September 17, 2007, Appco
      and its wholly-owned subsidiary Appco-KY, Inc. (“Appco-KY”) entered into a
      purchase and sale agreement with YA Landholdings, LLC and YA Landholdings 7,
      LLC
      pursuant to which Appco and Appco-KY sold certain property located in Kentucky,
      Tennessee and Virginia for $15,000 in cash. The proceeds were utilized to fund
      a
      portion of the acquisition cost of Appco. Certain properties were then leased
      back to Appco by YA Landholdings, LLC for a term of 20 years pursuant to the
      terms of a Land and Building Lease Agreement. The Land and Building Lease
      Agreement also contains four (4) five (5) year options to extend the term of
      the
      lease to a maximum of 40 years. The annual lease payments during each of the
      first five years of the term of the lease is $1,650. There was no gain or loss
      recorded associated with this transaction.





*Acquisition
      of USA Detergents*





The
      Company formed Titan Global Brands Division to integrate, protect and expand
      brand management capabilities and to identify and purchase other consumer
      product brands that can leverage and optimize growth from the Company's
      distribution channels. On October 16, 2007, the Company exercised its option
      to
      acquire 80% of the issued and outstanding capital of USA Detergents, Inc.
      (“USAD”) in exchange for one dollar pursuant to the Stock Purchase Agreement
      dated July 30, 2007 by and among the Company, USAD and USAD Metro Holdings,
      LLC,
      as amended. The Company’s results of operations for the nine months ended May
      31, 2008 include USAD’s results from the date the Company exercised its option
      to the end of the reporting period classified as discontinued operations. See
      additional discussion in Note 22.





USAD
      is
      headquartered in North Brunswick, New Jersey and is a manufacturer and
      distributor of value-branded home care products that leverages brand extensions
      and licensing agreements with consumer product conglomerates.





The
      acquisition was accounted for as a purchase. The purchase price allocated to
      the
      acquired assets and assumed liabilities were determined using management
      estimates based on a model developed by a professional valuation group. The
      Company has allocated the purchase price as follows:





Cash
            
            $
            6Accounts
                receivable
            
            
            4,367Inventory
            
            
            4,650Property,
                plant and equipment
            
            
            2,145Definte
                lived intangible assets
            
            
            2,560Goodwill
            
            
            6,569Other
                assets
            
            
            1,317Accounts
                payable
            
            
            (10,161
            )Notes
                payable
            
            
            (1,300
            )Revolving
                credit facility
            
            
            (10,153
            )Purchase
                price
            
            $
            -




12





*Acquisition
      of Secured Convertible Debt of Nexus Nano Electronics and Subsequent Surrender
      of Assets*





On
      November 2, 2007, Titan Nexus, Inc. (“Titan Nexus”), an indirect subsidiary of
      the Company, entered into a limited recourse assignment (the “Assignment”) with
      YA Global Investments, L.P. (“YA Global”). Pursuant to the Assignment, Titan
      Nexus was assigned all rights, title and interest to YA Global’s secured
      convertible debt position in Nexus Nano Electronics, Inc. (“Nexus Nano”), in the
      aggregate amount of $11,245, including principal and interest. The obligations
      are secured by all of Nexus Nano’s assets.





In
      consideration for the Assignment (i) the Company issued YA Global 2,000,000
      shares of common stock, valued at $2.00 per share, the price of the stock at
      the
      time of the closing, and (ii) Titan Electronics, a direct subsidiary of the
      Company, issued YA Global 103,503 shares of Titan Electronics series A
      convertible preferred stock valued at $7,245.





On
      November 5, 2007, the Company formed Titan Electronics Group (“Titan EG”). Titan
      EG is currently a division of the Company and is a wholly owned subsidiary.
      Titan Nexus, along with the Company’s legacy subsidiaries, Titan East and Titan
      Electronics are now a part of Titan EG. The Company anticipates that Titan
      EG
      will be divested and spun off into a separate entity via a stock
      dividend.





On
      November 30, 2007, Titan Nexus completed the final step in the acquisition
      of
      the assets of Nexus Nano, a manufacturer of custom circuit boards for aerospace,
      defense and other industries. The surrender of assets was completed by agreement
      between Nexus Nano as debtor and Titan as creditor. The purchase price allocated
      to the surrendered assets and assumed liabilities was based on fair value as
      of
      the surrender date as determined by management. The fair value of the
      surrendered assets is presented below:





Cash
            
            $
            3Accounts
                receivable
            
            
            338Inventory
            
            
            1,173Fixed
                assets
            
            
            1,533Goodwill
            
            
            8,571Other
                assets
            
            
            27Accounts
                payable
            
            
            (10
            )Short
                term debt
            
            
            (180
            )Long
                term debt
            
            
            (210
            )Value
                of common and preferred stock issued
            
            $
            11,245




*Acquisition
      of Assets in Global Brands Segment via a Secured Party Transfer of Global Brand
      Marketing, Inc. Collateral from Greystone Business Credit II,
      L.L.C.*





On
      December 14, 2007, the Company formed Titan Apparel, Inc. (“TAPP”) and acquired
      the collateral of Global Brand Marketing Inc. (“GBMI”), a California
      Corporation, through a Secured Party Bill of Transfer with Greystone Business
      Credit II, L.L.C. (“GBC”). The purchase price of the collateral was $7,961 and
      was financed through a Loan and Security Agreement with GBC. The Company’s
      results of operations for the nine months ended May 31, 2008 include TAPP’s
      results from the date of formation to the end of the reporting
      period.





TAPP
      is
      headquartered in Carpinteria, California and is an owner of several footwear
      brands and the Global Feet retail store chain and an authorized footwear
      marketer. TAPP designs, develops and markets stylish footwear for men, women
      and
      children. The primary reason for the acquisition was to facilitate the
      development of the Company’s Global Brands segment with an opportunistic
      acquisition of undervalued assets accompanied by a successful seasoned
      management team. The acquisition was accounted for as a purchase. The purchase
      price allocation of the acquired assets was determined by management. There
      were
      no definite or indefinite lived intangible assets established as part of the
      purchase price allocation. Management allocated the purchase price to the most
      liquid assets first at their respective fair values as of the date of the
      acquisition and then to the non-current assets (fixed assets) at their
      respective fair values as of the date of acquisition in succession until the
      carrying value of the acquired assets equaled the purchase price. The Company
      has allocated the purchase price as follows:


13




Cash
            
            $
            153Accounts
                receivable
            
            
            3,459Inventory
            
            
            3,437Fixed
                assets
            
            
            912Purchase
                price
            
            $
            7,961




*Proforma
      Operating Results*





Unaudited
      proforma operating results for the Company, assuming the acquisition of Appco
      occurred as of September 1, 2006, the beginning of fiscal year 2007, are
      presented below. The proforma operating results for Nexus Nano are not included
      due to immateriality. The proforma operating results for TAPP are not included
      because the predecessor company does not have the accounting records necessary
      to produce financial statements for the necessary periods.





Three Months
            
            Nine MonthsEnded
            
            Ended5/31/2007
            
            5/31/2007Net
                sales
            
            $
            146,810
            
            $
            398,400Net
                earnings (loss) applicable to common stockholders
            
            
            5,083
            
            
            (3,408
            )Net
                earnings (loss) applicable to common stockholders per share:Basic
                earnings (loss) per common share
            
            $
            0.10
            
            $
            (0.07
            )Diluted
                earnings (loss) per common share
            
            $
            0.04
            
            $
            (0.07
            )




*Divestiture
      of CDMA Wireless Assets*





On
      January 25, 2008, the Company’s subsidiary, Titan Wireless RM, Inc., completed a
      sale of certain assets for $1,000 and the assumption of certain liabilities
      to
      Boomerang Wireless, Inc. The Company received a Promissory Note from Boomerang
      for $1,000 bearing interest at the prime interest rate plus four percent and
      the
      note is fully reserved as of the date of acquisition. A reserve was established
      for the note based on the poor credit worthiness of Boomerang and its lack
      of
      stable financing. The Promissory Note is to be paid to the Company in four
      annual installments with interest in arrears beginning on December 31, 2008.
      The
      Company has obtained UCC-1 security interests in the accounts receivable,
      inventory, equipment and other assets of Boomerang as collateral to the
      Promissory Note. Boomerang also assumed certain liabilities of Titan Wireless
      RM, Inc as additional consideration to the Company. The Company retained its
      accounts receivable and retained its legacy wireless brand names Bravo Cellular
      and Picante Movil. The divestiture of the wireless assets was not treated as
      discontinued operations because this component of the Company and the
      Communications Segment is not clearly distinguishable from the rest of the
      Communications Segment by having its own financial statements. The Company
      recorded a gain on disposal of assets of $2,030 as a result of the transaction
      as liabilities assumed by the buyer were greater than the carrying value of
      assets divested.





*Titan
      PCB East Asset Purchase Agreement*





On
      May
      20, 2008, the Company entered into an Asset Purchase Agreement with Denis
      McCarthy dba Time Sensitive Circuits, a management led buy-out team (“TSC”), to
      sell substantially all of the assets of the Company’s Titan PCB East subsidiary.
      The agreement calls for the assumption by TSC of Titan PCB East’s debt with GBC
      and certain other liabilities. As of July 15, 2008, the transaction had not
      closed due to uncertainties surrounding principally provisions of the agreement
      regarding obtaining approval for the transaction by GBC and resolving open
      issues with the landlord of the operation’s facilities in Amesbury,
      Massachusetts. Management continues to account for the operations of Titan
      PCB
      East as continuing because the sale of the asset group is not probable due
      to
      the identified uncertainties.


14




***Note
      3 – Recent Accounting Pronouncements***





***SFAS
      No. 141(R)***


SFAS
      No.
      141(R) - In December 2007, the FASB issued FASB 141(R), "Business Combinations"
      of which the objective is to improve the relevance, representational
      faithfulness, and comparability of the information that a reporting entity
      provides in its financial reports about a business combination and its effects.
      The new standard requires the acquiring entity in a business combination to
      recognize all (and only) the assets acquired and liabilities assumed in the
      transaction; establishes the acquisition-date fair value as the measurement
      objective for all assets acquired and liabilities assumed (including contingent
      payments); requires expensing of all costs incurred in the transaction; and
      requires the acquirer to disclose to investors and other users all of the
      information they need to evaluate and understand the nature and financial effect
      of the business combination.





This
      Statement applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. An entity may not apply it
      before that date.





The
      Company is currently evaluating SFAS 141(R), and has not yet determined its
      potential impact on its future results of operations or financial
      position.





***Note
      4 – Income (Loss) per Common Share***





The
      Company computes net loss per share in accordance with Statement of Financial
      Accounting Standards No. 128 *“Earnings
      per Share”* (“SFAS
      128”) and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions
      of SFAS 128 and SAB 98, basic net income or loss per share is computed by
      dividing the net income or loss available to common stockholders for the period
      by the weighted-average number of common shares during the period. Diluted
      net
      income or loss per share is computed by dividing the net income or loss
      available to common stockholders for the period by the total number of common
      and common equivalent shares outstanding during the period.





During
      the period when they would be anti-dilutive, common stock equivalents (which
      during the three months ended May 31, 2008 consisted of employee
      options/warrants to purchase 1,342,500 common shares, warrants to purchase
      12,230,000 common shares and preferred stock convertible into 3,229,738 common
      shares) are not considered in the computations. During the three months ended
      May 31, 2007 the common stock equivalents that were anti-dilutive and therefore
      not considered in the calculations consisted of warrants to purchase 10,200,000
      shares and preferred stock convertible into 3,027,250 common shares. During
      the
      period when they would be anti-dilutive, common stock equivalents (which during
      the nine months ended May 31, 2008 consisted of employee options/warrants to
      purchase 1,582,500 common shares, warrants to purchase 22,250,000 common shares
      and preferred stock convertible into 3,229,738 common shares) are not considered
      in the computations. During the period when they would be anti-dilutive, common
      stock equivalents (which during the nine months ended May 31, 2007 consisted
      of
      options to purchase 845,000 common shares, warrants to purchase 11,100,000
      common shares, and preferred stock convertible into 3,027,250 common shares)
      are
      not considered in the computations.





***Note
      5 - Inventory***





Inventory
      consisted of the following:





**5/31/2008**
            
            **8/31/2007******Raw
                materials and finished subassemblies
            
            $
            2,408
            
            $
            597Work
                in process
            
            
            808
            
            
            566Finished
                goods
            
            
            12,241
            
            
            56415,457
            
            
            1,727Less
                inventory reserves
            
            
            (1,901
            )
            
            (64
            )$
            13,556
            
            $
            1,663




The
      reserve for obsolescence of $1,901 and $64 at May 31, 2008 and August 31, 2007,
      respectively, related primarily to raw material inventory in the Electronics
      and
      Homeland Security division.


15





***Note
      6 - Greystone Business Credit***





*Communications
      and Electronics and Homeland Security Divisions*


On
      December 29, 2006, the Company, together with all of its subsidiaries, entered
      into a credit facility with Greystone. The new credit facility with Greystone
      initially included a revolving line of credit (“Revolver”) in the maximum amount
      of $15,000 and also includes senior term loans of up to $7,950.





The
      revolver expires in December 2009, subject to earlier termination under certain
      circumstances. The revolving credit facility bears interest at a rate of 1.5%,
      plus the prime interest rate. Interest payments on the revolver are due monthly
      with principal paid at maturity. Revolver loans will be advanced based upon
      85%
      of eligible accounts receivable and up to a maximum of 85% of eligible
      inventory, subject to certain limitations. The Company is obligated to use
      any
      refunds on commercial taxes including Universal Service Fees (“USF”) to repay
      the term loans.





The
      senior term loans bear interest at a rate of 6%, plus the prime interest rate,
      provided that such rate is reduced by .5% for each reduction of principal by
      $1,000. The senior term loans were initially to be paid off in 48 equal
      installments of $135 per month which will result in repayment of the principal.
      At May 31, 2008, the Term Loan A had an interest rate of 11% and Term Loan
      B had
      an interest rate of 10%.





The
      Company granted a security interest in all of its assets to Greystone as
      security for the financing facility. Such security included a pledge of all
      trademarks and the stock of all subsidiaries.





The
      Company paid a commitment fee of $369 and will pay an annual commitment fee
      of
1⁄2% of the facility, payable on each anniversary. A loan servicing fee of .3%
      is
      payable each month based on the amount outstanding under the revolving facility.
      There is also a $20 per month administrative fee. In the event of a termination
      of the facility, an early termination fee will be payable. Such fee equals
      1% of
      the maximum revolving facility and the term loans if the termination occurs
      during the first year. As additional consideration for the facility, the Company
      issued to Greystone: (i) 500,000 shares of common stock valued at $505 which
      was
      recorded as a debt discount, and (ii) a warrant to purchase 500,000 shares
      of
      common stock at a price of $1.00 per share, exercisable for a period of five
      years which was recorded as a derivative liability. The Company is obligated
      to
      register the shares of common stock and the common stock underlying the
      warrant.





On
      February 14, 2007, the Company entered into Amendment #1 with Greystone. Through
      the amendment, Greystone increased the Company’s Revolver line of credit from
      $15,000 to $18,000 and provides for senior term loans of up to $7,608. The
      Company is required to have a minimum unused availability under the line in
      increasing amounts between $200 and $1,000.





On
      June
      1, 2007, the Company entered into Amendment #2 with Greystone. Through the
      amendment, the Company received approval from Greystone to transfer 100% of
      the
      issued and outstanding shares of common stock related to StartTalk from Oblio
      to
      Titan Global Holdings.





On
      June
      11, 2007, the Company received the proceeds from tax refunds owed related to
      Federal Excise Tax (“FET”). The Company used $3,232 of the proceeds to repay
      Term Loan B in full.





On
      July
      25, 2007, the Company entered into Amendment #3 with Greystone. Through the
      amendment, Greystone agreed to re-establish Term Loan B and advance the Company
      up to $1,500. On August 23, 2007, the Company entered into Amendment #4 with
      Greystone. Through the amendment, Greystone agreed to increase Term Loan B
      by
      $500 up to a maximum of $2,000. The monthly principal payment for Term Loan
      A is
      $18 and the new monthly principal payment for reestablished Term Loan B is
      $83.
      The amended senior Term Loan B is to be paid off in 24 equal installments,
      which
      will result in repayment of the principal. The terms for Loan A were not
      changed.





On
      September 17, 2007, the Company entered into Amendment #5 with Greystone.
      Through the amendment, Greystone consented to the debt issuance in favor of
      YA
      Global Investments, L.P. of $6,000 and agreed to a Term Loan C advance of
      $5,000. This three-year note carries an annual interest rate of 1.5% in excess
      of the prime interest rate and is fully collateralized with $5,000 of cash
      held
      in a restricted account. The entire balance of Term Loan C is due and payable
      on
      the maturity date of the loan.





On
      October 17, 2007, the Company entered into Amendment #6 with Greystone. Through
      the amendment, Greystone consented to the formation of Titan Card Services,
      Inc.


16




On
      October 16, 2007, the Company entered into Amendment #7 with Greystone. Through
      the amendment, Greystone reduced the amount of the minimum unused availability
      to $0 and agreed to increase the minimum unused availability by $16 each month
      up to a maximum amount of $750. In addition, the repayment schedule was modified
      for Term Loan B to $43 per month.





On
      November 30, 2007 the Company entered into Amendment #8 with Greystone. The
      amendment decreased the interest rate on Term Loan C from 1.5% above the prime
      rate to 0.75% per annum. The interest rate on Term Loan C was lowered to 0.75%
      because the loan was 100% collateralized by cash held in a non-interest bearing
      escrow at Greystone which approximates the market rate of interest for loans
      with this type of collateral.





On
      March
      3, 2008, effective December 2007, the Company entered into Amendment #9 with
      Greystone. Through the amendment, Greystone consented to the formation of Titan
      Communications, Inc.





On
      March
      3, 2008, effective February 11, 2008, the Company entered into Amendment #10
      with Greystone. The amendment created Term Loan D, as an advance to Titan Nexus
      and increased the revolver amount to $20,000; $7,000 to the Electronics and
      Homeland Security segment and $13,000 to the Communications segment. Term Loan
      D
      shall be repaid in monthly installments beginning March 1, 2008 with the balance
      due on the maturity date of February 1, 2011. The amendment also modified the
      interest rates as follows: all revolving loans have an interest rate of 1.5%
      per
      annum in excess of the prime rate except the revolving loans owed by Titan
      Nexus
      in excess of $1,000 which have an interest rate of 4.5% per annum in excess
      of
      the prime rate and the interest rates shall not be lower than 6.0% per annum,
      the interest rate on Term Loan A shall be 6.0% per annum in excess of the prime
      rate and shall be reduced by one-half of one percent for every $1,000 reduction
      in the term loan but not lower than 5.0% per annum in excess of the prime rate,
      the interest rate for Term Loan B is 5.0% per annum in excess of the prime
      rate,
      the interest rate for Term Loan C is 0.75% per annum and the interest rate
      for
      Term Loan D is 6.0% per annum in excess of the prime rate.  `





As
      of May
      31, 2008, Term Loans A and B are recorded at $2,629 and the revolver has a
      balance of $15,247 with an excess available credit of $0 based on actual
      borrowing capacity. Interest rates on the revolver were 3.5% on $11,830 and
      6.5%
      on $3,417.





On
      March
      5, 2008, Term Loan C’s outstanding balance of $5,000 was paid in full. Term Loan
      D has an outstanding balance of $778 and an interest rate of 11% as of May
      31,
      2008.





**Debt
      Covenant Restrictions Related to Communications and Electronics and Homeland
      Security Debts**





Maximum
                Cumulative Net Loss:
            
            $1,000
                on a cumulative basis for the period from September 1, 2006 through
                the
                end of the TermMaximum
                Leverage Ratio:
            
            Not
                applicableLimitation
                on Purchase Money Security Interests:
            
            $1,000Limitation
                on Equipment Leases:
            
            $1,000Additional
                Financial Covenants:
            
            None




The
      Company has met all covenant terms except the maximum cumulative net loss.
      The
      Company has received a written waiver from Greystone related to this covenant
      through May 31, 2009. No penalties have been assessed related to this
      violation.





*Energy
      Division*


On
      September 17, 2007, the Company acquired Appco. As part of the acquisition,
      the
      Company entered into a credit facility including a revolving line of credit
      in
      the maximum amount of $20,000 less the outstanding balance under Term Notes
      A, B
      and C under the Loan and Security Agreement dated as of December 29, 2006 (see
      above). The credit facility also includes term loans of up to $5,200. An
      aggregate of approximately $14,909 was advanced under the loan and credit
      facility related to the initial Appco acquisition. Advances will be based upon
      (i) 90% of eligible accounts receivable, and (ii) the sum of up to 45% of
      eligible convenience store inventory plus up to 75% of eligible fuel inventory.
      The borrower is required to have a minimum outstanding balance of $10,000.
      The
      revolving credit facility and the term loans bear interest at a rate of 1.5%,
      plus the prime interest rate. A loan servicing fee of .25% is payable each
      month
      based on the average daily outstanding balance outstanding under the revolving
      facility and the term loans. In the event of a termination of the facility,
      an
      early termination fee will be payable. Such fee equals 1% of the maximum
      revolving facility and the term loans if the termination occurs during the
      first
      year, which is reduced to 0.50% if termination occurs in the second year and
      0.25% if terminated thereafter. The borrower will also be assessed credit
      accommodation fees of 2% of the face amount of the letter of credit for up
      to 60
      days and 1% of the face amount of such letter of credit for each 30 day period
      thereafter. The loan and line of credit is due September 16,
      2012.


17




The
      Company issued Greystone a warrant to purchase 500,000 shares of common stock
      at
      a price of $2.00 per share, exercisable for a period of five years. Titan is
      obligated to register the common stock underlying the warrant within six months
      of the closing or by March 17, 2008. As of July 14, 2008, the common stock
      underlying the warrant has not yet been registered. No penalties have been
      assessed by Greystone related to this obligation.





At
      May
      31, 2008 the revolver had an outstanding balance of $10,293 and the term notes
      had a carrying value of $4,035 (net of discount of $523) and an excess
      availability and an excess available credit of $0 based on actual borrowing
      capacity. The interest rate on the revolver and term loans was 7.5% at May
      31,
      2008.





*Global
      Brands Division Including Discontinued Operations of USAD*


On
      October 16, 2007 the Company assumed a note as a result of the USAD acquisition.
      The note was held by Greystone and had an issue date of December 27, 2006 in
      the
      amount of a $10,000 line of credit which will mature on January 1, 2010. The
      line of credit includes $500 for equipment advances. Advances on the revolver
      are based on a formula related to certain levels of eligible accounts receivable
      and inventory (as defined in the agreement). The agreement has a term of three
      years with automatic three-year extensions unless either party gives notice
      to
      the other of its intention to terminate the agreement.





Advances
      under the equipment advance facility are repayable in 84 monthly installments
      of
      principal and interest commencing February 1, 2007; however, such indebtedness,
      if any, will become due and payable on the earlier of (a) repayment of all
      revolver advances and the termination of any commitment by Greystone to make
      revolver advances under the agreement, and (b) the agreement maturity date.
      All
      advances bear interest at the prime rate plus 1% per annum.





The
      Company also assumed four term notes designated A, B, C & D which have an
      interest rate of 6.0%. As of May 31, 2008 the revolver has an outstanding
      balance of $5,330 and the term notes have a balance of $3,885. The monthly
      principal payment for Term Loan A, B, C & D is $72.  As
      collateral for advances under the credit facility, the Company has granted
      Greystone a security interest in all of its assets. The revolver and lines
      have
      an excess available credit of $0 based actual borrowing capacity. The interest
      rate on the revolver and term loans was 6.0% at May 31, 2008.





On
      December 14, 2007, the Company through its subsidiary TAPP entered into a Loan
      and Security Agreement in connection with a Secured Party Bill of Transfer
      of
      the collateral of GBMI with Greystone. The credit facility includes a revolving
      line of credit in the maximum amount of $14,000. The credit facility also
      includes a term loan of up to $2,000. Loans will be advanced on the revolver
      based on a formula related to certain levels of eligible accounts receivable
      and
      inventory as defined in the agreement. The agreement has a maturity date of
      December 29, 2009. The revolving credit facility bears interest at 3% per annum
      in excess of the prime rate for a period of six months from the date of the
      loan
      and security agreement and 5% thereafter and the term loan bears interest at
      a
      rate of 5% per annum in excess of the prime rate for a period of six months
      from
      the date of the loan and security agreement and 7% thereafter. The agreement
      contains a provision for a net sales participation fee calculated as 5% of
      net
      sales to be applied to the outstanding balance of the term loan until the term
      loan is paid in full and thereafter paid as a fee. The agreement contains a
      provision for a sharing fee calculated as 25% of the net profits for the first
      four full fiscal quarters occurring after the loan agreement payable when the
      financial statements of the eligible fiscal quarter are delivered.  As
      collateral for advances under the credit facility, TAPP has granted Greystone
      a
      security interest in all of its assets including all trademarks and patents.
      The
      Company guaranteed the obligations of TAPP up to $250. At May 31, 2008 the
      revolver had an outstanding balance of $5,707 and the term note had a balance
      of
      $1,825 and an excess available credit of $0 based on actual borrowing capacity.
      The interest rates on the revolving credit facility and term loans were 8%
      and
      10%, respectively, at May 31, 2008.




18




***Note
      7 – YA Global***





On
      September 17, 2007, the Company executed a secured convertible debenture in
      the
      principal amount of $6,000, all of which was advanced immediately. The Company
      pledged all of its assets and rights to secure this debenture subordinate to
      Greystone. Interest on the debenture accrues at 10% per annum. The debenture
      is
      convertible at the option of the holder into shares of common stock of Titan
      at
      a price of $2.25 per share. The debenture matures on September 17, 2010.
      Beginning on May 1, 2008 and continuing on the first business day of each
      successive month, the Company will make payments by converting such installment
      payment into shares of common stock provided certain equity conditions are
      met.
      The conversion price is equal to the lower of (i) $2.25 per share, or (ii)
      90%
      of the lowest daily volume weighted average price of the common stock during
      the
      15 consecutive trading days immediately preceding the conversion date. The
      Company may also at its option choose to redeem a portion or all of the
      installment payment by paying such amounts in cash plus a redemption premium
      of
      10%. The Company may defer the payment of any installment payment to the
      maturity date if the volume weighted average price of the common stock equals
      110% of the applicable conversion price for the consecutive 5 trading days
      prior
      to the notice due date for the applicable installment payment. Each installment
      amount shall be equal to all accrued and unpaid interest, plus the lesser of
      (a)
      the product of (i) $200 multiplied by a fraction of which the numerator is
      the
      original principal amount and the denominator of which is the aggregate purchase
      price paid under the Purchase Agreement and (b) the principal amount of the
      Debenture on the installment payment date.





The
      Company has the right to redeem a portion or all amounts outstanding under
      the
      Debenture prior to the maturity date at a premium of 10% provided that (i)
      the
      Volume Weighted Average Price (VWAP) of Titan’s Common Stock is less than the
      conversion price of $2.25; (ii) no event of default has occurred and (iii)
      the
      underlying Registration Statement is effective.





The
      Company also issued YA Global warrants to purchase 525,000 shares of common
      stock at a price of $2.47 per share and 525,000 shares of common stock at a
      price of $2.81 per share, exercisable for a period of five years. Titan is
      obligated to register the common stock underlying the warrant within 90 days
      of
      the closing. The Company has not yet registered the common stock underlying
      the
      warrants. The Company has received a waiver from YA Global related to this
      deficiency. No penalties have been assessed related to this
      violation.





The
      note
      was issued with a beneficial conversion feature. At issuance, the note was
      recorded at $1,831 with an associated discount of $4,169. The discount will
      be
      amortized over the 36 month term of the note. At May 31, 2008, the note had
      a
      recorded balance of $2,141 with an associated unrecognized discount of $3,859,
      no payments have been made and the Company has not been notified of any
      defaults.





***Note
      8 – Seller-Financed Notes and Preferred Stock***





Seller-financed
      debt was provided in connection with the acquisition of Oblio on August 12,
      2005, and the Company issued to the Seller, F&L, LLP (“F&L”) formerly
      known as Oblio Telecom, LLP, an 18-month promissory note in the principal amount
      of $2,500. The note matured on February 12, 2007 and carried an interest rate
      of
      1% per annum. The note was recorded upon issuance at its fair value of $2,245,
      and the associated discount of $255 was amortized over the 18-month term of
      the
      note. The effective interest rate on the note was approximately 7.50%.





Additional
      seller financing was provided upon the closing of the Oblio acquisition in
      the
      amount of $2,323 in a contractual short term obligation that was not
      interest-bearing. On December 14, 2005, a promissory note was executed
      acknowledging this amount due to the Seller. The Note bears interest of 4%,
      and
      had an initial maturity date of May 31, 2006 which was extended to March 31,
      2009.





On
      December 29, 2006, F&L agreed to amend the terms of the Series A Preferred
      Stock originally issued to them as part of the Oblio acquisition. The provisions
      related to potential additional value of the preferred shares as a result of
      attainment of certain financial goals were eliminated and the stated value
      of
      the preferred stock was reduced from $9,000 to $4,500. The preferred stock
      agreement was modified as follows:


·
            The
                amended Series A Preferred Stock includes the first tranche only
                and is a
                fixed 3,000 shares with a stated value of $1.50 per
                share.


·
            Holders
                of the Series A Preferred are entitled to preferential cash dividends
                out
                of the Company’s funds at an annual rate of 3% of the then current stated
                value, payable quarterly.


·
            All
                shares must be redeemed by March 31,
                2009.


·
            The
                Series A Preferred is convertible into a number of shares of Common
                Stock
                equal to the then stated value (plus accrued and unpaid dividends)
                divided
                by $1.50 (the “Conversion Price”). The Conversion Price is subject to
                adjustments as a result of, among other things, stock splits and
                reclassifications and contains initial anti-dilution provisions including
                adjustments to the Conversion Price in the event of the Company issuing
                Common Stock at prices below the initial Conversion Price.


19





·
            The
                Series A Preferred is non-voting, subordinate to all Greystone debt
                and
                has a preference in liquidation of $12,345 as of May 31,
                2008.





On
      the
      same date, pursuant to the amendment, F&L agreed to extend the maturity date
      of the notes to March 31, 2009, and increase the interest rate to 5% per annum.
      Oblio will make monthly payments of $179, commencing January 31, 2007. In
      connection with the amendment, the Company issued 250,000 shares of common
      stock
      valued at $253 to F&L LLP. In addition, the Company agreed to guaranty the
      payment to be made by Oblio. No payments have been made since July 2007 and
      the
      Company is currently being sued by F&L, as discussed in Note
      19.





In
      accordance with SEC Accounting Series Release No. 268 *,
      Presentation in Financial Statements of "Redeemable Preferred Stock",* the
      Company has classified this preferred stock as well as the accrued dividends
      as
      long-term liability. Additionally, due to the potential variability of the
      Conversion Price as discussed above, the Company is required to record the
      embedded conversion feature of the Series A Preferred as a liability at fair
      value and to re-measure that value each reporting period with changes being
      charged to operations.





As
      of May
      31, 2008, the Company has recorded $3,570 as debt related to the note and $4,845
      related to the preferred stock (which includes $345 in accrued dividends).
      No
      dividend payments have been made as of July 15, 2008.





***Note
      9 – Deferred Purchase Consideration***





On
      May
      11, 2007, the Company acquired certain assets of Ready Mobile, LLC. Pursuant
      to
      the terms of the Asset Purchase Agreement, the Company agreed to pay
      consideration equal to 55% of earnings before interest, taxes, depreciation
      and
      amortization (EBITDA) for the first 36 months subsequent to the closing, payable
      monthly in arrears. As of August 31, 2007, the Company had accrued $3,401 for
      deferred purchase consideration which was management’s estimate of the total
      amount to be paid for the asset purchase.





As
      discussed further in Note 15, the Company determined to cease the distribution
      of CDMA prepaid wireless handsets and the related airtime through its subsidiary
      Titan Wireless RM, Inc, due to the increasing capital requirements associated
      with the business model at Titan Wireless, the Company’s wireless operating
      subsidiary. As such, the Company impaired the goodwill and intangible assets
      related to Ready Mobile asset purchase as of November 30, 2007. This impairment
      was offset by a reduction of the Deferred Purchase Consideration to $267 as
      of
      November 30, 2007. Furthermore, as the remaining assets associated with the
      wireless operations were sold on January 25, 2008, (see additional discussion
      in
      Note 2), the accrual for deferred purchase consideration was reduced to $0
      as of
      January 25, 2008.





***Note
      10 – Titan Electronics Convertible Preferred Stock***





On
      November 30, 2007, Titan Electronics, a direct subsidiary of the Company and
      the
      parent company of Titan Nexus, issued YA Global 103,503 shares of its series
      A
      convertible preferred stock (“Titan Electronics Preferred Stock”), which
      contains the following provisions:





•
upon
      any dissolution, liquidation, winding-up or change of control of Titan
      Electronics, the Titan Electronics Preferred Stock has a liquidation value
      of
      $70 per share, or an aggregate of $7,245;





•
The
      Titan Electronics Preferred Stock is convertible into shares of Titan
      Electronics common stock and initially each share converts into 70 shares of
      common stock. At such time as the common stock commences trading, the conversion
      ratio shall be amended to the product of the stated value, divided by the lower
      of (i) the value weighted average price VWAP of the Titan Electronics common
      stock for the first 30 trading days, (ii) the VWAP value weighted average price
      for the Titan Electronics common stock for the 20 trading days ending on the
      date which is one year after the initial trading date, or (iii) 85% of the
      lowest volume weighted average price during the 20 trading days immediately
      preceding the conversion date; provided that in no event shall such amount
      be
      less than the figure obtained by dividing $2,000 by the number of shares of
      common stock of Titan Electronics outstanding on a fully diluted basis, not
      including shares issuable to YA Global or their assignee. The Titan Electronics
      Preferred Stock contains customary value weighted anti-dilutions provisions.
      Holders of Titan Electronics Preferred Stock may not convert into shares of
      Titan Electronics common stock which would result in the holder owning more
      than
      4.99% of the then outstanding shares of common stock, except on 65 days’ prior
      notice;


20




•
The
      Titan Electronics Preferred Stock votes together with the Titan Electronics
      common stock and has the same number of votes as the number of shares of common
      stock into which the shares are convertible;





•
Titan
      Electronics has the right to redeem the Titan Electronics Preferred Stock on
      30
      days notice at any time in cash equal to the stated value of the shares being
      redeemed; and





•
In
      the
      event at any time after the date which is 18 months from the issuance date
      of
      the shares of Series A Preferred Stock, the Holder has the right to put the
      shares to Titan Electronics solely in the event (i) Titan Electronics has not
      acquired materially all of the assets of Nexus Nano, and (ii) the Titan
      Electronics common stock is not then trading. The redemption price equals the
      stated value.





In
      accordance with SEC Accounting Series Release No. 268 *,
      Presentation in Financial Statements of "Redeemable Preferred Stock",* the
      Company has classified this preferred stock as a long-term liability at face
      value.





***Note
      11 – Long-Term Debt***





Long-term
      debt consisted of the following:





Issue
            
            Expiration
            
            
            
            Outstanding
                atDate
            
            Date
            
            Instrument
            
            5/31/200808/12/2005
            
            
            03/31/2009
            
            $4,823
              Seller-Financed Debt
            
            $
            3,57012/29/2006
            
            
            02/01/2011
            
            $20,000
              Secured Revolving Note
            
            
            15,24712/29/2006
            
            
            02/01/2011
            
            $7,608
              Term Notes A & B
            
            
            2,62909/17/2007
            
            
            09/17/2012
            
            $20,000
              Secured Revolving Note
            
            
            10,29309/17/2007
            
            
            09/17/2012
            
            $5,200
              Term Notes
            
            
            4,55809/17/2007
            
            
            09/17/2010
            
            $6,000
              Convertible Debentures
            
            
            6,00011/30/2007
            
            
            08/31/2010
            
            Other
            
            
            27012/14/2007
            
            
            12/29/2009
            
            $14,000
              Secured Revolving Note
            
            
            5,70712/14/2007
            
            
            12/29/2009
            
            $2,000
              Term Notes
            
            
            1,82502/11/2008
            
            
            02/01/2011
            
            $830
              Term Note D
            
            
            778Total
                debt
            
            
            50,878Less
                discount from warrants and derivatives
            
            
            (4,383
            )Total
                carrying value of debt
            
            
            46,495Less
                current portion of long-term debt
            
            
            (6,732
            )Total
                long-term debt
            
            $
            39,763




Long-term
      debt repayments are due as follows:





Fiscal
              Year
            
            F&L
                Note
            
            YA
                Global
            
            Other
            
            Greystone
              Revolvers
            
            Greystone
              Term
                Debt
            
            Total
                Long-
              Term
                Debt2008
            
            $
            3,570
            
            $
            -
            
            $
            120
            
            $
            -
            
            $
            3,042
            
            $
            6,7322009
            
            
            -
            
            
            -
            
            
            120
            
            
            -
            
            
            1,226
            
            
            1,3462010
            
            
            -
            
            
            -
            
            
            30
            
            
            5,707
            
            
            2,899
            
            
            8,6362011
            
            
            -
            
            
            6,000
            
            
            -
            
            
            15,247
            
            
            1,331
            
            
            22,5782012
            
            
            -
            
            
            -
            
            
            -
            
            
            10,293
            
            
            1,293
            
            
            11,586$
            3,570
            
            $
            6,000
            
            $
            270
            
            $
            31,247
            
            $
            9,791
            
            $
            50,878




***Note
      12 - Derivative Financial Instrument Liability***




Pursuant
      to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
      as amended, and EITF Issue No. 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, A Company’s Own Stock, the
      Company has identified certain embedded and free-standing derivative
      instruments. Generally, where the ability to physical or net-share settle an
      embedded conversion option or free standing financial instrument is not deemed
      to be within the control of the Company, the embedded conversion option is
      required to be bifurcated and both the free-standing instruments and bifurcated
      conversion feature are accounted for as derivative liabilities.


21




At
      each
      reporting date, the Company estimates the fair values of all derivatives and
      changes in the fair value are charged to operations. For embedded and
      free-standing derivatives valued using the Black-Scholes option pricing model
      the following assumptions were used: (1) contractual term of 3 to 7 years;
      (2)
      volatility of 115%, (3) risk free interest rates between 4.11% and 4.70% and
      (4)
      dividend rate of 0%.




The
      fair
      value of the individual long-term embedded and free standing derivatives at
      May
      31, 2008 is as follows:





**Issue
                Date**
            
            **Expiration**
              **Date**
            
            **Instrument**
            
            **Exercise**
              **Price****per**
              **Share**
            
            **5/31/2008**9/17/07
            
            9/17/12
            
            Long-term
              fair value of conversion feature of convertible debenture
            
            
            
            
            $
            5,795**Long-term
                embedded derivatives**
            
            
            
            
            5,7953/24/06
            
            3/24/13
            
            6,750,000
              Warrants
            
            $
            0.23
            
            $
            2,69910/12/06
            
            10/12/11
            
            250,000
              Warrants
            
            $
            1.00
            
            
            6310/12/06
            
            10/12/11
            
            250,000
              Warrants
            
            $
            1.10
            
            
            6612/29/06
            
            12/29/11
            
            500,000
              Warrants
            
            $
            1.00
            
            
            1439/17/07
            
            9/17/12
            
            500,000
              Warrants
            
            $
            2.00
            
            
            1249/17/07
            
            9/17/12
            
            525,000
              Warrants
            
            $
            2.47
            
            
            1179/17/07
            
            9/17/12
            
            525,000
              Warrants
            
            $
            2.81
            
            
            108**Total
                long-term free-standing derivatives**
            
            
            
            
            3,3208/12/05
            
            3/31/09
            
            Long-term
              fair value of conversion feature of Oblio Series A Preferred Stock
            
            $
            1.50
            
            $
            -**Total
                embedded and free-standing derivative liabilities**
            
            
            
            $
            9,115




***Note
      13 – Related-Party Notes Payable***





On
      September 28, 2007, the Company entered into a 6.5% promissory note with Frank
      Crivello, managing partner of the Crivello Group (a stockholder). The maturity
      date of the note was March 28, 2008. As of May 31, 2008, the outstanding balance
      of the note payable was $283. Payment on the note has not been made and the
      revised maturity date has not been determined as of July 15, 2008.





On
      February 25, 2008, the Company, through its Titan PCB East subsidiary, entered
      into a 10% promissory note with The Irrevocable Children’s Trust (a
      stockholder). The note has a six-month term with all interest and principal
      due
      at maturity. As of May 31, 2008, the outstanding balance of the promissory
      note
      payable was $214.





On
      February 26, 2008, the Company, through its Titan Electronics subsidiary,
      entered into a 10% promissory note with The Irrevocable Children’s Trust (a
      stockholder). The note has a six-month term with all interest and principal
      due
      at maturity. As of May 31, 2008, the outstanding balance of the promissory
      note
      payable was $200.





On
      February 29, 2008, the Company entered into a 10% promissory note with The
      Irrevocable Children’s Trust (a stockholder). The note has a six-month term with
      all interest and principal due at maturity. As of May 31, 2008, the outstanding
      balance of the promissory note payable was $448.





On
      February 29, 2008, Titan Electronics received a cash advance of $20 from Mike
      Kadlec on a $70 promissory note dated March 4, 2008. The $70 promissory note
      was
      replaced by an installment note dated May 23, 2008 for $390. The installment
      note has a maturity date of May 23, 2010, bears interest at 8.5% payable monthly
      beginning July 15, 2008 and calls for monthly payments of $15 for the first
      twelve months and $17.5 for months thirteen through twenty-four. During the
      three months ended May 31, 2008, additional cash advances were made under the
      note totaling $349 bringing the total amount of cash advances to $369, which
      was
      outstanding at May 31, 2008. Mike Kadlec is currently the President for Titan
      Electronics.


22




On
      March
      4, 2008, Titan Electronics entered into a $67 promissory note dated March 4,
      2008 with Ed Peterson The note bears interest at an annual rate of 10% and
      matures on September 4, 2008. Interest is payable monthly and the principal
      amount is due at maturity. As of May 31, 2008 the outstanding balance of the
      promissory note payable was $67. Ed Peterson is currently the Vice President
      of
      Operations for Titan Electronics.





Effective
      March 4, 2008, Titan Electronics entered into a $55 promissory note with Stephen
      Kennedy. The note bears interest at an annual rate of 10% and matures on
      September 4, 2008. Interest is payable monthly and the principal amount is
      due
      at maturity. As of May 31, 2008, the outstanding balance of the promissory
      note
      payable was $55. Stephen Kennedy is currently the Vice President of Sales for
      Titan Electronics and is a Director of the Company.





In
      connection with the Asset Purchase Agreement with Denis McCarthy dba Time
      Sensitive Circuits, as of May 31, 2008, Denis McCarthy has advanced Titan PCB
      East, $100 to be used as working capital. Repayment terms have not been
      specified as of July 14, 2008 in the event that the transaction does not
      close.





***Note
      14 – Short-Term Notes Payable***





The
      Company has entered into 12-month financing agreements with several vendors
      to
      purchase fixed assets for its electronics and homeland security division. As
      of
      May 31, 2008, $73 is outstanding under these short-term notes
      payable.





As
      discussed in Note 2, the Company assumed certain short-term notes payables
      in
      the acquisitions of USAD and the surrender of assets of Titan Nexus. As of
      May
      31, 2008, the Company has recorded $1,259 related to these short-term notes
      payable.





***Note
      15 – Impairment of Goodwill and Intangible Assets***





Subsequent
      to November 30, 2007, the Company’s communications division experienced a
      significant decrease in sales and collections of outstanding accounts
      receivable. Many of the long-standing distributors of Oblio’s products stopped
      placing orders for new product and stopped sending payments for previously
      placed orders. While we are vigorously pursuing legal action against many of
      these customers, the extended collection process significantly disrupted the
      operating cash flow cycle of the prepaid international long distance portion
      of
      our communication division. These issues along with losses experienced in its
      network operations have resulted in the Company ceasing to do business as Oblio
      in the prepaid international long distance market. As such, the Company
      evaluated the division’s goodwill and other intangible assets for impairment
      based on changes in the business model. Based on the determination of
      management, the Company fully impaired the goodwill and all of the intangible
      assets of Oblio with the exception of the trade names as of November 30, 2007.
      Management determined to retain the trade names associated with Oblio and to
      continue to market them under Titan Communications and/or Pinless, Inc., dba
      Planet Direct.





Simultaneously,
      the Company determined to cease the distribution of CDMA prepaid wireless
      handsets and the related airtime through its subsidiary, Titan Wireless RM,
      Inc., due to the increasing capital requirements associated with the business
      model at Titan Wireless, the Company’s wireless operating subsidiary. As such,
      the Company evaluated goodwill and other assets for impairment based on changes
      in its business model. Accordingly, the Company incurred an impairment charge
      for $14,572 of goodwill and intangible assets related to the Oblio and Titan
      Wireless as of November 30, 2007.





In
      connection with the formation of our global brands division and related
      acquisition of USA Detergents on October 16, 2007, goodwill in the amount of
      $6,569 was established as of the acquisition date as part of the purchase price
      allocation. During the due diligence phase of the acquisition of USAD and prior
      to acquisition, the Company made certain assumptions regarding the working
      capital necessary to revitalize the core business of USAD. During the execution
      phase of the post-acquisition reorganization plan, the Company was unable to
      successfully negotiate work-out payment plans with key suppliers. The Company
      reevaluated the working capital requirements of this subsidiary and determined
      it was not feasible to fund the operations of USAD. As such, management
      determined to cease operations in its current structure. Accordingly, the
      Company incurred an impairment charge for $6,569 of goodwill related to the
      USA
      Detergents acquisition as of November 30, 2007. See additional discussion at
      Note 22.


23








***Note
      16 - Stock Options and Stock-Based Compensation***





The
      Company accounts for its stock-based compensation arrangements in accordance
      with the provisions of SFAS No. 123(R), *Share-Based
      Payment* .
      The
      Company recognizes compensation expense of a stock-based award over the vesting
      period based on the fair value of the award on the grant date, net of
      forfeitures. The fair value of stock options granted is calculated under the
      Black-Scholes option-pricing model. No stock-based compensation awards were
      granted during the nine months ended May 31, 2008.





***Note
      17 - Universal Service Fund Refund***





In
      1997,
      the FCC issued an order, referred to as the Universal Service Order that
      requires all telecommunications carriers providing interstate telecommunications
      services to periodically contribute to universal service support programs
      administered by the FCC, the Universal Service Funds (“USF”). The Company is
      currently exempt from remitting USF contributions on the vast majority of its
      revenues in the prepaid international long distance calling card portion of
      our
      communications division due to the Limited International Revenue Exemption
      (LIRE) whereby in excess of 88% of the originated calls are terminated
      internationally. On March 18, 2007 Oblio entered into a settlement and release
      agreement for USF charges included in billings in 2006 and 2007 with Sprint
      Communications Company, L.P. These amounts were recorded as USF recoverable
      as
      of August 31, 2007. In the three months ended November 30, 2007, Oblio
      determined that no further USF credits were recoverable and wrote off the
      remaining $1,402 of USF recoverable to cost of sales.




***Note
      18 – Treasury Stock***




On
      May 9,
      2007, the Company’s Board of Directors approved a 4,000,000 share open market
      buyback program. The Board cited its attractive share price, as well as,
      reported record financial revenue results and strategic progress from its
      various business units in making this decision. As of May 31, 2008, the Company
      had repurchased 1,274,157 shares for $1,660 including transaction costs under
      the repurchase program. The Company also repurchased 50,000 shares of employee
      stock options for $55 in June 2007.




Total
                Number of
            
            Maximum
                NumberShares
                Purchased
            
            of
                Shares that MayTotal
                Number of
            
            
            
            as
                Part of Publicly
            
            Yet
                Be PurchasedShares
            
            Average
                Price
            
            Announced
                Plans
            
            Under
                the Plans orPeriod
            
            Purchased
            
            Paid
                per Share
            
            or
                Programs
            
            Programs05/09/07
            
            
            08/31/07
            
            
            1,087,307
            
            $
            1.35
            
            
            1,037,30709/01/07
            
            
            11/30/07
            
            
            24,850
            
            
            1.62
            
            
            24,85012/01/07
            
            
            02/29/08
            
            
            212,000
            
            
            0.98
            
            
            212,00003/01/08
            
            
            05/31/08
            
            
            -
            
            
            -
            
            
            -**Total**
            
            
            **1,324,157**
            
            **$**
            **1.30**
            
            
            **1,274,157**
            
            
            **2,725,843**





***Note
      19 - Litigation***





ALLSTATE
      PRINTING & PACKAGING, INC


On
      March
      25, 2008, the Company’s subsidiary, Oblio, was notified, via a process server,
      that it was being sued by Allstate Printing & Packaging, Inc. (“Allstate”).
      Allstate is seeking $86 for alleged unpaid invoices for services rendered in
      Passaic County: Superior Court, NJ. This action is currently pending. The
      Company has accrued the amounts alleged to be due in its accounts payable at
      May
      31, 2008.





AMERTEL
      COMMUNICATIONS, INC


On
      April
      2, 2008, the Company’s subsidiaries, Oblio and Titan Wireless, were notified,
      via a process server, that it was being sued by Amertel Communications, Inc.
      (“Amertel”). Amertel is seeking $275 for alleged unpaid refunds for products
      purchased in the US District Court, MD. This action is currently pending. The
      Company disputes the amounts alleged to be due, and Management is unable to
      estimate the ultimate liability, if any, related to this claim at May 31,
      2008.


24


ASIA
      TELECOM CORPORATION


On
      March
      7, 2008, Oblio filed a lawsuit in Dallas County, Texas, against Asia Telecom
      Corporation (“Asia Telecom”) seeking to recover $753 for unpaid product. Asia
      Telecom has filed a special appearance claiming that it does not have sufficient
      contacts with the State of Texas to warrant being sued in a Texas Court. The
      hearing on Asia Telecom’s special appearance is scheduled for July 25,
      2008.





AT&T
      CORP.


On
      December 5, 2006, the Company’s subsidiary, Oblio Telecom, Inc. (“Oblio”), filed
      a Demand for Arbitration with the American Arbitration Association against
      AT&T Corp. (“AT&T”). Oblio sought a refund of amounts paid to AT&T
      for the period from 1999 to October 2006 for USF charges paid to AT&T
      pursuant the Purchase Order Agreement, which sets forth the parties’ business
      relationship. The fees paid to AT&T for AT&T’s Enhanced Prepaid Card
      Service (“Prepaid Card Service”) included USF and other Federal Communications
      Commission (the “FCC”) charges. AT&T retained this revenue instead of making
      the required contributions to the USF and other FCC programs based on AT&T’s
      argument that its Prepaid Card Service was exempt under the law.




On
      October 12, 2007, Oblio entered into a Settlement Agreement (the “Settlement
      Agreement”) with AT&T, effective as of October 11, 2007. Pursuant to the
      Settlement Agreement, AT&T agreed to waive and discharge its right to
      receive $7,200 and Oblio issued a promissory note for the payment of the balance
      of $600 in interest to AT&T in full settlement of the Partial Final Award
      issued in the arbitration proceeding on the counter claims brought by AT&T
      against Oblio and in full settlement of the Oblio’s Universal Service Fund claim
      against AT&T. As Oblio had already recorded its liability in its accounts
      payable, the $6,600 net reduction in accounts payable reduced cost of sales
      during the three months ended November 30, 2007.





Oblio
      has
      remitted $500 to AT&T in compliance with the Settlement Agreement as of May
      31, 2008. Additionally, the Company has recorded $100 as a liability to AT&T
      as of May 31, 2008 for the remainder of the amounts due AT&T per the
      Settlement Agreement.





BARRON
      S.
      WALL, INC. t/a INSURANCE CONSULTING ASSOCIATES


On
      March
      7, 2008, the Company’s subsidiary, USAD, was notified, via a process server,
      that it was being sued by Barron S. Wall, Inc. t/a Insurance Consulting
      Associates (“Barron”). Barron is seeking $7 for alleged unpaid invoices for
      services rendered in Middlesex County: Superior Court, NJ. This action is
      currently pending. The Company has accrued the amounts alleged to be due in
      its
      accounts payable at May 31, 2008.





CLIFTON
      PREPAID COMMUNICATIONS CORP.


On
      August
      21, 2007, Oblio filed suit against Clifton Prepaid Communications Corp., Clifton
      Pre-Paid Corp, and Aref Aref (collectively “Clifton”) for non-payment of
      invoices related to services rendered in the District Court, 199 th Judicial
      District, Collin County, Texas. Oblio seeks $2,199 in payment plus pre-judgment
      interest, post judgment interest at the maximum lawful rate from July 30, 2007
      until judgment at the rate of six percent per annum, and reasonable and
      necessary attorney fees and costs. Oblio also obtained Writs of Garnishment
      against Clifton’s funds on deposit with Bank of America, N.A. and J.P. Morgan
      Chase Bank. As a result of the Writs of Garnishment, Oblio trapped approximately
      $150 in Clifton’s bank accounts. Clifton has unsuccessfully attempted to
      dissolve the Writ of Garnishment. The trial in this case is scheduled for
      November 2008.





As
      of May
      31, 2008, the Company has fully reserved and allowed for the $2,199 in accounts
      receivable from Clifton less the amounts captured in the Writ of Garnishment.





CRESCENT
      FUND, INC.


On
      July
      6, 2007, the Company filed a lawsuit against Crescent Fund, Inc. in Dallas
      County, Texas, seeking a declaratory judgment declaring that the Company had
      no
      remaining liability to Crescent Fund, Inc. under a Consulting Agreement entered
      into by and between the Company and Crescent Fund, Inc. in October 2003. On
      July
      7, 2008, the trial court entered judgment in favor of the Company declaring
      that
      the Company had no remaining liability to Crescent Fund, Inc.





F&L,
      LLP


On
      November 27, 2007, the Company was notified, via a process server, that it
      was
      being sued by F&L, LLP (“F&L”) in the District Court of Dallas County,
      Texas 160 th Judicial
      District. F&L is seeking the Company to perform on its guarantee of notes
      payable from Oblio to F&L. Principal amounts due to F&L, LLP as of May
      31, 2008 is $3,570. This action is currently pending. The Company has recorded
      the amounts due as a liability as of May 31, 2008. Oblio has also recorded
      accrued interest of $410 related to this obligation. On April 29, 2008, GBC
      Funding, LLC intervened in the lawsuit seeking to stay the lawsuit as a result
      of F&L’s prior agreement to subordinate its debt and collection to the
      rights of GBC Funding, LLC. To date, F&L has voluntarily consented to the
      stay. However, the Motion to Stay is currently set for hearing in August
      2008.


25


GEOTEL
      INTERNATIONAL, LC


On
      January 31, 2008, the Company’s subsidiary, Starttalk, was notified, via a
      process server, that it was being sued by Geotel International, LC (“Geotel”).
      Geotel is seeking $73 for alleged unpaid invoices for services rendered in
      Miami-Dade County: Circuit Court, FL. This action is currently pending. The
      Company has accrued the amounts alleged to be due in its accounts payable at
      May
      31, 2008.





HAWAII
      GLOBAL EXCHANGE, INC. AND TRANSPAC TELECOM, INC.


On
      December 21, 2007, the Company’s subsidiary Oblio, filed a lawsuit against
      Hawaii Global in 162 nd Judicial
      District Court of Dallas County, Texas. Oblio sought to recover $1,319 for
      unpaid product. Hawaii Global then removed the lawsuit to the United States
      District Court for the Northern District of Texas. Hawaii Global then moved
      to
      dismiss the Texas lawsuit based upon lack of personal jurisdiction and in the
      alternative to transfer the Texas lawsuit to the United States District Court
      of
      Hawaii. The District Court denied Hawaii Global’s motion to dismiss and or
      transfer. On January 29, 2008, the Company’s subsidiary, Oblio, was notified,
      via a process server, that it was being sued by Hawaii Global Exchange, Inc.
      and
      Transpac Telecom, Inc. (“Transpac”). Transpac is alleging violation of the
      Communications Act, breach of oral contract, promissory estoppel, and
      intentional interference with contractual relations and/or prospective economic
      advantage in US District Court, HI. Oblio then filed a motion to dismiss the
      Hawaii lawsuit based upon lack of personal jurisdiction or, in the alternative,
      to transfer the Hawaii lawsuit to Texas. Although Hawaii Global and Transpac
      have opposed the motion to dismiss, they have consented to the transfer of
      the
      Hawaii lawsuit to the Northern District of Texas. The Hawaii lawsuit has been
      transferred and consolidated with the Texas Lawsuit. Hawaii Global has joined
      the Company, Bryan Chance, Kurt Jensen, Frank Crivello, and David Marks as
      parties to the lawsuit. The Company disputes these allegations and will defend
      itself, and Management is unable to estimate the ultimate liability, if any,
      related to this claim at May 31, 2008.





JACO
      ELECTRONICS, INC.


On
      September 1, 2006, a subsidiary of the Company, Titan Nexus, Inc. f/k/a Nexus
      Nano Electronic, Inc. (“Nexas Nano”) filed suit against Jaco Electronics, Inc.
      (“Jaco”) in the United States District Court for the Southern District of New
      York, alleging that Jaco had made certain misrepresentations in connection
      with
      an Asset Purchase Agreement executed in September 2004. Jaco denied the
      allegations and asserted counterclaims against Nexus Nano and other related
      entities. On June 27, 2008, the Company, Jaco, and others entered into a
      Settlement Agreement that provided for the release of claims between the parties
      and included a five-year Supply Agreement between Jaco, Titan Nexus, Inc. d/b/a
      NEO EMS, Inc., and Nexus Custom Electronics, Inc.




LANHAM
      ACT LAWSUIT


On
      February 15, 2008, Oblio filed a lawsuit in the United States District Court
      for
      the Northern District of Texas against various individuals and entities alleging
      trademark infringement under the Lanham Act. Many of the defendants have filed
      motion to dismiss which are currently pending before the Court.





LATIN
      AMERICAN VOIP, INC


On
      December 26, 2007, the Company and its subsidiaries, Oblio and Starttalk were
      notified, via a process server, that it was being sued by Latin American VOIP,
      Inc (“Latin American VOIP”). Latin American VOIP is seeking $723 for alleged
      unpaid invoices for services rendered in Palm Beach County: Circuit Court,
      Florida. This action is currently pending. The Company has accrued $630 of
      the
      amounts alleged to be due in its accounts payable as of May 31, 2008 and is
      disputing the difference of $93.





LEVEL
      3
      COMMUNICATIONS, LLC


On
      November 2, 2007, the Company’s subsidiary, Oblio, was notified, via a process
      server, that it was being sued by Level 3 Communications, LLC (“Level 3”). Level
      3 is seeking $2,379 for alleged unpaid invoices for services rendered in
      Broomfield County: District Court, CO. On May 14, 2008, Oblio entered into
      an
      Agreed Judgment in the amount of $2,042. As of May 31, 2008, Oblio has accrued
      the amount of the Agreed Judgment in accounts payable.





RICO
      LAWSUIT


On
      February 15, 2008, Oblio filed a lawsuit in the United States District Court
      for
      the Northern District of Texas against various individuals and entities alleging
      a conspiracy to defraud Oblio under the Racketeering, Influence Corruption
      Act
      (“RICO”). Many of the defendants have filed motion to dismiss which are
      currently pending before the Court.


26


STX
      COMMUNICATIONS, INC


On
      January 16, 2008, STX Communications, LLC d/b/a STX Phone Cards (“STX”) sought a
      Temporary Restraining Order (“TRO”) in the 14 th Judicial
      District Court of Dallas County, Texas against the Company’s subsidiary Oblio.
      The TRO immediately restrained Oblio from suspending its network support for
      any
      pre-paid phone card supplied by Oblio to STX and from taking any action to
      impair the network supporting any pre-paid phone card supplied by Oblio to
      STX.
      On January 23, 2008, the Company was notified by its attorneys that the TRO
      became effective and enforceable and that the Company was in violation of its
      TRO and was subject to sanctions for contempt of court. The TRO has since been
      dissolved by agreement of the parties.





STX
      has
      added the Company, Bryan Chance, Kurt Jensen, and Frank Crivello as defendants.
      STX claims that Oblio breached a contract to provide network support for prepaid
      phone cards, and to accept returns of the cards as necessary.  STX also
      alleges that Oblio has been unjustly enriched by STX’s payments for cards, and
      that Oblio breached the implied warranty of merchantability and the express
      warranty to provide network support for the cards, and that Oblio’s failure to
      provide network support breached a duty of care owed to STX.   STX
      also claims that Titan, Chance and Crivello tortiously interfered with the
      Oblio/STX contract and caused Oblio to purposefully interrupt network support
      for the cards sold to STX.  Finally, STX alleges all defendants tortiously
      interfered with STX’s business relationships with STX’s distributors and end
      consumers by playing recorded messages for end consumers to return their cards,
      and changing rate decks on the cards from the posted rates.  STX’s actual
      damages are not specified, but it seeks not less than $1,200 in exemplary
      damages, together with interest, and attorney’s fees.





Oblio
      has
      filed a counter-claim against STX, alleging STX failed to pay for the cards
      it
      purchased.  Oblio also claims STX, together with Tawfik and Raimondo, STX’s
      chief officers, fraudulently induced Oblio to sell pre-paid phone cards for
      certain foreign markets at a loss, in exchange for STX’s promise to place Oblio
      products in more lucrative local markets.  STX’s failure to place Oblio’s
      products in the promised markets caused Oblio damages in an amount not less
      than
      $10.





The
      case
      is currently set for trial on September 29, 2008, but the parties have agreed
      to
      request a continuance setting the trial for the week of April 20,
      2009.





TOUCH
      TELL, INC.


On
      December 21, 2007, Oblio filed suit in Dallas County, Texas, against Touch
      Tell,
      Inc. (“Touch Tell”) for $1,300 in unpaid product. Oblio also initially obtained
      a pre-judgment Writ of Garnishment against Touch Tell’s bank trapping $1,300.
      Touch Tell filed a counterclaim that claims that after allowing for credits,
      deactivations, and returns, Oblio owes Touch Tell approximately $268. Touch
      Tell
      successfully reduced the amount of the garnishment to $477. At May 31, 2008,
      Oblio has recorded accounts receivable from Touch Tell equal to the garnishment
      of $477. No amounts have been recorded or accrued related to the counter claim.
      The case is now set for trial in November 2008.





WESTERN
      PRINT & MAIL, LLC


On
      January 25, 2008, the Company’s subsidiary Titan Wireless was notified, via a
      process server, that it and Ready Mobile, LLC were being sued by Western Print
      & Mail, LLC (“Western”). Western is seeking $71 including late charges from
      Ready Mobile, LLC. Western is seeking $183 from Titan Wireless, which includes
      the $71 from Ready Mobile, LLC and $112 including late charges from Titan
      Wireless, for alleged unpaid invoices for services rendered in Iowa District
      Court for Linn County. This action is currently pending. The Company has not
      accrued any amounts related to the charges incurred by Ready Mobile, LLC. As
      per
      the asset purchase agreement with Ready Mobile, LLC, this liability was not
      assumed, and therefore is not a responsibility of the Company. In addition,
      the
      Titan Wireless liability was assumed by Boomerang Wireless, Inc. on January
      25,
      2008 with the sale of certain CMDA assets as discussed in Note 2.





OTHER
      LEGAL MATTERS


As
      of May
      31, 2008, the Company has fully reserved and allowed (through its allowance
      for
      doubtful accounts $15,736 and its allowance for sales returns $3,672) $19,408
      in
      accounts receivable recorded for the communications division matters referenced
      above including Clifton.


27


***Note
      20 – Contingency***





In
      January 2007, prior to the Company’s purchase of Appco, Appco entered into a
      settlement agreement with one of its cigarette vendors totaling $2,500. The
      settlement was in response to an investigation by the Federal Bureau of Alcohol,
      Tobacco and Firearms related a buy-down marketing program and certain
      contractual limitations with a cigarette vendor. Appco satisfies this obligation
      through the application of marketing funds that would have been otherwise
      received from the vendor through a marketing program. As of May 31, 2008, $691
      of the original settlement obligation remains unpaid of which $163 is a current
      liability.





***Note
      21 - Segment Information***





The
      Company considers itself in four distinct operating segments.





The
      Company, through its subsidiaries Titan Electronics, PCB East and Titan Nexus,
      is a fabrication service provider of time sensitive, high tech, prototype and
      pre-production printed circuit boards, providing time-critical printed circuit
      board manufacturing services to original equipment manufacturers, contract
      manufacturers and electronic manufacturing services providers. The Company
      considers this its electronics and homeland security business segment.





The
      Company, through its subsidiaries Titan Communications and Pinless, dba Planet
      Direct, is engaged in the creation, marketing, and distribution of prepaid
      telephone other related activities. The Company considers this its
      communications business segment.





The
      Company, through its Appco subsidiary, distributes petroleum fuels and operates
      retail convenience stores. The Company considers this its energy business
      segment.





The
      Company, through its Titan Apparel subsidiary headquartered in Santa Barbara,
      California designs, develops and markets stylish footwear for men, women and
      children. The Company acquired certain assets in TAPP in a transaction on
      December 14, 2007. The Company’s USAD subsidiary headquartered in North
      Brunswick, New Jersey, manufactures and distributes value-branded home care
      products that leverages brand extensions and licensing agreements with consumer
      product conglomerates was previously included in this segment but is considered
      discontinued operations. The Company considers this its global brands business
      segment.


28





**Three Months Ended****5/31/2008****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales
                :
            
            $
            6,977
            
            $
            42
            
            $
            120,336
            
            $
            957
            
            $
            -
            
            $
            128,312Interest
                expense:
            
            
            142
            
            
            1,009
            
            
            446
            
            
            152
            
            
            326
            
            
            2,075Net
                income (loss ) from continuingoperations
                :
            
            
            (1,161
            )
            
            (2,549
            )
            
            (154
            )
            
            (1,739
            )
            
            (523
            )
            
            (6,126
            )Loss
                from discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,139
            )
            
            -
            
            
            (1,139
            )Assets
                :
            
            
            16,479
            
            
            11,570
            
            
            41,036
            
            
            13,846
            
            
            (5,325
            )
            
            77,606Accounts
                receivable, net:
            
            
            3,784
            
            
            740
            
            
            5,271
            
            
            1,080
            
            
            -
            
            
            10,875Inventory,
                net
            
            
            1,886
            
            
            5
            
            
            9,598
            
            
            2,067
            
            
            -
            
            
            13,556Equipment
                and improvements , net:
            
            
            2,782
            
            
            325
            
            
            11,088
            
            
            872
            
            
            118
            
            
            15,185Depreciation
                expense:
            
            
            267
            
            
            46
            
            
            615
            
            
            90
            
            
            13
            
            
            1,031Goodwill
                and indefinite livedintangible
                assets :
            
            
            8,571
            
            
            -
            
            
            9,277
            
            
            -
            
            
            -
            
            
            17,848Definite
                lived intangible assets , net
            
            
            -
            
            
            3,778
            
            
            666
            
            
            -
            
            
            -
            
            
            4,444





**Three Months Ended****5/31/2007****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales
                :
            
            $
            6,174
            
            $
            24,627
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            30,801Interest
                expense:
            
            
            1,992
            
            
            (1,039
            )
            
            -
            
            
            -
            
            
            -
            
            
            953Net
                income (loss ):
            
            
            2,031
            
            
            4,498
            
            
            -
            
            
            -
            
            
            (1,792
            )
            
            4,737Assets
                :
            
            
            6,747
            
            
            47,187
            
            
            -
            
            
            -
            
            
            130
            
            
            54,064Accounts
                receivable, net:
            
            
            3,588
            
            
            11,379
            
            
            -
            
            
            -
            
            
            -
            
            
            14,967Inventory,
                net
            
            
            1,225
            
            
            911
            
            
            -
            
            
            -
            
            
            -
            
            
            2,136Equipment
                and improvements , net:
            
            
            1,648
            
            
            647
            
            
            -
            
            
            -
            
            
            -
            
            
            2,295Depreciation
                expense:
            
            
            171
            
            
            41
            
            
            -
            
            
            -
            
            
            -
            
            
            212Goodwill
                and indefinite livedintangible
                assets :
            
            
            -
            
            
            6,661
            
            
            -
            
            
            -
            
            
            -
            
            
            6,661Definite
                lived intangible assets , net:
            
            
            -
            
            
            18,352
            
            
            -
            
            
            -
            
            
            -
            
            
            18,352




**Nine Months
                Ended****5/31/2008****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            22,168
            
            $
            34,897
            
            $
            312,881
            
            $
            2,358
            
            $
            -
            
            $
            372,304Interest
                expense:
            
            
            572
            
            
            2,272
            
            
            1,669
            
            
            321
            
            
            882
            
            
            5,716Net
                income (loss) from continuing operations:
            
            
            5,317
            
            
            (17,187
            )
            
            (2,640
            )
            
            (3,139
            )
            
            (4,554
            )
            
            (22,203
            )Loss
                from discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,454
            )
            
            -
            
            
            (12,454
            )Net
                income (loss):
            
            
            5,317
            
            
            (17,187
            )
            
            (2,640
            )
            
            (15,593
            )
            
            (4,554
            )
            
            (34,657
            )Impairment
                of intangibles:
            
            
            -
            
            
            14,572
            
            
            -
            
            
            -
            
            
            -
            
            
            14,572Assets:
            
            
            16,479
            
            
            11,570
            
            
            41,036
            
            
            13,846
            
            
            (5,325
            )
            
            77,606Accounts
                receivable, net:
            
            
            3,784
            
            
            740
            
            
            5,271
            
            
            1,080
            
            
            -
            
            
            10,875Inventory,
                net
            
            
            1,886
            
            
            5
            
            
            9,598
            
            
            2,067
            
            
            -
            
            
            13,556Equipment
                and improvements, net:
            
            
            2,782
            
            
            325
            
            
            11,088
            
            
            872
            
            
            118
            
            
            15,185Depreciation
                expense:
            
            
            715
            
            
            283
            
            
            1,895
            
            
            154
            
            
            37
            
            
            3,084Goodwill
                and indefinite lived intangible assets:
            
            
            8,571
            
            
            -
            
            
            9,277
            
            
            -
            
            
            -
            
            
            17,848Definite
                lived intangible assets, net
            
            
            -
            
            
            3,778
            
            
            666
            
            
            -
            
            
            -
            
            
            4,444




29




**Nine Months Ended****5/31/2007****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            16,726
            
            $
            80,138
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            96,864Interest
                expense:
            
            
            1,962
            
            
            1,213
            
            
            -
            
            
            -
            
            
            9
            
            
            3,184Net
                income (loss)
            
            
            (2,898
            )
            
            6,907
            
            
            -
            
            
            -
            
            
            (3,278
            )
            
            731Assets:
            
            
            6,747
            
            
            47,187
            
            
            -
            
            
            -
            
            
            130
            
            
            54,064Accounts
                receivable, net:
            
            
            3,588
            
            
            11,379
            
            
            -
            
            
            -
            
            
            -
            
            
            14,967Inventory,
                net
            
            
            1,225
            
            
            911
            
            
            -
            
            
            -
            
            
            -
            
            
            2,136Equipment
                and improvements, net:
            
            
            1,648
            
            
            647
            
            
            -
            
            
            -
            
            
            -
            
            
            2,295Depreciation
                expense:
            
            
            171
            
            
            41
            
            
            -
            
            
            -
            
            
            -
            
            
            212Goodwill
                and indefinite lived intangible assets:
            
            
            -
            
            
            6,661
            
            
            -
            
            
            -
            
            
            -
            
            
            6,661Definite
                lived intangible assets, net:
            
            
            -
            
            
            18,352
            
            
            -
            
            
            -
            
            
            -
            
            
            18,352




All
      the
      Company's facilities are located in the United States and the majority of the
      Company's sales are made within the United States.





***Note
      22 - Discontinued Operations and Bankruptcy Filing in Global Brands
      Segment***





*Facts
      and Circumstances*





During
      the second quarter of fiscal 2008, the Company ceased its manufacturing
      operations for filling and packaging USAD liquid products. The Company has
      segregated the operating results of USAD from the results of continuing
      operations and classified them as discontinued operations for the three- and
      nine-month periods ended May 31, 2008. As USAD was acquired on October 17,
      2007,
      during the current fiscal period, prior period operating results were not
      restated. On February 12, 2008, several suppliers of USAD filed an involuntary
      Chapter 7 bankruptcy petition with the United States Bankruptcy Court in the
      District of Delaware. During the third fiscal quarter of 2008, the Company
      converted the Chapter 7 bankruptcy filing to a Chapter 11 bankruptcy filing
      and
      pursued other alternatives for the assets of USAD. On June 13, 2008, the
      bankruptcy was converted back to a Chapter 7 bankruptcy and the court appointed
      a trustee to oversee the liquidation of the remaining assets. The Company is
      exploring opportunities to maximize the value of the brands by outsourcing
      filling and packaging of USAD brands, licensing USAD brands to other
      manufacturers, and other alternatives. Management continues to account for
      the
      operations of USAD as discontinued operations because management is unable
      to
      estimate and reflect realizable values of USAD’s assets and the settlement
      amounts of USAD’s liabilities that may result from the bankruptcy
      proceedings.


30


*Financial
      Detail of the Discontinued Operations*





The
      results of operations of the discontinued USAD are as follows:




**Three**
            
            **Nine****Months**
            
            **Months****Ended**
            
            **Ended****5/31/2008**
            
            **5/31/2008**Sales
                - Global brands division
            
            $
            193
            
            $
            5,433Cost
                of sales - Global brands division
            
            
            793
            
            
            6,660(600
            )
            
            (1,227
            )Operating
                expenses :Sales
                and marketing
            
            
            1
            
            
            970General
                and administrative expenses
            
            
            357
            
            
            2,435Bad
                debt expense
            
            
            -
            
            
            567Impairment
                of intangibles
            
            
            -
            
            
            6,569Amortization
                of intangibles
            
            
            -
            
            
            193358
            
            
            10,734Loss
                from operations
            
            
            (958
            )
            
            (11,961
            )Other
                income (expenses):Other
                income
            
            
            -
            
            
            51Interest
                expense
            
            
            (181
            )
            
            (544
            )**Loss
                from discontinued operations**
            
            $
            (1,139
            )
            $
            (12,454
            )




The
      principal balance sheet items of the assets held for sale are stated
      below:





**May 31,****2008****Current
              assets**Cash
                and cash equivalents
            
            $
            189Accounts
                receivable, trade (less allowancefor doubtful accounts of $1,814)
            
            
            1,221Inventory,
                net
            
            
            3,112Prepaid
                expenses and other current assets
            
            
            158**Total
                current assets**
            
            **$**
            **4,680****Non-current
                assets**Equipment
                and improvements , net
            
            $
            1,929Definite-lived
                intangible assets , net
            
            
            2,367Other
                assets
            
            
            93**Total
                non-current assets**
            
            **$**
            **4,389****Current
                liabilities**Accounts
                payable -trade
            
            $
            8,598Accrued
                liabilities
            
            
            1,670Short-term
                notes payable
            
            
            1,250Current
                portion of long-term debt
            
            
            936**Total
                current liabilities**
            
            **$**
            **12,454****Non-current
                liabilities**Lines
                of credit
            
            $
            5,331Long-term
                debt
            
            
            2,950Other
                long-term liabilities
            
            
            560**Total
                non-current liabilities**
            
            **$**
            **8,841**




31


Long-term
      debt consisted of the following:





10/16/200701/01/2010$10,000Secured
                Revolving Note
            
            $
            5,33110/16/200701/01/2010$4,087
                Term Notes
            
            
            3,885Total
                debt
            
            
            9,216Less
                current portion of long-term debt
            
            
            (936
            )Total
                long-term debt
            
            $
            8,280





Long-term
      debt repayments are due as follows:





Fiscal
            
            Greystone
            
            Greystone
            
            Total Long-Year
            
            Revolvers
            
            Term Debt
            
            Term Debt2008
            
            $
            -
            
            $
            936
            
            $
            9362009
            
            
            -
            
            
            863
            
            
            8632010
            
            
            5,331
            
            
            2,086
            
            
            7,417$
            5,331
            
            $
            3,885
            
            $
            9,216





***Note
      23 - Subsequent Events***





On
      June
      24, 2008, the Company acquired all of IVI Communications, Inc. (“IVI”)
      outstanding Series A and B Preferred Stock from former holders. The Preferred
      Stock includes the right to vote a majority of IVI’s shares for any action to be
      taken by shareholders. The purchase price of the preferred stock was $0. IVI
      was
      formed in September 1995 to acquire traditional local and regional Internet
      access Service Providers (ISP’s) in the Western States to achieve economies of
      operation and accelerated growth through centralized management. In addition,
      the Company entered into a loan and security agreement with IVI for $100,000,
      bearing interest at 13% to be used to fund corporate expenses primarily
      associated with fulfilling IVI’s obligations for periodic reporting requirements
      with the Securities and Exchange Commission.




**ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS OR PLAN OF OPERATIONS**





*This
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations and other portions of this report contain forward-looking information
      that involve risks and uncertainties. The Company's actual results could differ
      materially from those anticipated by the forward-looking information. Factors
      that may cause such differences include, but are not limited to, availability
      and cost of financial resources, product demand, market acceptance and other
      factors discussed in this report under the heading “Forward Looking
      Information/Risk Factors. ” This Management's Discussion and Analysis of
      Financial Condition and Results of Operations should be read in conjunction
      with
      its unaudited consolidated financial statements and the related notes included
      elsewhere in this report.*





**Overview**





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





**Summary
      Corporate Background**





The
      Company is a diversified holding company with a dynamic portfolio of
      subsidiaries in the energy, communications, apparel, electronics and homeland
      security industries. The Company is committed to serving its broad base of
      customers and end consumers through a variety of wholesale and retail offerings.
      The Company has recruited and acquired through acquisitions a talented team
      of
      dedicated employees.





The
      Company was organized under the laws of the State of Utah on March 1, 1985,
      with
      the primary purpose of seeking potential business enterprises which in the
      opinion of the Company's management would prove profitable. The Company was
      largely inactive through 2001.





The
      Company began its electronics and homeland security division in 2001 through
      SVPC Partners LLC, a Delaware limited liability company that commenced its
      operations in July 2001 ("SVPC"). SVPC began acquiring technology equipment,
      processes, customer lists and orders from competitors but was unable to remain
      in business principally due to a severe market downturn and excessive levels
      of
      indebtedness. On July 16, 2001, SVPC acquired all of the assets of SVPC Circuit
      Systems, Inc. and certain assets of Circuit Systems, Inc. ("CSI") pursuant
      to a
      combined approved bankruptcy court sale. After acquiring SVPC Circuit Systems,
      Inc. and certain assets of CSI, Titan acquired certain system integration
      division assets out of bankruptcy from creditors of Paragon Electronic Systems,
      Inc.


32


On
      June
      28, 2002, the Company entered into a letter of intent with Titan PCB West,
      Inc.,
      a manufacturer of time sensitive, high tech, prototype and pre-production
      printed circuit boards.





Effective
      August 30, 2002, through the Company's wholly-owned subsidiary Titan EMS
      Acquisition Corp., a Delaware corporation ("AcquisitionCo"), the Company
      acquired all of the capital stock of Titan PCB West through an exchange of
      its
      Common Stock pursuant to an Agreement and Plan of Merger (the "Merger"). In
      connection with the Merger, its fiscal year end was also changed from June
      30 to
      August 31.





In
      connection with the Merger, AcquisitionCo merged with and into Titan PCB West
      through the exchange of 6,880,490 shares of its Common Stock for all of Titan
      PCB West's outstanding shares of common stock.





On
      August
      12, 2002, Titan PCB West acquired certain intangible assets contributed by
      Louis
      George, the Company's President and Chief Executive Officer, in exchange for
      50,000 shares of Titan common stock valued at $1.50 per share, pursuant to
      the
      terms and conditions of a Contribution Agreement and Assignment and Assumption
      of Liabilities.





On
      February 27, 2003, through the Company's subsidiary, Titan PCB East, the Company
      acquired substantially all of the assets of Eastern Manufacturing Corporation,
      an Amesbury, Massachusetts-based manufacturer of rigid-flex printed circuits
      using a patented manufacturing process (the "HVR Flex Ô Process"), for
      approximately $500 in a foreclosure sale from Eastern Manufacturing
      Corporation's secured lender Eastern Bank. The acquired assets included
      equipment, work-in-progress, inventory, technology and patent licenses and
      customer lists. In connection with this acquisition, the Company assigned
      Eastern Manufacturing Corporation's rights under a license agreement with Coesen
      Inc., a New Hampshire corporation ("Coesen Inc."), to manufacture PCBs using
      the
      HVR Flex Ô Process to Titan PCB East and Titan PCB East was granted an option to
      purchase certain real estate assets. The Company financed the acquisition of
      Eastern Manufacturing Corporation's assets through the issuance and sale on
      February 27, 2003 of secured promissory notes by Titan PCB East to a limited
      number of accredited investors in a private placement.





Effective
      March 5, 2003, the Company purchased shares of common stock of Coesen Inc.
      representing 33.3% of its issued and outstanding shares of common stock from
      Mr.
      Howard Doane, the principal stockholder and an officer and director of Eastern
      Manufacturing Corporation, in exchange for 30,000 shares of Titan common stock
      and $5 in cash. In connection with the share purchase, David M. Marks, one
      of
      Titan’s Directors, was elected to the Board of Directors of Coesen Inc. and Mr.
      Doane resigned as a director of Coesen Inc. In consideration for the license
      rights to the proprietary technology of Coesen Inc., the Company has agreed
      to
      pay Coesen Inc. a royalty in the amount of 2.0% of revenues derived from the
      Company's sale of products using this technology, payable on a quarterly basis,
      subject to Coesen Inc. forgiving the royalty payment should certain directors
      of
      Coesen Inc. be under employment contracts with us.





In
      2005,
      the Company launched its communications division by acquiring Oblio Telecom,
      Inc.





On
      July
      28, 2005, Farwell Equity Partners, LLC (“Farwell”) and its newly formed
      acquisition subsidiary, Oblio entered into an Asset Purchase Agreement with
      Oblio Telecom L.L.P. (“Seller”) and its sole owners, Sammy Jibrin and Radu
      Achiriloaie (“Selling Owners”), for the purchase of substantially all of the
      assets of Seller. This transaction closed on August 12, 2005, upon Oblio
      obtaining financing for the acquisition. Also, effective on August 12, 2005
      and
      immediately following the aforementioned closing, Farwell contributed its 1,000
      shares of the common stock of Oblio to Titan, which stock represents all of
      the
      authorized and outstanding common stock of Oblio. Upon receipt of the Oblio
      common stock by Titan, Oblio became a wholly-owned subsidiary of Titan.





Through
      the Oblio acquisition, the Company also acquired Pinless, Inc. Pinless offers
      customers the ability to access prepaid international calling features via
      e-commerce or Pinless residential dialing. Pinless supports first and second
      generation Americans that have established credit and prefer the convenience
      of
      managing their account purchases of prepaid communications services and products
      online through our website WhyUseIt.com.


33


On
      April
      17, 2006, the Company established StartTalk, Inc. to own and operate switching
      equipment. This switching equipment enables the Company to rapidly deploy and
      efficiently deliver prepaid international telecommunications services at
      favorable cost structures. StartTalk owns, operates and leases switching
      equipment in two strategic locations in the United States.





On
      September 28, 2006, the Company established Titan Wireless Communications,
      Inc.
      Titan Wireless is the Company’s prepaid wireless communications subsidiary and
      is a Mobile Virtual Network Operator (“MVNO”). Titan Wireless marketed its MVNO
      through two brands, BRAVO cellular and Picante Movil.





On
      May
      11, 2007, the Company through its subsidiary Titan Wireless acquired certain
      assets of Ready Mobile, LLC. Ready Mobile is in the business of creating,
      marketing, and distributing prepaid telephone products for the wireless markets.
      Pursuant to the terms of the Asset Purchase Agreement dated as of April 9,
      2007,
      the Company agreed to pay consideration equal to 55% of earnings before
      interest, depreciation, taxes, and amortization (EBITDA) for the first 36 months
      subsequent to the closing, payable monthly in arrears. The EDITDA calculation
      is
      based on revenue from the acquired distribution channels off set by a formula
      based expense structure. The assets acquired include all fixed assets,
      equipment, furniture, fixtures, and leasehold improvements located at Ready
      Mobile’s offices in Hiawatha, Iowa, and used by Ready Mobile in connection with
      its business. The Company also acquired all contracts and intellectual property
      of Ready Mobile used in the operation of the business. Substantially all of
      the
      assets of Titan Wireless were sold to Boomerang Wireless in an asset purchase
      agreement on January 25, 2008 for a $1,000 promissory note, a release of
      liability for asserted salary and bonus claims of $737 and the assumption of
      certain liabilities.





On
      July
      23, 2007, the Company formed a new division, the Titan Energy Group (“Titan
      Energy”). Titan Energy’s focus will be on acquiring and managing complementary
      energy sector assets, which falls in line with the Company’s strategy to aid
      growth through strategic acquisitions.





On
      August
      7, 2007, the Company formed a new division, Titan Global Brands (“Titan
      Brands”). Titan Brands will focus on integrating, protecting and expanding brand
      management capabilities and leveraging and optimizing growth from the Company's
      distribution channels.





On
      September 4, 2007, the Company formed Titan Card Services, Inc. ("Card
      Services"). Card Services is a division of the Company and is a wholly owned
      subsidiary. Card Services’ focus will be to capitalize on the burgeoning
      multibillion dollar international prepaid money transfer sector. Given the
      Company’s familiarity with the prepaid sector and the specific needs of its core
      demographic customer base, which includes first and second generation Americans,
      the Company's senior management identified a significant need in this growing
      market to transfer funds internationally. For competitive reasons, Titan will
      not release details of these products and their pricing at this time.


On
      September 17, 2007, the Company completed the acquisition of all of the issued
      and outstanding shares of capital stock of Appalachian Oil Company, Inc.
      (“Appco”), a corporation formed under the laws of Tennessee, from the James R.
      Maclean Revocable Trust, Sara G. Maclean, the Linda R. Maclean Irrevocable
      Trust
      and Jeffrey H. Benedict. The purchase price paid for the shares under the Appco
      stock purchase agreement, as amended, was $30,000 in cash, of which $1,000
      will
      be escrowed for 18 months following the closing of the acquisition in order
      to
      secure the Company’s potential claims against the Appco sellers for any breach
      of their representations, warranties and covenants under the stock purchase
      agreement. Appco is headquartered in Blountville, Tennessee and is primarily
      engaged in the distribution of petroleum fuels in eastern Tennessee,
      southwestern Virginia, eastern Kentucky, western North Carolina and southern
      West Virginia and in the operation of retail convenience stores in some of
      those
      regions. Appco is a part of the Titan Energy division.





On
      October 16, 2007, the Company exercised its option to acquire 80% of the issued
      and outstanding capital of USA Detergents, Inc. (“USAD”) in exchange for one
      dollar pursuant to the Stock Purchase Agreement dated July 30, 2007 by and
      among
      the Company, USAD and USAD Metro Holdings, LLC, as amended. USAD is
      headquartered in North Brunswick, New Jersey and is a manufacturer and
      distributor of value-branded home care products that leverages brand extensions
      and licensing agreements with consumer product conglomerates. On February 12,
      2008, several suppliers of USAD filed an involuntary Chapter 7 bankruptcy
      petition with the United States Bankruptcy Court in the District of Delaware.
      During the third fiscal quarter of 2008, the Company converted the Chapter
      7
      bankruptcy filing to a Chapter 11 bankruptcy filing and pursued other
      alternatives for the assets of USAD. On June 13, 2008, the bankruptcy was
      converted back to a Chapter 7 bankruptcy and the court appointed a trustee
      to
      oversee the liquidation of the remaining assets. The Company is exploring
      opportunities to maximize the value of the brands by outsourcing filling and
      packaging of USAD brands, licensing USAD brands to other manufacturers, and
      other alternatives


34


On
      November 2, 2007, Titan Nexus, Inc. (“Titan Nexus”), an indirect subsidiary of
      Titan Global Holdings, Inc. (the “Company”), entered into a limited recourse
      assignment (the “Assignment”) with YA Global Investments, L.P. (“YA Global”).
      Pursuant to the Assignment, Titan Nexus was assigned all rights, title and
      interest to YA Global’s secured convertible debt position in Nexus Nano
      Electronics, Inc. (“Nexus Nano”), in the aggregate amount of $11,245, including
      principal and interest. The obligations are secured by all of Nexus Nano’s
      assets. In consideration for the Assignment (i) Titan issued YA Global 2,000,000
      shares of common stock, valued at $2.00 per share, the price of the stock at
      the
      time of the closing, and (ii) Titan PCB West, Inc. (“Titan Electronics”), a
      direct subsidiary of the Company and the parent company of Titan Nexus, issued
      YA Global 103,503 shares of Titan PCB West series A convertible preferred
      stock.





On
      November 5, 2007, the Company formed Titan Electronics Group (“Titan EG”). Titan
      EG is currently a division of the Company and is a wholly owned subsidiary.
      Titan Nexus, along with the Company’s legacy subsidiaries, Titan East and Titan
      Electronics, Inc. are now a part of the Titan EG. The Company anticipates that
      this entity will be divested and spun off into a separate entity via a 100%
      stock dividend in FY 2008.





On
      November 30, 2007, Titan Nexus completed the final step in the acquisition
      of
      the assets of Nexus Nano Electronics, Inc. ("Nexus"), a manufacturer of custom
      circuit boards for aerospace, defense and other industries. The surrender of
      assets was completed by agreement between Nexus as debtor and Titan as
      creditor.





On
      December 14, 2007, Titan Apparel, Inc. (“Titan Apparel”), a wholly owned
      subsidiary of Titan Global Holdings, Inc., acquired substantially all of the
      assets of Global Brand Marketing Inc (“Global”). Global, located in Santa
      Barbara, CA, owns the brands Dry-shod, No Mass, Mehandi and Funflopps. Global
      operates under the banner Global Feet and sells its footwear products in 130
      countries worldwide. The purchase price of $7,961 was financed through a credit
      facility with Greystone Business Credit II L.L.C.





During
      January 2008, the Company created Titan Communications, Inc. (“Titan
      Communications”) and began operations in the Company’s Pinless Inc. subsidiary
      as Planet Direct Inc. Through these subsidiaries, the communications division
      will further its strategic endeavors in the prepaid international long distance
      marketplace and began exploring new relationships outside our historical
      distribution and supply channels.





On
      April
      25, 2008, PCB West, Inc. changed its name to Titan Electronics,
      Inc.





**Business
      Overview**





The
      Company is in the early stage of operations and, as a result, the relationships
      between revenue, cost of revenue, and operating expenses reflected in the
      financial information included in this Form 10-Q do not represent future
      expected financial relationships. Much of the cost of revenue and operating
      expenses reflected in its consolidated financial statements are costs based
      on
      the integration of the acquired companies and assets that comprise its
      operations. Accordingly, the Company believes that, at the Company's current
      stage of operations, period-to-period comparisons of results of operations
      are
      not meaningful.





The
      Company’s business strategy is to create shareholder value in each of its
      operating divisions, which include energy, communications, electronics and
      homeland security and consumer products. The Company may continue to evaluate
      acquisition, spin-off, and/or divestiture opportunities in its operating
      divisions. Additionally, the Company may pursue acquisition opportunities in
      new
      market segments.





The
      Company’s business strategy, by division, is to:





*Titan
      Global Energy Group*





Titan
      Global Energy Group was formed in the fourth quarter of fiscal year 2007. Titan
      Global Energy Group is a division engaged in the acquisition and management
      of
      complementary energy sector assets. On September 17, 2007 Titan Global Energy
      Group completed the acquisition of Appco. Appco, formed in 1923 and based in
      Blountville, Tennessee, is a regional petroleum company that owns and operates
      an extensive petroleum product distribution network that is comprised of 160
      dealers in the southeastern United States. Appco operates 54 convenience store
      locations in Tennessee, Kentucky and Virginia. Appco has more than 550 employees
      and maintains long standing partnerships with strategic terminal operators
      and
      major oil companies.


35








Titan
      Global Energy Group’s business strategy is to:





·
            Integrate
                the operations and distribution network of
                Appco.


·
            Increase
                the integration of biofuel products through strategic agreements
                and
                acquisitions that will enhance core profitability at wholesale and
                retail
                distribution and environmental responsibility in the markets we
                serve.


·
            Integrate
                vertically in the supply chain of purchasing
                petroleum.


·
            Increase
                inside store margins and volume through alignment with strategic
                distribution partners, product placement and aggressive liquid fuel
                pricing.





*Titan
      Communications Division*





Titan
      Communications Division is comprised of prepaid international long distance
      distribution, international long distance network operations and prepaid
      wireless distribution. The Company started its Communications Division with
      the
      purchase of the assets of Oblio Telecom in August 2005. Oblio Telecom was
      comprised of a strategic relationship with a tier one communications provider
      and a distribution network of over 60,000 retail locations for prepaid
      international long distance products. Subsequent to the acquisition of Oblio
      Telecom, the Company expanded relationships to another strategic tier one
      provider, began international network operations through its subsidiary
      Starttalk, Inc, and purchased assets of Ready Mobile, LLC to expand its prepaid
      wireless distribution of CDMA handsets. In the 2 nd quarter
      of fiscal 2008, the Company created Titan Communications, Inc., began operating
      its Pinless, Inc. subsidiary as Planet Direct, entered into a strategic
      relationship with a tier one international long distance telecommunications
      provider, ceased doing business as Oblio Telecom, divested of the wireless
      assets and suspended the international network operations.





Titan
      Communications Division business strategy is to:





·
            Evaluate
                the viability of the Company’s Oblio Telecom subsidiary and its
                distribution network.


·
            Create
                new distribution opportunities for prepaid international long distance
                products through new channels to include point of sale activated
                products.


·
            Enter
                strategic relationships with carriers and other entities to secure
                high
                quality, cost effective termination of international long distance
                traffic.


·
            Enter
                strategic relationships with tier one strategic partners to distribute
                prepaid international long distance products.


·
            Identify
                opportunities to leverage the Company’s distribution network and valued
                brands with other prepaid wireless offerings such as GSM handsets
                and
                airtime or SIM cards.


·
            Offer
                other prepaid services (i.e., money transfer, prepaid debit/credit
                cards,
                etc.) through existing distribution channels to first and second
                generation Americans.





In
      the
      quarter ended February 29, 2008, the Company created Titan Communications to
      further its strategic endeavors in the prepaid international long distance
      marketplace, and began exploring new relationships outside Oblio’s traditional
      distribution and supply channels.  Additionally, the Company no longer had
      strategic relationships with tier one partners for resale of prepaid
      international calling cards due to disputes over USF charges (see Note 17 to
      the
      consolidated financial statements). Simultaneously, the Company experienced
      a
      significant decrease in sales and collections of outstanding accounts
      receivable. Many of the long-standing distributors of Oblio’s products stopped
      placing orders for new product and stopped sending payments for previously
      placed orders. While we are vigorously pursuing legal action against many of
      these customers, the extended collection process has significantly disrupted
      the
      operating cash flow cycle of the prepaid international long distance portion
      of
      our communication’s division. These issues along with losses experienced in its
      network operations have resulted in the Company ceasing to do business as Oblio
      in the prepaid international long distance market. As such, the Company
      evaluated goodwill and other assets for impairment based on changes in business
      model. Goodwill and other intangibles of $4,666 were determined to be impaired
      and were written off during the quarter ended November 30, 2007. As of May
      31,
      2008, the allowance for sales returns remained at $3,552 and the allowance
      for
      uncollectible accounts receivable was increased to $12,114 for Oblio Telecom.


36


In
      the
      second quarter of fiscal 2008, Titan Wireless, Inc. (“Titan Wireless”), the
      Company’s wireless operating subsidiary, determined to cease the distribution of
      CDMA prepaid wireless handsets and the related airtime through its subsidiary
      Titan Wireless RM, Inc., due to the increasing capital requirements associated
      with the business model. As such, the Company evaluated goodwill and other
      assets for impairment based on changes in its business model. Goodwill
      associated with the purchase of Ready Mobile, LLC and the goodwill associated
      with the CDMA MVNO agreement in the amount of $9,906 was expensed as impaired
      as
      of November 30, 2007.  In addition, the remaining goodwill, definite and
      indefinite lived assets were written off against the contingent purchase price
      commitment established with the asset purchase from Ready Mobile, LLC. Titan
      Wireless has sold its CDMA wireless subscriber base and distribution network.
      Titan Wireless is concurrently seeking other strategic relationships to offer
      GSM handsets and airtime to its distribution channels, which would reduce
      capital costs per subscriber on an on-going basis.





*Titan
      Electronics and Homeland Security Division*





Titan’s
      Electronics and Homeland Security Division is comprised of Titan PCB East and
      Titan Electronics. These companies specialize in the manufacturing of advanced
      circuit boards and other high tech products for military and high-tech clients.
      On November 30, 2007, the Company completed its acquisition of Nexus Nano.
      Nexus
      Nano is a manufacturer of custom circuit boards for aerospace, defense and
      other
      industries.





Titan
      Electronics and Homeland Security Division business strategy is to:





·
            Target
                potential customers and industries needing prototype boards with
                required
                turnaround times between 24 hours and the industry standard 10
                days.


·
            Aggressively
                market specialty manufacturing services for time sensitive, high-tech
                prototype and pre-production Rigid and HVR Flex PCBs to the high
                technology industry and cater to customers who need time sensitive
                delivery of low to medium production runs with high quality and superior
                design and customer service interface whether for production or research
                and development.


·
            Expand
                the Company’s innovative “rep-centric” sales
                approach.


·
            Seek
                continued geographic diversification of its customer base through
                its
                nationwide rep network.


·
            Integrate
                operations of Nexus Nano Custom Electronics,
                Inc.





*Titan
      Global Brands*





Titan
      Global Brands was formed to integrate, protect and expand brand management
      capabilities and to identify and purchase other consumer product brands that
      can
      leverage and optimize growth from the Company's distribution channels. On
      October 17, 2007 the Company completed its acquisition of USA Detergents, Inc.
      (“USAD”). USAD distributed mixed truckloads of laundry, cleaner and candle
      brands at attractive prices and in unique merchandising configurations. By
      leveraging brand extensions and licensing agreements with consumer product
      conglomerates, USAD's brand extensions include Arm & Hammer, Aim, Close-up,
      Pepsodent, Betty Crocker, Snapple, Fabulous and Oxymax. Additionally, USAD
      owns
      tier one brands such as Country Air, Crystal Shine, Fine Care HS, Swiss Pine
      and
      Touch of Glass and USAD owns tier two brands such as Laundry Bright, Plumbers
      Aid, Power Scrub and Xtra Easy. USAD also owns 50% of net profits generated
      by
      the liquid cleaner portion of the Brillo brand. During the second quarter of
      fiscal 2008, the Company ceased its manufacturing operations for filling and
      packaging USAD liquid products. On February 12, 2008, several suppliers of
      USAD
      filed an involuntary Chapter 7 bankruptcy petition with the United States
      Bankruptcy Court in the District of Delaware. During the third fiscal quarter
      of
      2008, the Company converting the Chapter 7 bankruptcy filing to a Chapter 11
      bankruptcy filing and pursued other alternatives for the assets of USAD. On
      June
      13, 2008, the bankruptcy was converted back to a Chapter 7 bankruptcy and the
      court appointed a trustee to oversee the liquidation of the remaining assets.
      The Company is exploring opportunities to maximize the value of the brands
      by
      outsourcing filling and packaging of USAD brands, licensing USAD brands to
      other
      manufacturers, and other alternatives. See additional discussion in Note 22
      to
      the consolidated financial statements.





Subsequent
      to the quarter ended November 30, 2007, the Company, through its newly formed
      subsidiary Titan Apparel, Inc (“Titan Apparel”) acquired the assets of Global
      Brands Marketing, Inc. (“GBMI”). Titan Apparel, located in Santa Barbara, CA,
      owns the brands Dry-shod, No Mass, Mehandi and Funflopps. Titan Apparel operates
      under the banner Global Feet and, through its predecessor entity GBMI, sold
      its
      footwear products in 130 countries worldwide.


37


Titan
      Global Brands business unit strategy is to:





·
            Integrate
                USAD brands into Company’s distribution
                network.


·
            Evaluate
                the viability of USAD’s manufacturing facilities in New
                Jersey.


·
            Evaluate
                other strategic partners to manufacture or license products for USAD’s
                valued brands.


·
            Identify
                and integrate other extensions of Titan Global Brands portfolio of
                brands
                and intellectual property.





**ACCOUNTING
      PRINCIPLES; ANTICIPATED EFFECT OF GROWTH**





Below
      the
      Company describes a number of basic accounting principles which the Company
      employs in determining its recognition of revenues and expenses, as well as
      a
      brief description of the effects that the Company believes that its anticipated
      growth will have on its revenues and expenses in the future.





In
      our
      energy division, we recognize sales of petroleum and other items when the title
      passes to the customer. We recognize the gross amounts earned from sales to
      wholesale customers as revenues. Shipping and handling costs charged to
      customers are included in our sales. At May 31, 2008 we had $0 allowance for
      returns and an allowance for doubtful accounts of $109. Actual returns may
      differ materially from our estimates, and revisions to the allowances may be
      required from time to time.





Sales
      in
      our energy division are subject to volatility based on trading prices of
      petroleum and the competitive forces in our markets. We expect sales to continue
      to remain constant in fiscal year 2008 subject to changes in trading prices
      of
      petroleum.





In
      the
      communications division, the Company recognizes revenue upon the activation
      of
      its prepaid calling cards (except StartTalk products) by the customers or the
      transfer of risk of loss on our prepaid wireless handsets. The Company
      recognizes revenue as the minutes are used on our StartTalk products as that
      is
      when the revenue is earned. StartTalk products are provided through switches
      that the Company owns and/or leases and thus the Company is responsible for
      inbound and outbound termination. The third party switches bill as minutes
      are
      used. The Company records an estimated liability for these minutes when the
      cards are activated. Breakage is recognized ratably over the anticipated usage
      of cards. Revenue is deferred on StartTalk products that have been sold but
      services have not yet been provided to the end customer. The Company records
      sales as gross sales less an allowance for returns and discounts. We provide
      our
      customers a limited right of return for calling cards and defective handsets
      and
      record an allowance against gross revenues for estimated returns at the time
      of
      the sale based on historical results and current information related to specific
      customer accounts. At May 31, 2008 we had an allowance for returns of $3,672
      and
      an allowance for doubtful accounts of $15,726. Actual returns may differ
      materially from our estimates, and revisions to the allowances may be required
      from time to time.





We
      are
      currently evaluating the future direction of our prepaid international long
      distance business and the prepaid wireless business. We have incorporated Titan
      Communications, Inc., begun operating our Pinless, Inc. subsidiary as Planet
      Direct, entered into a strategic relationship with a tier one international
      long
      distance telecommunications provider, ceased doing business as Oblio Telecom,
      divested of the wireless assets and suspended the international network
      operations. Additionally, we are pursuing more economic means to provide prepaid
      wireless services to our distribution channels and customers. Specifically,
      we
      are pursuing opportunities to provide GSM services and/or other alternatives
      for
      prepaid wireless services and airtimes to our customers.




In
      our
      electronics and homeland security division, we recognize sales upon shipment
      to
      our customers. We record net sales as gross sales less an allowance for returns
      and discounts. At May 31, 2008 we had approximately 260 customers in our
      electronics and homeland security division. We provide our customers a limited
      right of return for defective PCBs and record an allowance against gross
      revenues for estimated returns at the time of sale based on its historical
      results. Because our customers quickly test the PCBs the Company manufactures
      for them, the majority of returns for defects occur within the first 15 days
      following shipment. At May 31, 2008, we had an allowance for returns of $119
      and
      an allowance for doubtful accounts of $289. Actual returns may differ materially
      from our estimates, and revisions to the allowances may be required from time
      to
      time.





We
      expect
      sales to grow in our electronics and homeland security division as we continue
      to develop our reputation in the quick turn and prototype and defense industry
      markets. Additional acquisitions such as the acquisition of Nexus Custom
      Electronics will also increase sales as well as cause disruption as facilities,
      employees, and processes are integrated. We expect these fluctuations to be
      relatively short lived while expecting the sales growth to be more permanent
      with the variable of market demand as a condition.


38


In
      our
      global brands division, we recognize sales at the time the merchandise is
      shipped to our distribution customers. At May 31, 2008 we had $0 allowance
      for
      returns and an allowance for doubtful accounts of $2,937. Actual returns may
      differ materially from our estimates, and revisions to the allowances may be
      required from time to time.





We
      are
      currently evaluating opportunities in our global brands division to outsource
      manufacturing of our products, license brands for other companies use in similar
      products and other strategic alternatives.




*Cost
      of Sales*





In
      our
      energy division, cost of sales consists of costs of acquiring petroleum and
      related products in our stores. Additionally, we include transportation costs
      of
      petroleum, shipping costs and handling costs in the cost of sales. Our cost
      of
      sales can fluctuate based on the changing market pricing of petroleum products
      on a daily basis. We effort to mitigate our risk of market fluctuations in
      petroleum pricing by purchasing fuel on the spot market at the refineries,
      through strategic relationships with terminal operators and prevailing rates
      on
      the open market.





In
      our
      communications division, cost of sales consists of network costs associated
      with
      terminating our customers’ traffic, regulatory fees, printing and shipping. The
      cost of wireless handsets is also included in cost of sales in our prepaid
      wireless division as well. Our cost of sales can fluctuate with changes in
      the
      amount of traffic to certain destinations, changes in the regulatory fees to
      certain destinations and method of call termination. Our network capacity
      utilizes least cost routing software which chooses routes real time from many
      suppliers for each destination to maintain a competitive cost base and
      acceptable call quality. If we are successful completing a strategic
      relationship with another tier one partner or other strategic partners, we
      could
      experience improvements in our margins.





In
      our
      electronics and homeland security division cost of sales consists of materials,
      labor, outside services and overhead expenses incurred in the manufacture and
      testing of its products. Many factors affect its gross margin, including, but
      not limited to, capacity utilization, production volume, production quality
      and
      yield. We do not participate in any long-term supply contracts and we believe
      there are a number of high quality suppliers for the raw materials we use.
      Our
      cost of goods, as a percentage of revenues, varies depending on the complexity
      of the PCBs we manufacture in any given period.





In
      our
      global brands division, cost of sales includes the cost of materials, labor,
      outside services and overhead expenses incurred in the manufacture and filling
      of its products. As in our electronics division, many factors affect our gross
      margin, including, but not limited to, capacity utilization, production volume,
      production quality and yield.





Included
      in cost of sales is overhead which is relatively fixed on an annual basis.
      Materials are variable and labor is semi-variable and is influenced by the
      complexity of orders as well as the quantity of orders. As our electronics
      and
      homeland security business is continually changing with regard to the type
      of
      product produced, we plan to implement broader use of production systems to
      control the overtime in production as well as the use of materials in
      production. We anticipate that these systems will assist in the pricing of
      its
      products with the objective to be more competitive and profitable in its target
      market.





*Operating
      and Non-Operating Expenses*





Each
      division’s operating expenses for the three months ended May 31, 2008 and 2007
      are comprised of marketing, general and administrative, certain non-recurring
      costs and costs related to mergers and acquisitions.





Selling
      and marketing expenses consist primarily of salaries and commissions paid to
      its
      internal sales team, commissions paid to independent sales representatives
      and
      costs associated with advertising and marketing activities. We expect our
      selling and marketing expenses to fluctuate as a percentage of sales as we
      add
      new personnel, develop new independent sales representative channels and
      advertise the products and company.





General
      and administrative expenses include all corporate and administrative functions
      that serve to support its current and future operations and provide an
      infrastructure to support future growth. Major items in this category include
      management and staff salaries and benefits, travel, network administration
      and
      systems/data processing, training, rent/leases and professional services. We
      do
      not expect a material increase in sales and marketing expense that is not
      consistent with an increase in our sales over a reasonable period of time.
      We
      anticipate our sales and marketing costs to fluctuate as a percentage of sales
      due to the addition of sales personnel and various marketing activities planned
      throughout the year.


39


*Interest
      Expense*





Interest
      expense reflects interest paid or accrued on debt instruments, the amortization
      of debt issuance costs, and finance charges. Interest expense includes, for
      derivative instrument liabilities, the amortization of the discount from the
      face value of convertible debt resulting from allocating part or all of the
      proceeds to the derivative instruments, together with the stated interest on
      the
      instrument, which is amortized over the life of the instrument, using the
      effective interest method.





*Gain
      or Loss from Derivative Liabilities*





The
      Company reviews the terms of convertible debt and equity instruments issued
      to
      determine whether there are embedded derivative instruments, including embedded
      conversion or other features that are required to be bifurcated and accounted
      for separately as derivative financial instruments. Generally, where the ability
      to physical or net-share settle an embedded conversion option is not deemed
      to
      be within the control of the Company, the embedded conversion option is required
      to be bifurcated and accounted for as a derivative liability. In connection
      with
      the sale of convertible debt and equity instruments, we may also issue
      free-standing options or warrants. Although the terms of the options and
      warrants may not provide for net-cash settlement, in certain circumstances,
      physical or net-share settlement is deemed to not be within our control and,
      accordingly, we are required to account for these free-standing options and
      warrants as derivative liabilities, rather than as equity. Certain instruments,
      including convertible debt and equity instruments and free-standing options
      and
      warrants, may be subject to registration rights agreements, which impose
      penalties for failure to register the underlying common stock. The existence
      of
      these potential cash penalties may require that the embedded conversion option
      and the free-standing options or warrants be accounted for as derivative
      instrument liabilities.





Derivative
      liabilities are initially measured at their fair value and then re-valued at
      each reporting date, with changes in the fair value reported as charges or
      credits to the statements of operations. For derivative liabilities related
      to
      free-standing warrants and embedded conversion features, we use the
      Black-Scholes option pricing model to determine the fair value. For derivative
      liabilities related to registration rights agreements and cash payment premiums,
      we used a discounted present value of expected future cash flows to determine
      the fair value. To the extent that the initial fair values of the bifurcated
      and/or free-standing derivative liabilities exceed the total proceeds received,
      an immediate charge to the statements of loss is recognized, in order to
      initially record the derivative liabilities at fair value. The discount from
      the
      face value of the convertible debt resulting from allocating part or all of
      the
      proceeds to the derivative liabilities, together with the stated interest on
      the
      instrument, is amortized over the life of the instrument through periodic
      charges to the statements of operations, using the effective interest method.





**Results
      of Operations**





As
      of May
      31, 2008, the Company has a working capital deficit of $26,762 including current
      assets and current liabilities from discontinued operations, a working capital
      deficit of $18,988 excluding current assets and current liabilities from
      discontinued operations and an accumulated deficit of $85,357. The Company
      generated sales of $128,312 and $30,801 for the three months ended May 31,
      2008
      and 2007, respectively; and incurred a net loss and had net income of $7,265
      and
      $4,771, respectively. The Company generated sales of $372,304 and $96,864 for
      the nine months ended May 31, 2008 and 2007, respectively; and incurred a net
      loss of $34,657 and had net income of $832, respectively. In addition, the
      Company used $10,692 and generated $10,096 of cash flows from continuing
      operations during the nine months ended May 31, 2008 and 2007,
      respectively.





**Three
      Months Ended May 31, 2008 Compared to the Three Months Ended May 31,
      2007**





The
      following table sets forth the results of operations for the three months ended
      May 31, 2008 and 2007 and should be read in conjunction with our consolidated
      financial statements and the related notes appearing elsewhere in this
      report.


40





**Three
                Months Ended****5/31/2008**
            
            **5/31/2007**Sales
                - Energy division
            
            $
            120,336
            
            
            94
            %
            $
            -
            
            
            -
            %Sales
                - Communications division
            
            
            42
            
            
            0
            
            
            24,627
            
            
            80Sales
                - Electronics and homeland security division
            
            
            6,977
            
            
            5
            
            
            6,174
            
            
            20Sales
                - Global brands division
            
            
            957
            
            
            1
            
            
            -
            
            
            -Total
                sales
            
            
            128,312
            
            
            100
            
            
            30,801
            
            
            100Cost
                of sales - Energy division
            
            
            113,687
            
            
            89
            
            
            -
            
            
            -Cost
                of sales - Communications division
            
            
            20
            
            
            0
            
            
            15,742
            
            
            51Cost
                of sales - Electronics and homeland security division
            
            
            7,094
            
            
            6
            
            
            5,826
            
            
            19Cost
                of sales - Global brands division
            
            
            640
            
            
            0
            
            
            -
            
            
            -Total
                cost of sales
            
            
            121,441
            
            
            95
            
            
            21,568
            
            
            70Gross
                profit
            
            
            6,871
            
            
            5
            
            
            9,233
            
            
            30Operating
                expenses:Sales
                and marketing
            
            
            593
            
            
            *
            
            
            406
            
            
            1General
                and administrative
            
            
            10,388
            
            
            8
            
            
            3,210
            
            
            10Bad
                debt expense
            
            
            1,071
            
            
            1
            
            
            2,008
            
            
            *Amortization
                of intangibles
            
            
            494
            
            
            *
            
            
            1,369
            
            
            4Total
                operating expenses
            
            
            12,546
            
            
            10
            
            
            6,993
            
            
            23Operating
                income (loss)
            
            
            (5,675
            )
            
            (4
            )
            
            2,240
            
            
            7Other
                income
            
            
            377
            
            
            *
            
            
            22
            
            
            *Interest
                expense
            
            
            (2,075
            )
            
            (2
            )
            
            (953
            )
            
            (3
            )Gain
                on value of derivative instruments
            
            
            1,247
            
            
            1
            
            
            3,462
            
            
            11Net
                income (loss) from continuing operations
            
            $
            (6,126
            )
            
            (5)
            %
            $
            4,771
            
            
            15
            %Loss
                from discontinued operations
            
            
            (1,139
            )
            
            (1
            )
            
            -
            
            
            -Net
                income (loss)
            
            $
            (7,265
            )
            
            (6)
            %
            $
            4,771
            
            
            15
            %





*Sales* .
      Sales
      increased by $97,511 or 317% from $30,801 in the three months ended May 31,
      2007
      to $128,312 in the three months ended May 31, 2008.  Sales increased
      primarily due to the formation of our Titan Energy division and the acquisition
      of Appco on September 17, 2007 and the formation of our Global Brands division,
      Titan Apparel and the related acquired assets.  Sales decreased in the
      communications division due to the Company ceasing business as Oblio in December
      2007 and rebuilding the communications segment of our business over the ensuing
      months since the revision of the marketing strategy for our prepaid
      international calling card business. In addition, the communications division
      sold its wireless related assets in the second quarter of fiscal 2008. As such,
      sales in the communication division decreased by $24,585 or 100% from $24,627
      in
      the three months ended May 31, 2007 to $42 in the three months ended May 31,
      2008.




*Cost
      of Sales* .
      Cost of
      sales increased $99,873 or 463%, from $21,568 in the three months ended May
      31,
      2007 to $121,441 in the three months ended May 31, 2008, and as a percentage
      of
      sales increased from 70% in the three months ended May 31, 2007 to 95% in the
      three months ended May 31, 2008. The cost of sales increased due to the
      formation of our Titan Energy division and the acquisition of Appco on September
      17, 2007 and the formation of our Global Brands division, Titan Apparel and
      the
      related acquired assets. Cost of sales in the communication division decreased
      $15,722 or 100%, from $15,742 in the three months ended May 31, 2007 to $20
      in
      the three months ended May 31, 2008.  Costs of sales decreased in the
      communications division due to the significantly lower sales in the comparable
      periods. The increase in cost of sales as a percent of sales is due to a higher
      percentage of sales in the current period from our energy division primarily
      made up of lower margin fuel sales compared to the prior period that was
      comprised primarily of sales in our communications division. In the prior
      period, the communications division primarily sold products serviced by third
      party carriers and had fixed margins albeit higher margins than our current
      product mix.


41


*Sales
      and Marketing* .
      Sales
      and marketing expenses increased by $187 or 46% in the three months ended May
      31, 2007 to $593 in the three months ended May 31, 2008. As a percentage of
      sales, sales and marketing expense decreased from 1% in the three months ended
      May 31, 2007 to less than 1% in the three months ended May 31, 2008. The
      decrease in sales and marketing expense as a percent of sales is due to the
      lower sales and marketing expense as a percent of revenue in our energy
      division, which was formed in fiscal 2008 as compared to our historical
      operations where the majority of the sales and marketing expense was incurred
      in
      our electronics and homeland security division. The energy division had sales
      of
      $120,336 for the three-month period ending May 31, 2008 and sales and marketing
      expenses of $21 or 0.017% whereas our electronics and homeland security division
      had sales of $6,977 and sales and marketing expenses of $525 or 7.5%. In the
      prior period, the sales from our electronics and homeland security division
      made
      up a larger percentage of total sales and therefore increased the combined
      sales
      and marketing expense as a percent of sales in the aggregate.




*General
      and Administrative Expenses* .
      General
      and administrative expenses increased $7,178 or 224% from $3,210 in the three
      months ended May 31, 2007 to $10,388 in the three months ended May 31, 2008.
      As
      a percentage of sales, general and administrative expense was slightly lower
      for
      the comparable periods due to cost reductions in the communications division.
      General and administrative expense increases were attributable to the
      acquisitions that occurred during the 2008 fiscal period. Acquired entity
      general and administrative expenses increased $8,505, electronics and homeland
      security general and administrative expenses increased $323 and the
      communications division general and administrative expenses decreased $1,592
      in
      the three months ended May 31, 2008 compared to the three months ended May
      31,
      2007. General and administrative expenses increased in the electronics and
      homeland security division due to staff additions and decreased in the
      communications division due to the sale of the wireless assets, staff reductions
      in the Richardson, Texas facility and other cost cutting measures.




*Bad
      Debt Expense* .
      Bad
      debt expense decreased $937 or 47% from $2,008 in the three months ended May
      31,
      2007 to $1,071 in the three months ended May 31, 2008. Bad debt expense for
      the
      prior period was established in the communications division in connection with
      a
      dispute with one of our wholesale providers. In the current period, an
      additional allowance for bad debt was established in the communications division
      due to the release of a portion of a pre-judgment garnishment obtained in
      connection with one of the lawsuits associated with accounts receivable. While
      management will continue its collection efforts, an adjustment to the
      established allowance for doubtful accounts will be made when and if those
      certain accounts are collected or are deemed to be collectible. Oblio has
      allowed $12,114 for uncollectible accounts and $3,552 for sales returns related
      to these disputes.




*Amortization
      of Intangibles* .
      Amortization of intangibles decreased $875 or 64% from $1,369 in the three
      months ended May 31, 2007 to $494 in the three months ended May 31, 2008.
      Amortization of intangibles decreased during the three months ended May 31,
      2008
      due to the impairment recorded during the quarter ended November 30, 2007 in
      the
      communications division. Intangible assets that were being amortized in the
      prior period were impaired in a prior quarter and are therefore no longer being
      amortized.




*Interest
      Expense* .
      Interest expense increased $1,122 or 118%, from interest expense of $953 in
      the
      three months ended May 31, 2007 to $2,075 in the three months ended May 31,
      2008. Interest expense increased primarily due to the debt used to finance
      our
      acquisition in our Titan Energy division, Titan Apparel, and Titan
      Nexus.





*Gain
      or Loss from Derivative Liabilities* .
      Derivative liabilities are initially measured at their fair value and then
      re-valued at each reporting date, with changes in the fair value reported as
      charges or credits to the statements of loss.  The Company recognized a
      gain from the change in fair value of its derivative liabilities of $1,247
      in
      the three months ended May 31, 2008 and a gain from the change in fair value
      of
      derivative liabilities of $3,462 in the three months ended May 31,
      2007.





**Nine
      Months Ended May 31, 2008 Compared to the Nine Months Ended May 31,
      2007**





The
      following table sets forth the results of operations for the nine months ended
      May 31, 2008 and May 31, 2007 and should be read in conjunction with our
      consolidated financial statements and the related notes appearing elsewhere
      in
      this report.


42





**Nine
                Months Ended****5/31/2008**
            
            **5/31/2007**Sales
                - Energy division
            
            $
            312,881
            
            
            84
            %
            $
            -
            
            
            -
            %Sales
                - Communications division
            
            
            34,897
            
            
            9
            
            
            80,138
            
            
            83Sales
                - Electronics and homeland security division
            
            
            22,168
            
            
            6
            
            
            16,726
            
            
            17Sales
                - Global brands division
            
            
            2,358
            
            
            1
            
            
            -
            
            
            -Total
                sales
            
            
            372,304
            
            
            100
            
            
            96,864
            
            
            100Cost
                of sales - Energy division
            
            
            296,738
            
            
            80
            
            
            -
            
            
            -Cost
                of sales - Communications division
            
            
            24,392
            
            
            7
            
            
            64,333
            
            
            66Cost
                of sales - Electronics and homeland security division
            
            
            21,379
            
            
            6
            
            
            16,014
            
            
            17Cost
                of sales - Global brands division
            
            
            1,981
            
            
            1
            
            
            -
            
            
            -Total
                cost of sales
            
            
            344,490
            
            
            93
            
            
            80,347
            
            
            83Gross
                profit
            
            
            27,814
            
            
            7
            
            
            16,517
            
            
            17Operating
                expenses:Sales
                and marketing
            
            
            1,859
            
            
            0
            
            
            1,481
            
            
            2General
                and administrative
            
            
            30,135
            
            
            8
            
            
            8,055
            
            
            8Bad
                debt expense
            
            
            9,869
            
            
            3
            
            
            2,130
            
            
            *Impairment
                of intangibles
            
            
            14,572
            
            
            4
            
            
            -
            
            
            -Amortization
                of intangibles
            
            
            2,452
            
            
            1
            
            
            4,038
            
            
            4Total
                operating expenses
            
            
            58,887
            
            
            16
            
            
            15,704
            
            
            16Operating
                income (loss)
            
            
            (31,073
            )
            
            (8
            )
            
            813
            
            
            1Other
                income
            
            
            1,583
            
            
            0
            
            
            43
            
            
            *Interest
                expense
            
            
            (5,716
            )
            
            (2
            )
            
            (3,184
            )
            
            (3
            )Gain
                on disposal of assets
            
            
            2,004
            
            
            1
            
            
            -
            
            
            -Gain
                (loss) on value of derivative instruments
            
            
            10,999
            
            
            3
            
            
            (4,630
            )
            
            (5
            )Gain
                on extinguishment of debt
            
            
            -
            
            
            -
            
            
            7,790
            
            
            8Net
                income (loss) from continuing operations
            
            $
            (22,203
            )
            
            (6)
            %
            $
            832
            
            
            1
            %Loss
                from discontinued operations
            
            
            (12,454
            )
            
            (3
            )
            
            -
            
            
            -Net
                income (loss)
            
            $
            (34,657
            )
            
            (9)
            %
            $
            832
            
            
            1
            %





*Sales.* Sales
      increased by $275,440 or 284% from $96,864 in the nine months ended May 31,
      2007
      to $372,304 in the nine months ended May 31, 2008.  Sales increased
      primarily due to the formation of our Titan Energy division and the acquisition
      of Appco on September 17, 2007.  In addition, the communications division
      is transitioning from selling products terminating on owned and or leased
      switching gear through its Oblio subsidiary to product offerings with service
      provided by third party telecommunication providers through Planet Direct.
      As
      such, sales in the communication division decreased by $45,241 or 56% from
      $80,138 in the nine months ended May 31, 2007 to $34,897 in the nine months
      ended May 31, 2008.  Sales in the electronics division increased by $5,442
      or 33% from $16,726 in the nine months ended May 31, 2007 to $22,168 in the
      nine
      months ended May 31, 2008




*Cost
      of Sales.* Cost
      of
      sales increased $264,143 or 329%, from $80,347 in the nine months ended May
      31,
      2007 to $344,490 in the nine months ended May 31, 2008, and as a percentage
      of
      sales increased from 83% in the nine months ended May 31, 2007 to 93% in the
      nine months ended May 31, 2008. The cost of sales increased due to the formation
      of our Titan Energy division and the acquisition of Appco on September 17,
      2007.  Cost of sales in the communication division decreased $39,941 or
      62%, from $64,333 in the nine months ended May 31, 2007 to $24,392 in the nine
      months ended May 31, 2008. Costs of sales decreased in the communications
      division due to the decrease in sales in part but also to increased margins
      for
      the nine months ended May 31, 2008 as compared to the corresponding prior
      period. The increased margin is due to prepaid international calling card minute
      delivery modifications in the 2008 period for products managed on owned and
      or
      leased switching gear. In the prior period, the vast majority of the sales
      were
      generated from products serviced by third parties and the communications
      division primarily served as a distributor with primarily fixed margins. 
Cost of sales in the electronics division increased $5,365 or 34%, from $16,014
      in the nine months ended May 31, 2007 to $21,379 in the nine months ended May
      31, 2008. The cost of sales increase in the electronics division was
      attributable to an increase in sales over the comparable periods. The increase
      in cost of sales as a percent of sales is due to a higher percentage of sales
      in
      the current period from our energy division primarily made up of lower margin
      fuel sales compared to the prior period that was comprised primarily of sales
      in
      our communications division.




43


*Sales
      and Marketing.* Sales
      and
      marketing expenses increased by $378 or 26%, from $1,481 in the nine months
      ended May 31, 2007 to $1,859 in the nine months ended May 31, 2008. As a
      percentage of sales, sales and marketing expense decreased from 2% in the nine
      months ended May 31, 2007 to less than 1% in the nine months ended May 31,
      2008.
      This decrease is primarily attributable to lower sales and marketing expenses
      as
      a percent of sales in our Titan Energy division in the nine months ended May
      31,
      2008 as compared to the nine months ended May 31, 2007 offset by sales and
      marketing expenses in our newly formed Titan Global Brands
      division.




*General
      and Administrative Expenses.* General
      and administrative expenses increased $22,080 or 274% from $8,055 in the nine
      months ended May 31, 2007 to $30,135 in the nine months ended May 31, 2008.
      As a
      percentage of sales, general and administrative expense was consistent for
      the
      comparable periods. General and administrative expense increases were
      attributable to the acquisitions that occurred during the 2008 fiscal period
      offset by decreases in general and administrative expenses in the communications
      division. Acquired entity general and administrative expenses constituted
      $23,019 of the general and administrative expenses increase offset by decreases
      in the communications division for the nine months ended May 31, 2008 when
      compared to the prior period.




*Bad
      Debt Expense.* Bad
      debt
      expense increased $7,739 or 363% from $2,130 in the nine months ended May 31,
      2007 to $9,869 in the nine months ended May 31, 2008. As a percentage of sales,
      bad debt expense increased due to an increase in the allowance for doubtful
      accounts in our communications division. In connection with the dispute with
      several of the wholesale providers in the communications division, management
      determined that the collection of customer receivables was considered doubtful
      and an appropriate reserve was established. While management will continue
      its
      collection efforts, an adjustment to the established allowance for doubtful
      accounts will be made when and if those certain accounts are collected or are
      deemed to be collectible. Oblio has allowed $12,114 for uncollectible accounts
      and $3,552 for sales returns related to these disputes.




*Amortization
      of Intangibles.* Amortization
      of intangibles decreased $1,586 or 39% from $4,038 in the nine months ended
      May
      31, 2007 to $2,452 in the nine months ended May 31, 2008. Amortization of
      intangibles decreased during the nine months ended May 31, 2008 due to the
      impairment recorded during the quarter ended November 30, 2007 in the
      communications division.




*Interest
      Expense.* Interest
      expense increased $2,532 or 80%, from interest expense of $3,184 in the nine
      months ended May 31, 2007 to $5,716 in the nine months ended May 31, 2008.
      Interest expense increased primarily due to the debt used to finance our
      acquisition in our Titan Energy division, Titan Apparel, and Titan
      Nexus.




*Gain
      on Disposal of assets.* Gain
      on
      disposal of assets increased $2,004 from $0 in the nine months ended May 31,
      2007.   The gain on disposal of assets is due to the sale of
      substantially all of our prepaid wireless assets on January 25, 2008.  A
      portion of the consideration on the sale of the wireless assets was a $1,000
      promissory note. An allowance was established on the date of the closing for
      the
      full amount of the $1,000 promissory note. A reserve was established for
      the note based on the poor credit worthiness of Boomerang and its lack of stable
      financing. The gain on disposal of assets equals the liabilities assumed by
      the
      buyer less the carrying amounts of the divested assets.




*Gain
      or Loss from Derivative Liabilities* .
      Derivative liabilities are initially measured at their fair value and then
      re-valued at each reporting date, with changes in the fair value reported as
      charges or credits to the statements of loss.  The Company recognized a
      gain from the change in fair value of its derivative liabilities of $10,999
      in
      the nine months ended May 31, 2008 and a loss from the change in fair value
      of
      derivative liabilities of $4,630 in the nine months ended May 31,
      2007.




*Impairment
      Charge.* Impairment
      charge was $14,572 for the nine months ended May 31, 2008. During the quarter
      ended November 30, 2007, the Company created Titan Communications to further
      its
      strategic endeavors in the prepaid international long distance marketplace
      and
      began exploring new relationships outside our legacy traditional distribution
      and supply channels. Additionally, Oblio experienced a significant decrease
      in
      sales and collections of outstanding accounts receivable.  Many of the
      long-standing distributors of Oblio’s products stopped placing orders for new
      product and stopped sending payments for previously placed
      orders.


44


While
      we
      are vigorously pursuing legal action against many of these customers, the
      extended collection process has significantly disrupted the operating cash
      flow
      cycle of the prepaid international long distance portion of our communication’s
      division.  These issues along with losses experienced in its network
      operations have resulted in the Company ceasing to do business as Oblio in
      the
      prepaid international long distance market. As such, the Company evaluated
      goodwill and other assets for impairment based on changes in business model.
      Accordingly, the Company incurred an impairment charge for $14,572 of goodwill
      and intangibles related to the Oblio Telecom and Titan Wireless.




Additionally,
      subsequent to November 30, 2007, Titan Wireless, the Company’s wireless
      operating subsidiary, determined to cease the distribution of CDMA prepaid
      wireless handsets and the related airtime through its subsidiary Titan Wireless
      RM, Inc, due to the increasing capital requirements associated with the business
      model.  As such, the Company evaluated goodwill and other assets for
      impairment based on changes in its business model.





**Liquidity
      and Capital Resources**





Our
      principal sources of liquidity are our existing cash and cash equivalents,
      cash
      generated from operations, and cash available from borrowings under our $13,000
      revolving credit facility in our communications division, our $7,000 revolving
      credit facility in our electronics and homeland securities division, our $20,000
      revolving credit facility in our energy division, and our $14,000 revolving
      credit facility in our global brands division for the continuing operations.
      As
      of May 31, 2008, the Company had no excess availability based on collateral
      limits under its revolving credit facilities. We may also generate liquidity
      from offerings of debt and/or equity in the capital markets. As of May 31,
      2008,
      we had a total of $2,999 in unrestricted cash and cash equivalents. As of May
      31, 2008, we also had restricted cash and cash equivalents and short-term
      investments of $617 that included funds to collateralize fuel bonds issued
      by a
      surety for Appco. See additional discussion in Note 6 to the consolidated
      financial statements.




During
      the nine months ended May 31, 2008, the Company made significant cost reductions
      in the communications division and the global brands division. In the
      communications division, the Company reduced staffing in the Richardson, Texas
      facility in connection with retooling the business; focusing on selling prepaid
      international calling cards that terminate on the networks of third parties.
      In
      addition, staff reductions were made when the wireless related assets were
      sold
      on January 25, 2008. Staff reductions were made in the global brands division
      in
      North Brunswick, New Jersey when our USAD operations were closed. We have
      realized lower general and administrative expenses in those divisions with
      the
      intent of reducing the negative operating cash flow of these segments and our
      business as we redefine those operations through new business ventures, modified
      operating structures, sale to a third party, or liquidation. In the instances
      where business liquidation is considered necessary by management, our senior
      lender will in most cases receive the majority of the proceeds from liquidation.
      While the trade accounts payable and related accrued expenses for the
      communications division have been recorded at the full amount of the amounts
      owed, management intends to negotiate with many of the unsecured creditors
      and
      attempt to settle these liabilities for less than face value. For the operations
      of our USAD subsidiary, a bankruptcy trustee has been appointed and is working
      through the process of an orderly liquidation of the assets to satisfy USAD’s
      obligations. As management determines and has an understanding of the ultimate
      settlement amount of the associated liabilities of USAD, liquidation accounting
      rules will prevail and liabilities will be recorded at their settled amounts.
      Given the recent cost containment measures implemented during the nine months
      ended May 31, 2008, management believes that our existing cash and investments,
      liquidity available under our revolving credit facility, ability to utilized
      term debt financing, ability to raise capital from the equity markets, ability
      to obtain funding from certain significant stockholders and or other related
      parties and cash flows from our remaining operations, namely the Energy segment,
      will be sufficient to meet our operating and capital requirements through at
      least the next twelve months. However, if we are not successful in continuing
      to
      reduce our costs and improve our related cash flows, it may be necessary to
      raise additional capital that may be dilutive to existing
      shareholders.





As
      of May
      31, 2008, the Company had a working capital deficit of $26,762 including
      discontinued operations, a working capital deficit of $18,988 from continuing
      operations and an accumulated deficit of $85,357. In addition, the Company
      used
      $9,848 in continuing operations during the nine months ended May 31, 2008.




We
      are in
      the process of reinvigorating the distribution of prepaid international calling
      cards. We have signed distribution contracts with several telecommunications
      providers that support the prepaid international calling card business. We
      have
      exclusive territory for one of the distribution contracts that offers extremely
      competitive minute delivery structures. We remain optimistic that we can and
      will rebuild this segment of our operations. In addition, we are evaluating
      additional communications carriers to revitalize our trusted brands in the
      prepaid international long distance markets. We are evaluating opportunities
      and
      implementing cost cutting measures in our electronics and homeland security
      division through various means. We also plan to pursue other strategic
      acquisitions in our energy division. We anticipate financing any purchases
      of
      assets, and any related working capital and/or initial operating cost needs,
      with cash from operations, our existing cash, cash equivalents and short-term
      investments, borrowings under our revolving credit facility, and proceeds from
      offerings of debt and/or equity securities. The amounts we may seek to raise
      through any such offerings may be substantial.  There can be no assurance
      that financing will be available in amounts or on terms acceptable to us, if
      at
      all.  Further, equity financing may result in dilution to existing
      shareholders and may involve securities that have rights, preferences, or
      privileges that are senior to our common stock.


45







*Operating
      Activities.* Cash
      used
      in operating activities from continuing operations was $10,692 during the nine
      months ended May 31, 2008 compared to cash generated in operating activities
      from continuing operations of $10,096 during the nine months ended May 31,
      2007.
      The increase in cash used by operations was primarily due to our net loss during
      the nine months ended May 31, 2008 compared to the nine months ended May 31,
      2007.




*Investing
      Activities.* Cash
      used in investing activities from continuing operations was $27,165 during
      the
      nine months ended May 31, 2008 compared to cash used in investing activities
      of
      $407 during the nine months ended May 31, 2007. The increase in cash used in
      investing activities was due primarily to cash payments related to the Appco
      acquisition.  The Company paid $30,000 to the sellers of Appco. In the
      prior period, equipment and improvements expenditures were $407 compared to
      $1,161 in the current nine-month period. This increase is due primarily to
      the
      construction of a new convenience store in our energy division. These increases
      were offset by cash provided by acquisitions of $3,784.




*Financing
      Activities.* Cash
      provided by financing activities from continuing operations during the nine
      months ended May 31, 2008 was $39,666 compared to cash used in financing
      activities of $9,702 during the nine months ended May 31, 2007. The increase
      in
      cash provided by financing activities is due to an increase in revolving lines
      of credit and term debt financing and the proceeds from the sale-leaseback
      transaction related to acquisitions. The Company raised $5,000 through an equity
      raise. The Company issued 2,500,000 shares valued at $2.00 per share to YA
      Global on November 9, 2007.





**Impact
      of Inflation**





The
      cost
      of our products produced in our electronics and homeland security division
      is
      influenced by the cost of a wide variety of raw materials, including precious
      metals such as gold used in plating, copper and brass used for contacts, and
      plastic material used in molding connector components. Generally, increases
      in
      the cost of raw materials, labor and services have been offset by price
      increases, productivity improvements and cost saving programs. We have no
      assurance, however, that we will be able to similarly offset such cost increases
      in the future.





The
      cost
      of our products produced in our energy segment is influenced by the cost of
      fuel. Crude oil and domestic wholesale petroleum markets are volatile. General
      political conditions, acts of war or terrorism and instability in oil producing
      regions, particularly in the Middle East, Russia and South America, could
      significantly impact crude oil supplies and wholesale petroleum costs.
      Significant increases and volatility in wholesale petroleum costs could result
      in significant increases in the retail price of petroleum products and in lower
      motor fuel gross margin per gallon. Increases in the retail price of petroleum
      products could impact consumer demand for motor fuel and convenience
      merchandise.





**Seasonality**





The
      Company has experienced sales fluctuations due to customer business shut downs
      over December holidays and the slow down of purchasing activities in the summer
      during peak vacation months for the electronics and homeland security. The
      Company expects to experience sales upswings in its energy division during
      the
      summer peak vacation months. Typically the fuel and convenience store industries
      experience the largest volumes during those months.





**Critical
      Accounting Policies**





*The
      SEC has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies
      provide additional disclosure and commentary on their most critical accounting
      policies. In FRR 60, the SEC defined the most critical accounting policies
      as
      the ones that are most important to the portrayal of a company's financial
      condition and operating results, and require management to make its most
      difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition,
      the Company's most critical accounting policies include: revenue recognition,
      which affects sales, inventory valuation, which affects its cost of sales and
      gross margin; and allowance for doubtful accounts and stock-based compensation,
      which affects general and administrative expenses. The methods, estimates and
      judgments the Company uses in applying these most critical accounting policies
      have a significant impact on the results the Company reports in its consolidated
      financial statements* .





46




*Revenue
      Recognition*





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





In
      the
      communications division, the Company recognizes revenue upon the activation
      of
      its prepaid calling cards (except StartTalk products) by the customers or the
      transfer of risk of loss on our prepaid wireless handsets. The Company
      recognizes revenue as the minutes are used on our StartTalk products as that
      is
      when the revenue is earned. StartTalk products are provided through switches
      that the Company owns and/or leases and thus the Company is responsible for
      inbound and outbound termination. The third party switches bill as minutes
      are
      used. The Company records an estimated liability for these minutes when the
      cards are activated. Breakage is recognized ratably over the anticipated usage
      of cards. Revenue is deferred on StartTalk products that have been sold but
      services have not yet been provided to the end customer. The Company records
      sales as gross sales less an allowance for returns and discounts. We provide
      our
      customers a limited right of return for calling cards and defective handsets
      and
      record an allowance against gross revenues for estimated returns at the time
      of
      the sale based on historical results.





In
      our
      electronics and homeland security division, we recognize revenue upon shipment
      to our customers. We record sales as gross sales less an allowance for returns
      and discounts. We provide our customers a limited right of return for defective
      PCBs and record an allowance against gross revenues for estimated returns at
      the
      time of sale based on historical results. Because our customers quickly test
      the
      PCBs delivered, the majority of returns for defects occur within the first
      15
      days following shipment.





In
      our
      energy division, we recognize sales of petroleum and other items when the title
      passes to the customer. We recognize the gross amounts earned from sales to
      wholesale customers as revenues. Shipping and handling costs charged to
      customers are included in our sales.





In
      our
      global brands division, we recognize sales at the time the merchandise is
      shipped to our distribution customers.





*Allowance
      for Doubtful Accounts*





We
      maintain an allowance for doubtful accounts for estimated losses resulting
      from
      the inability of our customers to make required payments. Our allowance for
      doubtful accounts is based on our assessment of the collectibility of specific
      customer accounts, the aging of accounts receivable, our history of bad debts,
      and the general condition of the industry. If a major customer's credit
      worthiness deteriorates, or our customers' actual defaults exceed our historical
      experience, our estimates could change and adversely impact our reported
      results. If a customers’ account is deemed to be uncollectible by management,
      the account is charged off against the allowance. The allowance is then
      re-assessed and adjusted accordingly.





*Inventory
      Valuation*





In
      our
      communications division, our policy is to value activated prepaid international
      card and wireless handset inventory at the lower of cost or market on a
      card-by-card basis on a first in first out basis.





In
      our
      electronics and homeland security division, our policy
      is to value raw material inventories at the lower of cost or market on a
      part-by-part basis on a first in first out basis. We also value work-in-process
      and finished goods utilizing a standard cost system which we believe
      approximates cost. This policy requires us to make estimates regarding the
      market value of its inventories, including an assessment of excess or obsolete
      inventories. We determine excess and obsolete inventories based on an estimate
      of the future demand for its products within a specified time horizon, generally
      12 months.





47




In
      our
      global brands division, inventories are stated at the lower of cost, determined
      by using the first-in, first-out method, or market. The Company periodically
      reviews inventory for slow-moving or obsolete items and such items are written
      down to net realizable value upon that determination.





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





*Long-lived
      Assets*





We
      review
      long-lived assets for impairment whenever events or changes in circumstances
      indicate that the related carrying amounts may not be recoverable. Determining
      whether impairment has occurred typically requires various estimates and
      assumptions, including determining which cash flows are directly related to
      the
      potentially impaired asset, the useful life over which cash flows will occur,
      their amount, and the asset’s residual value, if any. In turn, measurement of an
      impairment loss requires a determination of fair value, which is based on the
      best information available. We use internal discounted cash flow estimates,
      quoted market prices when available and independent appraisals as appropriate
      to
      determine fair value. We derive the required cash flow estimates from our
      historical experience and our internal business plans and apply an appropriate
      discount rate.





*Goodwill
      and Intangible Assets*





We
      test
      goodwill for impairment annually and whenever events or circumstances make
      it
      more likely than not that impairment may have occurred, such as a significant
      adverse change in the business climate or a decision to sell or dispose of
      a
      reporting unit. Determining whether an impairment has occurred requires
      estimating the fair value of the respective reporting unit, which we estimate
      using a discounted cash flow method. When available and as appropriate, we
      use
      comparative market multiples to corroborate discounted cash flow results. In
      applying this methodology, we rely on a number of factors, including actual
      operating results, future business plans, economic projections and market
      data.





If
      this
      analysis indicates goodwill is impaired, measuring the impairment requires
      a
      fair value estimate of each identified tangible and intangible asset. In this
      case we supplement the cash flow approach discussed above with independent
      appraisals, as appropriate.





*Stock-based
      Compensation*





We
      account for stock-based compensation according to SFAS 123(R) (revised 2004),
      “ *Share
      Based Payment* ”
by
      using the modified-prospective method. Stock-based compensation expense
      recognized in the consolidated statement of operations for the periods ended
      May
      31, 2008 includes compensation expense for stock-based payment awards granted
      prior to, but not yet vested, as of May 31, 2008, based on the grant date fair
      value estimated in accordance with SFAS 123(R).





As
      stock-based compensation expense recognized in the consolidated statement of
      operations for the periods ended May 31, 2008 is based on awards ultimately
      expected to vest, it has been reduced for estimated forfeitures. SFAS 123R
      requires forfeitures to be estimated at the time of grant and revised, if
      necessary, in subsequent periods if actual forfeitures differ form those
      estimates.





*Derivative
      Liabilities*





The
      Company reviews the terms of convertible debt and equity instruments issued
      to
      determine whether there are embedded derivative instruments, including embedded
      conversion and other features that are required to be bifurcated and accounted
      for separately as derivative financial instruments. Generally, where the ability
      to physical or net-share settle an embedded conversion option is not deemed
      to
      be within the control of the Company, the embedded conversion option is required
      to be bifurcated and accounted for as a derivative liability.





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





48




Derivative
      liabilities are initially measured at their fair value and then re-valued at
      each reporting date, with changes in the fair value reported as charges or
      credits to the statement of operations. For derivative liabilities related
      to
      free-standing warrants and embedded conversion features, we use the
      Black-Scholes option pricing model to determine the fair value. For derivative
      liabilities related to registration rights agreements and cash payment premiums,
      we used a discounted present value of expected future cash flows to determine
      the fair value.




To
      the
      extent that the initial fair values of the bifurcated and/or free-standing
      derivative liabilities exceed the total proceeds received, an immediate charge
      to the statement of loss is recognized, in order to initially record the
      derivative liabilities at fair value. The discount from the face value of the
      convertible debt resulting from allocating part or all of the proceeds to the
      derivative liabilities, together with the stated interest on the instrument,
      is
      amortized over the life of the instrument through periodic charges to the
      statements of loss, using the effective interest method. The classification
      of
      derivative instruments, including whether such instruments should be recorded
      as
      liabilities or as equity, is re-assessed at the end of each reporting period.
      Derivative liabilities are classified in the balance sheet as current or
      non-current based on the classification of the host instrument.





*Fuel
      Cost Hedges*





The
      Company’s energy segment makes limited use of derivative instruments to offset
      the exposure associated with oil prices that arise from liquid fuel inventory.
      The Company’s energy segment does not engage in speculative derivative
      activities or derivative trading activities nor does it use derivatives with
      leverage features. These derivatives are designated as fair value hedges, and
      therefore gains and losses resulting from the change in the fair values of
      the
      derivatives are offset in income by the gains and losses arising from the
      changes in fair value of the underlying hedged items.





*Income
      Taxes*





Under
      the
      asset and liability method of SFAS No. 109, *Accounting
      for Income Taxes* ,
      deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities, and their respective tax
      basis. Deferred tax assets, including tax loss and credit carry-forwards, and
      liabilities are measured using enacted tax rates expected to apply to taxable
      income in the years in which those temporary differences are expected to be
      recovered or settled. The effect on deferred tax assets and liabilities of
      a
      change in tax rates is recognized in income in the period that includes the
      enactment date. Deferred income tax expense represents the change during the
      period in the deferred tax assets and deferred tax liabilities. The components
      of the deferred tax assets and liabilities are individually classified as
      current and non-current based on their characteristics. Realization of the
      deferred tax asset is dependent upon generating sufficient taxable income in
      future years. Deferred tax assets are reduced by a valuation allowance when,
      in
      the opinion of management, it is more likely than not that some portion or
      all
      of the deferred tax assets will not be realized. The Company adopted Financial
      Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (“FIN
      48”), on September 1, 2007. FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an entity’s financial statements in accordance with
      SFAS no. 109 and prescribes a recognition threshold and measurement attribute
      for financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. Additionally, FIN 48 provides guidance
      on
      subsequent derecognizing of tax positions, financial statement classification,
      recognition of interest and penalties, accounting in interim periods and
      disclosure and transition requirements. There was no impact on the Company’s
      financial statements as a result of the implementation of FIN 48.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





We
      are
      exposed to various types of market risks in the normal course of business,
      including the impact of changes in commodity prices and interest rates. We
      may
      hedge market price fluctuations associated with physical purchases of fuel
      products by using derivative instruments including futures. We are exposed
      to
      changes in interest rates as fluctuations in market interest rates may lead
      to
      significant fluctuations in the fair value of our notes payable as many of
      our
      instruments are tied to the prime lending rate.





49




**ITEM
      4. CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures:* Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we conducted an evaluation of
      the
      effectiveness of the design and operations of our disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as of the end of the period covered by this Quarterly
      Report, that ensure that information relating to the Company which is required
      to be disclosed in this Quarterly Report is recorded, processed, summarized
      and
      reported, within required time periods. Due to inherent limitations, internal
      control over financial reporting may not prevent or detect misstatements. Also,
      projections of any evaluation of effectiveness to future periods are subject
      to
      the risk that controls may become inadequate because of changes in conditions
      or
      that compliance with the policies or procedures may deteriorate.





Based
      on
      this evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that the Company’s disclosure controls and procedures were not
      adequate and effective to ensure that material information relating to the
      Company and its consolidated subsidiaries would be accumulated and communicated
      to them by others within those entities, particularly during the period in
      which
      this Quarterly Report was being prepared, to allow timely decisions regarding
      required disclosure. The matters identified are with regard to insufficient
      documentation of our board of directors meetings, insufficient documentation
      of
      employee stock options and warrants granted, lack of documentation regarding
      approval of non-standard adjusting journal entries, insufficient documentation
      evidencing the research and proper application of revenue recognition issues,
      insufficient documentation of the accounting review and approval processes
      and
      insufficient documentation of acquisition and purchase price allocation
      accounting. A material weakness is a significant deficiency, or combination
      of
      significant deficiencies, that results in more than a remote likelihood that
      a
      material misstatement of the annual or interim financial statements will not
      be
      prevented or detected. Significant deficiencies are control issues that could
      have a significant adverse effect on the ability to record, process, summarize
      and report financial data in the financial statements.





*Changes
      in internal controls:* There
      have been no changes in the Company’s internal control over financial reporting
      during the three months ended May 31, 2008 that have materially affected, or
      are
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.




50


**PART
      II**





**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**


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





From
      time
      to time, the Company may become involved in various lawsuits and legal
      proceedings that arise in the ordinary course of business. While management
      does
      not believe these matters will have a material effect on the Company’s financial
      statements, litigation is subject to inherent uncertainties, and an adverse
      result could arise from time to time that may harm the Company’s business,
      financial condition and results of operations. The Company and its subsidiaries
      are involved in the following:





ALLSTATE
      PRINTING & PACKAGING, INC


On
      March
      25, 2008, the Company’s subsidiary, Oblio, was notified, via a process server,
      that it was being sued by Allstate Printing & Packaging, Inc. (“Allstate”).
      Allstate is seeking $86 for alleged unpaid invoices for services rendered in
      Passaic County: Superior Court, NJ. This action is currently pending. The
      Company has accrued the amounts alleged to be due in its accounts payable at
      May
      31, 2008.





AMERTEL
      COMMUNICATIONS, INC


On
      April
      2, 2008, the Company’s subsidiaries, Oblio and Titan Wireless, were notified,
      via a process server, that it was being sued by Amertel Communications, Inc.
      (“Amertel”). Amertel is seeking $275 for alleged unpaid refunds for products
      purchased in the US District Court, MD. This action is currently pending. The
      Company disputes the amounts alleged to be due, and Management is unable to
      estimate the ultimate liability, if any, related to this claim at May 31,
      2008.





ASIA
      TELECOM CORPORATION


On
      March
      7, 2008, Oblio filed a lawsuit in Dallas County, Texas, against Asia Telecom
      Corporation (“Asia Telecom”) seeking to recover $753 for unpaid product. Asia
      Telecom has filed a special appearance claiming that it does not have sufficient
      contacts with the State of Texas to warrant being sued in a Texas Court. The
      hearing on Asia Telecom’s special appearance is scheduled for July 25,
      2008.





AT&T
      CORP.


On
      December 5, 2006, the Company’s subsidiary, Oblio Telecom, Inc. (“Oblio”), filed
      a Demand for Arbitration with the American Arbitration Association against
      AT&T Corp. (“AT&T”). Oblio sought a refund of amounts paid to AT&T
      for the period from 1999 to October 2006 for USF charges paid to AT&T
      pursuant the Purchase Order Agreement, which sets forth the parties’ business
      relationship. The fees paid to AT&T for AT&T’s Enhanced Prepaid Card
      Service (“Prepaid Card Service”) included USF and other Federal Communications
      Commission (the “FCC”) charges. AT&T retained this revenue instead of making
      the required contributions to the USF and other FCC programs based on AT&T’s
      argument that its Prepaid Card Service was exempt under the law.




On
      October 12, 2007, Oblio entered into a Settlement Agreement (the “Settlement
      Agreement”) with AT&T, effective as of October 11, 2007. Pursuant to the
      Settlement Agreement, AT&T agreed to waive and discharge its right to
      receive $7,200 and Oblio issued a promissory note for the payment of the balance
      of $600 in interest to AT&T in full settlement of the Partial Final Award
      issued in the arbitration proceeding on the counter claims brought by AT&T
      against Oblio and in full settlement of the Oblio’s Universal Service Fund claim
      against AT&T. As Oblio had already recorded its liability in its accounts
      payable, the $6,600 net reduction in accounts payable reduced cost of sales
      during the three months ended November 30, 2007.





Oblio
      has
      remitted $500 to AT&T in compliance with the Settlement Agreement as of May
      31, 2008. Additionally, the Company has recorded $100 as a liability to AT&T
      as of May 31, 2008 for the remainder of the amounts due AT&T per the
      Settlement Agreement.





BARRON
      S.
      WALL, INC. t/a INSURANCE CONSULTING ASSOCIATES


On
      March
      7, 2008, the Company’s subsidiary, USAD, was notified, via a process server,
      that it was being sued by Barron S. Wall, Inc. t/a Insurance Consulting
      Associates (“Barron”). Barron is seeking $7 for alleged unpaid invoices for
      services rendered in Middlesex County: Superior Court, NJ. This action is
      currently pending. The Company has accrued the amounts alleged to be due in
      its
      accounts payable at May 31, 2008.





51




CLIFTON
      PREPAID COMMUNICATIONS CORP.


On
      August
      21, 2007, Oblio filed suit against Clifton Prepaid Communications Corp., Clifton
      Pre-Paid Corp, and Aref Aref (collectively “Clifton”) for non-payment of
      invoices related to services rendered in the District Court, 199 th Judicial
      District, Collin County, Texas. Oblio seeks $2,199 in payment plus pre-judgment
      interest, post judgment interest at the maximum lawful rate from July 30, 2007
      until judgment at the rate of six percent per annum, and reasonable and
      necessary attorney fees and costs. Oblio also obtained Writs of Garnishment
      against Clifton’s funds on deposit with Bank of America, N.A. and J.P. Morgan
      Chase Bank. As a result of the Writs of Garnishment, Oblio trapped approximately
      $150 in Clifton’s bank accounts. Clifton has unsuccessfully attempted to
      dissolve the Writ of Garnishment. The trial in this case is scheduled for
      November 2008.





As
      of May
      31, 2008, the Company has fully reserved and allowed for the $2,199 in accounts
      receivable from Clifton less the amounts captured in the Writ of Garnishment.





CRESCENT
      FUND, INC.


On
      July
      6, 2007, the Company filed a lawsuit against Crescent Fund, Inc. in Dallas
      County, Texas, seeking a declaratory judgment declaring that the Company had
      no
      remaining liability to Crescent Fund, Inc. under a Consulting Agreement entered
      into by and between the Company and Crescent Fund, Inc. in October 2003. On
      July
      7, 2008, the trial court entered judgment in favor of the Company declaring
      that
      the Company had no remaining liability to Crescent Fund, Inc.





F&L,
      LLP


On
      November 27, 2007, the Company was notified, via a process server, that it
      was
      being sued by F&L, LLP (“F&L”) in the District Court of Dallas County,
      Texas 160 th Judicial
      District. F&L is seeking the Company to perform on its guarantee of notes
      payable from Oblio to F&L. Principal amounts due to F&L, LLP as of May
      31, 2008 is $3,570. This action is currently pending. The Company has recorded
      the amounts due as a liability as of May 31, 2008. Oblio has also recorded
      accrued interest of $410 related to this obligation. On April 29, 2008, GBC
      Funding, LLC intervened in the lawsuit seeking to stay the lawsuit as a result
      of F&L’s prior agreement to subordinate its debt and collection to the
      rights of GBC Funding, LLC. To date, F&L has voluntarily consented to the
      stay. However, the Motion to Stay is currently set for hearing in August
      2008.




GEOTEL
      INTERNATIONAL, LC


On
      January 31, 2008, the Company’s subsidiary, Starttalk, was notified, via a
      process server, that it was being sued by Geotel International, LC (“Geotel”).
      Geotel is seeking $73 for alleged unpaid invoices for services rendered in
      Miami-Dade County: Circuit Court, FL. This action is currently pending. The
      Company has accrued the amounts alleged to be due in its accounts payable at
      May
      31, 2008.





HAWAII
      GLOBAL EXCHANGE, INC. AND TRANSPAC TELECOM, INC.


On
      December 21, 2007, the Company’s subsidiary Oblio, filed a lawsuit against
      Hawaii Global in 162 nd Judicial
      District Court of Dallas County, Texas. Oblio sought to recover $1,319 for
      unpaid product. Hawaii Global then removed the lawsuit to the United States
      District Court for the Northern District of Texas. Hawaii Global then moved
      to
      dismiss the Texas lawsuit based upon lack of personal jurisdiction and in the
      alternative to transfer the Texas lawsuit to the United States District Court
      of
      Hawaii. The District Court denied Hawaii Global’s motion to dismiss and or
      transfer. On January 29, 2008, the Company’s subsidiary, Oblio, was notified,
      via a process server, that it was being sued by Hawaii Global Exchange, Inc.
      and
      Transpac Telecom, Inc. (“Transpac”). Transpac is alleging violation of the
      Communications Act, breach of oral contract, promissory estoppel, and
      intentional interference with contractual relations and/or prospective economic
      advantage in US District Court, HI. Oblio then filed a motion to dismiss the
      Hawaii lawsuit based upon lack of personal jurisdiction or, in the alternative,
      to transfer the Hawaii lawsuit to Texas. Although Hawaii Global and Transpac
      have opposed the motion to dismiss, they have consented to the transfer of
      the
      Hawaii lawsuit to the Northern District of Texas. The Hawaii lawsuit has been
      transferred and consolidated with the Texas Lawsuit. Hawaii Global has joined
      the Company, Bryan Chance, Kurt Jensen, Frank Crivello, and David Marks as
      parties to the lawsuit. The Company disputes these allegations and will defend
      itself, and Management is unable to estimate the ultimate liability, if any,
      related to this claim at May 31, 2008.





JACO
      ELECTRONICS, INC.


On
      September 1, 2006, a subsidiary of the Company, Titan Nexus, Inc. f/k/a Nexus
      Nano Electronic, Inc. (“Nexas Nano”) filed suit against Jaco Electronics, Inc.
      (“Jaco”) in the United States District Court for the Southern District of New
      York, alleging that Jaco had made certain misrepresentations in connection
      with
      an Asset Purchase Agreement executed in September 2004. Jaco denied the
      allegations and asserted counterclaims against Nexus Nano and other related
      entities. On June 27, 2008, the Company, Jaco, and others entered into a
      Settlement Agreement that provided for the release of claims between the parties
      and included a five-year Supply Agreement between Jaco, Titan Nexus, Inc. d/b/a
      NEO EMS, Inc., and Nexus Custom Electronics, Inc.




52




LANHAM
      ACT LAWSUIT


On
      February 15, 2008, Oblio filed a lawsuit in the United States District Court
      for
      the Northern District of Texas against various individuals and entities alleging
      trademark infringement under the Lanham Act. Many of the defendants have filed
      motion to dismiss which are currently pending before the Court.





LATIN
      AMERICAN VOIP, INC


On
      December 26, 2007, the Company and its subsidiaries, Oblio and Starttalk were
      notified, via a process server, that it was being sued by Latin American VOIP,
      Inc (“Latin American VOIP”). Latin American VOIP is seeking $723 for alleged
      unpaid invoices for services rendered in Palm Beach County: Circuit Court,
      Florida. This action is currently pending. The Company has accrued $630 of
      the
      amounts alleged to be due in its accounts payable as of May 31, 2008 and is
      disputing the difference of $93.





LEVEL
      3
      COMMUNICATIONS, LLC


On
      November 2, 2007, the Company’s subsidiary, Oblio, was notified, via a process
      server, that it was being sued by Level 3 Communications, LLC (“Level 3”). Level
      3 is seeking $2,379 for alleged unpaid invoices for services rendered in
      Broomfield County: District Court, CO. On May 14, 2008, Oblio entered into
      an
      Agreed Judgment in the amount of $2,042. As of May 31, 2008, Oblio has accrued
      the amount of the Agreed Judgment in accounts payable.





RICO
      LAWSUIT


On
      February 15, 2008, Oblio filed a lawsuit in the United States District Court
      for
      the Northern District of Texas against various individuals and entities alleging
      a conspiracy to defraud Oblio under the Racketeering, Influence Corruption
      Act
      (“RICO”). Many of the defendants have filed motion to dismiss which are
      currently pending before the Court.





STX
      COMMUNICATIONS, INC


On
      January 16, 2008, STX Communications, LLC d/b/a STX Phone Cards (“STX”) sought a
      Temporary Restraining Order (“TRO”) in the 14 th Judicial
      District Court of Dallas County, Texas against the Company’s subsidiary Oblio.
      The TRO immediately restrained Oblio from suspending its network support for
      any
      pre-paid phone card supplied by Oblio to STX and from taking any action to
      impair the network supporting any pre-paid phone card supplied by Oblio to
      STX.
      On January 23, 2008, the Company was notified by its attorneys that the TRO
      became effective and enforceable and that the Company was in violation of its
      TRO and was subject to sanctions for contempt of court. The TRO has since been
      dissolved by agreement of the parties.





STX
      has
      added the Company, Bryan Chance, Kurt Jensen, and Frank Crivello as defendants.
      STX claims that Oblio breached a contract to provide network support for prepaid
      phone cards, and to accept returns of the cards as necessary.  STX also
      alleges that Oblio has been unjustly enriched by STX’s payments for cards, and
      that Oblio breached the implied warranty of merchantability and the express
      warranty to provide network support for the cards, and that Oblio’s failure to
      provide network support breached a duty of care owed to STX.   STX
      also claims that Titan, Chance and Crivello tortiously interfered with the
      Oblio/STX contract and caused Obli to purposefully interrupt network support
      for
      the cards sold to STX.  Finally, STX alleges all defendants tortiously
      interfered with STX’s business relationships with STX’s distributors and end
      consumers by playing recorded messages for end consumers to return their cards,
      and changing rate decks on the cards from the posted rates.  STX’s actual
      damages are not specified, but it seeks not less than $1,200 in exemplary
      damages, together with interest, and attorney’s fees.





Oblio
      has
      filed a counter-claim against STX, alleging STX failed to pay for the cards
      it
      purchased.  Oblio also claims STX, together with Tawfik and Raimondo, STX’s
      chief officers, fraudulently induced Oblio to sell pre-paid phone cards for
      certain foreign markets at a loss, in exchange for STX’s promise to place Oblio
      products in more lucrative local markets.  STX’s failure to place Oblio’s
      products in the promised markets caused Oblio damages in an amount not less
      than
      $10.





The
      case
      is currently set for trial on September 29, 2008, but the parties have agreed
      to
      request a continuance setting the trial for the week of April 20,
      2009.





53




TOUCH
      TELL, INC.


On
      December 21, 2007, Oblio filed suit in Dallas County, Texas, against Touch
      Tell,
      Inc. (“Touch Tell”) for $1,300 in unpaid product. Oblio also initially obtained
      a pre-judgment Writ of Garnishment against Touch Tell’s bank trapping $1,300.
      Touch Tell filed a counterclaim that claims that after allowing for credits,
      deactivations, and returns, Oblio owes Touch Tell approximately $268. Touch
      Tell
      successfully reduced the amount of the garnishment to $477. At May 31, 2008,
      Oblio has recorded accounts receivable from TouchTell equal to the garnishment
      of $477. No amounts have been recorded or accrued related to the counter claim.
      The case is now set for trial in November 2008.





WESTERN
      PRINT & MAIL, LLC


On
      January 25, 2008, the Company’s subsidiary Titan Wireless was notified, via a
      process server, that it and Ready Mobile, LLC were being sued by Western Print
      & Mail, LLC (“Western”). Western is seeking $71 including late charges from
      Ready Mobile, LLC. Western is seeking $183 from Titan Wireless, which includes
      the $71 from Ready Mobile, LLC and $112 including late charges from Titan
      Wireless, for alleged unpaid invoices for services rendered in Iowa District
      Court for Linn County. This action is currently pending. The Company has not
      accrued any amounts related to the charges incurred by Ready Mobile, LLC. As
      per
      the asset purchase agreement with Ready Mobile, LLC, this liability was not
      assumed, and therefore is not a responsibility of the Company. In addition,
      the
      Titan Wireless liability was assumed by Boomerang Wireless, Inc. on January
      25,
      2008 with the sale of certain CMDA assets as discussed in Note 2.





OTHER
      LEGAL MATTERS


As
      of May
      31, 2008, the Company has fully reserved and allowed (through its allowance
      for
      doubtful accounts $15,736 and its allowance for sales returns $3,672) $19,408
      in
      accounts receivable recorded for the communications division matters referenced
      above including Clifton.





**ITEM
      1A. RISK FACTORS**




Set
      forth
      below are material changes from risk factors previously disclosed in the
      Company’s Form 10-KSB for the year ended August 31, 2007. The risk factors below
      discuss risks with respect to acquisitions completed in the period covered
      by
      this report. In
      addition to the other information set forth in this report, you should carefully
      consider the factors discussed  in
      our
      Annual Report on Form 10-KSB for the year ended August 31, 2007, which could
      materially affect our business, financial condition or future results.





Risks
      Relating to the Company’s Energy Division:





***The
      convenience store industry is highly competitive and impacted by new entrants
      and our failure to effectively compete could result in lower sales and lower
      margins.***





The
      convenience store industry in the geographic areas in which we operate is highly
      competitive and marked by ease of entry and constant change in the number and
      type of retailers offering products and services of the type we sell in our
      stores. We compete with other convenience store chains, independently owned
      convenience stores, motor fuel stations, supermarkets, drugstores, discount
      stores, dollar stores, club stores and mass merchants. In recent years, several
      non-traditional retailers, such as supermarkets, club stores and mass merchants,
      have impacted the convenience store industry, particularly in the geographic
      areas in which we operate, by entering the motor fuel retail business. These
      non-traditional motor fuel retailers have captured a significant share of the
      motor fuels market, and we expect their market share will continue to grow.
      In
      some of our markets, our competitors have been in existence longer and have
      greater financial, marketing and other resources than we do. As a result, our
      competitors may be able to respond better to changes in the economy and new
      opportunities within the industry. To remain competitive, we must constantly
      analyze consumer preferences and competitors’ offerings and prices to ensure
      that we offer a selection of convenience products and services at competitive
      prices to meet consumer demand. We must also maintain and upgrade our customer
      service levels, facilities and locations to remain competitive and attract
      customer traffic to our stores. We may not be able to compete successfully
      against current and future competitors, and competitive pressures faced by
      us
      could have a material adverse effect on our business and results of operations
      and our ability to service our outstanding indebtedness.




54




***Historical
      prices for motor fuel have been volatile and significant changes in such prices
      in the future may adversely affect our profitability.***





Crude
      oil
      and domestic wholesale petroleum markets are volatile. General political
      conditions, acts of war or terrorism and instability in oil producing regions,
      particularly in the Middle East, Russia and South America, could significantly
      impact crude oil supplies and wholesale petroleum costs. Significant increases
      and volatility in wholesale petroleum costs could result in significant
      increases in the retail price of petroleum products and in lower motor fuel
      gross margin per gallon. Increases in the retail price of petroleum products
      could impact consumer demand for motor fuel and convenience merchandise. This
      volatility makes it extremely difficult to predict the impact future wholesale
      cost fluctuations will have on our operating results and financial condition.
      In
      addition, a sudden shortage in the availability of motor fuel could adversely
      affect our business because our retail stores typically have a three to four
      day
      supply of motor fuel and our motor fuel supply contracts do not guarantee an
      uninterrupted, unlimited supply of motor fuel. A significant change in any
      of
      these factors could materially impact our motor fuel gallon volumes, motor
      fuel
      gross profit and overall customer traffic, which in turn could have a material
      adverse effect on our business and results of operations and our ability to
      service our indebtedness.





***Wholesale
      cost increases and excise tax increases on cigarettes could adversely impact
      our
      revenues and profitability.***





Significant
      increases in wholesale cigarette costs and tax increases on cigarettes may
      have
      an adverse effect on unit demand for cigarettes. Cigarettes are subject to
      substantial and increasing excise taxes on both a state and federal level.
      Increased excise taxes may result in declines in overall sales volume as well
      as
      reduced gross profit percent. Currently, major cigarette manufacturers offer
      rebates to retailers. We include these rebates as a component of our gross
      margin from sales of cigarettes. In the event these rebates are no longer
      offered, or decreased, our wholesale cigarette costs will increase accordingly.
      In general, we attempt to pass price increases on to our customers. However,
      due
      to competitive pressures in our markets, we may not be able to do so. These
      factors could materially impact our retail price of cigarettes, cigarette unit
      volume and revenues, merchandise gross profit and overall customer traffic,
      which could in turn have a material adverse effect on our business and results
      of operations and our ability to service our indebtedness.





***Future
      legislation and campaigns to discourage smoking may have a material adverse
      effect on our revenues and gross profit.***




Future
      legislation and national, state and local campaigns to discourage smoking could
      have a substantial impact on our business, as consumers adjust their behaviors
      in response to such legislation and campaigns. Reduced demand for cigarettes
      could have a material adverse effect on sales of, and margins for, the
      cigarettes we sell.





***The
      wholesale motor fuel distribution industry is characterized by intense
      competition and fragmentation and our failure to effectively compete could
      result in lower margins.***





The
      market for distribution of wholesale motor fuel is highly competitive and
      fragmented, which results in narrow margins. We have numerous competitors,
      some
      of which may have significantly greater resources and name recognition than
      us.
      We rely on our ability to provide value-added reliable services and to control
      our operating costs in order to maintain our margins and competitive position.
      If we were to fail to maintain the quality of our services, customers could
      choose alternative distribution sources and our margins could decrease.
      Furthermore, there can be no assurance that major oil companies will not decide
      to distribute their own products in direct competition with us or that large
      customers will not attempt to buy directly from the major oil companies. The
      occurrence of any of these events could have a material adverse effect on our
      business and results of operations and our ability to service our indebtedness.





***Our
      motor fuel operations are subject to inherent risk, and insurance, if available,
      may not adequately cover any such exposure. The occurrence of a significant
      event that is not fully insured could have a material adverse effect on our
      business.***





We
      operate retail outlets that sell refined petroleum products and distribute
      motor
      fuel to our wholesale customers. The presence of flammable and combustible
      products at our facilities provides the potential for fires and explosions
      that
      could destroy both property and human life. These products, almost all of which
      are liquids, also have the potential to cause environmental damage if improperly
      handled or released. Insurance is not available against all operational risks,
      especially environmental risks, and there is no assurance that insurance will
      be
      available in the future. In addition, as a result of factors affecting insurance
      providers, insurance premiums with respect to renewed insurance policies may
      increase significantly compared to what we currently pay. The occurrence of
      a
      significant event that is not fully insured could have a material adverse effect
      on our business and results of operations and our ability to service our
      indebtedness.




55




***Decreases
      in consumer spending, travel and tourism in the areas we serve could adversely
      impact our business.***





In
      the
      convenience store industry, customer traffic is generally driven by consumer
      preferences and spending trends, growth rates for automobile and commercial
      truck traffic and trends in travel, tourism and weather. Changes in economic
      conditions could adversely impact consumer spending patterns and travel and
      tourism in our markets, which could have a material adverse effect on our
      business and results of operations and our ability to service our indebtedness.





***The
      industries in which we operate are subject to seasonal trends, which may cause
      our operating costs to fluctuate, affecting our cash flow.***





We
      experience more demand for our merchandise, food and motor fuel during the
      late
      spring and summer months than during the fall and winter. Travel, recreation
      and
      construction are typically higher in these months in the geographic areas in
      which we operate, increasing the demand for the products that we sell and
      distribute. Therefore, our revenues are typically higher in the second and
      third
      quarters of our fiscal year. As a result, our results from operations may vary
      widely from period to period, affecting our cash flow.





***Compliance
      with and liability under state and federal environmental regulations, including
      those that require investigation and remediation activities, may require
      significant expenditures or result in liabilities that could have a material
      adverse effect on our business.***





Our
      business is subject to various federal, state and local environmental laws
      and
      regulations, including those relating to underground storage tanks, the release
      or discharge of hazardous materials into the air, water and soil, the
      generation, storage, handling, use, transportation and disposal of hazardous
      materials, the exposure of persons to hazardous materials, and the health and
      safety of our employees. A violation of, liability under or compliance with
      these laws or regulations or any future environmental laws or regulations,
      could
      have a material adverse effect on our business and results of operations and
      our
      ability to service our outstanding indebtedness, including the notes.





Certain
      environmental laws, including CERCLA, impose strict, and under certain
      circumstances, joint and several, liability on the owner and operator as well
      as
      former owners and operators of properties for the costs of investigation,
      removal or remediation of contamination and also impose liability for any
      related damages to natural resources without regard to fault. In addition,
      under
      CERCLA and similar state laws, as persons who arrange for the transportation,
      treatment or disposal of hazardous substances, we also may be subject to similar
      liability at sites where such hazardous substances come to be located. We may
      also be subject to third party claims alleging property damage and/or personal
      injury in connection with releases of or exposure to hazardous substances at,
      from or in the vicinity of our current or former properties or off-site waste
      disposal sites. The costs associated with the investigation and remediation
      of
      contamination, as well as any associated third party claims, could be
      substantial, and could have a material adverse effect on our business and
      results of operations and our ability to service our outstanding indebtedness,
      including the notes. In addition, the presence or failure to remediate
      identified or unidentified contamination at our properties could potentially
      materially adversely affect our ability to sell or rent such property or to
      borrow money using such property as collateral.





We
      are
      required to make financial expenditures to comply with regulations governing
      underground storage tanks adopted by federal, state and local regulatory
      agencies. Compliance with existing and future environmental laws regulating
      underground storage tank systems of the kind we use may require significant
      capital expenditures in the future. These expenditures may include upgrades,
      modifications, and the replacement of underground storage tanks and related
      piping to comply with current and future regulatory requirements designed to
      ensure the detection, prevention, investigation and remediation of leaks and
      spills.





In
      addition, the Federal Clean Air Act and similar state laws impose requirements
      on emissions to the air from motor fueling activities in certain areas of the
      country, including those that do not meet state or national ambient air quality
      standards. These laws may require the installation of vapor recovery systems
      to
      control emissions of volatile organic compounds to the air during the motor
      fueling process. While we believe we are in material compliance with all
      applicable regulatory requirements with respect to underground storage tank
      systems of the kind we use, the regulatory requirements may become more
      stringent or apply to an increased number of underground storage tanks in the
      future, which would require additional, potentially material, expenditures.


56





***Failure
      to comply with the other state and federal regulations we are subject to may
      result in penalties or costs that could have a material adverse effect on our
      business.***





Our
      business is subject to various other state and federal regulations including,
      but not limited to, employment laws and regulations, minimum wage requirements,
      overtime requirements, working condition requirements, citizenship requirements
      and other laws and regulations. Any appreciable increase in the statutory
      minimum wage rate, income or overtime pay, adoption of mandated health benefits,
      or changes to immigration laws and citizenship requirements would likely result
      in an increase in our labor costs and such cost increase, or the penalties
      for
      failing to comply with such statutory minimums or regulations, could have a
      material adverse effect on our business and results of operations and our
      ability to service our outstanding indebtedness.





***Terrorist
      attacks and threatened or actual war may adversely affect our business.***





Our
      business is affected by general economic conditions and fluctuations in consumer
      confidence and spending, which can decline as a result of numerous factors
      outside of our control. Terrorist attacks or threats, whether within the United
      States or abroad, rumors or threats of war, actual conflicts involving the
      United States or its allies, or military or trade disruptions impacting our
      suppliers or our customers may adversely impact our operations. As a result,
      there could be delays or losses in the delivery of supplies to us, decreased
      sales of our products and extension of time for payment of accounts receivable
      from our customers. Specifically, strategic targets such as energy related
      assets (which could include refineries that produce the motor fuel we purchase
      or ports in which crude oil is delivered) may be at greater risk of future
      terrorist attacks than other targets in the United States. These occurrences
      could have an adverse impact on energy prices, including prices for our
      products, and an adverse impact on the margins from our operations. In addition,
      disruption or significant increases in energy prices could result in government
      imposed price controls. Any or a combination of these occurrences could have
      a
      material adverse effect on our business and results of operations and our
      ability to service our outstanding indebtedness.





Risks
      Relating to the Company’s Global Brands Division:





***We
      may discontinue products or product lines, which could result in returns, asset
      write-offs and shutdown costs. We may also engage in product recalls which
      would
      reduce our cash flow and earnings.***





In
      the
      past, we have discontinued certain products and product lines which resulted
      in
      returns from customers, asset write-offs and shutdown costs. We may suffer
      similar adverse consequences in the future to the extent we discontinue products
      that do not meet expectations or no longer satisfy consumer demand. Product
      returns, write-offs or shutdown costs would reduce cash flow and earnings.
      Product efficacy or safety concerns could result in product recalls or declining
      sales, which also would reduce our cash flow and earnings.




***We
      face intense competition in a mature industry and we may be required to increase
      expenditures and accept lower profit margins to preserve or maintain our market
      share. Unless the markets in which we compete grow substantially, a loss of
      market share will result in reduced sales levels and declining operating
      results.***





U.S.
      markets for consumer products are considered mature and commonly characterized
      by high household penetration, particularly with respect to our most significant
      product categories, such as laundry detergents, deodorizers, household cleaning
      products, toothpastes, antiperspirants and deodorants. Our unit sales growth
      in
      domestic markets will depend on increased use of our products by consumers,
      product innovation and our ability to capture market share from competitors.
      We
      may not succeed in implementing strategies to increase domestic revenues.





The
      consumer products industry, particularly the laundry detergent and personal
      care
      categories, is intensely competitive. To protect existing market share or to
      capture increased market share, we may need to increase expenditures for
      promotions and advertising and introduce and establish new products. Increased
      expenditures may not prove successful in maintaining or enhancing market share
      and could result in lower sales and profits. Many of our competitors are large
      companies, including Church and Dwight, The Procter & Gamble Company,
      Unilever, Inc., The Clorox Company, Colgate-Palmolive Company,
      Johnson & Johnson, S.C. Johnson & Son, Inc., many of which
      have greater financial resources than we do. These competitors have the capacity
      to outspend us should they attempt to gain market share. If we lose market
      share
      and the markets in which we compete do not grow, our sales levels and operating
      results will decline.


57





***Providing
      price concessions or trade terms that are acceptable to our trade customers,
      or
      the failure to do so, could adversely affect our sales and
      profitability.***





Consumer
      products, particularly those that are value-priced like many of our products,
      are subject to significant price competition and in recent years have been
      characterized by price deflation. From time to time, we may need to reduce
      the
      prices for some of our products to respond to competitive and customer pressures
      and to maintain market share. Any reduction in prices to respond to these
      pressures would harm profit margins. In addition, if our sales volumes fail
      to
      grow sufficiently to offset any reduction in margins, our results of operations
      would suffer.





Because
      of the competitive environment facing retailers, many of our trade customers,
      particularly our high-volume retail store customers, have increasingly sought
      to
      obtain pricing concessions or better trade terms. To the extent we provide
      concessions or better trade terms, our margins are reduced. Further, if we
      are
      unable to maintain terms that are acceptable to our trade customers, these
      trade
      customers could reduce purchases of our products and increase purchases of
      products from our competitors which would harm our sales and profitability.




***A
      continued shift in the retail market from food and drug stores to club stores
      and mass merchandisers could cause our sales to
      decline.***





Our
      performance also depends upon the general health of the economy and of the
      retail environment in particular and could be significantly harmed by changes
      affecting retailing and by the financial difficulties of retailers. Industry
      wide, consumer products such as those marketed by us are increasingly being
      sold
      by club stores and mass merchandisers, while sales of consumer products by
      food
      and drug stores comprise a smaller proportion of the total volume of consumer
      products sold. Sales of our products are stronger in the food and drug channels
      of trade and not as strong with the club stores and mass merchandisers. Although
      we have taken steps to improve sales by club stores and mass merchandisers,
      if
      we are not successful in improving sales to these channels, and the current
      trend continues our financial condition and operating results could suffer.




***Environmental
      matters create potential liability risks.***





We
      must
      comply with various environmental laws and regulations in the jurisdictions
      in
      which we operate, including those relating to the handling and disposal of
      solid
      and hazardous wastes and the remediation of contamination associated with the
      use and disposal of hazardous substances. A release of such chemicals due to
      accident or an intentional act could result in substantial liability to
      governmental authorities or to third parties. We have incurred, and will
      continue to incur, capital and operating expenditures and other costs in
      complying with environmental laws and regulations. It is possible that we could
      become subject to additional environmental liabilities in the future that could
      cause a material adverse effect on our results of operations or financial
      condition.




***Failure
      to maximize or successfully assert intellectual property rights could materially
      adversely affect our competitiveness.***





We
      rely
      on trademark, trade secret, patent and copyright laws to protect our
      intellectual property rights. We cannot be sure that these intellectual property
      rights will be maximized or that they can be successfully asserted. There is
      a
      risk that we will not be able to obtain and perfect our own intellectual
      property rights, or, where appropriate, license intellectual property rights
      necessary to support new product introductions. We cannot be sure that these
      rights, if obtained, will not be invalidated, circumvented or challenged in
      the
      future. In addition, even if such rights are obtained in the United States,
      the
      laws of some of the other countries in which our products are or may be sold
      do
      not protect intellectual property rights to the same extent as the laws of
      the
      United States. Our failure to perfect or successfully assert intellectual
      property rights could make us less competitive and could have a material adverse
      effect on our business, operating results and financial condition.





***Our
      Future Success Depends on Our Ability to Respond To Changing Consumer Demands,
      Identify and Interpret Fashion Trends and Successfully Market New
      Products***





The
      Company competes with numerous other marketers of footwear, some of which are
      larger and have greater resources than the Company. Product performance and
      quality, including technological improvements, product identity, competitive
      pricing and the ability to adapt to style changes are all important elements
      of
      competition in the footwear industry. The footwear industry in general is
      subject to changes in consumer preferences with respect to the popularity of
      particular designs and categories of footwear. The Company strives to maintain
      and improve its competitive position through promotion of brand awareness,
      sourcing efficiencies, and the style, comfort and value of its products. Future
      sales by the Company will be affected by its continued ability to sell its
      products at competitive prices and to meet shifts in consumer preferences.
      If
      the Company is unable to respond effectively to competitive pressures and
      changes in consumer spending, the Company's business, results of operations
      and
      financial condition will be adversely affected.


58





***Our
      Business May Be Negatively Impacted as a Result of our Failure to Retain
      Customers and Get Repeat Business***





The
      Company's financial success is directly related to the willingness of its
      customers to continue to purchase its products. The Company does not typically
      have long-term contracts with its customers. Sales to the Company's customers
      are generally on an order-by-order basis and are subject to rights of
      cancellation and rescheduling by the customers. Failure to fill customers'
      orders in a timely manner could harm the Company's relationships with its
      customers. Furthermore, if any of the Company's major customers experience
      a
      significant downturn in its business, or fails to remain committed to the
      Company's products or brands, then these customers may reduce or discontinue
      purchases from the Company, which could have an adverse effect on the Company's
      business, results of operations and financial condition.





The
      Company sells its products to wholesale customers and extends credit based
      on an
      evaluation of each customer's financial condition, usually without requiring
      collateral. The financial difficulties of a customer could cause the Company
      to
      stop doing business with that customer or reduce its business with that
      customer. The Company's inability to collect from its customers or a cessation
      or reduction of sales to certain customers because of credit concerns could
      have
      an adverse effect on the Company's business, results of operations and financial
      condition.





***Our
      Business May Be Negatively Impacted because of Changes in the Economy***





Our
      business depends on the general economic environment and levels of consumer
      spending in the United States and other parts of the world that affect not
      only
      the ultimate consumer, but also retailers, who are our primary direct customers.
      Purchases of footwear tend to decline in periods of recession or uncertainty
      regarding future economic prospects, when consumer spending, particularly on
      discretionary items, declines. During periods of recession or economic
      uncertainty, we may not be able to maintain or increase our sales to existing
      customers, make sales to new customers, open and operate new retail stores,
      maintain sales levels at our existing stores, maintain or increase our
      international operations on a profitable basis, or maintain or improve our
      earnings from operations as a percentage of net sales. In addition, the
      continued threat of terrorist attacks throughout the world similar to those
      on
      September 11, 2001, and the military action, or possible military action, taken
      by the United States and other nations in Iraq or other countries may cause
      significant disruption to commerce throughout the world. As a result, our
      operating results may be adversely and materially affected by downward trends
      in
      the domestic economy or the occurrence of events that slow the global economy
      or, more particularly, result in delays or cancellations of purchase orders
      for
      our products.





***Our
      Business Could Be Harmed if We Fail To Maintain Proper Inventory Levels***





The
      Company's ability to manage its inventories properly is an important factor
      in
      its operations. Inventory shortages can impede the Company's ability to meet
      at-once orders and can adversely affect the timing of shipments to customers
      and
      diminish brand loyalty. Conversely, excess inventories can result in increased
      interest costs as well as lower gross margins due to the necessity of lowering
      prices in order to liquidate excess inventories. If the Company is unable to
      effectively manage its inventory, its business, results of operations and
      financial condition will be adversely affected.





***We
      Face Intense Competition, Including Competition from Companies with
      Significantly Greater Resources than Ours, and If We Are Unable To Compete
      Effectively with These Companies, Our Market Share May Decline and Our Business
      Could Be Harmed***





We
      face
      intense competition in the footwear industry from other established companies.
      A
      number of our competitors have significantly greater financial, technological,
      engineering, manufacturing, marketing and distribution resources than we do.
      Their greater capabilities in these areas may enable them to better withstand
      periodic downturns in the footwear industry, compete more effectively on the
      basis of price and production and more quickly develop new products. In
      addition, new companies may enter the markets in which we compete, further
      increasing competition in the footwear industry.


59





We
      believe that our ability to compete successfully depends on a number of factors,
      including the style and quality of our products and the strength of the brand
      names we sell, as well as many factors beyond our control. We may not be able
      to
      compete successfully in the future, and increased competition may result in
      price reductions, reduced profit margins, loss of market share and an inability
      to generate cash flows that are sufficient to maintain or expand our development
      and marketing of new products, which would adversely impact our revenues and
      the
      trading price of our stock.





***Our
      Business Could Be Harmed If Our Contract Manufacturers or Suppliers Violate
      Labor, Trade or Other Laws***





We
      require our independent contract manufacturers, suppliers and licensees to
      operate in compliance with applicable laws and regulations. Manufacturers are
      required to certify that neither convicted, forced or indentured labor (as
      defined under United States law) nor child labor (as defined by law in the
      manufacturer’s country) is used in the production process, that compensation is
      paid in accordance with local law and that their factories are in compliance
      with local safety regulations. Although we promote ethical business practices
      and our sourcing personnel periodically visit and monitor the operations of
      our
      independent contract manufacturers, suppliers and licensees, we do not control
      them or their labor practices. If one of our independent contract manufacturers,
      suppliers or licensees violates labor or other laws or diverges from those
      labor
      practices generally accepted as ethical in the United States, it could result
      in
      adverse publicity for us, damage our reputation in the United States or render
      our conduct of business in a particular foreign country undesirable or
      impractical, any of which could harm our business.





In
      addition, if we, or our foreign manufacturers, violate United States or foreign
      trade laws or regulations, we may be subject to extra duties, significant
      monetary penalties, the seizure and the forfeiture of the products we are
      attempting to import or the loss of our import privileges. Possible violations
      of United States or foreign laws or regulations could include inadequate record
      keeping of our imported products, misstatements or errors as to the origin,
      quota category, classification, marketing or valuation of our imported products,
      fraudulent visas or labor violations. The effects of these factors could render
      our conduct of business in a particular country undesirable or impractical
      and
      have a negative impact on our operating results.





***Our
      Retail Stores Depend Heavily On the Customer Traffic Generated By Strip or
      Shopping Malls and By Tourism***





Our
      retails stores are located in strip malls and shopping malls we depend on
      obtaining prominent locations and the overall success of the malls to generate
      customer traffic. We cannot control the development of new malls, the
      availability or cost of appropriate locations within existing or new malls
      or
      the success of individual malls. Some of our stores occupy street locations
      that
      are heavily dependent on customer traffic generated by tourism. Any substantial
      decrease in tourism resulting from political, social or military events, a
      downturn in the economy or otherwise, is likely to adversely affect sales in
      our
      existing stores, particularly those with street locations. The effects of these
      factors could hinder our ability to open retail stores in new markets or reduce
      sales of particular existing stores, which could negatively affect our operating
      results.





***The
      Success of Our Business May Be Affected By Our Failure to Obtain Major Brand
      Licenses***





We
      anticipate deriving significant revenues and earnings in the future from an
      exclusive licensing agreement with a brand name or names to produce and sell
      branded footwear. We may not be able to obtain licensing agreements with other
      major brand names. If we are unable to obtain these licensing agreements, it
      could have a material adverse effect on our future sales and our business.





***Natural
      Disasters or a Decline in Economic Conditions in California Could Increase
      Our
      Operating Expenses or Adversely Affect Our Sales Revenue***





A
      substantial portion of our operations are located in California, including
      2 of
      our retail stores, our headquarters in Santa Barbara and our current
      distribution center in the Los Angeles Metropolitan area. Because a significant
      portion of our net sales is derived from sales in California, a decline in
      the
      economic conditions in California, whether or not such decline spreads beyond
      California, could materially adversely affect our business. Furthermore, a
      natural disaster or other catastrophic event, such as an earthquake or wild
      fires affecting California, could significantly disrupt our business including
      the operation of our only domestic distribution center. We may be more
      susceptible to these issues than our competitors whose operations are not as
      concentrated in California.


60





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





Not
      applicable.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





Not
      applicable.





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





Not
      applicable.





**ITEM
      5. OTHER INFORMATION**





Not
      applicable **.**





**ITEM
      6. EXHIBITS**





31.1
      -
      Certification of Principal Executive Officer pursuant to Rule 13a-14 and
      Rule


15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended





31.2
      -
      Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule
      15d


14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended





32.1
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section


906
      of
      the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)





32.2
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section


906
      of
      the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)


61





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized





TITAN
                GLOBAL HOLDINGS, INC.By:
            /s/
                Bryan ChanceBryan
                ChanceChief
                Executive Officer andPresident(Principal
                Executive Officer)TITAN
                GLOBAL HOLDINGS, INC.By:
            /s/
                Scott HensellScott
                HensellChief
                Financial Officer(Principal
                Financial andAccounting
                Officer)




62


SUBSIDIARIES




Oblio
      Telecom, Inc.





Titan
      Communications, Inc.





Titan
      Electronics, Inc. (formerly Titan PCB West, Inc.)





Titan
      PCB
      East, Inc.





Titan
      Nexus, Inc.





Titan
      Wireless Communications, Inc. (Titan Wireless RM, Inc.)





StartTalk,
      Inc.





Planet
      Direct Inc. (formerly Pinless, Inc.)





Appalachian
      Oil Company, Inc.





Appco-KY,
      Inc.





USA
      Detergents, Inc.





Titan
      Apparel, Inc.





America’s
      Value Brands Inc.




63