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 September 30, 2010

[  ]           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.)

Room 801, Austin Tower, 22-26 Austin Avenue, T.S.T, Kowloon, Hong Kong

 (Address of principal executive offices)(Zip Code)

(852) 2723 9628

(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 (Not required)

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 November 15, 2010

TITANIUM GROUP LIMITED AND SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page
Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2010 and 2009 (Unaudited)	4 - 5
Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2010 and 2009 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7 - 10

2

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

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

	September 30, 2010							December 31, 2009
	US$ (Unaudited)				HK$ (Unaudited)			HK$ (Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	60,533		$	472,159		$	92,368
Restricted cash			-			-			400,000
Accounts receivable, net			6,049			47,182			119,327
Deposits and other receivables			10,079			78,617			121,037
TOTAL ASSETS		$	76,661		$	597,958		$	732,732
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	710,078		$	5,538,608		$	4,613,777
Deferred revenue			3,080			24,022			38,434
Amount due to a stockholder			1,166			9,091			-
Amount due to a related party			335,417			2,616,250			-
Amount due to a director			140,522			1,096,072			1,028,572
Convertible debenture			1,400,000			10,920,000			-
Total current liabilities			2,590,263			20,204,043			5,680,783
Long-term liabilities:
Convertible debenture			-			-			10,798,178
Warrants liability			-			-			33,985
Total long-term liabilities			-			-			10,832,163
Total liabilities			2,590,263			20,204,043			16,512,946
Stockholders’ deficit:
Titanium Group Limited stockholders’ deficit:
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			876,355			6,835,562			6,835,562
Accumulated other comprehensive (loss) income			(1,247	)		(9,685	)		8,194
Accumulated deficit			(3,905,154	)		(30,460,225	)		(26,652,233	)
Total Titanium Group Limited stockholders’ deficit			(2,513,602	)		(19,606,085	)		(15,780,214	)
Total deficit			(2,513,602	)		(19,606,085	)		(15,780,214	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	76,661		$	597,958		$	732,732

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 NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

	Three months ended September 30,									Nine months ended September 30,
	2010			2010			2009			2010			2010			2009
	US$			HK$			HK$			US$			HK$			HK$
REVENUE, NET
Projects
Products	$	-		$	-		$	379,005		$	-		$	-		$	2,315,025
Services		-			-			5,767			-			-			250,056
		-			-			384,772			-			-			2,565,081
Maintenance
Services		616			4,805			77,735			1,848			14,413			383,224
Total revenue		616			4,805			462,507			1,848			14,413			2,948,305
COST OF REVENUE
Projects
Cost of products sold		-			-			247,913			-			-			1,636,854
Cost of services		-			-			3,650			-			-			190,281
		-			-			251,563			-			-			1,827,135
Maintenance
Cost of services		-			-			8,000			-			-			60,000
Total cost of revenue		-			-			259,563			-			-			1,887,135
GROSS PROFIT		616			4,805			202,944			1,848			14,413			1,061,170
OPERATING EXPENSES
Impairment loss on intangible assets		-			-			-			-			-			277,833
Research and development costs		-			-			606,985			-			-			1,918,726
Selling, general and administrative		33,379			260,376			1,753,986			302,016			2,355,747			4,958,583
Total operating expenses		33,379			260,376			2,360,971			302,016			2,355,747			7,155,142
LOSS FROM OPERATIONS		(32,763	)		(255,571	)		(2,158,027	)		(300,168	)		(2,341,334	)		(6,093,972	)

See accompanying notes to condensed consolidated financial statements.

4

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

	Three months ended September 30,									Nine months ended September 30,
	2010			2010			2009			2010			2010			2009
	US$			HK$			HK$			US$			HK$				HK$
Other income (expense):
Sundry income		-			-			-			218			1,700				-
Interest income		308			2,403			42			308			2,403				43
Interest expense		(70,395	)		(549,079	)		(218,400	)		(177,298	)		(1,382,924	)			(655,648	)
Discount of convertible debenture		-			-			(119,528	)		(15,618	)		(121,822	)			(358,584	)
Gain from change in fair value of warrant liability		-			-			184,306			4,357			33,985				44,850

Total other expense, net		(70,087	)		(546,676	)		(153,580	)		(188,033	)		(1,466,658	)		(969,339	)
LOSS BEFORE INCOME TAX		(102,850	)		(802,247	)		(2,311,607	)		(488,201	)		(3,807,992	)		(7,063,311	)
Income tax expense		-			-			-			-			-			-
NET LOSS	$	(102,850	)	$	(802,247	)	$	(2,311,607	)	$	(488,201	)	$	(3,807,992	)	$	(7,063,311	)
Less: net loss attributable to noncontrolling interests		-			-			-			-			-			5,289
NET LOSS ATTRIBUTABLE TO TITANIUM GROUP LIMITED	$	(102,850	)	$	(802,247	)	$	(2,311,607	)	$	(488,201	)	$	(3,807,992	)	$	(7,058,022	)
NET LOSS		(102,850	)		(802,247	)		(2,311,607	)		(488,201	)		(3,807,992	)		(7,063,311	)
Other comprehensive income (loss):
- Foreign currency translation gain (loss)		835			6,514			72,853			(2,292	)		(17,879	)		44,126
COMPREHENSIVE LOSS	$	(102,015	)	$	(795,733	)	$	(2,238,754	)	$	(490,493	)	$	(3,825,871	)	$	(7,019,185	)
Comprehensive gain (loss) attributable to noncontrolling interests		67			521			5,828			(183	)		(1,430	)		(1,759	)
Comprehensive loss attributable to Titanium Group Limited	$	(102,082	)	$	(796,254	)	$	(2,244,582	)	$	(490,310	)	$	(3,824,441	)	$	(7,017,426	)
Net loss per common share attributable to Titanium Group Limited – basic and diluted	$	(0.00	)	$	(0.02	)	$	(0.04	)	$	(0.01	)	$	(0.07	)	$	(0.14	)
Weighted average common stock outstanding – basic and diluted		51,644,399			51,644,399			51,644,399			51,644,399			51,644,399			51,644,399

See accompanying notes to condensed consolidated financial statements.

5

TITANIUM GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

	Nine months ended September 30,
	2010			2010			2009
	US$			HK$			HK$
Cash flow from operating activities:
Net loss attributable to Titanium Group Limited	$	(488,201	)	$	(3,807,992	)	$	(7,058,022	)
Adjustments to reconcile net loss to net cash used in operating activities:
Noncontrolling interests		-			-			(5,289	)
Depreciation and amortization		-			-			1,627,057
Impairment loss on intangible assets		-			-			277,833
Allowance for doubtful accounts		-			-			684,546
Stock issued for service rendered, non-cash		-			-			(21,606	)
Amortization cost on discount of convertible debenture		15,618			121,822			358,584
Loss from disposal of plant and equipment		-			-			95,610
Gain  from change in fair value of warrant liability		(4,357	)		(33,985	)		(44,850	)
Changes in operating assets and liabilities:
Accounts receivable		9,249			72,145			921,230
Inventories		-			-			(65,226	)
Deposits and other receivables		5,438			42,420			(375,196	)
Restricted cash		51,282			400,000			-
Accounts payable and accrued liabilities		118,568			924,831			1,175,748
Deferred revenue		(1,848	)		(14,412	)		(14,412	)
Amount due to a related party		-			-			171,645
Net cash used in operating activities		(294,251	)		(2,295,171	)		(2,272,348	)
Cash flows from investing activities:
Purchase of plant and equipment		-			-			(27,050	)
Net cash use in financing activities		-			-			(27,050	)
Cash flows from financing activities:
Advances from a director		8,654			67,500			1,137,427
Advances from a stockholder		1,166			9,091			-
Advances from a related party		335,417			2,616,250			-
Net cash provided by financing activities		345,237			2,692,841			1,137,427
Effect of exchange rate changes on cash and cash equivalent cash equivalents		(2,295	)		(17,879	)		44,134
NET CHANGE IN CASH AND CASH EQUIVALENTS		48,691			379,791			(1,117,837	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		11,842			92,368			1,190,869
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	60,533		$	472,159		$	73,032
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-		$	-
Cash paid for interest	$	-		$	-		$	-

See accompanying notes to condensed consolidated financial statement.

6

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(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 and Titanium Technology (Shenzhen) Co., Ltd. (collectively known as the “Group”). The Group’s functional currency is Hong Kong Dollars.

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 of America (“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, 2009 which has been derived from audited financial statements and these unaudited condensed financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2010 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 AnnualReport on Form 10-K for the year ended December 31, 2009.

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.

For the nine months ended September 30, 2010, the Group incurred a net loss of HK$3,807,992 and generated substantive losses over the past several years resulting in an accumulated deficit of HK$30,460,225 with a negative working capital deficit of HK$19,606,085 at September 30, 2010. 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 new business projects 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 September 30, 2011.

7

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

These factors raise substantial doubt about the Group’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Group not being able to continue as a going concern.

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 September 2009, the Financial Accounting Standard Board (“FASB”) issued certain amendments as codified in ASC Topic 605-25, “Revenue Recognition; Multiple-Element Arrangements”. These amendments provide clarification on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. An entity is required to allocate revenue in an arrangement using estimated selling prices of deliverables in the absence of vendor-specific objective evidence or third-party evidence of selling price. These amendments also eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The amendments significantly expand the disclosure requirements for multiple-deliver able revenue arrangements. These provisions are to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. The Group will adopt the provisions of these amendments in its fiscal year 2011 and is currently evaluating the impact of these amendments to its consolidated financial statements.

 In April 2010, the FASB issued Accounting Standard Updates (“ASU”) 2010-13, “Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on the Group’s financial sta tements.

In July 2010, the FASB issued new accounting guidance that will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance for credit losses. Certain additional disclosures in this new accounting guidance will be effective for the Group on December 31, 2010 with certain other additional disclosures that will be effective on March 31, 2011. The Group does not expect the adoption of this new accounting guidance to have a material impact on its consolidated financial statements.

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 nine months ended September 30, 2010, 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 nine months ended September 30, 2010, 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

8

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

shares of common stock as of September 30, 2010 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

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date .

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

For the nine months ended September 30, 2010, the Group incurred net operating losses of approximately HK$3,807,992 for income tax purposes and no provision for income taxes is required.

As of September 30, 2010, the operations in Hong Kong and the PRC incurred HK$19,970,666 of the aggregate net operating losses carryforward that may be used to offset future taxable income. The Group has provided for a valuation allowance of HK$3,804,687 against the significant portion of deferred tax assets as the management believes it is more likely than not that these assets will not be realized in the future.

NOTE 7 – AMOUNT DUE TO A STOCKHOLDER

As of September 30, 2010, the amount represented temporary advances made to the Group by a stockholder, Cancare International Group (HK) Limited, totaling HK$9,091, which was unsecured, non-interest bearing and repayable within the next twelve months, in which HK$169,863 carried interest at 9% per annum. For the nine months ended September 30, 2010, HK$9,863 of interest expense was accrued.

NOTE 8 – AMOUNT DUE TO A RELATED PARTY

As of September 30, 2010, the amount represented temporary advances made to the Group by a related company which was controlled by a director, Mr. Jialong Wen, totaling HK$2,616,250, which was unsecured, non-interest bearing and repayable within the next twelve months.

NOTE 9 – AMOUNT DUE TO A DIRECTOR

As of September 30, 2010, the amount represented temporary advances made to the Group by a director, Mr. Jialong Wen, totaling HK$1,096,072, which was unsecured, carried interest at 9% per annum and repayable within the next twelve months. For the nine months ended September 30, 2010, HK$67,500 of interest expense was incurred.

9

TITANIUM GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

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

(Unaudited)

NOTE 10 – 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. 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.

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

The debentures were discounted for the fair value of warrants and the intrinsic value of the beneficial conversion feature, pursuant to ASC Topic 470-20 “Debt with Conversions and Other Options”. The discount is being amortized over the life of the debentures. For the nine months ended September 30, 2010 and 2009, the Company recorded HK$33,985 (US$4,357) and HK$44,850 (US$5,750) as gain (loss) from change in warrant liability in the statements of operations. Interest expense of HK$1,305,561 (US$167,380) and HK$655,648 (US$84,057), including penalty interest was recognized for the nine months ended September 30, 2010 and 2009.

As of September 30, 2010, the Debentures became due and the Company has been in negotiations with the holders of the Debentures, but has not yet reached an agreement as to repayment of the Debentures.

10

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.  Comp anies 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.

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 finan cing 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.

We found that the amount of financing received in 2007 was not sufficient to allow us to pursue larger, more profitable contracts.  This forced us to bid for smaller, less profitable projects during the past two years.  When coupled with the worldwide economic downturn that began in 2008 and continued into 2009, our operations were severely affected.  In late 2009, we decided to completely reassess our method of operations and the way in which we market our products.  Accordingly, we laid off most of our staff and moved to smaller office space.  Currently, we are in the process of developing a new business plan that may include acquiring a business that will complement our existing products and services.  We are also in the process of negotiating with the holders of our converti ble debentures that matured in April 2010.

Critical Accounting Policies

      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

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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 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 ASC Topic 605, “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 Cert ain 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 s ince 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.

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·     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 d istributor 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.

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 currencies translation.  The consolidated financial statements are expressed in Hong Kong dollars (“HK$”).  The translations of HK$ amounts into the United States dollars (“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$1, the approximate free rate of exchange at December 31, 2009 and 2008.  Such translations should not be construed as representations that the HK$ amounts could be converted into US$ at that rate or any other rate.

We conduct major business in Hong Kong and the PRC and are subject to tax in these jurisdictions.  As a result of our business activities, we file tax returns that are subject to examination by the foreign tax authority.

Results of Operations

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009.  For the three months ended September 30, 2010, we did not have any projects revenues, as compared to US$49,329 (HK$384,772) in 2009.  As stated above, in late 2009, we decided to completely reassess our method of operations and the way in which we market our products.  We generated a small amount of maintenance revenues in 2010 of US$616 (HK$4,805), as compared to US$9,966 (HK$77,735) in 2009.

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As a result, our gross profit was US$616 (HK$4,805) in 2010, as compared to US$26,018 (HK$202,944) in 2009.

We did not recognize any expense for the amortization of intangible assets or any impairment loss on intangible assets in 2010, as we wrote our intangible assets to zero in 2009.  We did not incur any research and development expenses, as compared to US$77,819 (HK$606,985) in 2009.

Selling, general, and administrative expenses decreased by US$191,490 (HK$1,493,610) (85%) in 2010 as compared to 2009.  We laid off office staff and relocated to another office space at the end of 2009.

As a result of the decreased operating expenses, our loss from operations decreased from US$276,670 (HK$2,158,027) in 2009 to US$32,763 (HK$255,571) in 2010.

We had other expense in 2010 of US$70,087 (HK$546,676), due primarily to interest expense of US$70,395 (HK$549,079).  In 2009, other expense was US$19,689 (HK$153,580), consisting of interest expense of US$28,000 (HK$218,400) and amortization on discount of the convertible debentures of US$15,324 (HK$119,528), offset by a gain from the change in fair value of our warrant liability of US$23,629 (HK$184,306).

In summary, due to decreased operating expenses in the quarter ended September 30, 2010, we generated a net loss of US$102,850 (HK$802,247), as compared to a net loss of US$296,359 (HK$2,311,607) in 2009.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009.  For the nine months ended September 30, 2010, we did not have any projects revenues, as compared to US$328,857 (HK$2,565,081) in 2009.  As stated above, in late 2009, we decided to completely reassess our method of operations and the way in which we market our products.  We generated a small amount of maintenance revenues in 2010 of US$1,848 (HK$14,413), as compared to US$49,131 (HK$383,224) in 2009.

As a result, our gross profit was US$1,848 (HK$14,413) in 2010, as compared to US$136,047 (HK$1,061,170) in 2009.

We did not recognize any expense for the amortization of intangible assets or any impairment loss on intangible assets in 2010, as we wrote our intangible assets to zero in 2009.  We recognized an impairment loss on intangible assets of US$35,620 (HK$277,833) during the 2009 period as a result of the phasing out of our old product “ProFacer”.  We did not incur any research and development expenses, as compared to US$245,991 (HK$1,918,726) in 2009.

Selling, general, and administrative expenses decreased by US$333,700 (HK$2,602,836) (52%) in 2010 as compared to 2009 as we laid off office staff and moved to smaller office space at the end of 2009.

As a result of the decreased operating expenses, our loss from operations decreased from US$781,278 (HK$6,093,972) in 2009 to US$300,168 (HK$2,341,334) in 2010.

We had other expense in 2010 of US$188,033 (HK$1,466,658), due primarily to interest expense of US$177,298 (HK$1,382,924) and amortization on discount of the convertible debentures of US$15,618 (HK$121,822).  In 2009, other expense was US$124,274 (HK$969,339), consisting primarily

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of interest expense of US$84,057 (HK$655,648), amortization on discount of the convertible debentures of US$45,972 (HK$358,584), offset by a gain from the change in fair value of our warrant liability of US$5,750 (HK$44,850).

In summary, due to decreased operating expenses in the nine months ended September 30, 2010, we generated a net loss of US$488,201 (HK$3,807,992), as compared to a net loss of US$905,553 (HK$7,063,311) in 2009.

Going Concern

As a result of the losses incurred during the last two fiscal years and the accumulated deficit of US$3,416,952 (HK$26,652,233) at December 31, 2009, the report of our independent registered public accounting firm on the financial statements for the year ended December 31, 2009 included an explanatory paragraph indicating substantial doubt as to our ability to continue as a going concern.  We incurred a net loss of US$488,201 (HK$3,807,992) for the nine months ended September 30, 2010 and had an accumulated deficit of US$3,905,154 (HK$30,460,225) at September 30, 2010.  Management has taken certain action and continues to implement changes designed to improve the Company’s financial results and operating cash flows. The actions involve certain cost-saving initiati ves and growing strategies, including new business projects in the People’s Republic of China (the “PRC”). Management believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations through September 30, 2011.

Liquidity and Capital Resources

As of September 30, 2010, we had working capital deficit of US$2,513,602 (HK$19,606,085), as compared to a deficit of US$634,365 (HK$4,948,051) at December 31, 2009, due to the reclassification of our convertible debentures in the amount of US$1,400,000 (HK$10,920,000) as a current liability and the loss for the nine-month period.  In addition, there were reductions in accounts receivable, net of US$9,249 (HK$72,145), and increases in accounts payable and accrued liabilities of US$118,568 (HK$924,831), and amount due to a related party of US$335,417 (HK$2,616,250).

During the nine months ended September 30, 2010, our operating activities used cash of US$294,251 (HK$2,295,171), as compared to cash used of US$291,327 (HK$2,272,348) in 2009.  The most significant adjustment to reconcile net loss to net cash for the 2010 period was for amortization cost on discount of convertible debentures of US$15,618 (HK$121,822).  In 2009, we had a larger net loss, but more adjustments, such as US$208,597 (HK$1,627,057) for depreciation and amortization, US$87,762 (HK$684,546) for allowance for doubtful accounts, and US$45,972 (HK$358,584) for amortization cost on discount of convertible debentures.

In 2010, US$345,237 (HK$2,692,841) was provided by advances from a stockholder, a director and a related party.  There was US$145,824 (HK$1,137,427) provided by advances from a director in 2009.

          Our current fixed overhead is approximately US$34,000 (HK$265,200) 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, and professional fees.  We believe we will be able to fund the expenditures described above with advances from a stockholder and a director.

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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, management has 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.

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.

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Item 3.         Defaults Upon Senior Securities

None.

Item 4.         (Removed and Reserved)

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	2005 Stock Plan (2)
10.2	Form of Distributor Agreement (3)
10.3	Form of Reseller Agreement (3)
31.1	Rule 13a-14(a) Certification of Chief Executive Officer and 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 and 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.

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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
November 15, 2010	By:	/s/ LAN Mingzheng
		LAN Mingzheng
		Interim Chief Executive Officer and
		Principal Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)

I, LAN Mingzheng, 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. As the registrant's sole certifying officer, I am 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 13d-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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 financing reporting to be designed under my 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 my 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. As the registrant’s sole certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of 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: November 15, 2010                                                             /s/ LAN Mingzheng                                               

LAN Mingzheng

Interim Chief Executive Officer and 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 quarter ending September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, LAN Mingzheng, Principal Executive and 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/ LAN Mingzheng                                                 

LAN Mingzheng

Principal Executive and Financial Officer

November 15, 2010