**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 February 29, 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 oNo 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 filer o  Accelerated
      filer o   Non-accelerated
      filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes oNo
x





As
      of
      April 11 ,
      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 StatementsItem
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of Operations
            31Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            48Item
                4.
            Controls
                and Procedures
            48**PART
                II.**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            50Item
                1A.
            Risk
                Factors
            53Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            59Item
                3.
            Defaults
                Upon Senior Securities
            59Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            59Item
                5.
            Other
                information
            59Item
                6.
            Exhibits
            59Signatures
            60


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)**




****
            
            **February
                29,**
            
            **August
                31,****2008**
            
            **2007****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            2,354
            
            $
            1,190Restricted
                cash and short-term investments
            
            
            5,612
            
            
            750Accounts
                receivable, trade (less allowance for doubtful accounts of $14,575
                and
                  $2,940 and allowance for sales returns of $3,662 and $888,
                respectively)
            
            
            14,129
            
            
            12,699Universal
                service fund fees recoverable
            
            
            -
            
            
            1,406Inventory,
                net
            
            
            13,034
            
            
            1,663Prepaid
                expenses and other current assets
            
            
            1,284
            
            
            2,015Assets
                of discontinued operations, current
            
            
            5,258
            
            
            -Total
                current assets
            
            
            41,671
            
            
            19,723Equipment
                and improvements, net
            
            
            15,985
            
            
            2,326Definite-lived
                intangible assets, net
            
            
            4,937
            
            
            16,989Goodwill
                and indefinite-lived intangible assets
            
            
            17,848
            
            
            6,661Capitalized
                loan fees, net
            
            
            1,000
            
            
            412Other
                assets
            
            
            233
            
            
            305Assets
                of discontinued operations, non-current
            
            
            4,394
            
            
            -Total
                assets
            
            $
            86,068
            
            $
            46,416**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Accounts
                payable - trade
            
            $
            32,111
            
            $
            21,049Accrued
                liabilities
            
            
            6,980
            
            
            2,911Deferred
                revenue
            
            
            -
            
            
            12,009Related
                party - notes payable
            
            
            650
            
            
            -Short-term
                notes payable
            
            
            166
            
            
            72Current
                portion of long-term debt
            
            
            3,626
            
            
            3,432Liabilities
                of discontinued operations, current
            
            
            12,322
            
            
            -Total
                current liabilities
            
            
            55,855
            
            
            39,473Lines
                of credit
            
            
            29,078
            
            
            11,677Long-term
                seller-financed note, net of discount of $15 and $122, respectively
            
            
            1,408
            
            
            1,301Redeemable,
                convertible preferred stock, preference in liquidation of $12,056
                and
                  $4,743, respectively
            
            
            12,056
            
            
            4,743Long-term
                debt, net of discount of $4,706 and $713, respectively
            
            
            15,248
            
            
            4,112Long-term
                derivative liabilities
            
            
            10,361
            
            
            15,142Other
                long-term liabilities
            
            
            2,535
            
            
            116Liabilities
                of discontinued operations, non-current
            
            
            8,417
            
            
            -Total
                liabilities
            
            
            134,958
            
            
            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 49,157,051 outstanding,
                respectively
            
            
            55
            
            
            50Additional
                paid-in capital
            
            
            30,860
            
            
            21,968Accumulated
                deficit
            
            
            (78,091
            )
            
            (50,700
            )Treasury
                stock, at cost, 1,324,157 and 1,087,307 shares, respectively
            
            
            (1,714
            )
            
            (1,466
            )Total
                stockholders' deficit
            
            
            (48,890
            )
            
            (30,148
            )Total
                liabilities and stockholders' deficit
            
            $
            86,068
            
            $
            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**
            
            **Six
                Months Ended****2/29/2008**
            
            **2/28/2007**
            
            **2/29/2008**
            
            **2/28/2007******
            
            
            
            ****Sales
                - Energy division
            
            $
            102,529
            
            $
            -
            
            $
            192,544
            
            $
            -Sales
                - Communications division
            
            
            12,527
            
            
            30,938
            
            
            34,854
            
            
            55,511Sales
                - Electronics and homeland security division
            
            
            8,411
            
            
            5,140
            
            
            15,192
            
            
            10,552Sales
                - Global brands division
            
            
            1,401
            
            
            -
            
            
            1,401
            
            
            -Total
                sales
            
            
            124,868
            
            
            36,078
            
            
            243,991
            
            
            66,063Cost
                of sales - Energy division
            
            
            97,849
            
            
            -
            
            
            183,051
            
            
            -Cost
                of sales - Communications division
            
            
            6,102
            
            
            27,166
            
            
            24,371
            
            
            48,591Cost
                of sales - Electronics and homeland security division
            
            
            8,166
            
            
            5,057
            
            
            14,285
            
            
            10,188Cost
                of sales - Global brands division
            
            
            1,341
            
            
            -
            
            
            1,341
            
            
            -Total
                cost of sales
            
            
            113,458
            
            
            32,223
            
            
            223,048
            
            
            58,77911,410
            
            
            3,855
            
            
            20,943
            
            
            7,284Operating
                expenses:Sales
                and marketing
            
            
            570
            
            
            576
            
            
            1,266
            
            
            1,075General
                and administrative expenses
            
            
            11,058
            
            
            2,798
            
            
            19,746
            
            
            4,845Bad
                debt expense
            
            
            4,213
            
            
            89
            
            
            8,798
            
            
            122Impairment
                of intangibles
            
            
            -
            
            
            -
            
            
            14,572
            
            
            -Amortization
                of intangibles
            
            
            527
            
            
            1,335
            
            
            1,959
            
            
            2,669Loss
                from operations
            
            
            (4,958
            )
            
            (943
            )
            
            (25,398
            )
            
            (1,427
            )Other
                income (expenses):Other
                income
            
            
            593
            
            
            20
            
            
            1,181
            
            
            20Interest
                expense
            
            
            (2,177
            )
            
            (1,424
            )
            
            (3,641
            )
            
            (2,230
            )Gain
                on disposal of assets
            
            
            2,030
            
            
            -
            
            
            2,030
            
            
            -Gain
                (loss) on value of derivative instruments
            
            
            5,211
            
            
            (3,522
            )
            
            9,753
            
            
            (8,092
            )Gain
                on extinguishment of debt
            
            
            -
            
            
            7,790
            
            
            -
            
            
            7,790Income
                (loss) before income taxes
            
            
            699
            
            
            1,921
            
            
            (16,075
            )
            
            (3,939
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss) from continuing operations
            
            
            699
            
            
            1,921
            
            
            (16,075
            )
            
            (3,939
            )Loss
                from discontinued operations
            
            
            (3,615
            )
            
            -
            
            
            (11,314
            )
            
            -Net
                income (loss)
            
            $
            (2,916
            )
            $
            1,921
            
            $
            (27,389
            )
            $
            (3,939
            )Accrual
                of preferred stock dividend
            
            
            (34
            )
            
            -
            
            
            (68
            )
            
            (68
            )Net
                income (loss) applicable to common stockholders
            
            $
            (2,950
            )
            $
            1,921
            
            $
            (27,457
            )
            $
            (4,007
            )Net
                income (loss) applicable to common stockholders per share:BasicContinuing
                operations
            
            $
            0.01
            
            $
            0.04
            
            $
            (0.31
            )
            $
            (0.08
            )Discontinued
                operations
            
            
            (0.07
            )
            
            -
            
            
            (0.22
            )
            
            -Net
                income (loss)
            
            $
            (0.06
            )
            $
            0.04
            
            $
            (0.53
            )
            $
            (0.08
            )DilutedContinuing
                operations
            
            $
            -
            
            $
            0.04
            
            $
            (0.31
            )
            $
            (0.08
            )Discontinued
                operations
            
            
            (0.07
            )
            
            -
            
            
            (0.22
            )
            
            -Net
                income (loss)
            
            $
            (0.07
            )
            $
            0.04
            
            $
            (0.53
            )
            $
            (0.08
            )Number
                of weighted-average common shares outstanding:Basic
            
            
            53,527,203
            
            
            49,129,052
            
            
            52,035,419
            
            
            49,125,820Diluted
            
            
            54,303,750
            
            
            49,917,459
            
            
            52,035,419
            
            
            49,125,820





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)**




**Six
                Months Ended****2/29/2008**
            
            **2/28/2007**Cash
                flows from operating activities:Net
                loss from continuing operations
            
            $
            (16,075
            )
            $
            (3,939
            )Adjustments
                to reconcile net loss to net cash used in operating activities:Depreciation
            
            
            1,775
            
            
            365Bad
                debt and sales return allowances
            
            
            11,522
            
            
            122Gain
                on disposal of assets
            
            
            (2,030
            )
            
            -Non-cash
                compensation
            
            
            (35
            )
            
            84Non-cash
                asset retirement obligation accretion expense
            
            
            43
            
            
            4Non-cash
                interest expense (income)
            
            
            1,086
            
            
            (78
            )Amortization
                of debt discounts and bank fees
            
            
            186
            
            
            380Amortization
                of intangibles
            
            
            1,959
            
            
            2,669Goodwill
                and intangible assets impairment charge
            
            
            14,573
            
            
            -Loss
                (gain) on fair value of derivative liabilities
            
            
            (9,753
            )
            
            8,092(Gain)
                loss on debt extinguishment
            
            
            -
            
            
            (7,790
            )Warrants
                issued for services
            
            
            -
            
            
            414Changes
                in operating assets and liabilities, net of effects of acquisitions:Accounts
                receivable
            
            
            (3,556
            )
            
            (3,187
            )Inventory
            
            
            1,211
            
            
            189Prepaid
                expenses and other current assets
            
            
            1,259
            
            
            (140
            )Other
                assets
            
            
            105
            
            
            1Universal
                service fund fee recoverable
            
            
            1,406
            
            
            (2,547
            )Federal
                excise tax recoverable
            
            
            -
            
            
            (243
            )Accounts
                payable and accrued liabilities
            
            
            (944
            )
            
            9,380Deferred
                revenue
            
            
            (12,009
            )
            
            -Other
                liabilities
            
            
            429
            
            
            -Total
                adjustments
            
            
            7,227
            
            
            7,715Net
                cash (used in) generated by operating activities of continuing operations
            
            
            (8,848
            )
            
            3,776Net
                cash generated by operating activities of discontinued operations
            
            
            1,237
            
            
            -Net
                cash (used in) generated by operating activities
            
            
            (7,611
            )
            
            3,776Cash
                flows from investing activities:Equipment
                and improvements expenditures
            
            
            (677
            )
            
            (162
            )Restricted
                investment to collateralize obligation
            
            
            (4,862
            )
            
            -Cash
                paid to sellers of Appco
            
            
            (30,000
            )
            
            -Cash
                provided by acquisitions
            
            
            3,784
            
            
            -Proceeds
                from sale of fixed asset
            
            
            74
            
            
            -Net
                cash used in investing activities of continuing operations
            
            
            (31,681
            )
            
            (162
            )Net
                cash provided by investing activities of discontinued operations
            
            
            32
            
            
            -Net
                cash used in investing activities
            
            
            (31,649
            )
            
            (162
            )Cash
                flows from financing activities:Proceeds
                from issuance of common stock
            
            
            5,000
            
            
            -Proceeds
                from sale leaseback transaction
            
            
            15,000
            
            
            -Proceeds
                from issuance of long-term debt
            
            
            15,000
            
            
            8,154Proceeds
                from lines of credit, net of repayments
            
            
            9,439
            
            
            22Payments
                on long-term debt
            
            
            (1,724
            )
            
            (10,354
            )Capitalized
                loan fees
            
            
            (775
            )
            
            (684
            )Purchase
                of treasury stock
            
            
            (248
            )
            
            -Net
                cash provided by (used in) financing activities of continuing operations
            
            
            41,692
            
            
            (2,862
            )Net
                cash used in financing activities of discontinued operations
            
            
            (1,107
            )
            
            -Net
                cash provided by (used in) financing activities
            
            
            40,585
            
            
            (2,862
            )




6


**Titan
      Global Holdings, Inc.**


**Unaudited
      Consolidated Statements of Cash Flows Continued**


**(In
      thousands)**




**Six
                Months Ended****2/29/2008**
            
            **2/28/2007******Net
                increase in cash and cash equivalents
            
            $
            1,325
            
            $
            752Cash
                and cash equivalents at beginning of period including cash of
                discontinuedoperations
            
            
            1,190
            
            
            1,401Cash
                and cash equivalents at end of period including cash of discontinued
                operations
            
            $
            2,515
            
            $
            2,153Cash
                and cash equivalents at end of period of discontinued operations
            
            $
            161
            
            $
            -Cash
                and cash equivalents at end of period of continuing operations
            
            $
            2,354
            
            $
            2,153**Supplemental
                disclosures of cash flow information:**Interest
                Paid
            
            $
            1,994
            
            $
            1,756Income
                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
            
            $
            -
            
            $
            15Issuance
                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
            
            $
            -
            
            $
            505





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 period ended February 29, 2008 and six-month period ended February
      29, 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 Communications, (ii)
      Titan Electronics and Homeland Security (iii) Titan Global Energy Group, and
      (iv) Titan Global Brands.





Communications
      Segment




The
      Company, through its Pinless (dba Planet Direct Inc.) subsidiary, provides
      prepaid international phone cards, and prior to February 29, 2008, its Oblio
      Telecom, 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 and large chain retailers in all 50 United
      States and Puerto Rico.




During
      the three months ended February 29, 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’ 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
      the goodwill and certain intangible assets of Oblio as of November 30, 2007.


8




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 goodwill and intangible
      assets of Oblio and Titan Wireless during the three months ended November 30,
      2007. On January 23, 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.





During
      the three months ended February 29, 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 Oblio’s traditional distribution and supply channels.





Electronics
      and Homeland Security Segment




The
      Company, through its Titan East, Titan West 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.





Energy
      Segment





The
      Company, through its Appalachian Oil subsidiary is a leading petroleum
      distributor in the Southeastern United States. The operations include retail
      convenience stores and wholesale petroleum distribution. As of February 29,
      2008, the retail division operated 55 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. Appco’s unique retail/wholesale business model, scale, and
      merchandise offerings, combined with selected acquisition opportunities,
      position the Company for ongoing growth in sales and profitability. The Company
      intends to expand 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.




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 14, 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.





*Liquidity:*





As
      of
      February 29, 2008, the Company had a working capital deficit of $14,184
      including current assets and current liabilities from discontinued operations,
      a
      working capital deficit of $7,120 excluding current assets and current
      liabilities from discontinued operations, a stockholders’ deficit of $48,890 and
      an accumulated deficit of $78,091. The Company incurred a net loss of $27,389
      and used cash from continuing operations of $8,848 for the six months ended
      February 29, 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. The Company may also generate liquidity
      from future offerings of debt and/or equity. As of February 29, 2008, the
      Company had a total of $2,354 in unrestricted cash and cash equivalents. As
      of
      February 29, 2008, the Company also had restricted cash and cash equivalents
      and
      short-term investments of $5,612 that included funds set aside and pledged
      to
      secure a term loan obtained to facilitate the Appco acquisition and certain
      amounts to collateralize fuel bonds issued by a surety for Appco.





During
      the three months ended February 29, 2008, the Company made material changes
      to
      its operations in the communications and global brands division in an effort
      to
      decrease the cash flow used in operations. The Company reduced its labor force
      in the operations in Richardson, Texas; Hiawatha, Iowa; and North Brunswick,
      New
      Jersey and implemented severe cost reduction strategies in those operations.
      The
      intent of the changes is to reduce the negative operating cash flow of these
      segments as the Company redefines 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, the Company’s senior lender will in most cases receive the majority
      of the proceeds from liquidation. While the trade accounts payable and related
      accrued expenses for these operations 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.
      Given the recently implemented cost containment measures, management believes
      that the Company’s existing cash and investments, liquidity available under our
      revolving credit facility, ability to raise capital from the equity markets,
      our
      ability to obtain funding from certain significant stockholders, and cash flows
      from our remaining operations, namely the Energy segment, will be sufficient
      to
      meet its operating and capital requirements through at least the next twelve
      months. However, if the Company is not successful in continuing to reduce its
      costs and improve its related cash flows, it may be necessary to raise
      additional capital that may be dilutive to existing shareholders.





****** ***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 six months ended February 29, 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.


10




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





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 payment 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 six months ended
      February 29, 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.




11





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
            
            $
            -





*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 West, a direct subsidiary of the Company,
      issued YA Global 103,503 shares of Titan PCB West 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
      West are now a part of the Titan EG. The Company anticipates that Titan EG
      will
      be divested and spun off into a separate entity via a stock dividend in FY
      2008.





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




12





*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 six months ended February 29, 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:




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 Ended
            
            Six
                Months Ended2/29/2008
            
            2/28/2007
            
            2/29/2008
            
            2/28/2007Net
                sales
            
            $
            104,214
            
            $
            383
            
            $
            243,991
            
            $
            130,221Net
                earnings (loss) applicable to common stockholders
            
            
            (3,106
            )
            
            968
            
            
            (27,390
            )
            
            (1,791
            )Net
                loss applicable to common stockholders per share:Basic
                and diluted earnings (loss) per common share
            
            $
            (0.06
            )
            $
            0.02
            
            $
            (0.53
            )
            $
            (0.04
            )





*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.




13





***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.





The
      dilutive effect of net income applicable to common stockholders from continuing
      operations and weighted-average common shares outstanding is presented
      below:





Three
                Months Ended**2/29/2008**
            
            **2/28/2007**Net
                income from continuing operations
            
            $
            699
            
            $
            1,921Less:
                preferred stock dividends
            
            
            (34
            )
            
            -Net
                income applicable to common stockholders from continuing
                operations
            
            
            665
            
            
            1,921Diluted
                effect on net income net income applicable to common stockholders
                from
                continuing operations:Less:
                gain on value of derivative instrumentsWarrants
            
            
            (665
            )
            
            -Net
                income applicable to common stockholders from continuing operations
                -
                diluted
            
            $
            -
            
            $
            1,921Weighted-average
                common shares outstanding:Basic
            
            
            53,527,203
            
            
            49,129,052Common
                share equivalents:Employee
                stock options/warrants
            
            
            337,427
            
            
            427,788Warrants
            
            
            439,120
            
            
            360,619Diluted
            
            
            54,303,750
            
            
            49,917,459




14





During
      the period when they would be anti-dilutive, common stock equivalents (which
      during the three months ended February 29, 2008 consisted of employee
      options/warrants to purchase 300,000 common shares, warrants to purchase
      9,816,750 common shares and preferred stock convertible into 3,207,238 common
      shares) are not considered in the computations. During the three months ended
      February 28, 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 six months ended February 29, 2008 consisted of employee
      options/warrants to purchase 1,292,500 common shares, warrants to purchase
      12,230,000 common shares and preferred stock convertible into 3,207,238 common
      shares) are not considered in the computations. During the period when they
      would be anti-dilutive, common stock equivalents (which during the six months
      ended February 28, 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:





**2/29/2008**
            
            **8/31/2007**Raw
                materials and finished subassemblies
            
            $
            2,553
            
            $
            597Work
                in process
            
            
            943
            
            
            566Finished
                goods
            
            
            11,448
            
            
            56414,944
            
            
            1,727Less
                inventory reserves
            
            
            (1,910
            )
            
            (64
            )$
            13,034
            
            $
            1,663





The
      reserve for obsolescence of $1,910 and $64 at February 29, 2008 and August
      31,
      2007, respectively, related primarily to raw material inventory in the
      Electronics and Homeland Security division.





***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 to be paid off in 48 equal installments
      of
      $135 per month which will result in repayment of the principal. At February
      29,
      2008, the Term Loan A had an interest rate of 12% and Term Loan B had an
      interest rate of 11%.





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 was recorded as a derivative liability. The Company is obligated to
      register the shares of common stock and the common stock underlying the
      warrant.




15





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.





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.





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
      February 29, 2008, Term Loans A and B are recorded at $2,368 (net of $101
      discount) and the revolver has a balance of $15,032 with an excess availability
      of $10,107 based on loan limits and an excess available credit of $0 based
      on
      actual borrowing capacity. Interest rates on the revolver were 4.5% on $11,390
      and 7.5% on $3,642.




16





As
      of
      February 29, 2008, Term Loan C has an outstanding balance of $5,000 and an
      interest rate of 0.75%. Term Loan D has an outstanding balance of $830 and
      an
      interest rate of 12% as of February 29, 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 experienced a large cumulative loss in fiscal year 2007 related to
      several non-cash factors. The Company has received a written waiver from
      Greystone related to this covenant through August 31, 2008. 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.





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 April 14, 2008, the common stock
      underlying the warrant has not yet been registered. The warrants had a value
      of
      $167 at February 29, 2008.





At
      February 29, 2008 the revolver had an outstanding balance of $9,924 and the
      term
      notes had a carrying value of $4,216 (net of discount of $618) and an excess
      availability of $10,442 based on loan limits 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 February 29, 2008.





*Global
      Brands Division*


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.




17





The
      Company also assumed four term notes designated A, B, C & D which have an
      interest rate of 8.50%. As of February 29, 2008 the revolver has an outstanding
      balance of $5,041 and the term notes have a balance of $3,755. 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 availability of $5,291 based on loan limits and an excess available
      credit of $0 based on actual borrowing capacity. The interest rate on the
      revolver and term loans was 7.0% at February 29, 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 February 29, 2008
      the
      revolver had an outstanding balance of $4,121 and the term note had a balance
      of
      $2,000 and an excess availability of $9,879 based on loan limits and an excess
      available credit of $0 based on actual borrowing capacity. The interest rates
      on
      the revolving credit facility and term loans were 9% and 11%, respectively,
      at
      February 29, 2008.





***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 warrants had a value of $314 at February 29, 2008. 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.




18





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 February 29, 2008, the note
      had
      a recorded balance of $2,013 with an associated unrecognized discount of
      $3,987.





***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 a 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.


·
            The
                Series A Preferred is non-voting.





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 long-term liability as well
      as
      the accrued dividends. 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
      February 29, 2008, the Company has recorded $3,555 as debt related to the note
      (net of $15 discount) and $4,811 related to the preferred stock (which includes
      $311 in accrued dividends).





***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, depreciation, taxes,
      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.




19





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 PCB West Convertible Preferred Stock***





Titan
      West, 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 West Preferred Stock”), which contains the following
      provisions:





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





•
The
      Titan West Preferred Stock is convertible into shares of Titan West 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 West common stock for the first 30 trading
      days,
      (ii) the VWAP value weighted average price for the Titan West 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 West outstanding on a fully
      diluted basis, not including shares issuable to YA Global or their assignee.
      The
      Titan West Preferred Stock contains customary value weighted anti-dilutions
      provisions. Holders of Titan West Preferred Stock may not convert into shares
      of
      Titan West 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;





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





•
Titan
      West has the right to redeem the Titan West 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 West solely in the event (i) Titan West has not acquired
      materially all of the assets of Nexus Nano, and (ii) the Titan West 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:




20




Issue
            
            Expiration
            
            
            
            Outstanding
                atDate
            
            Date
            
            Instrument
            
            2/29/200808/12/2005
            
            
            03/31/2009
            
            $4,823
              Seller-Financed Debt
            
            $
            3,57012/29/2006
            
            
            02/01/2011
            
            $20,000
              Secured Revolving Note
            
            
            15,03212/29/2006
            
            
            02/01/2011
            
            $7,608
              Term Notes A & B
            
            
            2,46909/17/2007
            
            
            09/17/2012
            
            $20,000
              Secured Revolving Note
            
            
            9,92409/17/2007
            
            
            09/17/2012
            
            $5,200
              Term Notes
            
            
            4,83409/17/2007
            
            
            09/17/2010
            
            $6,000
              Convertible Debentures
            
            
            6,00009/17/2007
            
            
            09/17/2010
            
            $5,000
              Term Note C
            
            
            5,00011/30/2007
            
            
            08/31/2010
            
            Other
            
            
            30012/14/2007
            
            
            12/29/2009
            
            $14,000
              Secured Revolving Note
            
            
            4,12112/14/2007
            
            
            12/29/2009
            
            $2,000
              Term Notes
            
            
            2,00002/11/2008
            
            
            02/01/2011
            
            $830
              Term Note D
            
            
            830Total
                debt
            
            54,080Less
                discount from warrants and derivatives
            
            (4,721
            )Total
                carrying value of debt
            
            49,359Less
                current portion of long-term debt
            
            (3,626
            )Total
                long-term debt
            $
            45,733




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
            
            $
            2,147
            
            $
            -
            
            $
            120
            
            $
            -
            
            $
            1,359
            
            $
            3,6262009
            
            
            1,423
            
            
            -
            
            
            120
            
            
            -
            
            
            1,432
            
            
            2,9752010
            
            
            -
            
            
            -
            
            
            60
            
            
            4,121
            
            
            3,286
            
            
            7,4672011
            
            
            -
            
            
            6,000
            
            
            -
            
            
            15,032
            
            
            6,742
            
            
            27,7742012
            
            
            -
            
            
            -
            
            
            -
            
            
            9,924
            
            
            2,314
            
            
            12,238$
            3,570
            
            $
            6,000
            
            $
            300
            
            $
            29,077
            
            $
            15,133
            
            $
            54,080




***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.





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
      February 29, 2008 is as follows:




21


**Issue
                  Date**
              
              **Expiration**
                **Date**
              
              **Instrument******
              
              **Exercise**
                **Price
                  per**
                **Share**
              
              **Fair
                  Value at 2/29/2008**09/17/2007
              
              
              09/17/2012
              
              Long-term
                fair value of conversion feature of convertible debenture
              
              
              
              
              $
              6,222**Long-term
                  embedded derivatives**
              
              **6,222**03/24/2006
              
              
              03/24/2013
              
              6,750,000
                Warrants
              
              $
              0.23
              
              
              3,29510/12/2006
              
              
              10/12/2011
              
              250,000
                Warrants
              
              $
              1.00
              
              
              9010/12/2006
              
              
              10/12/2011
              
              250,000
                Warrants
              
              $
              1.10
              
              
              8712/29/2006
              
              
              12/29/2011
              
              500,000
                Warrants
              
              $
              1.00
              
              
              18609/17/2007
              
              
              09/17/2012
              
              500,000
                Warrants
              
              $
              2.00
              
              
              16709/17/2007
              
              
              09/17/2012
              
              525,000
                Warrants
              
              $
              2.47
              
              
              16009/17/2007
              
              
              09/17/2012
              
              525,000
                Warrants
              
              $
              2.81
              
              
              154**Total
                  long-term free-standing derivatives**
              
              **4,139******08/12/2005
              
              
              03/31/2009
              
              Long-term
                fair value of conversion feature of Oblio Series A Preferred Stock
              
              $
              1.50
              
              
              -**Total
                  embedded and free-standing derivative liabilities**
              **$**
              **10,361**




***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 February 29, 2008, the outstanding
      balance of the note payable was $250. Payment on the note has not been made
      and
      the revised maturity date has not been determined as of April 14,
      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 February 29, 2008, the outstanding balance of the promissory
      note was $110.





On
      February 26, 2008, the Company, through its Titan PCB West 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 February 29, 2008, the outstanding balance of the promissory
      note 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 February 29, 2008, the
      outstanding balance of the promissory note was $33.





On
      February 29, 2008, Titan PCB West received a cash advance of $20 from Mike
      Kadlec on a $70 promissory note dated March 4, 2008. 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. Mike Kadlec is currently
      the Senior Vice President of Sales for Titan PCB West.





On
      February 29, 2008, Titan PCB West received a cash advance of $37 from Ed
      Peterson on a $67 promissory note dated March 4, 2008. 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. Ed Peterson is currently
      the Vice President of Operations for Titan PCB West.





***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
      February 29, 2008, $132 is outstanding under these short-term notes
      payable.




22




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
      February 29, 2008, the Company has recorded $1,284 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, and 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 Detergent acquisition as of November 30, 2007.





***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* ,
      under
      which 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 six months ended February 29, 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.




23




***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 February 29, 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.





Period
            
            Total
                Number of
              Shares
              Purchased
            
            Average
                Price
              Paid
                per Share
            
            Total
                Number of
              Shares Purchased as
              Part of Publicly
              Announced Plans
              or Programs
            
            Maximum Number
              of Shares that May
              Yet Be Purchased
              Under the Plans or
              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
            
            
            212,000**Total**
            
            **1,324,157**
            
            **$**
            **1.30**
            
            
            **1,274,157**
            
            
            **2,725,843**





***Note
      19 - Litigation***





AT&T


On
      December 5, 2006, the Company filed a Demand for Arbitration with the American
      Arbitration Association against AT&T Corp. (“AT&T”). The Company was
      seeking 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.




In
      February 2005, the FCC issued an order that made it clear that AT&T is
      required to pay USF charges on its Prepaid Card Service, a large percentage
      of
      which was resold to the public through Oblio. The order required AT&T and
      all companies providing calling card services similar to those described in
      the
      order to file new or revised Form 499s to properly report revenues consistent
      with the Order’s findings.





In
      compliance with the FCC order, Oblio has registered with the FCC as an
      Interstate Telecommunications Service Provider and is now considered to be
      a
      direct contributor of USF. As a direct contributor, over 98% of Oblio’s revenue
      is exempt from USF contributions and other Universal Service Administrative
      Company’s mandated fees to AT&T or other wholesale telecommunications
      service providers due to a specific FCC rule exemption applicable to
      international services.




On
      April
      16, 2007, Oblio filed a Petition for Declaratory Relief with the FCC requesting
      that the FCC find that AT&T’s refusal to honor Oblio’s proof of exemption
      from USF pass-through charges and request for a refund of collected USF charges
      are unreasonable practices and unjustly discriminatory in violation of Sections
      201(b) and 202(a) of the Communications Act.  Oblio thereafter filed a
      motion to stay the arbitration pending the FCC’s determination of Oblio’s
      Petition for Declaratory Ruling.  On May 4, 2007, the arbitrator stayed
      Oblio’s claims, but ordered that AT&T’s counterclaims, discussed below,
      could proceed.  On June 19, 2007, the FCC issued a Public Notice seeking
      public comment on Oblio’s Petition for Declaratory Ruling by interested parties
      on or before July 19, 2007.




In
      the
      arbitration, AT&T maintained that it did not charge Oblio USF fees, and if
      it did, Oblio was not owed any refund of USF amounts embedded in the amounts
      charged by AT&T to Oblio from 1999 to October 2006.  AT&T also
      filed a counterclaim in the arbitration against Oblio seeking payment for $7,200
      plus interest for prepaid phone cards purchased by Oblio.  In the
      arbitration, Oblio admitted that it has not paid AT&T the amount sought by
      AT&T.  However, Oblio asserted that the amounts claimed by AT&T are
      completely offset and excused by the USF amounts claimed by Oblio.




24




On
      October 12, 2007, the Company entered into a Settlement Agreement (the
“Settlement Agreement”) with AT&T, effective as of October 11, 2007. Prior
      to the Settlement Agreement, Oblio had refused to pay AT&T for previously
      delivered services in response to AT&T’s refusal to honor Oblio’s request
      for a refund of certain Universal Service Fund pass through charges which Oblio
      had alleged that it paid previously to AT&T. 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
      February 29, 2008. Additionally, the Company has recorded $100 as a liability
      to
      AT&T as of February 29, 2008 for the remainder of the amounts due AT&T
      per the Settlement Agreement.





CLIFTON
      PREPAID COMMUNICATIONS CORP


On
      August
      21, 2007, the Company 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. The Company is seeking $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. The Company also filed a
      Motion for Writ of Garnishment against Clifton’s funds on deposit with Bank of
      America, N.A.





On
      August
      22, 2007, Clifton filed a Motion to Dissolve Writ of Garnishment. A hearing
      was
      set on September 12, 2007. On September 12, 2007, the court denied Clifton’s
      Motion to Dissolve Writ of Garnishment. The case is still pending in
      litigation.





As
      of
      February 29, 2008, the Company has fully reserved and allowed for the $2,199
      in
      accounts receivable from Clifton. The Company has recorded no other amounts
      related to this suit.





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
      February 29, 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”). Allstate 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 February
      29,
      2008.





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 February 29, 2008.





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
      February 29, 2008 is $3,570. This action is currently pending. The Company
      has
      recorded the amounts due as a liability as of February 29, 2008. Oblio has
      also
      recorded accrued interest of $410 related to this obligation. The Company has
      filed a counterclaim against F&L and Sammy Jibrin for fraud.




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
      February 29, 2008.





25




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. Once the Hawaii lawsuit has
      been transferred, it is likely that the two lawsuits will be consolidated.
      This
      action is currently pending. 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 February 29, 2008.




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. This action is currently pending. The
      Company has accrued in accounts payable at February 29, 2008, $2,042 of the
      amounts alleged to be due, which is the amount Management believes will
      ultimately be paid related to this claim.





LATIN
      AMERICAN VOIP, INC


On
      December 26, 2007, the Company’s 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 the amounts
      alleged to be due in its accounts payable as of February 29, 2008.





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. As of January 24, 2008,
      the Company has complied with the request and is no longer in violation of
      the
      order. Oblio has filed a counterclaim against STX of unpaid
      product.





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 accrued
      $103 of the amounts alleged to be due from Titan Wireless in its accounts
      payable at February 29, 2008. 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


Subsequent
      to November 30, 2007, the Company’s subsidiary, Oblio, filed Motions for Writ of
      Garnishment against various customers for lack of payment for services rendered
      by Oblio. Motions for Writ of Garnishment have been issued for Touchtell
      Communications, Inc., Pactel Corporation, Detroit Phone Cards, and Diamond
      Phone
      Cards.




26




On
      February 15, 2008, Oblio filed two lawsuits in the United States District Court
      for the Northern District of Texas against various individuals and entities.
      One
      of the lawsuits alleged violations of the RICO Act (conspiracy to defraud),
      and
      the other lawsuit alleged violations of the Lanham Act (trademark infringement)





As
      of
      February 29, 2008, the Company has fully reserved and allowed (through its
      allowance for doubtful accounts $11,401 and its allowance for sales returns
      $3,552) $14,953 in accounts receivable recorded for the communications division
      matters referenced above including Clifton.





***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 February 29, 2008,
      $1,030 of the original settlement obligation remains unpaid of which $502 is
      a
      current liability.





***Note
      21 - Segment Information***





The
      Company considers itself in four distinct operating segments.





The
      Company, through its subsidiaries PCB West, 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.




27




**Three
                Months Ended****2/29/2008****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            8,411
            
            $
            12,527
            
            $
            102,529
            
            $
            1,401
            
            $
            -
            
            $
            124,868Interest
                expense:
            
            
            242
            
            
            616
            
            
            841
            
            
            169
            
            
            309
            
            
            2,177Net
                income (loss) from continuing operations:
            
            
            5,904
            
            
            4,029
            
            
            (2,051
            )
            
            (1,400
            )
            
            (5,783
            )
            
            699Loss
                from discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,615
            )
            
            -
            
            
            (3,615
            )Net
                income (loss):
            
            
            5,904
            
            
            4,029
            
            
            (2,051
            )
            
            (5,015
            )
            
            (5,784
            )
            
            (2,917
            )Assets:
            
            
            17,780
            
            
            13,695
            
            
            40,255
            
            
            14,438
            
            
            (100
            )
            
            86,068Accounts
                receivable, net:
            
            
            4,210
            
            
            1,740
            
            
            6,778
            
            
            1,401
            
            
            -
            
            
            14,129Inventory,
                net
            
            
            2,138
            
            
            -
            
            
            8,501
            
            
            2,395
            
            
            -
            
            
            13,034Equipment
                and improvements, net:
            
            
            3,047
            
            
            351
            
            
            11,544
            
            
            918
            
            
            125
            
            
            15,985Depreciation
                expense:
            
            
            255
            
            
            54
            
            
            562
            
            
            2
            
            
            13
            
            
            886Goodwill
                and indefinite lived intangible assets:
            
            
            8,571
            
            
            -
            
            
            9,277
            
            
            -
            
            
            -
            
            
            17,848Definite
                lived intangible assets, net
            
            
            -
            
            
            4,205
            
            
            732
            
            
            -
            
            
            -
            
            
            4,937





**Three
                Months Ended****2/28/2007****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            5,140
            
            $
            30,938
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            36,078Interest
                expense:
            
            
            (182
            )
            
            1,602
            
            
            -
            
            
            -
            
            
            4
            
            
            1,424Net
                income (loss):
            
            
            127
            
            
            2,582
            
            
            -
            
            
            -
            
            
            (788
            )
            
            1,921Assets:
            
            
            6,168
            
            
            49,544
            
            
            -
            
            
            -
            
            
            295
            
            
            56,007Accounts
                receivable, net:
            
            
            3,100
            
            
            13,451
            
            
            -
            
            
            -
            
            
            -
            
            
            16,551Inventory,
                net
            
            
            1,065
            
            
            1,165
            
            
            -
            
            
            -
            
            
            -
            
            
            2,230Equipment
                and improvements, net:
            
            
            1,661
            
            
            349
            
            
            -
            
            
            -
            
            
            -
            
            
            2,010Depreciation
                expense:
            
            
            167
            
            
            32
            
            
            -
            
            
            -
            
            
            -
            
            
            199Goodwill
                and indefinite lived intangible assets:
            
            
            -
            
            
            4,448
            
            
            -
            
            
            -
            
            
            -
            
            
            4,448Definite
                lived intangible assets, net:
            
            
            -
            
            
            18,761
            
            
            -
            
            
            -
            
            
            -
            
            
            18,761




**Six
                Months Ended****2/29/2008****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            15,192
            
            $
            34,854
            
            $
            192,544
            
            $
            1,401
            
            $
            -
            
            $
            243,991Interest
                expense:
            
            
            431
            
            
            1,263
            
            
            1,222
            
            
            169
            
            
            556
            
            
            3,641Net
                income (loss) from continuing operations:
            
            
            6,478
            
            
            (14,638
            )
            
            (2,486
            )
            
            (1,400
            )
            
            (4,029
            )
            
            (16,075
            )Loss
                from discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (11,314
            )
            
            -
            
            
            (11,314
            )Net
                income (loss):
            
            
            6,478
            
            
            (14,638
            )
            
            (2,486
            )
            
            (12,714
            )
            
            (4,029
            )
            
            (27,389
            )Impairment
                of intangibles:
            
            
            -
            
            
            14,572
            
            
            -
            
            
            -
            
            
            -
            
            
            14,572





**Six
                Months Ended****2/28/2007****E
                & HS**
            
            **Comm**
            
            **Energy**
            
            **Brands**
            
            **Corp.**
            
            **Total**Sales:
            
            $
            -
            
            $
            55,511
            
            $
            10,552
            
            $
            -
            
            $
            -
            
            $
            66,063Interest
                expense:
            
            
            (31
            )
            
            2,257
            
            
            -
            
            
            -
            
            
            4
            
            
            2,230Net
                income (loss):
            
            
            (5,047
            )
            
            1,544
            
            
            -
            
            
            -
            
            
            (436
            )
            
            (3,939
            )




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.




28




***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
      six-month periods ended February 29, 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. The Company is in the process of converting the Chapter
      7
      bankruptcy filing to a Chapter 11 bankruptcy filing and is also pursuing other
      alternatives for the assets of USAD, which could include a sale or facility
      closure and subsequent liquidation. 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.





*Financial
      Detail of the Discontinued Operations*





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





**Three**
            
            **Six****Months**
            
            **Months****Ended**
            
            **Ended****2/29/2008**
            
            **2/29/2008**Sales
                - Global brands division
            
            $
            2,057
            
            $
            5,240Cost
                of sales - Global brands division
            
            
            2,662
            
            
            5,867(605
            )
            
            (627
            )Operating
                expenses:Sales
                and marketing
            
            
            454
            
            
            969General
                and administrative expenses
            
            
            1,679
            
            
            2,078Bad
                debt expense
            
            
            567
            
            
            567Impairment
                of intangibles
            
            
            -
            
            
            6,569Amortization
                of intangibles
            
            
            129
            
            
            1932,829
            
            
            10,376Loss
                from operations
            
            
            (3,434
            )
            
            (11,003
            )Other
                income (expenses):Other
                income
            
            
            19
            
            
            59Interest
                expense
            
            
            (200
            )
            
            (370
            )**Loss
                from discontinued operations**
            
            $
            (3,615
            )
            $
            (11,314
            )






29




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





**February 29,****2008****Current
                assets**Cash
                and cash equivalents
            
            $
            161Accounts
                  receivable, trade (less allowancefor
                  doubtful accounts of $1,878)
            
            
            1,422Inventory,
                net
            
            
            3,360Prepaid
                expenses and other current assets
            
            
            315**Total
                current assets**
            
            $
            5,258**Non-current
                assets**Equipment
                and improvements, net
            
            $
            1,929Definite-lived
                intangible assets, net
            
            
            2,367Other
                assets
            
            
            98**Total
                non-current assets**
            
            **$**
            **4,394****Current
                liabilities**Accounts
                payable - trade
            
            $
            8,863Accrued
                liabilities
            
            
            1,273Short-term
                notes payable
            
            
            1,250Current
                portion of long-term debt
            
            
            936**Total
                current liabilities**
            
            **$**
            **12,322****Non-current
                liabilities**Lines
                of credit
            
            $
            5,041Long-term
                debt
            
            
            2,819Other
                long-term liabilities
            
            
            557**Total
                non-current liabilities**
            
            **$**
            **8,417**




Long-term
      debt consisted of the following:


Issue
              
              Expiration
              
              
              
              Outstanding
                  atDate
              
              Date
              
              Instrument
              
              2/29/200810/16/2007
              
              
              01/01/2010
              
              $10,000 Secured Revolving Note
              
              $
              5,04110/16/2007
              
              
              01/01/2010
              
              $4,087 Term Notes
              
              
              3,755Total
                  debt
              
              
              
              
              
              
              
              
              8,796Less
                  current portion of long-term debt
              
              
              (936
              )Total
                  long-term debt
              
              $
              7,860





Long-term
      debt repayments are due as follows:





Fiscal
              Year
            
            Greystone
              Revolvers
            
            Greystone
              Term Debt
            
            Total Long-
              Term Debt2008
            
            $
            -
            
            $
            936
            
            $
            9362009
            
            
            -
            
            
            863
            
            
            8632010
            
            
            5,041
            
            
            1,956
            
            
            6,997$
            5,041
            
            $
            3,755
            
            $
            8,796




***Note
      23 - Subsequent Events***





On
      March
      5, 2008, the $5,000 Term Note C with Greystone was satisfied in full with the
      $5,000 in restricted cash that was held as collateral against the obligation.





30




**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**





A
      detailed overview of our business and history is set forth in our Annual Report
      on Form 10-KSB for the year ended August 31, 2007, to which overview we make
      reference. 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 cutting edge 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.





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.





31




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.





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.




32




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.
      The Company is in the process of converting the Chapter 7 bankruptcy filing
      to a
      Chapter 11 bankruptcy filing and is also pursuing other alternatives for the
      assets of USAD, which could include a sale or facility closure and subsequent
      liquidation. 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





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 West”), 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
      West 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 popular 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.




33




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.





**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 56 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.





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.






34




·
            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.


·
            Evaluate
                the viability of the Company’s distribution of prepaid CDMA handsets and
                wireless airtime.


·
            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 February
      29, 2008, the allowance for sales returns remained at $3,552 and the allowance
      for uncollectible accounts receivable was increased to $11,272 for Oblio
      Telecom.




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 PCB West. 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.




35




*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. In addition, 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. The Company is
      in
      the process of converting the Chapter 7 bankruptcy filing to a Chapter 11
      bankruptcy filing and is also pursuing other alternatives for the assets of
      USAD
      which could include a sale or facility closure and subsequent liquidation.
      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.





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 February 29, 2008 we had $0 allowance
      for returns and an allowance for doubtful accounts of $90. 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 February 29, 2008 we had an allowance for returns of
      $3,552 and an allowance for doubtful accounts of $11,401. Actual returns may
      differ materially from our estimates, and revisions to the allowances may be
      required from time to time.




36




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 February 29, 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 February 29, 2008, we had an allowance for returns of
      $109 and an allowance for doubtful accounts of $330. 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.





In
      our
      global brands division, we recognize sales at the time the merchandise is
      shipped to our distribution customers. At February 29, 2008 we had $0 allowance
      for returns and an allowance for doubtful accounts of $2,762. 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.




37




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 February 29, 2008 and
      2006 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.




*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.




38




**Results
      of Operations**





As
      of
      February 29, 2008, the Company has a working capital deficit of $14,184
      including current assets and current liabilities from discontinued operations,
      a
      working capital deficit of $7,120 excluding current assets and current
      liabilities from discontinued operations and an accumulated deficit of $78,091.
      The Company generated sales of $124,868 and $36,078 for the three months ended
      February 29, 2008 and February 28, 2007, respectively; and incurred a net loss
      and had net income of $2,916 and $1,921, respectively. The Company generated
      sales of $243,991 and $66,063 for the six months ended February 29, 2008 and
      February 28, 2007, respectively; and incurred a net loss of $27,389 and $3,939,
      respectively. In addition, the Company used $8,848 and generated $3,776 of
      cash
      flows from continuing operations during the six months ended February 29, 2008
      and February 28, 2007, respectively.




**Three
      Months Ended February 29, 2008 Compared to the Three Months Ended February
      28,
      2007**





The
      following table sets forth the results of operations for the three months ended
      February 29, 2008 and February 28, 2007 and should be read in conjunction with
      our consolidated financial statements and the related notes appearing elsewhere
      in this report.


39
  **Three
                  Months Ended****2/29/2008**
              
              **2/28/2007**Sales
                  - Energy division
              
              $
              102,529
              
              
              82
              %
              $
              -
              
              
              -
              %Sales
                  - Communications division
              
              
              12,527
              
              
              10
              
              
              30,938
              
              
              86Sales
                  - Electronics and homeland security division
              
              
              8,411
              
              
              7
              
              
              5,140
              
              
              14Sales
                  - Global brands division
              
              
              1,401
              
              
              1
              
              
              -
              
              
              -Total
                  sales
              
              
              124,868
              
              
              100
              
              
              36,078
              
              
              100Cost
                  of sales - Energy division
              
              
              97,849
              
              
              78
              
              
              -
              
              
              -Cost
                  of sales - Communications division
              
              
              6,102
              
              
              5
              
              
              27,166
              
              
              75Cost
                  of sales - Electronics and homeland security division
              
              
              8,166
              
              
              7
              
              
              5,057
              
              
              14Cost
                  of sales - Global brands division
              
              
              1,341
              
              
              1
              
              
              -
              
              
              -Total
                  cost of sales
              
              
              113,458
              
              
              91
              
              
              32,223
              
              
              89Gross
                  profit
              
              
              11,410
              
              
              9
              
              
              3,855
              
              
              11Operating
                  expenses:Sales
                  and marketing
              
              
              570
              
              
              *
              
              
              576
              
              
              2General
                  and administrative
              
              
              11,058
              
              
              9
              
              
              2,798
              
              
              8Bad
                  debt expense
              
              
              4,213
              
              
              3
              
              
              89
              
              
              *Amortization
                  of intangibles
              
              
              527
              
              
              *
              
              
              1,335
              
              
              4Total
                  operating expenses
              
              
              16,368
              
              
              13
              
              
              4,798
              
              
              13Operating
                  income
              
              
              (4,958
              )
              
              (4
              )
              
              (943
              )
              
              (3
              )Other
                  income
              
              
              593
              
              
              *
              
              
              20
              
              
              *Interest
                  expense
              
              
              (2,177
              )
              
              (2
              )
              
              (1,424
              )
              
              (4
              )Gain
                  on disposal of assets
              
              
              2,030
              
              
              2
              
              
              -
              
              
              -Gain
                  (loss) on value of derivative instruments
              
              
              5,211
              
              
              4
              
              
              (3,522
              )
              
              (10
              )Gain
                  on extinguishment of debt
              
              
              -
              
              
              *
              
              
              7,790
              
              
              22Net
                  income from continuing operations
              
              $
              699
              
              
              1
              %
              $
              1,921
              
              
              5
              %Loss
                  from discontinued operations
              
              
              (3,615
              )
              
              (3
              )
              
              -
              
              
              -Net
                  income/(loss)
              
              $
              (2,916
              )
              
              (2
              )%
              $
              1,921
              
              
              5
              %




Sales.
      Sales increased by $88,790 or 246% from $36,078 in the three months ended
      February 28, 2007 to $124,868 in the three months ended February 29, 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 a tier one telecommunications provider
      through its Pinless, Inc subsidiary as Planet Direct. As such, sales in the
      communication division decreased by $18,411 or 60% from $30,938 in the three
      months ended February 28, 2007 to $12,527 in the three months ended February
      29,
      2008. The majority of the sales in three-month period were attributable to
      prepaid international calling card products sold in prior periods that had
      not
      been used by the end consumer. This deferred revenue was recognized in the
      three
      months ended February 29, 2008 as sales in accordance with our revenue
      recognition policy.




Cost
      of
      Sales. Cost of sales increased $81,235 or 252%, from $32,223 in the three months
      ended February 28, 2007 to $113,458 in the three months ended February 29,
      2008,
      and as a percentage of sales increased from 89% in the three months ended
      February 28, 2007 to 91% in the three months ended February 29, 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 $21,064 or 78%, from $27,166 in the three months ended
      February 28, 2007 to $6,102 in the three months ended February 29, 2008. 
Costs of sales decreased in the communications division due to the decrease
      in
      sales in part but also to increased margins for the three months ended February
      29, 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.




40




Sales
      and
      Marketing. Sales and marketing expenses decreased by $6 or 1%, from $576 in
      the
      three months ended February 28, 2007 to $570 in the three months ended February
      29, 2008. As a percentage of sales, sales and marketing expense decreased from
      2% in the three months ended February 28, 2007 to less than 1% in the three
      months ended February 29, 2008. This decrease is primarily attributable to
      lower
      sales and marketing expenses as a percent of sales in our Titan Energy division
      in the three months ended February 29, 2008 as compared to the three months
      ended February 28, 2007 offset by sales and marketing expenses in our newly
      formed Titan Global Brands division.




General
      and Administrative Expenses. General and administrative expenses increased
      $8,260 or 295% from $2,798 in the three months ended February 28, 2007 to
      $11,058 in the three months ended February 29, 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. Acquired entity
      general and administrative expenses constituted $8,219 of the $11,058 general
      and administrative expenses for the three months ended February 29,
      2008.




Bad
      Debt
      Expense. Bad debt expense increased $4,124 or 4,634% from $89 in the three
      months ended February 28, 2007 to $4,213 in the three months ended February
      29,
      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 one of our wholesale providers, management
      determined that the collection of several 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 $11,272 for uncollectible
      accounts and $3,552 for sales returns related to these disputes.




Amortization
      of Intangibles. Amortization of intangibles decreased $808 or 61% from $1,335
      in
      the three months ended February 28, 2007 to $527 in the three months ended
      February 29, 2008. Amortization of intangibles decreased during the three months
      ended February 29, 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 $753 or 53%, from interest expense of $1,424
      in the three months ended February 28, 2007 to $2,177 in the three months ended
      February 29, 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 $2,030 from $0 in the three months ended February
      28, 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 $5,211 in the three months ended February 29, 2008 and a loss
      from the change in fair value of derivative liabilities of $3,522 in the three
      months ended February 28, 2007.





**Six
      Months Ended February 29, 2008 Compared to the Six Months Ended February 28,
      2007**





The
      following table sets forth the results of operations for the six months ended
      February 29, 2008 and February 28, 2007 and should be read in conjunction with
      our consolidated financial statements and the related notes appearing elsewhere
      in this report.




41




**Six
                  Months Ended****2/29/2008**
              
              **2/28/2007**Sales
                  - Energy division
              
              $
              192,544
              
              
              79
              %
              $
              -
              
              
              -
              %Sales
                  - Communications division
              
              
              34,854
              
              
              14
              
              
              55,511
              
              
              84Sales
                  - Electronics and homeland security division
              
              
              15,192
              
              
              6
              
              
              10,552
              
              
              16Sales
                  - Global brands division
              
              
              1,401
              
              
              1
              
              
              -
              
              
              -Total
                  sales
              
              
              243,991
              
              
              100
              
              
              66,063
              
              
              100Cost
                  of sales - Energy division
              
              
              183,051
              
              
              75
              
              
              -
              
              
              -Cost
                  of sales - Communications division
              
              
              24,371
              
              
              10
              
              
              48,591
              
              
              74Cost
                  of sales - Electronics and homeland security division
              
              
              14,285
              
              
              6
              
              
              10,188
              
              
              15Cost
                  of sales - Global brands division
              
              
              1,341
              
              
              1
              
              
              -
              
              
              -Total
                  cost of sales
              
              
              223,048
              
              
              91
              
              
              58,779
              
              
              89Gross
                  profit
              
              
              20,943
              
              
              9
              
              
              7,284
              
              
              11Operating
                  expenses:Sales
                  and marketing
              
              
              1,266
              
              
              1
              
              
              1,075
              
              
              2General
                  and administrative
              
              
              19,746
              
              
              8
              
              
              4,845
              
              
              7Bad
                  debt expense
              
              
              8,798
              
              
              4
              
              
              122
              
              
              *Impairment
                  of intangibles
              
              
              14,572
              
              
              6
              
              
              -
              
              
              -Amortization
                  of intangibles
              
              
              1,959
              
              
              1
              
              
              2,669
              
              
              4Total
                  operating expenses
              
              
              46,341
              
              
              19
              
              
              8,711
              
              
              13Operating
                  income
              
              
              (25,398
              )
              
              (10
              )
              
              (1,427
              )
              
              (2
              )Other
                  income
              
              
              1,181
              
              
              0
              
              
              20
              
              
              *Interest
                  expense
              
              
              (3,641
              )
              
              (1
              )
              
              (2,230
              )
              
              (3
              )Gain
                  on disposal of assets
              
              
              2,030
              
              
              1
              
              
              -
              
              
              -Gain
                  (loss) on value of derivative instruments
              
              
              9,753
              
              
              4
              
              
              (8,092
              )
              
              (12
              )Gain
                  on extinguishment of debt
              
              
              -
              
              
              -
              
              
              7,790
              
              
              12Net
                  loss from continuing operations
              
              $
              (16,075
              )
              
              (7
              )%
              $
              (3,939
              )
              
              (6
              )%Loss
                  from discontinued operations
              
              
              (11,314
              )
              
              (5
              )
              
              -
              
              
              -Net
                  loss
              
              $
              (27,389
              )
              
              (11
              )%
              $
              (3,939
              )
              
              (6
              )%





*Sales.* Sales
      increased by $177,928 or 269% from $66,063 in the six months ended February
      28,
      2007 to $243,991 in the six months ended February 29, 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 a tier one telecommunications provider
      through its Pinless, Inc subsidiary as Planet Direct. As such, sales in the
      communication division decreased by $20,657 or 37% from $55,511 in the six
      months ended February 28, 2007 to $34,854 in the six months ended February
      29,
      2008.  Sales in the electronics division increased by $4,640 or 44% from
      $10,552 in the six months ended February 28, 2007 to $15,192 in the six months
      ended February 29, 2008




*Cost
      of Sales.* Cost
      of
      sales increased $164,269 or 279%, from $58,779 in the six months ended February
      28, 2007 to $223,048 in the six months ended February 29, 2008, and as a
      percentage of sales increased from 89% in the six months ended February 28,
      2007
      to 91% in the six months ended February 29, 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 $24,220 or 49%, from $48,591 in the six months ended February 28,
      2007
      to $24,371 in the six months ended February 29, 2008. Costs of sales decreased
      in the communications division due to the decrease in sales in part but also
      to
      increased margins for the six months ended February 29, 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 $4,097
      or 40%, from $10,188 in the six months ended February 28, 2007 to $14,285 in
      the
      six months ended February 29, 2008. The cost of sales increase in the
      electronics division was attributable to an increase in sales over the
      comparable periods.




42




*Sales
      and Marketing.* Sales
      and
      marketing expenses increased by $191 or 18%, from $1,075 in the six months
      ended
      February 28, 2007 to $1,266 in the six months ended February 29, 2008. As a
      percentage of sales, sales and marketing expense decreased from 2% in the six
      months ended February 28, 2007 to 1% in the six months ended February 29, 2008.
      This decrease is primarily attributable to lower sales and marketing expenses
      as
      a percent of sales in our Titan Energy division in the six months ended February
      29, 2008 as compared to the six months ended February 28, 2007 offset by sales
      and marketing expenses in our newly formed Titan Global Brands
      division.




*General
      and Administrative Expenses.* General
      and administrative expenses increased $14,901 or 308% from $4,845 in the six
      months ended February 28, 2007 to $19,746 in the six months ended February
      29,
      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 and the wireless operations acquired in the third quarter of
      fiscal 2007 from Ready Mobile RM. Acquired entity general and administrative
      expenses constituted $15,050 of the $19,746 general and administrative expenses
      for the six months ended February 29, 2008.




*Bad
      Debt Expense.* Bad
      debt
      expense increased $8,676 or 7,111% from $122 in the six months ended February
      28, 2007 to $8,798 in the six months ended February 29, 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 one of our wholesale providers, management determined that the collection
      of several 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 $11,272 for uncollectible accounts and $3,552
      for
      sales returns related to these disputes.




*Amortization
      of Intangibles.* Amortization
      of intangibles decreased $710 or 27% from $2,669 in the six months ended
      February 28, 2007 to $1,959 in the six months ended February 29, 2008.
      Amortization of intangibles decreased during the six months ended February
      29,
      2008 due to the impairment recorded during the quarter ended November 30, 2007
      in the communications division.




*Interest
      Expense.* Interest
      expense increased $1,411 or 63%, from interest expense of $2,230 in the six
      months ended February 28, 2007 to $3,641 in the six months ended February 29,
      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 $2,030 from $0 in the six months ended February
      28,
      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 $9,753
      in
      the six months ended February 29, 2008 and a loss from the change in fair value
      of derivative liabilities of $8,092 in the six months ended February 28,
      2007.




*Impairment
      Charge.* Impairment
      charge was $14,572 for the six months ended February 29, 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. 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.




43




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 February 29, 2008, the Company had excess availability of $30,428 based
      on
      loan limits and $0 based on actual collateral limits. We may also generate
      liquidity from offerings of debt and/or equity in the capital markets. As of
      February 29, 2008, we had a total of $2,354 in unrestricted cash and cash
      equivalents. As of February 29, 2008, we also had restricted cash and cash
      equivalents and short-term investments of $5,612 that included funds set aside
      and pledged to secure term loan obtained to facilitate the Appco acquisition
      and
      certain amounts to collateralize fuel bonds issued by a surety for Appco. See
      additional discussion in Note 6 to the consolidated financial
      statements.




During
      the six months ended February 29, 2008, the Company has made material changes
      to
      its operations in the communications and global brands division in an effort
      to
      decrease the cash flow used in operations.  The Company has reduced its
      labor force in the operations in Richardson, Texas; Hiawatha, Iowa; and North
      Brunswick, New Jersey and implemented severe cost reduction strategies in those
      operations. The intent of the changes is to reduce 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 these operations 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.
      Given the recent cost containment measures implemented during the six months
      ended February 29, 2008, management believes that our existing cash and
      investments, liquidity available under our revolving credit facility, ability
      to
      raise capital from the equity markets, ability to obtain funding from certain
      significant stockholders 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
      February 29, 2008, the Company had a working capital deficit of $14,184
      including discontinued operations, a working capital deficit of $7,120 from
      continuing operations and an accumulated deficit of $78,091. In addition, the
      Company used $8,848 in continuing operations during the six months ended
      February 29, 2008. The cash used in operations during the three months ended
      February 29, 2008 were primarily to fund our communications division’s network
      operations during periods of decreased collections of accounts receivable (see
      additional discussion in Note 15).




We
      are in
      the process of reinvigorating the distribution of prepaid international calling
      cards after the recent signing of a distribution contract with a tier one
      communications partner. 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.




44




*Operating
      Activities.* Cash
      used
      in operating activities from continuing operations was $8,848 during the six
      months ended February 29, 2008 compared to cash generated in operating
      activities from continuing operations of $3,776 during the six months ended
      February 28, 2007. The increase in cash used by operations was primarily due
      to
      our larger net loss during the six months ended February 29, 2008 than in the
      six months ended February 28, 2007.




*Investing
      Activities.* Cash
      used in investing activities from continuing operations was $31,681 during
      the
      six months ended February 29, 2008 compared to cash used in investing activities
      of $162 during the six months ended February 28, 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. The Company
      also incurred additional increases in investment in restricted short-term
      investments used to collateralize obligations and an increase in purchases
      of
      fixed assets during the comparable periods. These increases were offset by
      cash
      provided by acquisitions of $3,784.




*Financing
      Activities.* Cash
      provided by financing activities during the six months ended February 29, 2008
      was $41,692 compared to cash used in financing activities of $2,862 during
      the
      three months ended February 28, 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* .




45





*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.





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.




46




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
      February 29, 2008 includes compensation expense for stock-based payment awards
      granted prior to, but not yet vested, as of February 29, 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 February 29, 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.




47




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*





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.





**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.





**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.




48




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 February 29, 2008 that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.




49





**PART
      II**





**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





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:





AT&T


On
      December 5, 2006, the Company filed a Demand for Arbitration with the American
      Arbitration Association against AT&T Corp. (“AT&T”). The Company was
      seeking 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.




In
      February 2005, the FCC issued an order that made it clear that AT&T is
      required to pay USF charges on its Prepaid Card Service, a large percentage
      of
      which was resold to the public through Oblio. The order required AT&T and
      all companies providing calling card services similar to those described in
      the
      order to file new or revised Form 499s to properly report revenues consistent
      with the Order’s findings.





In
      compliance with the FCC order, Oblio has registered with the FCC as an
      Interstate Telecommunications Service Provider and is now considered to be
      a
      direct contributor of USF. As a direct contributor, over 98% of Oblio’s revenue
      is exempt from USF contributions and other Universal Service Administrative
      Company’s mandated fees to AT&T or other wholesale telecommunications
      service providers due to a specific FCC rule exemption applicable to
      international services.




On
      April
      16, 2007, Oblio filed a Petition for Declaratory Relief with the FCC requesting
      that the FCC find that AT&T’s refusal to honor Oblio’s proof of exemption
      from USF pass-through charges and request for a refund of collected USF charges
      are unreasonable practices and unjustly discriminatory in violation of Sections
      201(b) and 202(a) of the Communications Act.  Oblio thereafter filed a
      motion to stay the arbitration pending the FCC’s determination of Oblio’s
      Petition for Declaratory Ruling.  On May 4, 2007, the arbitrator stayed
      Oblio’s claims, but ordered that AT&T’s counterclaims, discussed below,
      could proceed.  On June 19, 2007, the FCC issued a Public Notice seeking
      public comment on Oblio’s Petition for Declaratory Ruling by interested parties
      on or before July 19, 2007.




In
      the
      arbitration, AT&T maintained that it did not charge Oblio USF fees, and if
      it did, Oblio was not owed any refund of USF amounts embedded in the amounts
      charged by AT&T to Oblio from 1999 to October 2006.  AT&T also
      filed a counterclaim in the arbitration against Oblio seeking payment for $7,200
      plus interest for prepaid phone cards purchased by Oblio.  In the
      arbitration, Oblio admitted that it has not paid AT&T the amount sought by
      AT&T.  However, Oblio asserted that the amounts claimed by AT&T are
      completely offset and excused by the USF amounts claimed by Oblio.





On
      October 12, 2007, the Company entered into a Settlement Agreement (the
“Settlement Agreement”) with AT&T, effective as of October 11, 2007. Prior
      to the Settlement Agreement, Oblio had refused to pay AT&T for previously
      delivered services in response to AT&T’s refusal to honor Oblio’s request
      for a refund of certain Universal Service Fund pass through charges which Oblio
      had alleged that it paid previously to AT&T. 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.




50




Oblio
      has
      remitted $500 to AT&T in compliance with the Settlement Agreement as of
      February 29, 2008. Additionally, the Company has recorded $100 as a liability
      to
      AT&T as of February 29, 2008 for the remainder of the amounts due AT&T
      per the Settlement Agreement.





CLIFTON
      PREPAID COMMUNICATIONS CORP


On
      August
      21, 2007, the Company 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. The Company is seeking $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. The Company also filed a
      Motion for Writ of Garnishment against Clifton’s funds on deposit with Bank of
      America, N.A.





On
      August
      22, 2007, Clifton filed a Motion to Dissolve Writ of Garnishment. A hearing
      was
      set on September 12, 2007. On September 12, 2007, the court denied Clifton’s
      Motion to Dissolve Writ of Garnishment. The case is still pending in
      litigation.





As
      of
      February 29, 2008, the Company has fully reserved and allowed for the $2,199
      in
      accounts receivable from Clifton. The Company has recorded no other amounts
      related to this suit.





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
      February 29, 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”). Allstate 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 February
      29,
      2008.





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 February 29, 2008.





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
      February 29, 2008 is $3,570. This action is currently pending. The Company
      has
      recorded the amounts due as a liability as of February 29, 2008. Oblio has
      also
      recorded accrued interest of $410 related to this obligation. The Company has
      filed a counterclaim against F&L and Sammy Jibrin for fraud.




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
      February 29, 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. Once the Hawaii lawsuit has
      been transferred, it is likely that the two lawsuits will be consolidated.
      This
      action is currently pending. 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 February 29, 2008.




51




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. This action is currently pending. The
      Company has accrued in accounts payable at February 29, 2008, $2,042 of the
      amounts alleged to be due, which is the amount Management believes will
      ultimately be paid related to this claim.





LATIN
      AMERICAN VOIP, INC


On
      December 26, 2007, the Company’s 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 the amounts
      alleged to be due in its accounts payable as of February 29, 2008.





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. As of January 24, 2008,
      the Company has complied with the request and is no longer in violation of
      the
      order. Oblio has filed a counterclaim against STX of unpaid
      product.





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 accrued
      $103 of the amounts alleged to be due from Titan Wireless in its accounts
      payable at February 29, 2008. 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 to the consolidated financial
      statements.





OTHER
      LEGAL MATTERS


Subsequent
      to November 30, 2007, the Company’s subsidiary, Oblio, filed Motions for Writ of
      Garnishment against various customers for lack of payment for services rendered
      by Oblio. Motions for Writ of Garnishment have been issued for Touchtell
      Communications, Inc., Pactel Corporation, Detroit Phone Cards, and Diamond
      Phone
      Cards.





On
      February 15, 2008, Oblio filed two lawsuits in the United States District Court
      for the Northern District of Texas against various individuals and entities.
      One
      of the lawsuits alleged violations of the RICO Act (conspiracy to defraud),
      and
      the other lawsuit alleged violations of the Lanham Act (trademark infringement)





As
      of
      February 29, 2008, the Company has fully reserved and allowed (through its
      allowance for doubtful accounts $11,401 and its allowance for sales returns
      $3,552) $14,953 in accounts receivable recorded for the communications division
      matters referenced above including Clifton.




52




**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.




***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.




53




***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.





***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.




54




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.





***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.




55




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.




***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 are comprising 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.




56




***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.





***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.




57




***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.





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.




58




***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.




**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**


22.1
        -
        Subsidiaries





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)




59




**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
                Chance
              Chief
                Executive Officer and
              President
              (Principal
                Executive Officer)TITAN
                GLOBAL HOLDINGS, INC.By:
            /s/
                Scott HensellScott
                Hensell
              Chief
                Financial Officer
              (Principal
                Financial and
              Accounting
                Officer)





60