Forward-Looking Statements

The information set forth in Management's Discussion and Analysis or Plan of Operations ("MD&A") may contains certain "forward-looking statements" including, among others (i) expected changes in the Company's revenues and profitability,
(ii) prospective business opportunities and (iii) the Company's strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "estimates," "intends," "plan" "expects," "may," "will," "should," "predicts," "anticipates," "continues," or "potential," or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Annual Report on Form 10-K should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.

You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Annual Report on Form 10-K..

The Company's revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the Company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, changing government regulations domestically and internationally affecting our products and businesses.

Overview

Phoenix International Ventures, Inc. ("we," "us," "our," "PIV" or the "Company") was incorporated on August 7, 2006. The financial statements are consolidated with those of our wholly owned subsidiaries, Phoenix Aerospace, Inc. ("PAI") and Phoenix Europe Ventures Ltd. ("PEV")

PAI was incorporated on April 18, 2003. The Company, Zahir Teja, and Phoenix Aerospace, Inc. entered into a Share Exchange Agreement dated as of December 1, 2006. As a result of this transaction, PAI became a wholly owned subsidiary of the Company. The effective date of this transaction was January 1, 2007. The foregoing transaction has been treated for accounting purposes as a "reverse merger."

The principal business reason for the share exchange was to establish a holding company structure. This structure, we believe, facilitates future acquisitions and the opening up of new lines of business. Of course, there can be no assurance that we will make any such acquisitions or open up any such new lines of business.

PAI manufactures support equipment for military aircraft which are used for maintaining, operating or testing aircraft sub-systems. It manufactures some of the existing support equipment which is in need of overhaul or facing maintainability and components obsolescence issues and it also manufactures new support equipment.

PAI is ISO 9001/2000 certified. We recently renewed the process and extended the ISO 9001/2000 certificate until April 26, 2010. PAI has a licensing agreement with Lockheed Martin Aeronautics Company to re-manufacture several types of Support Equipment for P-3 Orion surveillance aircraft. PAI has a marketing, sales and manufacturing agreement with Honeywell Aerospace GmbH for Air Start Cart, RST-184 which is used on various aircraft.

The main users of the equipment are the United States Air Force, US Navy and defense-aerospace companies.

COMPARISON OF THE PERIOD ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007

Financial Information - Percentage of Revenue
12 Months ended December 31, 2008

                                            2008       2007
Sales                                        100 %      100 %
Cost of sales                                -61 %      -84 %
Gross profit                                  39 %       16 %
Operating expenses:
Research and Development                       0 %        0 %
Marketing & Selling                            0 %        0 %
General and administrative expenses          -45 %     -142 %
Total operating expenses                     -45 %     -142 %
Other income (expense)                        23 %       -3 %
Net Income (loss)                             17 %     -129 %

Revenues. Revenues increased 130% to $2,180,804 for the twelve months ended December 31, 2008, compared to $948,775 for the twelve months ended December 31, 2007. The increase in revenues is primarily attributable to an increase in sales order and deliveries. For the twelve months ended December 31, 2008, remanufacturing contracts accounted for 9% of our revenues, manufacturing and parts trading were 64%, and study contracts were 27% of product sales. This compares to manufacturing and remanufacturing accounted for 10% of our revenues, study contracts 36% and product sales 54% for the twelve months ended December 31, 2007.

US Navy and Air Force represented 43% of the Company's revenues for the year ended December 31, 2008. The remaining 57% of sales was to aerospace companies and military contractors. Two customers represented 61% of the Company's revenues for the year ended December 31, 2008.

Cost of Sales. Cost of revenues consists primarily of sub contractors and raw materials used in the manufacturing process, along with labor and other related charges. Cost of sales increased to $1,334,162 for the twelve months ended December 31, 2008, compared to $792,264 for the twelve months ended December 31, 2007, representing 61% and 84% of the total revenues for the twelve months ended December 31, 2008 and December 31, 2007 respectively. The decrease in costs of sales as percentage of total sales is primarily attributable to the increase in high margin orders being delivered.

General and Administrative Expenses. General and administrative expenses decreased by 28% from $1,347,730 for the twelve months ended December 31, 2007 to $989,030 for the twelve months ended December 31 2008. The decrease in general and administrative costs is primarily attributable to an approximate $460,000 option expense during the twelve months ended December 31, 2007 which did not re-occur during the twelve months ended December 31, 2008. As a percentage of revenues, general and administrative expenses decreased to 45% for the twelve months ended December 31, 2008, as compared to 142% for the twelve months ended December 31, 2007.

Interest Expense. Interest expense increased to $62,992 for the twelve months ended December 31, 2008, as compared to $30,320 for the twelve months ended December 31, 2006. The increase in interest expense is primarily attributed to expenses associated with the promissory note arrangement the company entered into in the twelve months ended December 31, 2008.

Income before Taxes. Net income before taxes for the twelve months ended December 31, 2008 amounted to $360,774, as compared to a net loss of $1,221,539 for the twelve months ended December 31, 2007. The increase in income is primarily attributed with additional revenues from manufacturing contracts as well as a recovery of contingency in the amount of $566,154 the twelve months ended December 31, 2008.

Taxes on Income The Company had no tax liabilities for the twelve months ended December 31, 2007 or 2008.

Net Income Net income for the twelve months ended December 31, 2008 amounted to $360,774. as compared to a net loss of $1,221,539 for the twelve months ended December 31, 2007. The increase in income is primarily attributed with additional revenues from manufacturing contracts as well as a recovery of contingency in the amount of $566,154 the twelve months ended December 31, 2008.

Earnings (Loss) Per Share. The earnings per share for the twelve months ended December 31, 2008 was 0.046 basic and 0.036 for fully diluted shares. The loss per share of common stock for the twelve months ended December 31, 2007 was
(0.170) (basic and diluted shares).

LIQUIDITY AND CAPITAL RESOURCES

Cash as of December 31, 2008, amounted to $225,767 as compared with $70,314 as of December 31, 2007, an increase of $155,453. Net cash used in operating activities for the twelve months ended December 31, 2008, was $67,842. Net cash provided by financing activities for the twelve months ended December 31, 2008 was $232,254.

Our capital investments are primarily for the purchase of equipment for services that we provide or intend to provide. This equipment includes truck, shop tools, and shop machinery. There is no need for material capital investments in order to execute the current backlog. Although this may change, we currently do not expect to obtain any material capital investments in the next twelve months.

The Company leases its 7,500 square foot operating facility under a lease expiring September 30, 2009. The lease contains one-year renewal options. Minimum lease payments through September 30, 2009 are $28,350.

On January 29, 2009 the Company entered into an agreement to lease a new production facility starting from March 1, 2009 until February 28, 2011 at a monthly rent of $4,120. Minimum payments on this lease for the next 12 months will be $41,200.

We borrowed $236,536 as part of a promissory note arrangement. These notes are to mature at intervals between June 21, 2009 and August 19, 2009. We expect to repay these obligations primarily from cash generated by our operating activities.

We shall continue to finance our operations mainly from the cash provided from operating activities. As of December 31, 2008, the Company had a backlog of approximately $5,693,160. One of the orders is for the design and manufacturing of new aircraft engine trailers for the approximate amount of $2,227,386 this order contains a progress billing arrangement in it. In addition, two of the orders are from two customers for the approximate amount of $833,762 these orders are for time, material and an agreed profit. We collect a significant amount of these revenues on a monthly basis and progress towards milestone billing. For these types of orders, which make up most of our backlog, there is no need for us to finance materials and labor. Additionally, management is expecting, although there can be no assurance, that additional orders will come in. Since December 31, 2008 we have announced an additional $629,000 of new orders. These orders are expected to be delivered in 2009. A consultant has exercised an option to purchase 274,000 shares in redemption of $137,000. In the past twelve months, we experienced a significant improvement in our financial situation. This improvement is mainly attributable to a $566,154 recovery of a contingency. Senior management is also willing to defer salary payments if necessary. As a result, we believe we will have enough funds from our operations to support our operations for fiscal 2009.

We may consider raising additional capital through private and/or public placements to fund possible acquisitions and other business development activities and for working capital.

Recent Issued Accounting Pronouncements

Please refer to note 1 of the financial statements.

Critical accounting policies:

Our discussion and analysis of our financial condition and results of operation are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since these estimates are inherently uncertain, actual results may materially differ.

The following is a discussion of our accounting policies that are both most important to the portrayal of our financial condition and results, and that require managements most difficult, subjective, or complex judgments.

Stock Based Compensation.

We account for stock option grants in accordance with SFAS No. 123(R), Share-Based Payment. We record the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award-the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments is estimated using a Black-Scholes option-pricing model. In the event that the Company does not have sufficient trading history to estimate its volatility the company uses a surrogate in order to calculate implied volatility. In the event that there is insufficient history regarding exercise practice of the employees the Company applies the "plain vanilla" expected term as allowed by SEC Staff Accounting Bulletin No. 107. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award, if any, over the fair value of the original award.

Revenue Recognition

We account for sales derived from long-term study and production contracts in conformity with the American Institute of Certified Public Accountants (AICPA) Statement of Position No. 81-1 (SOP 81-1), Accounting for the Performance of Construction-Type and Certain Production-Type Contracts. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Significant factors that influence these estimates include internal and external engineering performance and business volume assumptions. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Anticipated losses on long-term contracts are recognized when such losses become evident.

Sales are subject to a limited warranty that provides for repair or replacement of defective parts. In accordance with SFAS 48, Revenue Recognition When Right of Return Exists management has evaluated the Company's experience with sales returns. Historically, the Company has not experienced any costs for warranty claims. As such, the warranty reserve was zero at the end of 2008 and 2007.

Income Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Our provision for income taxes is based on current statutory income tax rates. Significant judgment is required in determining income tax provisions as well as deferred tax asset and liability balances, including the estimation of valuation allowances and the evaluation of tax positions.