SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





[X]
            Quarterly
      report under Section 13 or 15(d) of the Securities Exchange Act of 1934
      for the quarterly period ended September 30,
  2007




Commission
File Number: 000-31451







ENCOMPASS HOLDINGS,
INC.


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





NEVADA
            
            95-4756822(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)








1005 Terminal Way, Suite 110, Reno,
Nevada 89502


(Address
of principal executive office) (Zip Code)





(775)
324-8531


(Issuer's
telephone number)







Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.


Yes
[X] No [   ]


Indicate
by checking the box below, whether the registrant is a shell company as defined
in Rule 12b-2 of the Exchange Act.
 Yes
[   ] No [X]




As of
September 30, 2007, the number of outstanding shares of the issuer's common
stock, $0.001 par value, was 278,269,250 shares.





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 Large
      accelerated filer _____
                  
                  Accelerated
      filer _____Non-accelerated
      filer _____
                  
                  Smaller
      reporting company X





1





TABLE OF CONTENTS





ITEM
      1.
            FINANCIAL
      STATEMENTSConsolidated
      Unaudited Balance Sheets as of September 30, 2007 and June 30,
      2007
            3Consolidated
      Unaudited Statements of Operations for the three months ended September
      30, 2007 and September 30, 2006
            4Consolidated
      Unaudited Statement of Cash Flows for the three months ended September 30,
      2007 and September 30, 2006
            5Notes
      to Consolidated Financial Statements
            6ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            10ITEM
      3.
            CONTROLS
      AND PROCEDURES
            12PART II - OTHER
      INFORMATIONITEM
      6.
            EXHIBITS
            12SIGNATURES
            13


















































2
 ENCOMPASS
HOLDINGS, INC.
 (A
Developmental Stage Enterprise)
 
 Condensed
Consolidated Balance Sheets


September
      30,
                                                        
                                                        
                                                        June
      30,2007
                                                        
                                                        
                                                        2007AssetsCurrent
      assets:Cash
                                                        
                                                        $
                                                        384,246
                                                        
                                                        
                                                        $
                                                        91,299Prepaid
      expenses
                                                        
                                                        
                                                        86,170
                                                        
                                                        
                                                        
                                                        131,380Other
      current assets
                                                        
                                                        
                                                        32,543
                                                        
                                                        
                                                        
                                                        5,793Net
      current assets of discontinued operations
                                                        
                                                        
                                                        306,677
                                                        
                                                        
                                                        
                                                        308,479Total
      current assets
                                                        
                                                        
                                                        809,636
                                                        
                                                        
                                                        
                                                        536,951Equipment,
      net
                                                        
                                                        
                                                        562,734
                                                        
                                                        
                                                        
                                                        600,232Equipment
      of discontinued operations, net
                                                        
                                                        
                                                        8,142,422
                                                        
                                                        
                                                        
                                                        8,433,989Deposits
      & other assets
                                                        
                                                        
                                                        36,649
                                                        
                                                        
                                                        
                                                        36,649Net
      other assets of discontinued operations
                                                        
                                                        
                                                        391,765
                                                        
                                                        
                                                        
                                                        349,246$
                                                        9,943,206
                                                        
                                                        
                                                        $
                                                        9,957,067
 Liabilities and Net Capital
      DeficiencyCurrent
      liabilities:Accounts
      payable
                                                                                  
                                                                                  $
                                                                                  731,956
                                                                                  
                                                                                  
                                                                                  $
                                                                                  724,044Accrued
      liabilities
                                                                                  
                                                                                  
                                                                                  1,239,139
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,131,322Other
      current liabilities
                                                                                  
                                                                                  
                                                                                  318,889
                                                                                  
                                                                                  
                                                                                  
                                                                                  269,100Net
      current liabilities of discontinued operations
                                                                                  
                                                                                  
                                                                                  6,280,619
                                                                                  
                                                                                  
                                                                                  
                                                                                  5,313,243Total
      current liabilities
                                                                                  
                                                                                  
                                                                                  8,570,603
                                                                                  
                                                                                  
                                                                                  
                                                                                  7,437,709Long-term
      obligations
                                                                                  
                                                                                  
                                                                                  3,937,303
                                                                                  
                                                                                  
                                                                                  
                                                                                  3,547,138Accrued
      interest
                                                                                  
                                                                                  
                                                                                  249,586
                                                                                  
                                                                                  
                                                                                  
                                                                                  176,404Long-term
      obligations of discontinued operations
                                                                                  
                                                                                  
                                                                                  64,870
                                                                                  
                                                                                  
                                                                                  
                                                                                  64,870Minority
      interest
                                                                                  
                                                                                  
                                                                                  1,238,621
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,276,003Net
      capital deficiency:Preferred
      stock; no par value; authorized 200,000 shares:Series
      A – 100,000 shares designated, issued & outstanding
                                                                                  
                                                                                  
                                                                                  100
                                                                                  
                                                                                  
                                                                                  
                                                                                  100Series
      B – 100,000 shares designated, issued &
    outstanding
                                                                                  
                                                                                  
                                                                                  100
                                                                                  
                                                                                  
                                                                                  
                                                                                  100Common
      stock; $.001 par value; authorized 500,000,000 shares; issued and
      outstanding 278,269,250 shares at September 30, 2007 (270,534,750 shares
      at June 30, 2007)
                                                                                  
                                                                                  
                                                                                  278,269
                                                                                  
                                                                                  
                                                                                  
                                                                                  270,535Convertible
      promissory note & accrued interest
                                                                                  
                                                                                  
                                                                                  120,296
                                                                                  
                                                                                  
                                                                                  
                                                                                  118,279Additional
      paid in capital
                                                                                  
                                                                                  
                                                                                  38,713,363
                                                                                  
                                                                                  
                                                                                  
                                                                                  38,705,209Retained
      deficit
                                                                                  
                                                                                  
                                                                                  (27,848,795
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (27,848,795
                                                                                  )Deficit
      accumulated during the development stage
                                                                                  
                                                                                  
                                                                                  (15,381,110
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (13,790,485
                                                                                  )Net
      capital deficiency
                                                                                  
                                                                                  
                                                                                  (4,117,777
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (2,545,057
                                                                                  )$
                                                                                  9,943,206
                                                                                  
                                                                                  
                                                                                  $
                                                                                  9,957,067
  See
accompanying notes.
 3
 ENCOMPASS
HOLDINGS, INC.
 (A
Developmental Stage Enterprise)
 
 Condensed
Consolidated Statements of Operations
  Cumulativeactivity
      duringdevelopmentstageApril
      1, 2006Three months
      ended
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    throughSeptember 30
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    September
      30,2007
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    2006
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    2007Operating
      expenses:Selling,
      general and administrative
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    754,803
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    747,317
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    6,112,901Research
      & development
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    98,789
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    95,260
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    1,658,824Write-down
      of rotary engine patterns,demonstration
      engines not held for sale, andintellectual
      assets
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    -
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    -
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    7,717,000Total
      operating expenses
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    853,592
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    842,577
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    15,488,725Net
      loss from operations
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (853,592
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (842,577
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (15,488,725
                                                                                                                                                                                    )Other
      income (expenses):Change
      in fair value of derivative liabilities
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (2,289
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    5,390
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (6,229
                                                                                                                                                                                    )Interest
      expense, net
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (82,698
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (151,636
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (755,840
                                                                                                                                                                                    )Other
      income (expense)
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (84,987
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (157,026
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (762,069
                                                                                                                                                                                    )Net
      loss from continuing operations before minorityinterest
      in net loss of subsidiary & provision forincome
      taxes
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (938,579
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (685,551
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (16,250,794
                                                                                                                                                                                    )Minority
      interest in net loss of subsidiary
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    37,382
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    319
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    4,218,341Provision
      for income taxes – State of California
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    -
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    -
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    -Net
      loss from continuing operations
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (901,197
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (685,232
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (12,032,453
                                                                                                                                                                                    )Discontinued
      operations –net
      loss from discontinued operations
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (689,428
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (554,271
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (3,348,657
                                                                                                                                                                                    )Net
      loss
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (1,590,625
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (1,239,503
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (15,381,110
                                                                                                                                                                                    )Net
      loss per common share:Continuing
      operations
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.003
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.024
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.155
                                                                                                                                                                                    )Discontinued
      operations
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (.003
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (.019
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    
                                                                                                                                                                                    (.043
                                                                                                                                                                                    )Net
      loss per common share
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.006
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.043
                                                                                                                                                                                    )
                                                                                                                                                                                    
                                                                                                                                                                                    $
                                                                                                                                                                                    (.198
                                                                                                                                                                                    )
 See
accompanying notes.
 4
 ENCOMPASS
HOLDINGS, INC.
 (A
Developmental Stage Enterprise)
 
 Condensed
Consolidated Statements of Cash Flows
  Cumulativeactivity
      duringdevelopmentstageApril
      1, 2006Three
      months ended
                                                                                
                                                                                
                                                                                throughSeptember
      30
                                                                                
                                                                                
                                                                                September
      30,2007
                                                                                
                                                                                
                                                                                2006
                                                                                
                                                                                
                                                                                2007Cash
      flows from operating activities:Net
      loss
                                                                                
                                                                                $
                                                                                (1,590,625
                                                                                )
                                                                                
                                                                                $
                                                                                (1,239,503
                                                                                )
                                                                                
                                                                                $
                                                                                (15,381,110
                                                                                )Net
      loss from discontinued operations
                                                                                
                                                                                
                                                                                689,428
                                                                                
                                                                                
                                                                                
                                                                                554,271
                                                                                
                                                                                
                                                                                
                                                                                2,575,137Adjustment
      to reconcile net loss to net cash provided bycontinuing
      operating activities:Minority
      interest in net loss of subsidiary
                                                                                
                                                                                
                                                                                37,382
                                                                                
                                                                                
                                                                                
                                                                                319
                                                                                
                                                                                
                                                                                
                                                                                1,238,621Impairment
      of long-lived assets
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                7,717,000Other
      adjustments
                                                                                
                                                                                
                                                                                37,498
                                                                                
                                                                                
                                                                                
                                                                                (14,092
                                                                                )
                                                                                
                                                                                
                                                                                23,406Changes
      in assets and liabilities, net of acquisition
                                                                                
                                                                                
                                                                                826,317
                                                                                
                                                                                
                                                                                
                                                                                699,005
                                                                                
                                                                                
                                                                                
                                                                                (3,826,946
                                                                                ) -Net
      cash used in discontinued operating activities
                                                                                
                                                                                
                                                                                (64,534
                                                                                )
                                                                                
                                                                                
                                                                                (815,408
                                                                                )
                                                                                
                                                                                
                                                                                (3,365,774
                                                                                )Net
      cash flows from discontinued investing activities
                                                                                
                                                                                
                                                                                (42,519
                                                                                )
                                                                                
                                                                                
                                                                                6,356
                                                                                
                                                                                
                                                                                
                                                                                1,483,736Cash
      flows from financing activities –Borrowings
      from long-term borrowings
                                                                                
                                                                                
                                                                                400,000
                                                                                
                                                                                
                                                                                
                                                                                780,000
                                                                                
                                                                                
                                                                                
                                                                                2,207,303Net
      change in cash
                                                                                
                                                                                
                                                                                292,947
                                                                                
                                                                                
                                                                                
                                                                                (29,052
                                                                                )
                                                                                
                                                                                
                                                                                325,265Cash
      at beginning of period
                                                                                
                                                                                
                                                                                91,299
                                                                                
                                                                                
                                                                                
                                                                                42,062
                                                                                
                                                                                
                                                                                
                                                                                58,981Cash
      at end of period
                                                                                
                                                                                $
                                                                                384,246
                                                                                
                                                                                
                                                                                $
                                                                                13,010
                                                                                
                                                                                
                                                                                $
                                                                                384,246
 See
accompanying notes.
 5
 ENCOMPASS
HOLDINGS, INC.
 (A
Development Stage Enterprise)
 
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2007
  1.
              Summary of significant
      accounting policies
  Business: Encompass
Holdings, Inc. (the “Company” or “Encompass”) is incorporated under the laws of
the State of Nevada.
 
 Interim
reporting:  Encompasses’ year-end for accounting and tax
purposes is December 31. Aqua and Engines’ year-end for tax purposes is June 30.
In the opinion of Management, the accompanying consolidated financial statements
as of September 30, 2007 and 2006 and for the three months then ended,
consisting of only normal recurring adjustments, except as noted elsewhere in
the notes to the consolidated financial statements, necessary to present fairly
its financial position, results of its operations and cash flows. The results of
operations for the three months ended September 30, 2007 and 2006 are not
necessarily indicative of the results to be expected for the full
year.
 
 Business combinations &
basis of consolidation: The 2007 consolidated financial statements
include the accounts of Encompass and its wholly-owned subsidiaries AquaXtremes,
Inc. (“Aqua”); Xtreme Engines, Inc. (“Engines”), and its 51% owned subsidiary
Rotary Engines Technology, Inc. (“RETI”).
 
 The 2006
consolidated financial statements include the accounts of Encompass and its
wholly-owned subsidiaries Aqua; Engines, and its 51% owned subsidiary RETI since
its acquisition. Effective April 1, 2006, Engines formed RETI. On April 3, 2006,
RETI issued 49% of its common stock in exchange for rotary equipment, patterns,
demonstration rotary engines, and rotary engine intellectual
assets.
 
 Aqua is
developing recreational water sports products, Engines is developing a marine
engine for use in recreational water sports products, and RETI is developing
rotary engines primarily for commercial use.
 
 The 2007
and 2006 consolidated financial statements also include the accounts of
Encompass’ wholly-owned subsidiaries NACIO Systems, Inc. (“NACIO”) and NACIO’s
wholly-owned subsidiary Interactive Holding Group, Inc. (“IHG”). On November 29,
2006, the Board of Directors approved a formal plan to divest Encompass’
interest in NACIO and cease providing integrated communications of high speed
Internet access and managed server and computer software compliance monitoring
services and products. Accordingly, NACIO and IHG are reported as discontinued
operations in the accompanying consolidated financial statements. The divesture
has not yet been completed as of June 30, 2007.
 
 All
inter-company accounts and transactions have been eliminated.
 
 6
 ENCOMPASS
HOLDINGS, INC.
 (A
Development Stage Enterprise)
 
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2007
  Development stage
enterprise: On April 10, 2007, the Company changed its focus from the
manufacturing of recreational water sports products and the marketing of one of
its products known as the XBoardTM to the development of rotary engines primarily
for commercial use.
 
 Because
the rotary engine is still developing and the Company has not recognized sales
from rotary engine products, the Company is considered to be in the development
stage. Accordingly, the Company has adopted the accounting and reporting
standards of Statement of Financial Accounting Standards (“SFAS”) No. 7,
“Accounting and Reporting by Development Stage Enterprises”.
 
 Research and
development: Research and product development costs, which consist of
direct product development costs, salaries and related benefits costs, and
indirect costs, including facility costs based on the proportionate share of
facility use are expensed as incurred.
 
 Net loss per common
share: Net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period. The
weighted average number of common stock shares outstanding was 274,402,000 for
the three months ended September 30, 2007; 28,993,112 for the three months ended
September 30, 2006; and 77,713,837 for the cumulative activity during
development stage April 1, 2006 through September 30, 2007. Convertible notes
payable and warrants are not considered to be common stock equivalents as the
effect on net loss per common share would be anti-dilutive.
 
 The
Company adopted the provisions of SFAS No. 128R, “Earnings per share – an
amendment of FASB Statement No. 128” addressing contingently convertible debt
and several other issues on July 1, 2006. There was no effect on the computation
of earnings per share as a result of the adoption of SFAF No. 128R as the effect
was anti-dilutive.
 
 Significant risks &
uncertainties: The process of preparing financial statements in
conformity with generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets, liabilities,
revenues and expenses. Such estimates and assumptions primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
 
 2.
              Operations
  In the
fourth quarter of fiscal year ended June 30, 2007, the Company’s operating
strategies have included the development of recreational water sports products
and the development of a variety of sizes of rotary engines that will be powered
by various fuels for commercial use. The engines will also be utilized
to power recreational water sports products being developed by the
Company.
 7
 ENCOMPASS
HOLDINGS, INC.
 (A
Development Stage Enterprise)
 
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2007
  Encompass
has been dependent upon debt and equity financing to continue its development of
rotary engine products. During 2007, the Company received an aggregate of
$2,460,000 in equity and debt financing to continue its activities. There can be
no assurances that the Company will be able to continue to raise additional
financing.
  In
November 2006, the Company adopted a formal plan to divest Encompass’ interest
in NACIO and cease providing integrated communications of high speed Internet
access and managed server and computer software compliance monitoring services
and products. Since its acquisition, NACIO has been dependent upon Encompass for
debt and equity financing and has not achieved profitability.
 
 Management
believes these actions will enable it to continue in existence until it achieves
profitable operations. The consolidated financial statements do not reflect
adjustments relating to the recorded asset amounts, or the amounts of
liabilities that would be necessary should the Company not be able to continue
in existence.
 
 3.
                Contingencies and
      litigation
  NACIO is
the plaintiff in a lawsuit against a former employee for retrieval of certain
intellectual property and damages related to the unlawful use of one of NACIO’s
intellectual software properties, as well as for business interference. There is
no provision in the accompanying consolidated financial statements as a result
of this gain contingency.
 
 NACIO is
a co-defendant in a lawsuit claiming damages of approximately $42,000 for legal
fees connected to the defense of a former NACIO officer. NACIO denies any
wrongdoing, has filed a counterclaim against the former officer, and has been
vigorously defending itself against the claim. The amount has been previously
reported as accounts payable in the accompanying consolidated financial
statements. The counterclaim, filed by NACIO against the former officer, seeks a
settlement in excess of $1,000,000. There is no provision in the accompanying
consolidated financial statements for the counterclaim as a result of this gain
contingency.
 
 Encompass
is a co-defendant in a lawsuit by a former officer of NACIO claiming damages of
$8,000,000 when it acquired certain assets of NACIO. In August 2007, Encompass
and NACIO were previously resolved of any wrongdoing in a similar lawsuit filed
by Nacio Investment Group, LLC, except for the repayment of loans advanced to
NACIO by Nacio Investment Group, LLC. The loans were previously reported in the
consolidated financial statements. Encompass denies any wrongdoing and believes
the lawsuit will be dismissed similar to the previous case.
 
 8
 ENCOMPASS
HOLDINGS, INC.
 (A
Development Stage Enterprise)
 
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2007
  No
provision for losses has been provided in the accompanying consolidated
financial statements as the outcome of this matter is uncertain.
 
 NACIO is
non-compliant with respect to certain federal and state payroll related
liabilities. Included in current liabilities of discontinued operations is
approximately $255,500 of unpaid payroll taxes.
 
 4.
              Preferred
      stock
  The
Company’s preferred stock may be voting or have other rights and preferences as
determined from time to time by the Board of Directors.
 
 The Board
of Directors has designated 100,000 shares of its preferred stock as Series “A”.
The Series “A” preferred stock is convertible, at the option of the Company,
into 1,000,000 shares of its common stock. The Company has reserved 1,000,000
shares of its common stock to be issued in the event of conversion.
 
 The Board
of Directors has designated 100,000 shares of its preferred stock as Series “B”.
The Series “B” preferred stock is entitled to: dividends in the same manner as
holders of common stock, vote on all matters at 250 votes per share as a single
class of shareholder, and liquidation preferences in the same manner as holders
of common stock.
 
 5.
              Common
      stock
  On July
26, 2007, the Company issued an aggregate of 117,000 shares of its common stock
in exchange for convertible notes payable. The shares were issued at $.0011 per
share.
 
 6.
              Subsequent
      event
 
 On
January 18, 2008, NACIO filed for bankruptcy.






9


ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
 Management’s
discussion and analysis contains various forward-looking statements within the
meaning of the Securities and Exchange Act of 1934. These statements consist of
any statement other than a recitation of historical fact and can be identified
by the use of forward looking terminology such as “may”, “expect”, “anticipate”,
“estimates”, or “continue” or use of negative or other variations of comparable
terminology. We caution that these statements are further qualified by important
factors that could cause actual results to differ materially from those
contained in our forward looking statements, that these forward looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in our forward looking statements.
 
 Management’s
discussion and analysis should be read in conjunction with the financial
statements and the notes thereto.
 
 EXECUTIVE
LEVEL OVERVIEW
 
 During
the three months ended September 30, 2007, the Company continued its operating
strategic focus on the development, manufacturing, and marketing of recreational
water sports products and the development of rotary engines primarily for
commercial use. Currently, the Company is developing a variety of sizes of
rotary engines that will be powered by alternative fuels.
 
 RESULTS OF
OPERATIONS
  Three months ended September
30, 2007 compared to the three months ended September 30,
2006:
  2007
                                                    
                                                    
                                                    2006
                                                    
                                                    
                                                    Increase
                                                      (Decrease)
                                                    
                                                    
                                                    %Selling,
      general  & administrative expenses
                                                    
                                                    $
                                                    754,803
                                                    
                                                    
                                                    $
                                                    747,317
                                                    
                                                    
                                                    $
                                                    7,486
                                                    
                                                    
                                                    
                                                    1.00%Research
      & development
                                                    
                                                    $
                                                    98,789
                                                    
                                                    
                                                    $
                                                    95,260
                                                    
                                                    
                                                    $
                                                    3,529
                                                    
                                                    
                                                    
                                                    3.71%Total
      operating expenses
                                                    
                                                    $
                                                    853,592
                                                    
                                                    
                                                    $
                                                    842,577
                                                    
                                                    
                                                    $
                                                    11,015
                                                    
                                                    
                                                    
                                                    1.31%Gain
      (loss) in change in fair value of derivative liabilities
                                                    
                                                    $
                                                    (2,289
                                                    )
                                                    
                                                    $
                                                    5,390
                                                    
                                                    
                                                    $
                                                    (7,679
                                                    )
                                                    
                                                    
                                                    (142.47)%
  The
decrease in the change in fair market value of derivative liabilities was
attributable to the decrease in the market value of the Company’s common stock
price during the three months ended September 30, 2007.
  Interest
      expense, net
                        
                        $
                        82,698
                        
                        
                        $
                        151,636
                        
                        
                        $
                        (68,938
                        )
                        
                        
                        (45.46)%  The
decrease in interest expense was attributable to the change in composition of
our short & long-term obligations with a lower interest rate. The effective
interest rate of our short & long-term obligations changed from 19.1% to
8.4%
  10
  Net
      loss from continuing operations
                        
                        $
                        901,197
                        
                        
                        $
                        685,232
                        
                        
                        $
                        (215,965
                        )
                        
                        
                        (31.52)%Net
      loss
                        
                        $
                        1,590,625
                        
                        
                        $
                        1,239,503
                        
                        
                        $
                        (351,122
                        )
                        
                        
                        (28.33)%
 FINANCIAL POSITION &
LIQUIDITY AND CAPITAL RESOURCES
 
 As of September 30, 2007
compared to June 30, 2007:
  September
                    
                    
                    June
                    
                    
                    Increase30,
      2007
                    
                    
                    30,
      2007
                    
                    
                    (decrease)
                    
                    
                    %Cash
                    
                    $
                    384,246
                    
                    
                    $
                    91,299
                    
                    
                    $
                    292,947
                    
                    
                    
                    320.87%
  The
increase in cash was due to additional long-term borrowings of $400,000 on
September 21, 2007.
  Prepaid
      expenses
              
              $
              86,170
              
              
              $
              131,380
              
              
              $
              (45,210
              )
              
              
              (34.42)%
  The
decrease in prepaid expenses was due to a reduction in prepaid legal fees during
the three months ended September 30, 2007.
 Total
      current assets
                          
                          $
                          809,636
                          
                          
                          $
                          536,951
                          
                          
                          $
                          272,685
                          
                          
                          
                          50.78%Equipment
      of discontinued operations
                          
                          $
                          8,142,424
                          
                          
                          $
                          8,433,989
                          
                          
                          $
                          (291,565
                          )
                          
                          
                          (3.46)%
  The
decrease in equipment of discontinued operations was due entirely to
depreciation expenses charged for the three months ended September 30,
2007.
  Total
      assets
                
                $
                9,943,206
                
                
                $
                9,957,067
                
                
                $
                (13,861
                )
                
                
                .14%Accrued
      liabilities
                
                $
                1,239,139
                
                
                $
                1,131,322
                
                
                $
                107,817
                
                
                
                9.53%
  The
increase in accrued liabilities was a result in an the accrual of auditing fees
and unpaid but earned management fees during the three months ended September
30, 2007
 Total
      current liabilities
                  
                  $
                  8,570,603
                  
                  
                  $
                  7,437,709
                  
                  
                  $
                  1,132,894
                  
                  
                  
                  15.23%Long-term
      obligations
                  
                  $
                  3,937,303
                  
                  
                  $
                  3,547,138
                  
                  
                  $
                  390,165
                  
                  
                  
                  11.00%
  The
increase in long-term obligations was due to additional borrowings of $400,000
on September 21, 2007.
  Net
      capital deficiency
              
              $
              4,117,777
              
              
              $
              2,545,057
              
              
              $
              1,572,720
              
              
              
              61.80%Total
      liabilities & net capital deficiency
              
              $
              9,943,206
              
              
              $
              9,957,067
              
              
              $
              (13,861
              )
              
              
              (3.46)%


11


ITEM 3.  CONTROLS AND
PROCEDURES




As
required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of our management, including our President and Chief Executive
Officer. Based upon that evaluation, we concluded that our disclosure controls
and procedures are effective in ensuring that material information related to
us, required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the rules and regulations of the SEC. There have been no
significant changes in our internal controls subsequent to the date we carried
out our evaluation.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including the Company’s Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.





PART II - OTHER
INFORMATION




ITEM 6.
 EXHIBITS




(a) Exhibits .




Exhibit
                                Number
                              
                              Description
      of Document31.1
                              
                              Rule
      13a-14(a)/15d-14(a) Certification31.2
                              
                              Rule
      13a-14(a)/15d-14(a) Certification32.1
                              
                              Section
      1350 Certification32.2
                              
                              Section
      1350
Certification

























12


SIGNATURES





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




Encompass Holdings,
      Inc.Date:
      November 6, 2008
              By:
              /s/ J.
      SCOTT WEBBERJ.
      Scott WebberPresident,
      Chief Executive Officer





























































13