10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[x]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

[  ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission file number 0-52415

TITANIUM GROUP LIMITED

(Exact name of registrant as specified in its charter)

British Virgin Islands (State or other jurisdiction of incorporation or organization) Not Applicable  (IRS Employer Identification No.)

15/F, Kennedy Town Commercial Tower, 23 Belcher’s Street, Kennedy Town, Hong Kong

 (Address of principal executive offices)(Zip Code)

(852) 3427 3177

(Registrant’s telephone number, including area code)

Not applicable

 (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes           [   ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [  ] Yes    [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company.  See definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]

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

[  ]Yes   [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  51,644,399 shares of Common Stock, $0.01 par value, as of August 15, 2009

TITANIUM GROUP LIMITED AND SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page
Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	2
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2009 and 2008	3 - 4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008	5
Notes to Condensed Consolidated Financial Statements	6 - 11

1

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

(Currency expressed in Hong Kong Dollars (“HK$”), except for number of shares)

	June 30,								December 31,
	2009				2009				2008
ASSETS	US$ (Unaudited)				HK$ (Unaudited)				HK$ (Audited)
Current assets:
Cash and cash equivalents		$	29,527			$	230,309			$	1,190,869
Restricted cash			51,282				400,000				400,000
Accounts receivable, net			186,267				1,452,882				2,613,724
Inventories			11,355				88,572				38,001
Deposits and other receivables			51,143				398,918				287,928
Total current assets			329,574				2,570,681				4,530,522
Non-current assets:
Plant and equipment
Cost			608,268				4,744,487				4,774,277
Less: accumulated depreciation			(355,417	)			(2,772,255	)			(2,343,817	)
			252,851				1,972,232				2,430,460
Intangible assets, net			484,464				3,778,830				4,685,454
Deferred tax assets			87,633				683,534				683,534
TOTAL ASSETS		$	1,154,522			$	9,005,277			$	12,329,970
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	364,224			$	2,840,947			$	1,732,507
Deferred revenue			6,159				48,042				57,650
Income tax payable			1,619				12,626				12,626
Total current liabilities			372,002				2,901,615				1,802,783
Long-term liabilities:
Debenture payable			1,353,734				10,559,122				10,320,066
Warrants liability			29,576				230,693				91,237
Total long-term liabilities			1,383,310				10,789,815				10,411,303
Total liabilities			1,755,312				13,691,430				12,214,086
Stockholders’ (deficit) equity:
Titanium Group Limited stockholders’ (deficit) equity:
Common stock, US$0.01 (HK$0.078) par value, 100,000,000 shares authorized, 51,644,399 shares issued and outstanding			516,444				4,028,263				4,028,263
Additional paid-in capital			873,584				6,813,956				6,835,562
Accumulated other comprehensive loss			(7,186	)			(56,043	)			(27,316	)
Accumulated deficit			(1,983,632	)			(15,472,329	)			(10,725,914	)
Total Titanium Group Limited stockholders’ (deficit) equity			(600,790	)			(4,686,153	)			110,595
Noncontrolling interests			-				-				5,289
Total (deficit) equity			(600,790	)			(4,686,153	)			115,884
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY		$	1,154,522			$	9,005,277			$	12,329,970

See accompanying notes to condensed consolidated financial statements.

2

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”), except for number of shares)

(Unaudited)

	Three months ended June 30,									Six months ended June 30,
	2009			2009			2008			2009			2009			2008
	US$			HK$			HK$			US$			HK$			HK$
REVENUE, NET
Projects
Products	$	92,865		$	724,346		$	2,512,893		$	248,208		$	1,936,020		$	3,962,656
Services		-			-			185,903			31,319			244,289			2,553,595
		92,865			724,346			2,698,796			279,527			2,180,309			6,516,251
Maintenance
Services		9,966			77,734			70,804			39,165			305,489			155,468
Total revenue		102,831			802,080			2,769,600			318,692			2,485,798			6,671,719
COST OF REVENUE
Projects
Cost of products sold		63,322			493,913			3,728,098			178,069			1,388,941			4,644,311
Cost of services		60			470			139,577			23,927			186,631			1,851,721
		63,382			494,383			3,867,675			201,996			1,575,572			6,496,032
Maintenance
Cost of services		513			4,000			10,000			6,667			52,000			30,000
Total cost of revenue		63,895			498,383			3,877,675			208,663			1,627,572			6,526,032
GROSS PROFIT (LOSS)		38,936			303,697			(1,108,075	)		110,029			858,226			145,687
Operating expenses:
Impairment loss on intangible assets		-			-			-			35,619			277,832			-
Research and development costs		85,478			666,728			-			168,172			1,311,741			-
Selling, general and administrative		211,511			1,649,786			1,087,412			419,821			3,274,598			4,024,916
Total operating expenses		296,989			2,316,514			1,087,412			623,612			4,864,171			4,024,916
LOSS FROM OPERATIONS		(258,053	)		(2,012,817	)		(2,195,487	)		(513,583	)		(4,005,945	)		(3,879,229	)
Other income (expense):
Sundry income		8,975			70,000			1,077,813			8,974			70,000			1,077,813
Government grant income		-			-			-			-			-			42,267
Interest income		-			1			275			-			1			662
Interest expense		(28,029	)		(218,624	)		(242,956	)		(56,057	)		(437,248	)		(450,231	)
Discount of convertible debenture		(15,324	)		(119,529	)		(18,642	)		(30,648	)		(239,056	)		276,151
Gain (loss) from change in fair value of warrant liability		5,190			40,482			-			(17,879	)		(139,456	)		-
Total other (expense) income		(29,188	)		(227,670	)		816,490			(95,610	)		(745,759	)		946,662

See accompanying notes to condensed consolidated financial statements.

3

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”), except for number of shares)

(Unaudited)

	Three months ended June 30,									Six months ended June 30,
	2009			2009			2008			2009			2009			2008
	US$			HK$			HK$			US$			HK$			HK$
LOSS BEFORE INCOME TAX	$	(287,241	)		(2,240,487	)		(1,378,997	)	$	(609,193	)		(4,751,704	)		(2,932,567	)
Income tax expense		-			-			-			-			-			-
NET LOSS		(287,241	)		(2,240,487	)		(1,378,997	)		(609,193	)		(4,751,704	)		(2,932,567	)
Less: net loss attributable to the noncontrolling interests		-			-			18,550			678			5,289			35,014
NET LOSS ATTRIBUTABLE TO TITANIUM GROUP LIMITED	$	(287,241	)		(2,240,487	)		(1,360,447	)	$	(608,515	)		(4,746,415	)		(2,897,553	)
NET LOSS		(287,241	)		(2,240,487	)		(1,378,997	)		(609,193	)		(4,751,704	)		(2,932,567	)
Other comprehensive income (loss):
- Foreign currency translation gain (loss)		-			2			-			(3,684	)		(28,727	)		(16,375	)
COMPREHENSIVE LOSS	$	(287,241	)	$	(2,240,485	)	$	(1,378,997	)	$	(612,877	)	$	(4,780,431	)	$	(2,948,942	)
Comprehensive loss attributable to the noncontrolling interests		-			-			18,550			973			7,587			36,324
Comprehensive loss attributable to Titanium Group Limited	$	(287,241	)	$	(2,240,485	)	$	(1,360,447	)	$	(611,904	)	$	(4,773,844	)	$	(2,912,618	)
Net loss per common share attributable to Titanium Group Limited – basic and diluted	$	(0.01	)	$	(0.04	)	$	(0.03	)	$	(0.01	)	$	(0.09	)	$	(0.06	)
Weighted average shares outstanding - basic and diluted		51,644,399			51,644,399			51,644,399			51,644,399			51,644,399			51,456,343

See accompanying notes to condensed consolidated financial statements.

4

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

	Six months ended June 30,
	2009			2009			2008
	US$			HK$			HK$
Cash flow from operating activities:
Net loss attributable to Titamium Group Limited	$	(608,515	)	$	(4,746,415	)	$	(2,897,553	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Noncontrolling interests		(973	)		(7,587	)		(35,014	)
Depreciation and amortization		139,361			1,087,018			1,446,538
Impairment loss on intangible assets		35,619			277,832			-
Allowance for (recovery from) doubtful accounts		62,019			483,748			(90,541	)
Stock issued for service rendered, non-cash		(2,770	)		(21,606	)		81,037
Amortization cost on discount of convertible debenture		30,648			239,056			(276,151	)
Gain from disposal of plant and equipment		-			-			(265,813	)
Loss from change in fair value of warrant liability		17,879			139,456			-
Changes in assets and liabilities:
Accounts receivable		86,807			677,094			7,967,634
Amount due from shareholder		-			-			-
Inventories		(6,483	)		(50,571	)		686,063
Deposits and other receivable		(14,229	)		(110,990	)		(34,778	)
Accounts payable and accrued liabilities		148,268			1,156,482			(3,933,582	)
Deferred revenue		(7,391	)		(57,650	)		(76,867	)
Net cash (used in) provided by operating activities		(119,760	)		(934,133	)		2,570,973
Cash flows from investing activities:
Purchase of plant and equipment		-			-			(11,700	)
Payments relating to software development costs		-			-			(2,353,934	)
Net cash used in investing activities		-			-			(2,365,634	)
Cash flows from financing activities:
Repayments on short-term bank loan		-			-			(26,347	)
Net increase in bank overdraft		-			-			138,515
Net cash provided by financing activities		-			-			112,168
Effect of exchange rate changes on cash and cash equivalent cash equivalents		(3,389	)		(26,427	)		(16,950	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(123,149	)		(960,560	)		300,557
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		152,676			1,190,869			1,168,331
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	29,527		$	230,309		$	1,468,888
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-		$	-
Cash paid for interest	$	-		$	-		$	242,586

See accompanying notes to condensed consolidated financial statements

5

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

NOTE 1 - GENERAL

Titanium Group Limited (the “Company” or “TTNUF”) was incorporated as an International Business Company with limited liability in the British Virgin Islands (“BVI”) under the International Business Companies Act (“IBC Act”) of the British Virgin Islands on May 17, 2004 and subsequently registered under the BVI Business Companies Act (“BVIBC Act”) on January 1, 2007 when the IBC Act was repealed and replaced with the BVIBC Act. The Company, through its subsidiary companies, Titanium Technology Limited and Titanium Technology (Shenzhen) Co., Ltd., mainly focus in the development of advanced biometric technology and installation and implement of advanced facial based biometric identification and security projects for law enforcement, mass transportation, and other government and private sector customers.

The accompanying financial statements present the financial position and results of operations of the Company and its subsidiary companies, Titanium Technology Limited, Titanium Technology (Shenzhen) Co., Ltd., Titanium RFID Limited and Titanium Biometrics Limited (collectively known as the “Group”). The Group’s functional currency is Hong Kong Dollars (“HK$”).

NOTE 2 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, the consolidated balance sheet as of December 31, 2008 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended June 30, 2009 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2009 or for any future period.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2008.

NOTE 3 – GOING CONCERN UNCERTAINTIES

These condensed consolidated financial statements have been prepared assuming that the Group will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

The Group had incurred a net loss of HK$4,746,415 for the six months ended June 30, 2009 and had an accumulated deficit of HK$15,472,329 as of June 30, 2009. Additionally, the Group has incurred substantive losses over the past several years and has a capital deficit of HK$4,686,153. Management has taken certain action and continues to implement changes designed to improve the Group’s financial results and operating cash flows. The actions involve certain cost-saving initiatives and growing strategies, including rapid promotion and marketing the new products in the People’s Republic of China (the “PRC”). Management believes that these actions will enable the Group to improve future profitability and cash flow in its continuing operations through June 30, 2010. As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Group’s ability to continue as a going concern.

6

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS

The Group has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” and Accounting Principles Board (“APB”) Opinion No. 28, “Interim Financial Reporting.” (“FAS 107”) This FSP requires publicly-traded entities to disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods, the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by FAS 107. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. The Group adopted FSP FAS 107-1 and APB 28-1 for the period ended June 30, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“FAS 165”), which establishes general standards of accounting for, and requires disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Group adopted the provisions of FAS 165 for the quarter ended June 30, 2009. The adoption of FAS 165 did not have a material effect on the consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140” (“FAS 166”). FAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. FAS 166 is effective for fiscal years beginning after November 15, 2009. The Group will adopt FAS 166 in fiscal 2010 and is evaluating the impact it will have on the consolidated results of the Group.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. FAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Group will adopt FAS 167 in fiscal 2010 and is evaluating the impact it will have on the consolidated results of the Group.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification ™ and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162” (“FAS 168”). FAS 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” and establishes the “FASB Accounting Standard Codification ™ ” (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles in the United States. All guidance contained in the Codification carries an equal level of authority. On the effective date of FAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. FAS 168 will be effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Group has evaluated this new statement, and has determined that it will not have a significant impact on the determination or reporting of the financial results.

7

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

NOTE 5 – PER SHARE INFORMATION

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Group. For the period ended June 30, 2009, outstanding warrants to purchase 3,000,000 shares of common stock of the Group which were issued in connection with the prior sale of common stock expired on June 30, 2008 and, hence, do not have any dilutive effect.

During the six months ended June 30, 2009, the Group did not grant any stock options to employees, directors and consultants. The effect of outstanding stock options which could result in the issuance of 4,625,000 shares of common stock as of June 30, 2009 is anti-dilutive. As a result, diluted loss per share data does not include the assumed exercise of outstanding stock options and has been presented jointly with basic loss per share.

NOTE 6 – INCOME TAXES

The Group accounts for income tax using SFAS No. 109 “Accounting for Income Taxes,” which requires the asset and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the years of recovery or reversal and the effect from a change in tax rates is recognized in the statements of operations in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

The Group also adopts the provisions of the Financial Accounting Standards Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The adoption of FIN 48 did not have a significant impact on the Group’s consolidated financial statements.

For the six months ended June 30, 2009, the Group and its subsidiaries incurred net operating losses of approximately HK$4,751,704 for income tax purposes and no provision for income taxes is required.

As of June 30, 2009, the Group recognized a deferred tax asset of approximately HK$683,534, primarily relating to the aggregate cumulative tax losses of HK$10,270,492 for Hong Kong subsidiaries and HK$3,231,751 for the PRC subsidiary.  These losses are available to be carried forward to offset future taxable income and tax loss from the PRC subsidiary and will begin to expire in 5 years from the year of incurrence, if unutilized. The deferred tax assets consists mainly of tax losses from differing tax regimes and for which a valuation allowance of HK$1,726,303 has been provided for the period ended June 30, 2009, as the management believes it is more likely than not that these assets will not be realized in the future.

NOTE 7 – INTANGIBLE ASSETS, NET

For the period ended June 30, 2009, the Group performed its impairment test on its certain software products in accordance with SFAS No. 144 and determined that their carrying values were impaired due to the continued decline in expected future benefits resulting from the change in economic environment. Hence, an impairment loss of HK$277,832 was recorded.

8

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

NOTE 8 – CONVERTIBLE DEBENTURE

On April 3, 2007, the Company entered into a Securities Purchase Agreement (the “Agreement”) with several accredited investors (“the Investors”). In accordance with the Agreement, the Investors agreed to purchase in the aggregate, HK$11,310,000 (US$1,450,000) principal amount of Series A 8% Senior Convertible Debentures (“the Debenture”).

The Debenture has the following material terms:

• Interest at 8% per annum, payable quarterly on January 1, April 1, July 1 and October 1 beginning July 1, 2007 in cash or in shares at the option of the Company, with the shares to be registered pursuant to an effective registration statement and priced at the lesser of (a) US$0.30 or (b) 90% of the volume-weighted average price for the 10 consecutive trading days immediately prior to payment;

• Maturity date of 36 months;

• Convertible at any time by the holders into shares of the Company’s common stock at a price equal to US$0.30;

• Convertible at the option of the Company as long as there is an effective registration statement covering the shares underlying the debentures and the closing bid price of the Company’s common stock is at least US$0.75 per share;

• Redeemable at the option of the Company at 120% of face value, as long as there is an effective registration statement covering the shares underlying the debentures; and

• Anti-dilution protections to allow adjustments to the conversion price of the debentures in the event the Company sells or issues shares at a price less than the conversion price of the debentures.

• The holders of the Debenture and Warrants have registration rights that require the Company to file a registration statement with the Securities and Exchange Commission to register the resale of the common stock issuable upon conversion of the Debenture or the exercise of the Warrants.

In connection with the Financing, on the same date, the Company issued warrants to investors that are exercisable for up to 4,833,333 shares of common stock of the Company with an exercise price of US$0.50 per share. The warrants are exercisable for a five-year period commencing on April 3, 2007. The Company also paid a placement fee of HK$1,131,000 (US$145,000) and issued warrants to the placement agents entitling the holders to purchase an aggregate of 483,333 shares of common stock of the Company at an exercise price of US$0.315 per share in a warrant life of seven years.

Proceeds of the financing were used for working capital and for the further development of the Company’s proprietary technology.

On April 3, 2007, the Company received HK$9,555,000 (US$1,225,000), net of expenses in relation to issuance of the Debenture of HK$1,755,000 (US$225,000) after all the closing conditions were satisfied.

The debentures were discounted for the fair value of warrants, pursuant to APB 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”. The debentures were further discounted for the intrinsic value of the beneficial conversion feature, pursuant to EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”. The discount is being amortized over the life of the debentures. For the period ended June 30, 2009 and 2008, the Company recorded HK$139,456 (US$17,879) and HK$0 (US$0) as loss from change in warrant liability in the statements of operations.

9

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

As of June 30, 2009, the fair value of the warrants of HK$230,693 (US$29,576) was recorded as warrants liability in the balance sheet, as determined by the Company using the Black-Scholes option pricing model under the following assumptions:

Risk-free interest rate (%)	4.46
Expected dividend yield (%)	0
Expected term in years (years)	3
Expected volatility (%)	100.4

Interest expense of HK$437,248 (US$56,057) and HK$450,231 (US$57,722) was recognized for the six months ended June 30, 2009 and 2008.

NOTE 9 – SEGMENT INFORMATION

The Company considers its business activities to constitute one single segment. The Group’s chief operating decision makers use consolidated results to make operating and strategic decisions. The geographic distribution of the Group’s customers is:

lHong Kong, including the government and commercial sectors; and

lThe PRC, mainly the government agencies, financial institutions and commercial sectors.

An analysis of the Group’s long-lived assets and revenues by region are as follows:

	June 30, 2009		December 31, 2008
	HK$		HK$
Long-lived assets:
- Hong Kong	$	5,719,533	$	7,078,634
- The PRC		31,529		37,280
	$	5,751,062	$	7,115,914

	Six months ended June 30,
	2009			2008
	HK$			HK$
Revenue:
- Hong Kong		$	2,419,434		$	6,447,949
- The PRC			66,364			223,770
		$	2,485,798		$	6,671,719

10

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Currency expressed in Hong Kong Dollars (“HK$”))

(Unaudited)

NOTE 10 – COMMITMENTS AND CONTINGENCIES

(a)           Operating lease commitments

The Company rented office space under non-cancelable operating lease agreements which run for a term of 1 to 3 years, with fixed monthly rentals, expiring in various years through May 2011. Costs incurred under these operating leases are recorded as rental expense and totaled approximately HK$224,478 and HK$242,796 for the periods ended June 30, 2009 and 2008, respectively.

As of June 30, 2009, future minimum annual operating lease payments are as follows:

Period ending June 30,	HK$
2010	$	303,996
2011		274,441
Total	$	578,437

(b)           Capital commitments

In December 2008, the Company established a joint venture company, Titanium Biometrics Limited with 51% of equity interest in Hong Kong. This joint venture company will engage in the promotion and marketing of biometrics face recognition access control and time attendance systems in Mainland China. Total estimated investment costs are approximately HK$1,906,500. As of June 30, 2009, the Group is committed to make a contingent payment of HK$972,315 to the joint venture company for the working capital purpose.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

As Titanium Technology is a software development company, it earns revenues primarily through license sales of its products, which utilize the proprietary technology it develops.  Development of the technology requires a significant outlay of cash before a viable product is developed that utilizes the technology.  After development of a product, even more cash is required to market the product before any revenues are realized.  Accordingly, the challenge that faces many software development companies is being able to obtain enough cash to fund research and development and marketing expenses and sustain the company until revenues are generated.  Such funds are needed fairly quickly after products are developed, as the environment in which the products are used is constantly changing.  Companies face the risk of discovering that their products do not meet the needs of the potential customers or are technologically outdated after a marketing campaign is launched.  If that happens, the research and development costs are never recouped.

While we have been able to develop proprietary products mainly based on proceeds from sales revenues and from subsidy income received from the Hong Kong government, we believe that external funding from investors can stimulate and accelerate product development and marketing for a number of reasons.  First, the company has now achieved a certain amount of recognition in the biometrics industry, especially in Hong Kong and the surrounding region.  It has also established several important marketing channels, most notably a sole distributor in Japan who brought along opportunities and major customers such as the NTT Group.  Second, there is increased awareness in the personal security area in which biometric technologies are some of the most commonly used applications.  We expect the global market size to grow due to concerns about identity theft and security.  Third, we have developed a technology within the past year that we believe can be utilized in a one-to-many application.  Based on this developed technology, management believes that the company should try to market its products and services in areas outside of Asia and compete in a larger market.

We raised net proceeds of US$517,425 (HK$4,035,915) through a private placement of securities during the third quarter of 2005.  These proceeds have been used to provide the funds necessary to implement the next step in our business plan, which was becoming a publicly-held company in the United States.  Our common stock commenced trading on the OTC Bulletin Board in July 2006 under the symbol “TTNUF.”  Funds were used for legal, accounting, and corporate consulting services and working capital.  We believe that by becoming a publicly-held company, we will enhance the visibility of our products and services and our ability to obtain additional financing in the future.

We obtained financing resulting in net proceeds of US$1,225,000 (HK$9,555,000) in April 2007.  These proceeds have been used for working capital and for the further development of our proprietary technology.

In September 2007, we set up a Hong Kong joint venture, Titanium RFID Limited, in which we hold a 51% interest.  This joint venture will engage in the development and marketing of radio frequency identification (RFID) solutions to complement our core biometric technology.  In December 2008, we set up a Hong Kong joint venture, Titanium Biometrics Limited, in which we hold a 51% interest. This joint venture will engage in the promotion and marketing of biometrics face recognition access control and time attendance systems in Mainland China.

Effective June 10, 2009, control of Golden Mass Technologies Ltd., the Company’s largest shareholder, changed from Dr. Kit Chong “Johnny” Ng to Crown Prince International Limited, a British Virgin Islands corporation owned by Lai Huamin.  Golden Mass Technologies Ltd. owns 25,835,221 shares, which represents approximately 50% of the registrant’s issued and outstanding shares. Dr. Kit Chong “Johnny” Ng resigned as the Chairman of the Board of Directors and principal financial officer and continues to serve as the Honorary Chairman. Mr. Lai was appointed to serve as a director and the Chairman of the Board.  We believe this change of control will be beneficial to the long term growth of the company.  The new major shareholder and the new members of the management team are experienced veterans in the industry and are capable to bring in additional capital to strengthen the operation and the research and development of the Group.  They are also well connected in the region and will be a tremendous aid in the Company’s sales and marketing efforts in the PRC.

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Critical Accounting Policies

Intangible assets.  Intangible assets include (1) patent and license right registration fees and (2) product development costs.

PATENT AND LICENSE RIGHT REGISTRATION FEES.  Patent and license right registration fees represents the software licenses and patent costs paid to third parties and is amortized using the straight-line method over their estimated useful lives of 10 years.

PRODUCT DEVELOPMENT COSTS.  We account for developments costs related to software products to be sold, leased or otherwise marketed in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86 “Accounting for the Costs of computer Software to be Sold, Leased, or Otherwise Marketed” (“SFAS No. 86”),  Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers.  Costs that are capitalized include direct labor and related overhead.  These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in hardware and software technologies.  For the period ended June 30, 2009, we did not incur any capitalized product development costs.

Amortization of capitalized software development costs begins when the product is available for general release to customers.  Amortization is computed by the straight-line method over the estimated economic life of the products, ranging from 4 to 5 years.

In prior years, we developed our products, namely ProAccess and ProFacer, under the subsidy assistance program from the Government of the Hong Kong Special Administrative Region (“HKSAR”) in developing the innovative products.  Pursuant to such program, HKSAR was required to provide funding to us for our product development, which was available up to the aggregate amount of US$256,410 (HK$2,000,000) in accordance with the milestones of the product development plan.  We received such grant of an aggregate of US$244,864 (HK$1,909,938) and were not subject to any repayment.  However, we were required to contribute approximately 50% of the overall project cost in accordance with the grant agreement.  When the project was completed, we tendered to the Government its pro rata share of the residual funds remaining in the project account.  In addition we were obligated to pay the Government a royalty fee of 5% on the gross revenue earned from any activities in connection with the project, up to an aggregate amount equal to the amount subsidized to us.

Upon the completion, the ownership of the intellectual property resulting from the project was vested in us.  The royalty fee paid by us for the periods ended June 30, 2009 and 2008 amounted to US$3 (HK$20) and US$3,105 (HK$24,220), respectively.  As of June 30, 2009, we have an unpaid royalty fee against the subsidy grant totaling US$215,444 (HK$1,680,459).

Impairment of long-lived assets.  In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” all long-lived assets such as plant and equipment and intangible assets held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  An impairment in the carrying value of an asset group is recognized whenever anticipated future undiscounted cash flows from an asset group are estimated to be less than its carrying value.  The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. We reviewed our impairment test on certain intangible assets such as patents and trademarks and concluded that the decline in expected future benefits from certain software products such as ProFacer items was sufficient to result in an impairment loss of US$35,619 (HK$277,832).

Revenue recognition.  We generate revenues principally from contracts for facial-based biometric identification and security projects, which typically include outside purchased workstations and live-scan devices, bundled with our proprietary software.  In all cases, the customers are granted a license to use the software in perpetuity so long as the software is installed on the hardware for which it was originally intended.  The contract price of our facial-based biometric identification and security projects generally includes twelve months of free post-contract customer support.  We also generate revenues from services performed under fixed-price and time-and-material agreements.  To a lesser extent, we also generate revenues from sales of our proprietary biometrics products and re-sales of products sourced from outside third parties.  We classify the revenues generated by these activities as

13

either project products revenue, project services revenue, or maintenance services revenue.  Maintenance services are what the customer purchases if support and software upgrades are desired after the free twelve-month period.

In accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition,” we recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

We also apply the provisions of Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.”  For arrangements that require significant production, modification, or customization of software, we apply the provisions of Accounting Research Bulletin (“ARB”) No. 45, “Long-Term Construction-Type Contracts,” and SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.”  We also consider the guidance of the Emerging Issues Task Force (“EITF”) Topic 00-21, “Revenue Arrangements with Multiple Deliverables” with respect to the recognition of revenue from the sale of hardware components (separate accounting units) of a multiple deliverable arrangement.  While these statements govern the basis for revenue recognition, significant judgment and the use of estimates are required in connection with the determination of the amount of product, maintenance and service revenue as well as the amount of deferred revenue to be recognized in each accounting period.  Material differences may result in the amount and timing of our revenue for any period if actual results differ from management’s judgment or estimates.

PRODUCTS REVENUE.  The timing of product revenue recognition is dependent on the nature of the product sold.  Product arrangements comprising multiple deliverables including software, hardware, professional services, and maintenance are generally categorized into one of the following:

·     Facial-based biometric identification and security projects that do not require significant modification or customization of our software:  Revenue associated with these arrangements, exclusive of amounts allocated to maintenance, for which we have vendor-specific objective evidence of fair value (“VSOE”), is recognized upon installation and receipt of written acceptance of the project by the customer when required by the provisions of the contract, provided that all other criteria for revenue recognition have been met.  Revenue resulting from arrangements for which VSOE of the maintenance element does not exist is recognized ratably over the maintenance period.  To date, we have not made an allocation of contract revenue to separate accounting units since all of the products have been delivered simultaneously and no deferral of revenue would result.

·     Facial-based biometric identification and security projects that require significant modification or customization of our software:  Revenue associated with these arrangements is recognized using the percentage of completion method as described by SOP 81-1.  The percentage of completion method reflects the portion of the anticipated contract revenue, excluding maintenance that has VSOE, which has been earned, equal to the ratio of labor effort expended to date to the anticipated final labor effort, based on current estimates of total labor effort necessary to complete the project.  Revenue resulting from arrangements for which VSOE of the maintenance element does not exist is recognized ratably over the contractual maintenance period.

·     Self-developed software products sales and re-sale of purchased third parties products:  Revenue associated with the sale of these products, excluding maintenance when applicable, is recognized upon shipment to the customer.  The amount of these revenues has historically not been significant.

·     Sales to authorized distributors:  We also use authorized distributors to sell certain of our products and only the authorized distributors are allowed to resell those products.  We require the authorized distributors to purchase the products and then sell through the authorized distributors’ own distribution channels to the end customers.  From our perspective, the authorized distributors are the ordinary customers and the only preferential treatment to them is that the sales prices to distributors have been predetermined in accordance with the distribution agreements, and are approximately 30% to 40% off the recommended retail prices.  Once the products are delivered and the distributor has accepted the products, we bill the distributor and the distributor is obligated to settle the bill accordingly within the credit period granted.  There is no right of return or other incentives given to the distributors.  We are not required to provide training to authorized distributors.

14

SERVICES REVENUE.  Services revenue is primarily derived from computer engineering services, system design, consulting and integration and maintenance services that are not an element of an arrangement for the sale of products.  These services are generally billed on a time and materials basis.  The majority of our professional services are performed under time-and-materials arrangements.  Revenue from such services is recognized as the services are provided.

MAINTENANCE SERVICES REVENUE.  Maintenance revenue consists of fees for providing technical support and software updates, primarily to customers purchasing the primary products.  We recognize all maintenance revenue ratably over the applicable maintenance period.  We determine the amount of maintenance revenue to be deferred through reference to substantive maintenance renewal provisions contained in the arrangement.

INTEREST INCOME.  Interest income is recognized on a time apportionment basis, taking into account the principal amounts outstanding and the interest rates applicable.

Foreign currency translation.  The consolidated financial statements are expressed in Hong Kong dollars (“HK$”).  The translations of HK$ amounts into the United States dollar (“US”) are for the convenience of readers in the United States of America only and have been made at the rate of HK$7.8 to US$1, the approximate free rate of exchange at December 31, 2008 and 2007.  Such translations should not be construed as representations that the HK$ amounts could be converted into US$ at that rate or any other rate.

Results of Operations

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008.  For the three months ended June 30, 2009, projects revenues decreased by US$253,135 (HK$1,974,450) (73%) over the same period in 2008. The decrease of projects revenues was attributed primarily to the company’s strategy to focus its sales effort of its new product – eGuard, which had been launched earlier in the year but has experienced production delay due to manufacturing issues. The issues are expected to be resolved in the third quarter of 2009.

Our cost of projects as a percentage of projects revenues was 68% for 2009 as compared to 143% for 2008.  Our cost of projects revenue in 2008 exceeded revenues due to materials we purchased for a Housing Authority project of approximately US$256,400 (HK$2,000,000) that could not be billed to the client.

Selling, general, and administrative expenses increased by US$72,099 (HK$562,374) (52%) in 2009 as compared to 2008 due mainly to an increase in provision for doubtful debt of US$38,893 (HK$303,368) and increase in professional fee of US$11,548 (HK$90,076).

Despite the decreased revenues and increased operating expenses, our loss from operations decreased from US$281,473 (HK$2,195,487) in 2008 to US$258,053 (HK$2,012,817) in 2009.  In 2008, we had incurred a gross loss on projects.

We had other expense in 2009 of US$29,188 (HK$227,670), due to interest expense of US$28,029 (HK$218,624).  In contrast, we had other income of US$104,678 (HK$816,490) in 2008, due to sundry income of US$138,181 (HK$1,077,813), which mainly consists of the receipt of a refund for promotion expenses of US$104,103 (HK$812,000), which was paid in 2007, and a gain of US$34,079 (HK$265,813) due to disposal of fixed asset, which more than offset interest expense of US$31,148 (HK$242,956).

In summary, due to decreased revenues in the quarter ended June 30, 2009 and increased operating and other expenses, we generated a net loss of US$287,241 (HK$2,240,487), as compared to a net loss of US$174,416 (HK$1,360,447) in 2008.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008.  For the six months ended June 30, 2009, projects revenues decreased by US$555,890 (HK$4,335,942) (67%) over the same period in 2008. The decrease of projects revenues was attributed primarily to the company’s strategy to focus its sales effort of its new product – eGuard, as described above.

15

Our cost of projects as a percentage of projects revenues was 72% for 2009 as compared to 100% for 2008.  Our cost of projects revenue in 2008 exceeded revenues due to materials we purchased for a Housing Authority project of approximately US$256,400 (HK$2,000,000) that could not be billed to the client.

Selling, general, and administrative expenses decreased by US$96,195 (HK$750,318) (19%) in 2009 as compared to 2008 due mainly to a reduction of professional fees of US$33,364 (HK$260,236).

We recognized an impairment loss on intangible assets of US$35,619 (HK$277,832) during the 2009 period as a result of the phasing out of our old product “ProFacer”.  There was no impairment loss in 2008.

During the six months ended June 30, 2009, we incurred US$168,172 (HK$1,311,741) of research and development expenses, compared to none in the same period of 2008.

Due to the decreased revenues and increased operating expenses, our loss from operations increased from US$497,337 (HK$3,879,229) in 2008 to US$513,583 (HK$4,005,945) in 2009.

We had other expense in 2009 of US$95,610 (HK745,759), consisting of interest expense of US$56,057 (HK$437,248), amortization cost on discount of convertible debentures of US$30,648 (HK$239,056), and loss from change in fair value of warrant liability of US$17,879 (HK$139,456).  In contrast, we had other income in 2008 of US$121,367 (HK$946,662), due to sundry income of US$138,181 (HK$1,077,813), which mainly consists of the receipt of a refund for promotion expenses of US$104,103 (HK$812,000), which was paid in 2007, and a gain of US$34,079 (HK$265,813) due to disposal of asset.  We also had a gain from change in warrant liability of US$35,404 (HK$276,151) which more than offset interest expense of US$57,722 (HK$450,231).

In summary, due to decreased revenues in 2009 and increased operating and other expenses, we generated a net loss of US$608,515 (HK$4,746,415), as compared to a net loss of US$371,481 (HK$2,897,553) in 2008.

Going Concern

As a result of the losses incurred during the last two fiscal years and the accumulated deficit of US$1,375,117 (HK$10,725,914) at December 31, 2008, the report of our independent registered public accounting firm on the financial statements for the year ended December 31, 2008 included an explanatory paragraph indicating substantial doubt as to our ability to continue as a going concern.  We incurred a net loss of US$608,515 (HK$4,746,415) for the six months ended June 30, 2009 and had an accumulated deficit of US$1,983,632 (HK$15,472,329) at June 30, 2009.  Management has taken certain actions and continues to implement changes designed to improve the Company’s financial results and operating cash flows.  The actions involve certain cost-saving initiatives, continuous development of new products and growing strategies, including rapid promotion and marketing the new products in the People’s Republic of China.  Management believes that these actions will enable the Company to move towards profitability and improve cash flow in its continuing operations through June 30, 2010.

Liquidity and Capital Resources

As of June 30, 2009 , we had working deficit of US$42,428 (HK$330,934), as compared to working capital of US$349,711 (HK$2,727,739) at December 31, 2008, due primarily to the loss for the six-month period.  The decrease was reflected in reductions in cash of US$123,149 (HK$960,560) and accounts receivable, net of US$148,826 (HK$1,160,842), and an increase in accounts payable and accrued liabilities of US$142,108 (HK$1,108,440), offset by small increases in inventories of US$6,483 (HK$50,571) and deposits and other receivables of US$14,229 (HK$110,990).

During the six months ended June 30, 2009, our operating activities used cash of US$119,760 (HK$934,133), as compared to providing cash of US$329,612 (HK$2,570,973) in 2008.  The most significant adjustments to reconcile net loss to net cash were for depreciation and amortization (US$139,361 and HK$1,087,018), the impairment loss on intangible assets (US$35,619 and HK$277,832), an allowance for doubtful accounts (US$62,019 and HK$483,748) and the loss from change in fair value of warrant liability (US$17,879 and HK$139,456).

16

We did not have any cash flows from investing or financing activities in 2009.  In comparison, we used US$301,789 (HK$2,353,934) in 2008 for software development costs and also used US$3,378 (HK$26,347) for repayment of a short-term bank loan.

Our working capital had a deficit of US$42,428 (HK$330,934) as at June 30, 2009. As such, our growth plan may require additional funding from outside sources.  We intend to pursue discussion with existing shareholders, third party financing sources and potential lenders to ensure access to funds as required.  Our future liquidity will also depend on our revenue growth and ability to control our operating expense.  Our current fixed overhead is approximately US$64,102 (HK$500,000) per month, without giving any effect to any revenues that we generate.  Fixed overhead comprises salaries, office rent and maintenance, utilities, telephone, travel, office supplies, employee benefits, insurance and licenses.  We believe we will be able to fund the expenditures described above with our existing cash flow, based upon the signed contracts for orders that we have.  At June 30, 2009, several backlog orders of approximately US$800,000 (HK$6,240,000) will be confirmed, as compared to approximately US$1,800,000 (HK$14,040,000) at June 30, 2008.  We expect that approximately US$400,000 (HK$3,120,000) will be carried forward to the next fiscal year.

Forward-Looking Statements

This report includes “forward-looking statements.”  All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” or “continue” or the negative thereof or variations thereon or similar terminology.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove to have been correct.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4.  CONTROLS AND PROCEDURES

As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the end of the period covered by this report.  This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and principal financial officer.  Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective.  There were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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PART II - OTHER INFORMATION

Item 1.          Legal Proceedings

We are not a party to any pending legal proceedings.

Item 1A.       Risk Factors

Not required for smaller reporting companies.

Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.          Defaults Upon Senior Securities

None.

Item 4.          Submission of Matters to a Vote of Security Holders

None

Item 5.          Other Information

None.

Item 6.          Exhibits

Regulation S-K Number	Exhibit
3.1	Memorandum of Association, as amended (1)
3.2	Articles of Association, as amended (1)
4.1	Form of Warrant (2)
4.2	Form of Subscription Agreement (2)
10.1	Employment agreement with Jason Ma dated January 1, 2005 (1)
10.2	Employment agreement with Humphrey Cheung dated January 1, 2005 (1)
10.3	Employment agreement with Billy Tang dated January 1, 2005 (1)
10.4	Office lease dated June 22, 2005 (1)
10.5	2005 Stock Plan (2)
10.6	Technical Service Agreement with IBM China/Hong Kong Limited dated October 5, 2004 and Amendment to Supplier Agreement dated December 3, 2004 (2)
10.7	Technology Partnership and Research & Development Contract with China Scientific Automation Research Center dated June 15, 2005 (2)
10.8	Technology Research and Development Contract with Tsing Hua University dated November 4, 2005 (2)
10.9	Form of Distributor Agreement (3)
10.10	Form of Reseller Agreement (3)
10.11	Distributor Agreement with Elixir Group Limited dated January 1, 2004 (4)
10.12	Distributor Agreement with Smart Wireless Corporation dated February 1, 2005 (4)
10.13	Agreement with Shanghai Commercial Bank Ltd. dated February 7, 2006 (4)
10.14	Securities Purchase Agreement dated April 3, 2007 (5)
10.15	Form of Debenture (5)
10.16	Registration Rights Agreement dated April 3, 2007 (5)
10.17	Form of Warrant (5)
10.18	November 2007 Amendment and Waiver Agreement (6)

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Regulation S-K Number Exhibit

31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer

__________________

(1) Incorporated by reference to the exhibits to the initial filing of the registration statement on Form S-1 (File No. 333-128302) on September 14, 2005.

(2) Incorporated by reference to the exhibits to Amendment No. 1 to the registration statement on Form S-1 (File No. 333-128302) on December 9, 2005.

(3)   Incorporated by reference to the exhibits to Amendment No. 2 to the registration statement on Form S-1 (File No. 333-128302) on January 26, 2006.

(4)   Incorporated by reference to the exhibits to Amendment No. 3 to the registration statement on Form S-1 (File No. 333-128302) on March 8, 2006.

(5)   Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K dated April 3, 2007 (File No. 0-52415), filed April 4, 2007.

(6)   Incorporated by reference to the exhibits to the registrant's current report on Form 8-K dated November 23, 2007 (File No. 0-52415), filed November 26, 2007.

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TITANIUM GROUP LIMITED
August 20, 2009	By:	/s/ Billy Tang
		Wai Hung "Billy" TANG
		Chief Executive Officer

August 20, 2009	By:	/s/ Mingzheng Lan
		Mingzheng LAN
		Principal Financial Officer

20

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Wai Hung “Billy” Tang, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Titanium Group Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 20, 2009	/s/ Billy Tang
	Wai Hung "Billy" Tang
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mingzheng LAN, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Titanium Group Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 20, 2009	/s/ Mingzheng Lan
	Mingzheng LAN
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Titanium Group Limited (the “Company”) on Form 10-Q for the period ending June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wai Hung “Billy” Tang, Acting Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Billy Tang                                             

Wai Hung “Billy” Tang

Chief Executive Officer

August 20, 2009

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Titanium Group Limited (the “Company”) on Form 10-Q for the period ending June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mingzheng LAN, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mingzheng Lan                                                    

Mingzheng LAN

Principal Financial Officer

August 20, 2009