TAMG Transnational Group Inc (PK)

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

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

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

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

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

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

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

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

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

On June 15, 2007, the Company’s wholly-owned subsidiary, PAGI, was dissolved pursuant to a resolution ratified by the Company’s Board of Directors.

Description of Business
Transnational Automotive Group, Inc. and its wholly-owned and majority-owned subsidiaries (collectively referred to hereinafter as “the Company” or “TAUG”) are engaged in the development and operations of mass public transportation systems in Cameroon, Africa. The Company’s current operations are comprised of an intra-city bus transit system in the capital city of Yaoundé under the brand name, LeBus, and an inter-city bus transit system between Yaoundé and Douala, known as “LeCar”. The Company is in the process of establishing additional inter-city bus lines servicing other metropolitan regions within Cameroon. The Company’s objective is to expand its existing transportation operations in Cameroon and establish, develop and operate mass transit systems in other sub-Saharan African nations.

Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Transnational Automotive Group, Inc. and its wholly-owned and majority-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-QSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been reflected therein. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with U.S generally accepted accounting principles have been omitted pursuant to such rules and regulations. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending February 28, 2008. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-KSB for the year ended February 28, 2007.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company, LeCar Transportation Corporation, S.A. (“LeCar”), a wholly-owned subsidiary in Cameroon, and Transnational Automotive Group, Cameroon, S.A. (“Taug-C”), a wholly-owned Cameroonian subsidiary, which owns a 66% interest in Transnational Industries – Cameroon, S.A. (“LeBus”). Various Cameroon

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governmental bodies own the remaining 34% equity interest in LeBus. All material intercompany balances and transactions have been eliminated in consolidation.

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

Going Concern
The Company is subject to various risks in connection with the operation of its business including, among other things, (i) losses from operations, (ii) changes in the Company's business strategy, including the inability to execute its strategy due to unanticipated changes in the market, (iii) the Company's lack of liquidity and potential ability to raise additional capital, and (iv) the lack of historical operations necessary to demonstrate the eventual profitability of its business strategy. As of November 30, 2007, the Company has an accumulated deficit of $16,306,665 as well as a working capital deficiency of $9,000,220.

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

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

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

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

Foreign Currency Translation
All assets and liabilities of foreign operations included in the consolidated financial statements are translated at period-end exchange rates and all accounts in the consolidated statements of operations are translated at the average exchange rate for the reporting period. Stockholders’ equity accounts are translated at historical exchange rates. The Company considers the U.S. dollar to be its functional currency, given that the majority of all funds used in operations through the end of November 30, 2007 were funded in U.S. dollars. Accordingly, accumulated exchange rate adjustments resulting from the process of translating the Company’s financial statements expressed in foreign currencies into U.S. dollars are reflected as income or loss in the accompanying consolidated statements of operations.

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

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

Cash equivalents

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The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

Accounts receivable
Accounts receivable consist of amounts due from the Company’s former outside Ad Agency, Nelson Cameroun (“Nelson”), who was previously responsible for the billing and collection of fees from customers for the placement of advertisements on the Company’s buses. Such amounts are billed when earned or due and when collection is reasonably assured. The Company does not accrue finance or interest charges on outstanding receivable balances. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. Management periodically reviews all delinquent accounts receivable balances, if any, and based on an assessment of recoverability, estimates the portion, if any, of the balance that will not be collected.

During the current year, the Company terminated its contract with Nelson. The Company is currently in litigation with Nelson to settle past due receivables and payables between both parties. As a result of this contingency, the Company has reserved $76,298, representing the entire accounts receivable balance due from Nelson as of November 30, 2007.

Other receivables
Other receivables consist of amounts receivable due from the government of Cameroon for subsidies to fund the Company’s intra-city bus operations known as LeBus. Other receivables also include Value Added Taxes (“VAT”) receivable due from various agencies of the government of Cameroon.

Other receivables as of November 30, 2007 are comprised of the following:

Presentation” (EITF 06-03). EITF 06-03 applies to taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer, and states that the presentation of such taxes on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. Additionally, for such taxes reported on a gross basis, the amount of such taxes should be disclosed in interim and annual financial statements if the amounts are significant. The provisions of EITF 06-03 are effective for interim and annual reporting periods beginning after December 15, 2006. On March 1, 2007, the Company adopted EITF 06-03. The Company collects certain Value Added Taxes (“VAT”) on its ticket sales, which are levied by the government of Cameroon. VAT taxes are accounted for on a gross basis and recorded as revenue. For the three month and nine month periods ended November 30, 2007, total VAT taxes levied on ticket sales approximated $281,381 and $721,496, respectively.

The majority of the Company’s revenues were derived from the sale of tickets for its inter-city and city bus operations. The Company recognizes revenue from the sale of bus tickets when the transportation services have been provided. The Company also generates revenue from cash subsidies provided by agencies of the government of Cameroon (“government subsidies”). Revenue from government subsidies are recognized as revenue when earned and when collection is reasonably assured. Selling, general and administrative costs are charged to operations as incurred.

Basic and diluted loss per share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common stock outstanding during the period. Diluted loss per common share is computed by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued. The shares issuable upon the exercise of warrants and convertible debentures for the three and nine month periods ended November 30, 2007 and 2006, were anti-dilutive and, therefore, excluded from the calculation of net loss per share. The following potential common shares have been excluded from the computation of diluted net loss per share for the nine month periods ended November 30, 2007 and 2006 because the effect would have been anti-dilutive.

Recent accounting pronouncements

In September 2006, FASB issued SFAS 157 “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect of this pronouncement on its consolidated financial statements.

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

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

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. Management is currently evaluating the effect of this pronouncement on its consolidated financial statements.

In February 2007, FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. FASB 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FASB 159 for their first quarter 2007 financial statements. This Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair value in subsequent reporting periods must be recognized in current earnings. FASB 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities. Management is currently evaluating the effect of this pronouncement on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

FASB Staff Position on FAS No. 115-1 and FAS No. 124-1 (“the FSP”), “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” was issued in November 2005 and addresses the determination of when an investment is considered impaired, whether the impairment on an investment is other-than-temporary and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of other-than-temporary impairments on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance on Emerging Issues Task Force (EITF) Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary, must be recognized in earnings at an amount equal to the entire difference between the securities cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also required that an investor recognize other-than-temporary impairment losses when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The adoption of this statement will not have a material impact on our consolidated financial statements.

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Included in the accompanying consolidated balance sheet as of November 30, 2007, is restricted cash of $64,193, which is comprised of restricted cash set aside pursuant to a court order to cover any potential litigation settlements arising from a breach of contract claim brought forth against the Company by its former outside ad agency, Nelson Cameroun. The claim relates to amounts owed to the outside ad agency that are in dispute. Refer to note 10 for more details about litigation.

Depreciation and amortization expense for the three month periods ended November 30, 2007 and 2006 were $593,662 and $102,792, respectively, and for the nine month periods ended November 30, 2007 and 2006 were $1,368,659 and $108,709, respectively.

The Company issued various promissory notes payable which are unsecured, due on demand, and bear interest at rates ranging from 7% to 40% per annum. A description of all outstanding unsecured promissory note obligations is as follows:

• As of November 30, 2007, the Company has $110,000 outstanding due to two unrelated parties that bear interest at 7% and are due on demand. The accrued interest on these notes payable as of November 30, 2007 was $15,817. Interest expense for the nine month periods ended November 30, 2007 and 2006 was $7,242 and $6,563, respectively.

• On February 12, 2007, the Company was advanced $400,000 under a short-term unsecured promissory note obligation from an unrelated party, bearing interest at 40% with an original maturity date of May 12, 2007. The Company negotiated an extended repayment term through January 31, 2008. Under the terms of the renewal agreement, the Company issued to the holder 30,000 shares of the Company’s common stock. The Company recognized $41,100 of aggregate debt discount, representing the fair market value of the 30,000 shares issued pursuant to this obligation, which is included in additional paid-in capital in the accompanying consolidated balance sheet as of November 30, 2007. Also, under the terms of the renewal agreement, $40,000 of accrued interest as of May 12, 2007 was converted into a note payable. As of November 30, 2007, an aggregate of $440,000 was outstanding under this obligation. The accrued interest as of November 30, 2007 was $37,195. The interest expense for the nine month periods ended November 30, 2007 and 2006 was $70,084 and $7,111, respectively.

• On March 28, 2007, the Company was advanced $400,000 under a short-term unsecured promissory note obligation from an unrelated party, bearing interest at 14% per annum and payable in full on September 28, 2007. Under the terms of the

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promissory note agreement, the Company issued to the holder 40,000 shares of the Company’s common stock. The Company recognized $34,000 of aggregate debt discount, representing the fair market value of the 40,000 shares under this obligation, which is included in additional paid-in capital in the accompanying consolidated balance sheet as of November 30, 2007. Also, under the terms of the renewal agreement, $40,000 of accrued interest as of May 12, 2007 was converted into a notes payable. As of November 30, 2007, an aggregate of $440,000 was outstanding under this obligation. The accrued interest as of November 30, 2007 was $10,801. The interest expense for the nine month periods ended November 30, 2007 and 2006 was $62,246 and $0, respectively.



• As of November 30, 2007, an aggregate of $1,575,000 was borrowed from Tov Trust (“Tov”), a trust whose trustee is Seid Sadat, the chief financial officer and a director of the Company (note 9). These borrowings were advanced in three separate installments. The first installment of $425,000 was advanced on November 6, 2006 and is unsecured, bearing interest at 10% per annum and was initially due on demand. The second installment of $400,000 was advanced on February 12, 2007. Borrowings under the second advance are unsecured, bearing interest at 40% per annum, and was initially due on May 12, 2007, including unpaid interest. The third installment of $750,000 was borrowed on May 30, 2007 and is unsecured, bearing interest at 10% per annum and was initially due on demand.
  
  On July 31, 2007, the Company's Board of Directors approved a resolution to issue 170,000 shares of the Company’s common stock to Tov in exchange for extending the maturity date of the $1,575,000 of aggregate outstanding obligations due to Tov through October 31, 2007. The Company recognized $232,900 of aggregate debt discount, representing the fair market value of the 170,000 shares under these related party obligations, which is included in additional paid-in capital in the accompanying consolidated balance sheet as of November 30, 2007.
  
  The accrued interest as of November 30, 2007 was $203,233. The interest expense for the nine month periods ended November 30, 2007 and 2006 was $185,642 and $0, respectively.

The debt discount for all shares of common stock issued pursuant to these notes payable obligations is being amortized beginning on the date each respective shares of common stock were issued through October 31, 2007, the maturity date of these obligations. Total finance costs charged to operations in connection with the amortization of the deferred interest for the three and nine month periods ended November 30, 2007 was $186,018 and $308,000, respectively.

As of November 30, 2007, aggregate amounts outstanding under unsecured notes payable to unrelated parties were $990,000. As of November 30, 2007, notes payable due to related party was $1,575,000.

Convertible Debentures
Through the end of the fiscal year ended February 28, 2007, the Company raised an aggregate of $3,781,000 from the issuance of convertible debentures (“convertible debentures”) under several private placement memorandum offerings. The debentures were convertible into the common stock of the Company at exercise prices ranging from $.48 to $.50 per share. The debentures bear interest at 7% per annum and are automatically converted into common stock after one year from the date of issuance, unless converted earlier. There were no convertible debentures issued during the three and nine month periods ended November 30, 2007.

The Company calculated the beneficial conversion feature embedded in the convertible debentures in accordance with EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” (“EITF 98-5”) and EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”, (“EITF 00-27”) and recorded $1,003,050 of aggregate debt discount for the year ended February 28, 2007, which was included in additional paid-in capital as of February 28, 2007.

The Company also issued to the holders of the convertible debentures warrants to acquire an aggregate of 8,427,416 shares of the Company’s common stock at an exercise price of $1.50 per share. The warrants had an original term of two-years from the date of issuance. In connection with these debentures, the Company recorded aggregate debt discount of $2,777,950 related to the fair of the warrants issued, which was included in additional paid-in capital as of February 28, 2007.

The debt discount underlying the valuation of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: applicable risk-free interest rate based on the current treasury-bill interest rate at the grant date of 3.5%; dividend yields of 0%; volatility factors of the expected market price of the Company’s common stock of 203%; and an expected life of the warrants of one year. The debt discount is being amortized over one year, the life of the convertible debentures. Total finance costs associated with the amortization of the warrants was $346,074 and $323,012 for the three month periods ended November 30, 2007 and 2006, respectively. Total finance costs associated with the amortization of the warrants for the nine month periods ended November 30, 2007 and 2006 was $1,296,741 and $745,787, respectively.

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On May 24, 2007, the Company’s Board of Directors issued a resolution to extend the maturity date of the convertible debentures issued pursuant to the Private Placement Memorandum dated January 23, 2006 and to increase the number of shares of common stock eligible for conversion. The number of warrants issued to convertible debenture holders was also adjusted to equal the number of shares to be issued upon conversion. In connection with the Board Resolution, the maturity date on the warrants was extended from two years to five years and the conversion rate of the exercise option was reduced from $.48 - $.50 per share to an adjusted conversion rate of $.4464 per share. The reduction in the conversion rate resulted in an increase of 455,226 additional warrants outstanding and an additional 455,226 shares of common stock eligible for conversion for the debenture holders. On account of the repricing of the conversion price and issuance of additional warrants, the Company recorded a finance cost of $445,326 for the nine month period ended November 30, 2007.

Common stock

During the nine month period ended November 30, 2007, $1,098,500 of convertible debentures and $72,525 of related accrued interest were converted into 2,463,037 shares of common stock (note 7). There was no debt conversions during the three month period ended November 30, 2007.

In connection with a Private Placement Memorandum to accredited investors dated January 17, 2007, the Company entered into Subscription Agreements with various accredited investors for the sale of investment units (“Units”), with each Unit consisting of (i) one share of the Company’s common stock at $0.50 per share and (ii) a warrant to purchase one share of common stock at $1.50 per share. The warrants do not offer a “cashless exercise” provision and holders will be required to pay $1.50 per share to exercise each warrant. The warrants have a term of five years from the date of each underlying Subscription Agreement. The Company has agreed to pay the placement agents the equivalent of $173,125 of commissions (or 5% of the proceeds received from the sale of the Units) as compensation for their services.

During the three and nine month periods ended November 30, 2007, investors purchased an aggregate of $700,000 and $4,377,500, respectively, in Units representing 1,400,000 (for the three month period ended November 30, 2007) and 8,755,000 (for the nine month period ended November 30, 2007) shares of common stock at a price of $0.50 per share, and warrants to purchase an additional 1,400,000 (for the three month period ended November 30, 2007) and 8,755,000 (for the nine month period ended November 30, 2007) shares of common stock at $1.50 per share. The fair value of the 8,755,000 warrants issued in connection with the January 17, 2007 private placement offering was $3,041,587. This amount was calculated using the Black-Scholes pricing model with the following assumptions: applicable risk-free interest rate based on the current treasury-bill interest rate at the date of grant of 3.5%; dividend yield of 0%; volatility factors of the expected market price of our common stock of 203%; and an expected life of the warrants of five years.

During the three and nine month periods ended November 30, 2007, the Company recognized $132,692 and $445,326, respectively, of finance costs in connection with the 455,226 additional shares to be issued to debenture holders as a result of the repricing of the investment units sold to debenture holders (note 7).

During the nine month period ended November 30, 2007, the Company recognized an aggregate of $308,000 (including $232,900 to a related party) of deferred finance costs in connection with the issuance of 240,000 (including 170,000 to a related party) shares of the Company’s common stock to various holders of unsecured promissory note agreements (see note 6). Total finance costs associated with the amortization of the deferred interest under these obligations for the three and nine month periods ended November 30, 2007

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The fair value of the 8,755,000 warrants issued in connection with the private placement memorandum (dated January 17, 2007) during the nine month period ended November 30, 2007 was calculated using the Black-Sholes pricing model with the following assumptions: Applicable risk-free interest rate based on the current treasury-bill interest rate at the date of grant of 3.5%; dividend yield of 0%; volatility factors of the expected market price of our common stock of 203%; and an expected life of the warrants of five years.

The fair value of the 455,226 warrants issued to convertible debenture holders was calculated using the Black-Sholes pricing model with the following assumptions: applicable risk-free interest rate based on the current treasury-bill interest rate at the grant date of 3.5%; dividend yields of 0%; volatility factors of the expected market price of the Company’s common stock of 203%; and an expected life of the warrants of five years.

As of November 30, 2007, an aggregate of $1,575,000 was borrowed from Tov against notes payable (note 6). These borrowings were advanced in three separate installments. The first installment of $425,000 was advanced on November 6, 2006 and is unsecured, bearing interest at 10% per annum and was due on October 31, 2007. The second installment of $400,000 was advanced on February 12, 2007. Borrowings under the second advance are unsecured, bearing interest at 40% per annum, and was due on October 31, 2007, including unpaid interest. The third installment of $750,000 was borrowed on May 30, 2007 and is unsecured, bearing interest at 10% per annum and was due on October 31, 2007. The Company is currently negotiating renewal provisions for these obligations with the Trustee of Tov.

During the nine month period ended November 30, 2007, an aggregate of 170,000 shares of the Company’s common stock were issued to Tov in consideration for the Company being granted a deferred maturity date on the $1,575,000 of outstanding promissory note obligations advanced by Tov (note 6).

As of November 30, 2007, an aggregate of $203,233 of accrued interest was owed to Tov under these unsecured promissory note obligations.

As of November 30, 2007, Tov had advanced TAUG $1,020,000 in connection with a private placement offering of 7% convertible debentures and stock warrants to accredited investors. On November 7, 2006, our Board of Directors issued a resolution that resulted in the settlement of these advances through the issuance of a 7% convertible debenture to Tov. Under the terms of the agreement, at

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the election of the Trustee, Tov could convert these debentures into 2,240,143 shares of common stock. The Company also issued Tov 5-year warrants to purchase an additional 2,240,143 shares of common stock of TAUG, exercisable at $1.50 per share. Through November 30, 2007, the trustee of Tov had not exercised his conversion election on behalf of the debentures owned by the trust. As of November 30, 2007, an aggregate of $39,171 of accrued interest was owed to Tov under this convertible debenture.

On March 24, 2006, the Company was advanced $150,000 from the plan assets of a pension plan for the benefit of the Company’s chief financial officer (“related party debenture”) in connection with a private placement offering of 7% convertible debentures and stock warrants to accredited investors (note 6). Under the terms of the subscription agreement, the related party debenture is convertible into 336,022 shares of common stock. In connection with the subscription agreement for this related party debenture, the pension plan was also issued 5-year warrants to acquire an additional 336,022 shares of common stock at an exercise price of $1.50. On May 21, 2007, the related party debenture of $150,000 and $10,120 of accrued interest on the debenture were converted into 336,022 shares of common stock.

The Company entered into a consulting agreement with Magidoff Sadat & Gilmore, LLP (“MSG”), a professional services firm, pursuant to which MSG agreed to provide services to TAUG including assistance in managerial oversight, internal accounting and financial reporting, and advisory services. The agreement also obligates the Company to reimburse MSG $3,500 per month in shared rent costs. For the three and nine month periods ended November 30, 2007, the Company was charged an aggregate of $146,500 and $439,500, respectively, including $10,500 (three months) and $31,500 (nine months) of shared rent costs, by MSG under this consulting agreement. As of November 30, 2007, $812,115 was owed to MSG, which is included in due to related parties in the accompanying consolidated balance sheet as of November 30, 2007. Seid Sadat is the managing partner of MSG and the chief financial officer and director of TAUG.

As of November 30, 2007, an aggregate of $30,986 was owed to Dr. Ralph Thomson, the Company’s president and chief executive officer. Amounts owed to Dr. Thomson have been included in due to related parties in the accompanying consolidated balance sheet as of November 30, 2007.

Officer Indemnification

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

Employment Agreements

On July 31, 2007, the Company entered into an employment agreement with the president of the Company’s African operations. Under the terms of the agreement, the Company agreed to remunerate the president cash compensation of $6,000 per month plus deferred compensation of $4,000 per month payable in stock through the duration of his employment. The Company has accrued $24,000 of deferred compensation owed to the president as of November 30, 2007, representing deferred compensation payable under this employment agreement through the end of November 30, 2007.

Loss Contingencies

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

Purchase Commitments

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As of November 30, 2007, the Company was obligated under a purchase commitment agreement with a bus manufacturer in China and a sea freight carrier for the purchase and sea freight charges associated with the acquisition of 30 urban transportation buses for an aggregate cost of $1,600,000 plus sea freight.

Litigation

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

On November 8, 2007, the Company’s subsidiary, LeCar Transportation Corporation, S.A. (“LeCar”), was named a defendant in a wrongful termination case involving several disgruntled former employees of the subsidiary who were terminated by the Company during 2007. The plaintiffs are seeking unspecified amounts in compensatory damages, including deferred salary, and punitive damages. Under Cameroonian law, the cases are first investigated by the Labor Board Division and subsequently referred to the higher courts based on the merits of the respective allegations. To date, the cases are still pending review by the Labor Board Division. The Company believes the former employees’ claims are without merit and intends to vigorously defend against the claims brought forth by these suits and to pursue all available legal remedies. The Company has not provided for any loss contingencies, in the event of an unfavorable outcome.

On September 12, 2007, the Company’s subsidiary, Transnational Automotive Group, Cameroon S.A., was named a defendant in a breach of contract claim brought forth by its former ad agency, Nelson Cameroun (“Nelson”). The complaint alleges the Company wrongfully terminated its contract with Nelson prior to its expiration. The plaintiff was seeking damages of $300,000, representing amounts owed by the Company pursuant to the terms of the ad agency contract. The Company filed a counter-suit against Nelson alleging breach of good faith, breach of contract, fraud, misrepresentation, and negligence and breach of fiduciary duty. The Company is seeking unspecified amounts as compensatory damages pursuant to its cross-complaint. The Company has put up a deposit of $64,193 that is being held by the courts in Cameroon pending the outcome of the lawsuit. This amount has been classified as restricted cash in the accompanying consolidated balance sheet as of November 30, 2007. The Company has reserved $76,298, representing the entire accounts receivable balance due from Nelson as of November 30, 2007 pursuant to the terms of the ad agency agreement prior to its termination. The Company has accrued $77,454 as of November 30, 2007, representing amounts billed by Nelson pursuant to the terms of the ad agency contract prior to its termination.

On September 14, 2007, the Cameroonian high court with jurisdiction over the case issued an injunction for the Company to pay an amount approximating $300,000 in favor of Nelson’s claim. The Company has filed an appeal to the injunction. For the three months ended November 30, 2007, the Company has provided a legal reserve for $250,000, representing the amount of the injunction less amounts accrued as of November 30, 2007. The $250,000 reserve for legal claims is included in accounts payable and accrued expenses as of November 30, 2007. The appeal is scheduled to be heard in January 2008.

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

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Transnational (PK) (USOTC:TAMG)
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