U.S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K




R
            ANNUAL REPORT
      PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the fiscal year ended December 31, 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 No. 000-26139





Titan
Energy Worldwide, Inc.




Nevada
                  
                  26-0063012(State or other jurisdiction of incorporation or organization)
                  
                  (I.R.S. Employer Identification No.)





10315
Grand River Avenue, Suite 302, Brighton, MI 48116


(Address
of principal executive offices) (Zip Code)





Company’s
telephone number, including area code: (810) 229-5422





Securities
registered under Section 12(b) of the Exchange Act: None.





Securities
registered under Section 12(g) of the Exchange Act:





Common
stock, par value $0.0001 per share.


(Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act       Yes
 ̈ No R





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   Yes  ̈ No R





Indicate
by check mark whether the Company (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 twelve months (or such shorter period that the Company was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90
days.              Yes
R 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 (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files).       Yes o  No o





Check if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained in this form, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.R





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





Large
      accelerated filer £
              Accelerated
      filer£
              Non-accelerated
      filer £
              Smaller
      reporting company R





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes  ̈ No R





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of June
30, 2009: $942,732





Indicate
the number of shares outstanding of the Company’s classes of common stock as of
March 24, 2010: 20,506,097 shares.





Documents
incorporated by reference: None.








TABLE
OF CONTENTS




PART
      I
                                                                                              
                                                                                              3ITEM 1.
                                                                                              DESCRIPTION
      OF BUSINESS
                                                                                              3ITEM
      2.
                                                                                              DESCRIPTION
      OF PROPERTY
                                                                                              20ITEM
      3.
                                                                                              LEGAL
      PROCEEDINGS
                                                                                              20ITEM
      4.
                                                                                              (REMOVED
      AND RESERVED)
                                                                                              20PART
      II
                                                                                              
                                                                                              21ITEM
      5.
                                                                                              MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                                                                                              21ITEM
      7.
                                                                                              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                                                                              22ITEM
      8.
                                                                                              FINANCIAL
      STATEMENTS
                                                                                              27ITEM
      9.
                                                                                              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                                                                                              28ITEM
      9A(T).
                                                                                              CONTROLS
      AND PROCEDURES
                                                                                              28ITEM
      9B.
                                                                                              OTHER
      INFORMATION
                                                                                              28PART
      III
                                                                                              
                                                                                              29ITEM
      10.
                                                                                              DIRECTORS
      AND EXECUTIVE OFFICERS OF THE COMPANY
                                                                                              29ITEM
      11.
                                                                                              EXECUTIVE
      COMPENSATION
                                                                                              30ITEM
      12.
                                                                                              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                                                                                              32ITEM
      13.
                                                                                              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
                                                                                              33ITEM
      14.
                                                                                              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                                                                              33ITEM
      15.
                                                                                              EXHIBITS
                                                                                              34










PART
I





ITEM
1.  Description of Business





Statements
in this Form 10-K Annual Report may be “forward-looking
statements.”  Forward-looking statements include, but are not limited
to, statements that express our intentions, beliefs, expectations, strategies,
predictions or any other statements relating to our future activities or other
future events or conditions. These statements are based on current expectations,
estimates and projections about our business based, in part, on assumptions made
by our management. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may, and probably will, differ materially
from what is expressed or forecasted in the forward-looking statements due to
numerous factors, including those described above and those risks discussed from
time to time in this Form 10-K Annual Report, including the risks described
under “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and in other documents which we file with
the Securities and Exchange Commission (“SEC”).





In
addition, such statements could be affected by risks and uncertainties related
to our financial condition, factors that affect our industry, market and
customer acceptance, competition, government regulations and requirements,
pricing, general industry and market conditions, growth rates, and general
economic conditions. Any forward-looking statements speak only as of the date on
which they are made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this Form 10-K Annual Report.





Overview





Titan
Energy Worldwide, Inc., a Nevada corporation, is hereinafter referred to as
“we,” “us,” “our” “Titan Energy,” or the “Company.”









We
provide our products and services to industrial, commercial and government
customers in New York, New Jersey, Connecticut, Florida, Minnesota, Wisconsin,
Michigan, Nebraska, Iowa, North and South Dakota. We have more than 1,000
customers representing more than 4,000 generators at locations across the
country.  Our customers include utilities, major national retailers,
telecommunications companies, banks, data centers, grocery stores, hospitals and
other health care facilities, schools and colleges, property management
companies, government and military facilities, manufacturers, and retail stores,
among others.





Since our
inception, we have grown significantly. We began with one office providing
emergency and back-up power in 2006 and have expanded to more than 11 states
which are serviced by seven regional offices.  We also have developed
a growing international business with sales to the Caribbean, Central and South
America. We have expanded our maintenance and service programs for power
generation assets and now offer remote monitoring and technologies that
support demand response programs for several of our
customers.





We
reported gross sales revenues of $10.6 million in 2009, a 35% increase in
revenues from the previous year.  As discussed in more detail below,
about 72% of these revenues were from the sale of power generation equipment. We
have significantly grown our service business which for the most part consists
of recurring revenue service contracts to maintain and manage our customers’
power generation assets.  Management believes that our current run
rate and projected sales in 2010 indicate that our company can reach $20 million
in gross revenues in 2010, partially due to acquisitions we made in 2009 of
established power generation businesses in Florida and New York/New
Jersey.  Management also believes that the percentage of sales tied to
service contracts will continue to increase and could be as high as 40% in
2010.





Management
believes that it can be cash positive in 2010 based on the formula of earnings
before income taxes, depreciation and amortization (“EBITDA”) excluding non-cash
share-based compensation and payments. For the year ended December 31, 2009,
using continuing operations, this formula produces net cash outflow of $651,864
compared to the net cash outflow for the year ended December 31, 2008 of
$935,272. This is an improvement of $283,408, or 30%, in the last year. We
believe that as our business becomes more profitable and we reduce corporate
overhead, we can attain our goal of being cash positive.


3





Significant Recent
Developments





The
following developments were critical to building our business:





·
            In
      June of 2009, we acquired the Industrial and Service Division of RB Grove,
      an established 52-year old power generation provider located in Miami,
      Florida.  This company is now called Grove Power, a subsidiary
      of Titan Energy Worldwide, and will be responsible for our expansion
      throughout the Southeast United States, the Caribbean, Central and South
      America.


·
            In
      November 2009, Jeffrey Flannery resumed his position as Chief Executive
      Officer of the company, a position he held between 2005 and
      2007.  He has served as Chairman of the Board of Directors since
      the company’s inception.


·
            In
      December of 2009, we acquired a power generation business in New Jersey
      which gave us purchase orders, backlog and extensive customer and
      marketing relationships in New York, Connecticut and New
      Jersey.  This business has been involved in managing several
      solar installations as well as traditional engine driven power
      generators.


·
            In
      2009, we began offering 24/7 remote monitoring for our
      customers.


·
            In
      2009, we increased our products and service offerings by developing sales
      and service agreements with GE (UPS systems) and Lister Petter
      (smaller-sized diesel engines).


·
            During
      the past 12 months, we increased our sales force from 12 to
      15.


·
            During
      the past year, we increased our service department to 18 service
      technicians.


·
            We
      implemented a regional subdealer program that allows us to sign on
      qualified dealers to buy industrial sized generators from Titan
      Energy.




We are
seeking to expand our national footprint further by establishing an office in
the Western United States.  The benefit to Titan Energy would be the
ability to offer value to our customers who have facilities and operations in
this part of the nation, and the opportunity to expand our services into the
highly populated territories of California and other nearby
states.  We have identified potential candidates which could create
this Western Titan Energy office but we do not have an agreement with any of
these parties at the time of the publication of this annual report.





We plan
to expand all areas of our business through several initiatives, including
increasing our equipment sales; increasing the proportion of our revenues that
comes from recurring service contracts; increasing our business in energy
efficiency; increasing our market share in power generation through our
subdealer program and through acquisitions; improving our technology offerings
in order to create more efficient programs for our customers; expanding the
lines and types of energy saving equipment we offer our customers; increasing
our sales of renewable energy technologies and expanding the territories where
we sell these products; and becoming more involved in managing demand response
programs for our utility and end-user customers.  These initiatives
are discussed in more detail in the Strategy Section of this
report.





Background





Our management considers our role in
development and operation of the nation’s Smart Grid to be a valuable one that
can have an immediate and long-lasting impact on the function and stability of
the national electrical grid.  To appreciate how our business operates
within the complex utility industry requires some background on the electrical
power industry, the Smart Grid, and the regulatory organizations that influence
our business.





The
Electric Power Industry





According
to the U.S. Department of Energy (“DOE”), the U.S. electricity industry has
grown to more than $300 billion over the last decade.  (Source: DOE,
“The Smart Grid: An Introduction”) The electrical utility grid has not kept up
with the growth in demand for power. According to the North American Electric
Reliability Council, demand for electricity is expected to increase over the
next 10 years by approximately 18% in the United States, while generation
capacity is expected to increase by only 6%. Another way of looking at this is
that since 1982, growth in peak demand for electricity – driven by population
growth, bigger houses, bigger TVs, more air conditioners and computers – has
exceeded growth by almost 25% every year.As a result, in North
America, the margin between electric supply and demand is projected to drop
below minimum target levels over the next few years.




In
simplified terms, the utility system can be thought of in terms of three
segments: energy production, transmission and
distribution.  Utilities have been constrained in their ability to
invest in new power production plants needed to meet this projected growth by a
restrictive regulatory process, the increased burden of environmental
constraints and a lack of government and public support for long-term, major
capital infrastructure projects. This has increased the strain on the existing
electric power grid and, combined with higher costs to produce electricity, has
caused the price of electricity to increase in nearly all areas of the country,
especially during peak demand periods.


4




Challenges
at the level of production are mirrored on the transmission side of the
electrical power grid. Under-investment in the transmission infrastructure
required to deliver power from centralized power plants to end-use customers has
resulted in an overburdened electric power grid. This periodically prevents the
transport of the lowest cost power to constrained areas, which can affect
reliability and cause significant economic impact.  For example,
although a base load power plant might have sufficient capacity, if the grid is
underdeveloped for delivery, it will result in congestion on the
grid.  When there is congestion on the grid, the utility might
call upon a generating plant to operate based on its ability to alleviate the
congestion (its location).  If the called-upon generator is a peaking
plant the cost of energy will be higher.  Not only does this increase
the cost of energy during non-peak times, when a peaking event occurs the
capacity intended for peaking is already being used.




This
under-investment in generation and transmission, coupled with a dramatic growth
in electricity consumption, has led to an increased frequency of service
failures or interruptions, including brownouts (when power delivery is severely
reduced) and blackouts (when power delivery is completely disrupted), which
results in lost productivity, loss of perishable goods, and other major
problems.




This
environment of increasing demand coupled with inadequate resources has generated
a strong awareness and growing need in the marketplace for products and services
in our strategic growth areas of Emergency and Back-up Power, Power Generation
Maintenance Programs, Demand Response and Alternative Energy
Services.




Electrical
Utilities, ISOs and RTOs





We
believe that a key market for Titan Energy is the utilities, including the
growing number of co-operatives, aggregators, and independent system operators,
referred to as ISOs, and regional transmission organizations, or
RTOs.  Historically, electric utility companies were formed in North
America as regulated monopolies to manage the capital intensive, mission
critical service of delivering electricity to end-use customers.  ISOs
and RTOs have been formed in some markets to take control of the operation of
the regional power system, coordinate the supply of electricity, and establish
fair and efficient markets. In these restructured markets, utilities continue to
own and maintain their generating plants, transmission and distribution lines,
but now independent power generators and electricity suppliers are allowed to
openly compete in the market as well.





We often
work closely with utilities and cooperatives when it has come to interfacing
between a customer’s power generation systems and the electrical
grid.  We also provide energy audits and efficiency programs for the
utilities to their customers.  When it comes to demand reponse
programs we often work with the utility or cooperative to ensure that a customer
is meeting the requirements of the rate savings program that the utility
sponsors.





The
Smart Grid





While
definitions of what constitutes a Smart Grid vary, nearly all attempts to
describe the Smart Grid include one key element: the need to provide accurate and
reliable communication of information.  Through monitoring,
automated reporting and validation, we believe that the Smart Grid can begin to
have the multitude of effects that it promises to all sectors of our economy
including
greater consumer controls over energy usage, better integration of renewable
energy resources, and lower utility costs due to a lessened need for costly
infrastructure improvements.





For the
most part, the electrical utility grid that we have been referring to is not
exceedingly “smart.”  The foundation of the transmission system
consists of decade’s old technology that oftentimes requires customers to notify
the utility of power outages, costly truck rolls to read electrical meters, and
inefficient load profiles of electrical consumption. However, billions of
dollars, dozens of utilities and hundreds of companies are dedicated to finding
a way to bring a new level of intelligence, communication and efficiency to the
electrical grid.





Electric
utilities are under increasing economic, regulatory, environmental and societal
pressure to deploy open standard based smart grid technologies to more
efficiently serve their customers and the public at
large.   Likewise, the Federal Energy Regulatory Commission
(“FERC”) has been directed by Congress to adopt standards and protocols over
Smart Grid technologies and FERC has committed to implement rate treatment
policies that support investments in Smart Grid technologies.  On July
16, 2009, FERC issued a Policy Statement for development of key standards for
Smart Grid devices and systems and an interim rate.  (Smart Grid
Policy, 128, FERC ¶ 61,060 (2009))   We are enthusiastic about
the opportunities this may create for Titan and our customers.


The
economic advantages of having a more intelligent electrical grid are numerous.
The U.S. electric power system is designed to be 99.97% reliable. While this
sounds good in theory, in practice this error rate translates into interruptions
in the electricity supply that directly or indirectly cost American consumers an
estimated $150 billion a year (Source: DOE, “The Smart Grid: An
Introduction”).  Smart Grid technologies could reduce power
disturbance costs to the U.S. economy by $49 billion per year. (Source: Electric
Power Research Institute (EPRI),“Electricity Sector Framework for
the Future”)




5




The EPRI
estimates $1.8 trillion in annual additive revenue by 2020 with a substantially
more efficient and reliable grid. Delivering the electrical power generated
today by more efficient means can greatly reduce the need to build out new power
plants by between $46 billion and $117 billion over the next 20 years.
Widespread deployment of technology that allows businesses to more easily
control their power consumption could add $5 billion to $7 billion per year back
into the U.S. economy by 2015, and $15 billion to $20 billion per year by 2020.
According to the EPRI’s same report, distributed generation technologies and
smart, interactive storage capacity could add another $10 billion per year to
the U.S. economy by 2020.




Titan
Energy considers itself to be an important participant in the Smart Grid
development and implementation, a company that can contribute solutions, new
technologies and results that will benefit the utilities and customers
alike.




The
Role of Demand Response Programs




According
to the DOE, the majority of operational problems on the electrical grid occur
during times of peak loads, when the system is threatened by a demand for
electricity in a region or area that cannot be adequately supplied due to lack
of power or transmission capacity.  These periods of peak load occur
relatively infrequently, less than 1% of the time, yet are responsible for the
economic impacts of power failures as well as the utility’s need to build
additional infrastructure or buy expensive energy to meet the need during these
relatively rare periods.




It is
estimated by the International Energy Agency that over 10% of the $2.65 trillion
in electrical power infrastructure to be built between 2007 and 2030 will be
constructed specifically to meet peaks in electricity demand which occur less
than 88 hours per year. Based on these estimates, the market in North America
for reducing demand during these critical peak hours, in place of building
supply infrastructure, is $11.5 billion per year, if the need to build-out
infrastructure occurs on an equal annual basis. Using these same assumptions,
the market for eliminating the top 1% of peak demand for electricity worldwide
during this same period could be over $59.2 billion per year.  Based
on its June 2009 Congressionally-mandated National Assessment of Demand Response
Potential, FERC estimates the potential for peak electricity demand reductions
across the country to be between 38 gigawatts (GW) and 188 GW. Another industry
analyst, the Brattle Group, estimates that reducing peak demand in America by a
mere 5% would yield savings of about $66 billion over 20 years.





As the
electric power industry confronts these many challenges, demand response has
emerged as an important solution to help address the imbalance in electric
supply and demand. For example, the Energy Policy Act of 2005 declared it the
official policy of the United States to encourage demand response and the
adoption of devices that enable it.  The National Action Plan
published by FERC “aspires to maximize the amount of cost‐effective demand
response resources that can be developed and deployed in the United
States.”





Demand Response Programs
allow customers to respond to either a reliability trigger or a price trigger by
lowering their power consumption.   The customer can participate
through a utility system operator, load-serving entity, ISO/RTO, or other demand
response provider (such as an aggregator).





Dispatchable Demand Response
Programs provide direct control and allow someone other than the customer
to make planned changes in the customer’s energy
consumption.  Examples include: Interruptible or Curtailable Rate
Programs and Demand-Side Management Programs which are retail price-responsive
demand response programs offered by utilities.  Titan Energy has
extensive experience in helping its customers participate in Interruptible Rate
Programs.  Another example includes: wholesale price-responsive demand
response such as when a customer’s potential demand reduction is offered for
sale into an organized market of an ISO/RTO.  If the bid is accepted,
direction is given to reduce demand.





Non-Dispatchable Demand Response
Programs allow the decision regarding whether and when to control load
based on current information.  Examples include: Time-of-Day Rates and
Dynamic Pricing.





The most
available and productive source of Demand Response is the on-site generator.
Diesel and natural gas generators offer the largest and most available source of
immediate power.  It is likely that generators will remain the on-site
generation system of choice for many years to come.  Developments in
the design of diesel and other generators have produced a new echelon of engine
powered generators that are cleaner, quieter and more environmentally
friendly.





In fact,
the DOE has identified the distributed generation components of the electrical
grid as one of the principal areas where improved grid performance could be
almost immediately gained.  Titan Energy believes that the ability to
utilize these distributed power sources in a variety of intelligent and
controllable ways could be one of the answers to improving grid performance and
reducing the need to build additional power plants.


6




Distributed
generation assets are typically consumer owned and rely on a range of generation
technologies that deliver electricity directly to the consumer. Generators,
photovoltaic panels and small-scale wind turbines are familiar examples.
However, the most available and productive source of distributed power
generation is the on-site generator.  While it is expected that the
number of wind and solar power systems will increase, Management believes that
generators will remain the distributed power generation system of choice for
many years to come due to reliability, cost factors, availability of materials,
regional climatic factors and changing financial incentives.  At the
same time, developments in the design of diesel and other generators spurred on
by changes in the regulatory environment have produced a new generation of
engine powered generators that are cleaner, quieter and more environmentally
friendly.





Demand
response programs aimed at reducing peak load by having onsite generators
(called “peaking generators”) provide a facility’s electrical power can have
economic benefits for both the utility and the consumer.  In many
cases, peaking generators only need to run a few hours a year when the load on
the grid is at its highest, and energy costs are as high as $1000 per megawatt
hour (MWh) to generate (Source: Electricity Advisory Committee's report, “Keeping the Lights On in the New
World”). In the longer term, the use of demand response/load management
programs as a power generation resource avoids building expensive peak
generation infrastructure.





A Smart
Grid that connects distributed generation through monitoring and diagnostics
also improves asset management and can extend the life of expensive power
generation systems. At the same time, certain technologies will allow the grid
to better adapt to the dynamics of renewable energy, helping utilities and
consumers more easily access these resources and reap the benefits. Titan is
dedicated to deploying available Smart Grid applications that can achieve demand
reduction, communicate peak prices to consumers so as to allow better decision
making, and integrate consumer storage, distributed generation and smart
building controls with the goal of peak reduction and significant energy
savings.





The
Impact of Regulation and the Opportunity It Creates




Regulation by State and Federal
Government.The state and federal governments’ regulation of the energy
industry continues to advance our market opportunities.  The states
regulate the retail sales and transmission of energy to consumers, whereas FERC
protects consumers by ensuring the wholesale electric market is just and
reasonable.





The
states regulatory oversight of retail energy rates for consumers also
encompasses renewable energy and energy conservation mandates and
programs.  Interruptible rate programs, offered by utilities and
regulated by each state’s Public Utility Commission, or other state regulatory
agency, have increased the payback for our customers who choose on-site
generation.   These rate programs and our ability to work with
the utility on behalf of a customer provide us with a substantial strength in
marketing our on-site generation products.





FERC’s
regulation of the wholesale electric market includes sales and transmission of
electricity in interstate commerce, and promoting safe, reliable and efficient
energy infrastructure.  In The Strategic Plan FY 2009-2014
(September, 14, 2009)FERC identifies key strategies which include the
Smart Grid, Demand Response, and Renewable Resources.





Regulation of Power Engines and
Emission.In 1996, the Environmental Protection Agency (EPA) introduced
new emission standards aimed at non-road mobile diesel engines including onsite
stationary power generators. To be phased in over a four-year period beginning
January 2007, these regulations require the new diesel engines which power these
generators to comply with a tiered timing structure of emission allowances.
Based on the system’s engine horsepower rating, generators are rated from Tier 1
to 4, with most non-emergency diesel engine generators required to arrive at
Tier 4 by 2012. Tier 4 requirements are the most stringent.





Beginning
January 1, 2011, the EPA will introduce the next phase of its Tier 4 emissions
control regulations. The regulations limit emissions of oxides of nitrogen,
particulate matter, hydrocarbons and carbon monoxide. Non-emergency diesel
engines less than 10 liters per cylinder and greater than 175 hp will be
required to meet Tier 4 regulations. The term “non-emergency” is very important
in this context. Essentially, if an installation is classified as emergency, the
power generator must not run unless the primary electrical power source is not
available. However, owner/operators are allowed to run their
emergency-classified power generators up to 100 hours per year for maintenance
and testing. There is no current limit for run time during an emergency or power
outage. The challenges facing the electric power industry are unique in a number
of areas, particularly with the larger power generators, where regulations
focus on reducing nitrogen oxide emissions from generator sets by 90
percent, compared to a 45 percent reduction for other equipment
types.


Since the
Tier 4 emissions levels are so low, the EPA decided that emergency standby
generator sets, which by their nature run very few hours per year, would be
exempt from Tier 4 regulations, including any associated after-treatment.
Furthermore, the EPA states that emergency standby applications can utilize
current Tier products such as today’s Tier 2 and Tier 3 offerings. The list of
applications that will require Tier 4 certified generator sets in 2011 are as
follows:  non-emergency standby units, prime power applications, load
management/peak shaving and electric power rental units.  These
include nearly all generators that would be deployed in a demand reduction or
load management type of program.


7
  In
addition to these federal standards, there are state and local regulations that
may force the use of Tier 4 generator sets in 2011 and beyond. In 2011, the
State of California will most likely have emissions regulations requiring the
use of after-treatment on all standby generator sets including emergency units.
As a result it is estimated that the vast majority of standby generator
sets sold into the State of California beginning in 2011 will be Tier 4.Along with California,
some regions and localities have stationary emission limits far more stringent
than EPA diesel engine tier levels including: the New England states; Atlanta,
Georgia; and Houston, Texas. The result is that diesel-fueled generator sets
deployed in these areas, even if certified to the appropriate EPA tier level,
may not meet local requirements.





While
good maintenance has always been among end-user best practices, the new
emissions regulations now imply that maintenance will be larger part of
compliance. Although the regulations are not explicit, the EPA requires a diesel
power generator to remain in compliance throughout its defined useful life, and
that normal maintenance is the only way to accomplish this. This may also
include record keeping, validation and other compliance measures which could be
audited.





Diesel
engine manufacturers will bear the burden of testing their diesel engines and
certifying them according to EPA guidelines. However, owner/operators have a
great deal of responsibility to understand how the regulations affect power
generator availability, how installations are classified, as well as the
record-keeping and maintenance requirements. Many companies in the standby and
demand reduction industry are rightfully concerned about the impact these new
standards will have on their respective businesses.  In effect, Tier 4
will likely increase the expense, lower profitability, and lengthen returns on
investment for both back-up power and demand reduction providers and
consumers.  However, these new requirements have long been anticipated
and the major generator engine manufacturers have been announcing their
technological answers to Tier 4 standards and more solutions are becoming
available both for new engines as well as for aftertreatment options. Management
believes that engine design and engineering will solve many of these problems
and that suitable solutions to its business applications will be available and
affordable.





At the
same time, we believe that this change in emission policy could bring
significant opportunity for Titan Energy.   We believe that the
need for emergency power and demand reduction is not going to lessen and the
costs of not having power or the ability to support our ailing grid are too
high. We feel that we have alternative equipment technologies that will satisfy
Tier 4 standards, solutions such as natural gas engines and smaller diesel
units arranged in parallel configurations.  We also believe that there
will be a greater need for our maintenance and service programs as this will be
a requirement of the owners/operators.  Finally, we believe that Titan
Energy could benefit from providing the monitoring and validations
technologies which will allow for improved operations and compliance with the
new regulations.





Titan Energy
Solutions





We
provide our products and services across four strategic business areas:
Emergency and Back-up Power Solutions, Power Maintenance Programs, Demand
Reduction Solutions and Renewable Energy Technologies, although we operate in
one business segment.





We
operate our business in the industrial and commercial sectors of the US
economy.  According to a study by McKinsey & Company (“Unlocking Energy Efficiency in the
US Economy”), the industrial sector accounts for 51% of the end use
consumption and 40% of the end use potential for energy
efficiency.  The commercial sector consumes 20% of the end use energy
and offers 25% of the efficiency potential.  Electricity represents
the major share of consumption in this sector.  Therefore, the
industrial and commercial sectors combined represent more than 75% of the energy
market as well as the greatest potential for creating energy efficiency results
for every dollar invested in energy efficiency.





Our Emergency and Back-up Power
Business





According
to the DOE, power failure is responsible for $150 billion in annual losses in
the U.S (Source: “The Smart
Grid: An Introduction”).  There are many industries which
simply cannot afford to lose power for any length of time for economic
reasons.   The table below illustrates the economic damages
across several industries:





Cost of One-Hour Power Service
                                Interruption in Various
                                Industries
                              
                              Average Cost of
                                1-Hour of InterruptionCellular
      communications
                              
                              $
                              41,000Telephone
      ticket sales
                              
                              $
                              72,000Airline
      reservation system
                              
                              $
                              90,000Semiconductor
      manufacturer
                              
                              $
                              2,000,000Credit
      card operation
                              
                              $
                              2,580,000Brokerage
      operation
                              
                              $
                              6,480,000Source:
      U.S. Department of Energy




8


OurEmergency and Back-up Powerbusiness provides customers with electrical power generation
equipment to be used primarily during a power outage or
emergency.  Titan Energy offers a complete turn-key solution to help
companies avoid costly power outages as well as ensure uninterrupted
operations during times of emergency. We help design, engineer and install the
power equipment needed by each customer.  In 2009, sales of power
generation equipment accounted for $7.7 million, or 72%, of our
business.  We operate as an exclusive dealer (10KW and above) for
Generac Power Systems in five Midwestern states, and a Power Partner dealer
(10KW to 600 KW) for MTU Onsite Energy in Florida.  We also sell
switchgear, UPS and related equipment used to support our customers’ power
generation systems.





We
believe that our market potential is further influenced by regional
factors.  All areas of the United States are subject to failures of
the electrical utility grid and the resultant interruption in power, unstable
power and greatly increased energy prices during peak periods.  Some
areas, however, are more susceptible to power problems.  Our
opportunity in some areas of the country is increased due to the occurrence and
frequency of storms and other natural disasters.  Florida is a key
example of a state that frequently needs to respond to power outages due to
hurricanes and high winds.  Other areas of the country experience
brown outs and black outs due to heavy snow and ice storms, floods and other
natural catastrophes.  Customers in these regions of the U.S. include
grocery stores who must maintain power to keep produce chilled or frozen, gas
stations and toll booths that must remain operational during time of emergency,
bank and financial institution that require constant online capabilities, health
care institutions, public buildings, government buildings and many other
businesses.





Federal,
state and regional regulations also impact our opportunities.  Some
industries are nationally mandated to have adequate emergency and back power due
to the nature of their services; hospitals and critical care facilities, and
financial institutions are a few such examples.  Some states have
placed mandates across additional industries due to the frequency of natural
disasters and other factors.  In Florida for example, gas stations
must have power back-up systems, as well as apartments, schools and many other
public buildings.




Our
Power Maintenance Programs





Power
generation systems represent considerable investments that require proper
maintenance and service in order to operate when required during a time of
emergency or during a demand reponse request. Titan Energy’s Power Maintenance Programs
offer maintenance, repair and support service for our customers’ power
generation systems.  In 2009 these annualized contracts contributed
$3.0 million (28%) of our gross sales revenues.  To support our
customers, we maintain warehouses of inventory and parts, a fleet of service
trucks and a staff of 18 trained service technicians in both the Midwest and
Florida. Titan Energy is committed to utilizing advanced communications and
network technologies to improve service.  We offer a monitoring
system that provides 24/7 real time access to a customer’s power generation
system.  With remote monitoring and communication controls, we can
better manage a customer’s energy assets, maintain their compliance in an
interruptible rate program with a utility, and identify potential issues with a
company’s power generation systems before a more serious problem
occurs.




We expect
our service business to grow considerably in the coming years. With every new
generator we sell, we usually sign a service contract for one to five years in
term-length. However, our market potential is not defined solely by the
generators we sell.  An increasing number of our service customers are
facilities that have acquired generators from our competitors but sign up with
Titan Energy for their service needs.





9




Because
we are able to service facilities far outside our sales territories, we believe
that our potential market could be much broader than the areas where we have
offices.  In addition, this does not take into account the fact that
we also service numerous cellular transmission towers, highway toll booths and
direction signs, and government and institutional facilities, which may not be
included in these estimates.  And as new regulations make energy
back-up systems even more expensive and require maintenance and performance
records on generation equipment, we believe that customers will be more likely
to adopt preventive and maintenance programs so as to protect their investment
and comply with the regulators.  Taking all these factors into
consideration, we believe the market opportunity for Titan Energy Power
Maintenance programs could be more than $500 million per year.





Our
Demand Response Business





Our Demand Responsebusiness is
responsible for managing the power generation assets of our customers in
utility-sponsored programs that lessen demand during peak periods and lower
utility rates for participating customers. When used at specific times, onsite
generators can significantly reduce peak loads and reduce energy expenses for
industrial and commercial customers in areas where utilities offer reduced rates
for participation in peak load reduction programs.




Our
services provide assistance to reduce electric demand during periods of peak
demand using onsite generation to shift load off the electrical grids and
thereby preventing grid failures. By improving grid reliability and efficiency,
we delay the need for construction of new electrical generating plants. In
effect, all consumers of electricity benefit from our demand response
activities. We
enter into management contracts with commercial, institutional and industrial
customers to help them negotiate and comply with utility sponsored programs for
demand reduction.


We
believe that the market opportunity is significant and will remain so as demand
response programs, operational efficiency and energy savings are given increased
priority by commercial, institutional and industrial end-users of electricity,
and as energy market prices remain volatile. Titan Energy generates revenues in
various ways from this program:  the sale of power generation
equipment, service and maintenance contracts for the equipment after
installation, and separate monitoring and management fees for helping the
customer comply with the utilities and the regulatory agencies. We believe that
our experience with industrial generators, our established relationships with
utilities and ability to integrate new communications technology to support
demand response programs uniquely position Titan Energy in this business
segment.





Our
Renewable Energy Business




From
all levels of government, national to regional, demands are being made for
renewable power generation technologies, such as solar and wind power, to begin
replacing our dependence on traditional power generation.Most
U.S. states have adopted goals to generate between 10% and 30% of their
electrical energy by the year 2030 from alternative or renewable energy power
sources, an effort that will require billions of dollars of new investment in
equipment and systems (Source: M.J. Beck Consulting “The RPS Edge” March 2010)




At
the same time that energy efficiency programs are targeting existing and
traditional power generation systems, the same institutions are creating
mandates and distributing considerable financial support to the establishment
and deployment of renewable energy power generation technologies, such as wind
and solar power.  Again, the administration is leading the way by
mandating that by the year 2020, 20% of all energy production in the U.S. be
produced by alternative energy sources.  Regional and state
governments such as New York have been particularly progressive in demanding
through legislation and supporting through incentives the deployment of more
wind and solar powered generation system.




Renewable Energy Business


10





We are
able to design, engineer, install and manage solar, wind, fuel cells as well as
the traditional natural gas and diesel engine generators systems.  In
fact, management believes that there will be greater demand for mixed source
power generation systems in the near future and we are preparing our systems and
technologies to be able to work with all these future scenarios.





Our Products and
Services





Emergency
and Back-up Power Generation Systems





We
provide a variety of customers with power generation equipment that can range
from 5kW to several MegaWatts, depending on their needs and
applications. We also provide the transfer switches, UPS systems and other
necessary equipment to create dependable power generation systems.  We
currently represent several brands of generator manufacturers. In some areas of
the country, we have exclusive distribution and service territories for certain
manufacturers.




Generac Power Systems Generators.In the Midwest, through our Titan Energy Services, Inc. (TESI)
subsidiary, we are an authorized dealer for Generac Power Systems, Inc.
(“Generac”) generators and other products in four Midwestern states. TESI
provides products to protect a company’s critical equipment from over/under
voltage or outages, transient surges and harmonic distortion. TESI provides a
full line of power generation equipment for all kinds of applications, in both
diesel and natural gas options. The Generac brand features fully
integrated power generation systems that include industrial, commercial, and
residential generator sets, as well as automatic transfer switches, controls,
fuel tanks and enclosures. For higher kilowatt requirements, Generac’s
Modular Power System (“MPS”) utilizes multiple diesel or natural gas generators
in various side-by-side arrangements that match the power output of large single
engine units.  The MPS system is based upon diesel fueled units of
400, 500 or 600 kW working in concert to offer outputs ranging from 800 to 6000
kW, and natural gas units of 100 to 300 kW with combined outputs of 200 to 3000
kW.




Many of our customers are seeking
“greener” solutions for stand by and emergency power generation. The new Generac
Bi-FuelTM configuration provides a number of alternative energy options. This
technology uses a combination of diesel and natural gas to take advantage of the
best qualities of each fuel (more power from diesel, lower emissions from
natural gas). Bi-Fuel configurations are available for both stand-alone and MPS
applications.  Single-engine units are available at 300 and 375 kW
output, while Gemini Twin Pack modules are rated at 600 and 750 kW. MPS versions
can be combined as needed to achieve numerous power outputs up to 3750
kW.  While operating under load, Bi-Fuel units can operate on up to
90% natural gas. If conditions dictate, the unit can revert to 100% diesel fuel
with a no break automatic fuel changeover. The on-site diesel fuel tank required
for Bi-Fuel units can also be smaller, if desired, to save space and
cost.





Management
believes that the MPS units and in particular the natural gas units offer
affordable solutions to some of the new regulations such as Tier 4 requirements
which are currently impacting the use of diesel engine generators in demand
reduction programs.  For more on this, please refer the Section on
Regulatory
Issues.





MTU OnSite Energy Generators.Our Grove Power subsidiary is a factory-authorized Power Partner
dealership for Florida.  In the Northeast, we are a subdealer. In
these territories, we offer a complete line of MTU Onsite Energy diesel,
natural gas, and propane generator sets, including digital engine and generator
controls which provide UL2200 listing for both standby and prime power
applications. The MTU (Detroit Diesel) engine line-up is a class of products
recognized and accepted throughout North America and the international market
place.




·
            Diesel
      generator set ratings range from 20 kW to 3250 kW, using John Deere and
      MTU (Detroit Diesel) engines.


·
            Gas
      generator set ratings range from 20 kW to 400 kW, using GM and Doosan
      engines.




Lister Petter Products.The
Lister Petter series of generators provide clean stable power with very steady
voltage and frequency output. The Alpha SeriesTM engines
are extensively used in generator sets with tens of thousands of installations.
Lister Petter’s strength is manufacturing small 6-30kw long run diesel engine
generator systems.  Where a region such as the Caribbean has a lack of
natural gas and unstable utility power this product is in high
demand.





Transfer Switches and
Switchgear.ASCO Power Technologies and General
Electric-Zenith offer automatic transfer switches and paralleling switchgear,
ranging from 40amp to 4000amp, in 2, 3, and 4 pole
configurations.


11





Uninterruptible Power Supply (UPS)
Systems–The
Digital Energy General Electric (GE) UPS Series was developed using GE’s “Design
for Six Sigma” methodology to ensure that the product fully meets customer
requirements and expectations.  They manufacture systems from 10 -750
KVA.  The UPS system is designed to provide seamless power during any
utility fluctuations or loss of power. The UPS system provides battery backup
power until an emergency backup engine generator comes online.  Once
the engine generator is producing proper voltage and frequency, the UPS switches
the building load onto the engine generator.  This provides the
highest degree of protection typically used by data centers, banks and credit
card companies.





Renewable
Energy Technologies




While
influenced heavily by rebate and incentive programs, we have seen an increased
interest and demand for solar technology solutions from our commercial
customers, sometimes as a standalone power generation solution, other times as a
mixed source solution.  We work with established wholesalers who have
volume purchase agreements with several manufacturers.  This way, we
are better able to meet the particular needs of a customer or
application.  In general we provide the project management for these
solar installations, working with third-party engineers and installers to
complete the project for our customer.




While we
have not completed any installations in other areas of renewable energy, our
management does have extensive experience in combined heat and power (CHP), wind
turbines and fuel cell technologies and we feel prepared to take on these
opportunities as they become more available in the future.




Maintenance
and Service Programs




Titan
Energy recognizes additional revenues from service contracts, installation and
maintenance services for its customers and owners of power generation equipment.
We offer service contracts and support to all generator owners. The service
contracts yield higher margin as compared to equipment sales and help support
our effort to achieve profitability. These service contracts may also include
remote monitoring services which allow owners to be informed of the condition
and operations of their equipment at any time and from any place. With terms
ranging from one to five years, service and remote monitoring contracts are
providing the Company with recurring revenues.





We
provide factory trained technicians with parts and manuals in their trucks and
in our warehouse, all to accomplish the most responsive and proficient service
available. We believe that our services have the following specific
advantages:





·
            Factory trained
      technicians. No other organization has Generac, MTU Online Energy,
      Lister-Petter, ASCO Power Technologies and GE-Zenith factory trained
      technicians. All Titan Energy technicians attend factory training on
      regular intervals.





·
            Warranty. As the
      authorized distributor, only Titan Energy can perform warranty work on the
      manufacturer’s products.





·
            Service Manuals and technical
      documents. As the exclusive Industrial Distributor in certain
      territories, we are the only company that has these technical documents to
      provide the necessary service. Any other organization must get these from
      us.





·
            Parts. To meet the
      needs of our customers quickly and efficiently, we inventory the common
      service items in our warehouses and in our trucks, so as to avoid the need
      and expense to special order from another
  source.





Strategy





Currently,
Titan Energy specializes in providing industrial, commercial and institutional
customers with the power generation equipment and energy management solutions
that enable our customers to maintain critical operations during a grid failure
and to better manage their energy usage and save money.  We have
extensive experience in integrating onsite power generation equipment with the
needs of the local electrical grid and utility based programs.  We
believe that our knowledge of key technologies, our network of offices and
service centers in more than 12 key states, our expanding base of more than
1,000 customers including several Fortune 500 companies, and our established
working relationships with utilities across the country are all key factors that
position Titan Energy to capitalize strongly in the energy management and Smart
Grid arena.





Our
strategy is to capitalize on our growing national footprint of sales and service
centers, our scalable technology platform and our market position to continue
providing intelligent energy solutions to commercial, institutional and
industrial customers and utilities. Ultimately, our aim is to become one of the
leading energy management solutions provider for commercial, institutional and
industrial customers throughout the United States.





We plan to grow significantly as a
company over the next several years through the development and successful
implementation of the following business initiatives:


12





Expansion
of Our Power Generation Sales in Existing Territories





Sales of
power generation and associated equipment would provide the company with
significant revenues and create opportunities for Titan Energy to develop long
term customer contracts for service and in some cases demand reduction
programs.  These sales also create opportunities for us to deploy our
monitoring and communication technologies, services that generate recurring
revenues and stronger profit margins.  We plan to grow our Equipment
sales in the following ways:





Expand Equipment Sales Through
SubDealer program.  Titan Energy plans to expand its Subdealer
program in all of Titan Energy’s existing territories where it has an exclusive
relationship with a manufacturer.  Subdealers are independent sales
and service companies that are authorized by us to market, sell and service our
line of power generation equipment.  Subdealers are generally paid a
commission on sales.  There are several potential subdealers in our
current territories.  We believe this could give us the ability to
double our equipment and service sales through this program alone.





Expand Sales into Underrepresented
Territories.We have identified
several key territories that we believe offer great opportunity for high margin
equipment sales including: the Caribbean, Central America and South
America.





Web based Sales.We will seek to expand
our ability to offer web based sales of equipment and parts through the
development of a sophisticated online ordering system.




Expansion
of Our Operations Into Other Key Geographical Territories




We also
expect to expand our addressable market by pursuing opportunities in new
geographic regions in North America and beyond.  We have been able to
further our relationships and increase our revenues with a number of major
customers due to our ability to service customers across several regions of the
United States.  This expansion would take place primarily through
acquisition of established, accretive operations in these
areas.  Management is currently in discussions with a number of
possible acquisition candidates although to date no definitive agreements have
been signed and we cannot assure you that any definitive agreements will be
entered into.





Expansion
of Our Power Maintenance Programs





Our
Maintenance and Service programs usually involve recurring revenues and offer us
higher margins than equipment sales.  Therefore, we are focused on
aggressively increasing the number of these contracts throughout our territories
and expanding the number of national accounts that allow us to service multiple
facilities for a customer throughout the United States. We will seek to
accomplish this expansion in the following ways:





Expand Our Service Sales
Force.We
believe we have the internal capacity to expand our service sales in the Midwest
and Florida, where we have established operations, without adding significantly
to our administrative or overhead expenses.  We also plan to open
service sales operations in additional territories such as New York, New Jersey
and parts of the Midwest where we do not currently have service
operations.





Sub Dealer Program. Through our subdealer
program in the Midwest, we expect to acquire relationships with a number of
established companies that could also offer us additional service
opportunities.  As with equipment sales, the cost of new service
contracts through our subdealer program is minimal and, as an exclusive dealer
in these territories, we are the only authorized service provider for the
industrial line of products.





Strategic Acquisitions.We have identified
several potential acquisition candidates that provide quality power generation
service in strategic areas for Titan Energy.  We intend to pursue
these acquisitions but we have not signed any definitive agreements at this time
and we cannot assure you that we will be able to enter into definitive
agreements in the future.





Expansion
of Our Renewable Energy Business





We
believe renewable energy technologies and services could play a large role in
Titan Energy’s future growth as the technologies become more affordable and
effective and mandates require the continued installation of solar, wind and
other renewable energy power generation sources around the U.S. We believe that
our broad geographic reach, sales offices in key population areas and
professional team of experienced technicians that are available 24/7 are key
incentives for renewable energy companies to work with us.


13





Expansion
of Our Energy Efficiency Programs




The
demand for qualified energy auditors is increasing in many regions of the
country as buildings and facilities are being required to meet new energy
efficiency standards.  Many utilities in our service areas are seeking
to hire qualified third party auditors to provide energy audits for their
industrial and commercial customers.  Titan Energy has extensive
experience and trained personnel to provide these audits and has established
agreements with certain utilities in the Midwest to begin offering these
services.  We belive that we can offer a total solution to energy
efficiency: we can provide technical audits, provide energy savings solutions,
help customers understand and benefit from various government and utility
sponsored programs to reduce energy usage, help match up a customer with more
advantageous utility programs, and obtain and install traditional and/or
alternative power generation systems so as to take advantage of available
financial incentives.




We plan
to expand this program in the Midwest as well as in New York, New Jersey,
Florida and other areas through the following initiatives:




Sign on with Utilities as Energy
Auditors.Target utilities that
have existing energy audit and efficiency programs in our key
territories.





Expand Energy Audit Sales
Force.Recruit, train and
deploy accredited energy auditors in each or our service areas. Develop
relationships with established energy efficiency companies to provide audit
services for Titan Energy.





Expand into Additional
Territories.Open offices and
develop a contractor program to work with the major utilities and energy
organizations in each region.





Expansion
of Our Demand Response Programs




Management
believes that onsite distributed power generation systems offer an
under-utilized resource for solving problems related to congestion and failure
on our electrical power grids. These programs are also of potential economic
benefit to the customers who participate.  According to the DOE, less
than 5% of the potential power available from distributed generators are being
utilized to support our electrical power grid and that utilizing only 5% of this
potential would save the U.S. economy more than $40 billion per
year.





As more
Demand Response Programs are developed and offered, we believe that we are well
suited to help customers participate in these programs.  Customers
with very small generators will be able to participate through an
Aggregator.  We believe that savvy customers will want to take
advantage of the potentially more lucrative programs of the wholesale
market.  Titan Energy will seek to expand its role in the demand
response industry by providing a full range of load management services to our
industrial and commercial customers. Our services will allow our customers to
utilize incentives to reduce electric demand during periods of peak demand using
onsite generation to shift load off the electrical grids and thereby preventing
grid failures. By improving grid reliability and efficiency, we delay the need
for construction of new generation plants. In effect, all consumers of
electricity could benefit from our demand response activities. We plan to enter into
contracts with commercial, institutional and industrial customers to help them
negotiate and comply with utility sponsored programs for demand reduction. We
will support these programs with the ability to install new equipment, maintain
existing power generation systems and advanced communications and control
technologies. We believe we can attain good growth within our current customer
base as well as through establishing these programs with new customers in our
service territories.





In
addition, we are committed to the development, implementation and broader
adoption of technology-enabled demand response solutions. This technology
enables us to continuously monitor remotely, deliver and receive alerts, send
control signals to, and receive bi-directional communications from an
Internet-enabled network of dispersed end-use customer sites.  With
this technology we can better coordinate requests from utilities as well as
manage, monitor and remotely maintain our customers’ generators.  We
believe that improved communications and network technologies will increase our
opportunities in the demand response industry by giving us the ability to offer
a more efficient and responsive service to a broader range of potential
customers.


14





Increase Sales of Technology-Enabled
Energy Management Solutions





At Titan
Energy, we believe literally in the maxim: “You can’t manage what you can’t
measure.”  One of our goals is to develop and expand the use of more
effective monitoring and communication technologies that will allow us to better
measure and so manage our customers’ energy assets.  We plan to
develop these programs through internal development and acquisition of key
companies and/or technologies. The result of utilizing these technologies could
be greater efficiencies in managing customer assets, greater revenues through
the deployment of recurring revenue service programs, and lowered costs due to
less need for technicians to manually monitor and service
equipment.




Key
systems we plan to offer include:




Remote, Automated, On-line
Monitoring Systems.We plan to expand
the capabilities of this technology and make it available to a greater number of
our customers as part of our services and maintenance program.





Metering
Systems.   We have identified a number of metering systems
that provide onsite monitoring and information to consumers.  We are
currently working with a number of end users to determine the validity, efficacy
and pricing for these newer series and hope to move into commercial
implementation later in 2010.





Online, Automated Reporting
Services.  As the need increases for detailed, real-time
information about generator operations and efficiencies due to regulatory and
other factors, we intend to provide the reporting and management programs that
will allow our customers to more easily and cost-effectively comply with
regulators.





Capitalize
on Emerging Legislation





The need
for demand reduction, energy efficiency and smart grid capabilities has been
endorsed by the federal government with the passing of the 2007 Energy
Independence and Security Act, which included a smart grid provision allocating
federal funds to smart grid projects, and mandating all utilities look at smart
grid alternatives prior to building additional generation capacity. The
provisions of this Act were strengthened by the passing of the American Recovery
and Reinvestment Act passed in February 2009 which is intended to inject
billions of dollars into the development and deployments of energy efficiency
technologies. It is our intention to pursue opportunities created by federal and
state legislation to promote energy efficiency, demand reduction and smart grid
technologies and wherever possible to seek financial support for the development
and deployment of our new technologies.





At the
same time, there have been critical changes in the regulations governing power
generators and emergency power systems.  We believe that these changes
in emissions policy, while posing challenges to everyone in the industry, also
bring significant opportunity for Titan Energy.  The need for
emergency power and demand reduction is not going to lessen.  The
costs of not having power or the ability to support our ailing grid are too
high. We feel that we have alternative equipment technologies that will satisfy
Tier 4 standards, technologies which offer solutions such as natural gas
engines and smaller units arranged in parallel configurations.  We
believe that there will also be a greater need for our maintenance and service
programs as this will be a requirement imposed on the owners and
operators.  We believe that Titan Energy will benefit from the
monitoring and validation technologies which will allow for improved operations
and compliance with the new regulations.





Operations





As of
December 31, 2009, we had 49 employees. None of our employees is covered by a
collective bargaining agreement, and we have not experienced any work stoppage.
We consider our relations with our employees to be good. Our future success is
dependent in substantial part upon our ability to attract, retain and motivate
qualified management, technical, marketing and other personnel.





Our
operation comprises several functionally distinct sub-groups: Executive,
Customer, Sales and Services.





Executive
Operations





Executive
operations primarily deal with the roles and responsibilities that we have as a
publicly traded company.  This involves general fiduciary and
operational oversight, compliance with SEC auditing and reporting requirements,
meeting with our Board of Directors, as well as shareholder and investor
relations.  Currently we have three individuals in executive
operations: our Chief Executive Officer, Chief Financial Officer and Chief
Operational Officer.





Customer
Operations





Customer
operations are responsible for all project management, hardware installation,
and on-going customer relationship management. The 8 members of this group
include project managers, accounts receivable and accounts payable personnel,
warranty specialists, accounting directors and assistants and administrative
support. Five of these individuals are located at our Minneapolis office, two in
Florida and one in New Jersey.





15




Sales
Operations





As of
December 31, 2009, our sales team consisted of 15 employees. We organize our
sales efforts by product type.





Our commercial and industrial sales
group sells power generation equipment to commercial, institutional and
industrial customers. Our commercial and industrial sales group is located in
major electricity regions throughout the United States, including New York,
Florida, and the Midwest. In each of these territories, we have a general
manager, who reports to our Chief Operating Officer.





Our
service sales department sells maintenance and repair service contracts to
industrial and commercial customers which have power
generators.  These contracts can vary in term from one year to as many
as ten years. In many cases, our service sales teams follow up on sales of power
generators from our industrial sales group, while also pursuing service
contracts with customers which own power generation equipment from other
suppliers. We have service sales personnel in the Midwest and in
Florida.  These people report to the General Manager in each of these
areas.





Service
Operations





Titan
Energy prides itself on the quality, training and commitment of our Service
Department.  We feel that delivering timely, quality service to our
customers is the best way to maintain loyalty and generate new
sales.





Personnel –We have a total
of 18 service technicians located in the Midwest and Florida.  Three
of these people have received advanced training and instruction on power
generation systems and related equipment and have been certified as master
technicians by our manufacturers.  All technicians are required to
receive on-going training and education through programs offered by our
manufacturers.





Trucks and Service Vehicles –
we have a total of 18 modern service trucks which carry more than $360,000 of
equipment, parts and tools.  Since some of our customers are located
in remote areas, our trucks must be properly equipped to complete a job while on
site.





Equipment – we also have
numerous special tools and equipment which are necessary to perform our duties
as service technicians for these sophisticated power generation
systems.  These tools include load banks, fuel cells for refueling,
fluke meters, infrared scanners, warranty kits, and all tools required to work
on electrical and mechanical systems that make up a power generation
system.





Technologies – we offer
remote monitoring systems which allow us to place a monitoring device on a power
generation system and transmit data from that equipment to our offices where
systems can be monitored 24-hours a day.  These systems can also be
used to remote start power generation equipment and perform various tests which
help indicate the equipment’s status.





Inventory — Titan Energy
carries approximately $900,000 in inventory.  We have nearly $300,000
in inventory at our Florida facilities, a number which can increase if there is
a presence of threat of major storms in the area.





Warehouses – we have
warehouses in Minneapolis, Minnesota; Ankeny, Iowa; Omaha, Nebraska; and Miami,
Florida.




Competition




We
face intense competition in all of our business segments, strategic growth areas
and business units.




In our
Emergency and Back-Up Power business, we face competition from larger more
established companies that represent Caterpillar, Cummins, Kohler and other
smaller equipment manufacturers. We believe we offer power generators that in
many cases feature improved capabilities, such as better and more automated
control systems, more fuel alternatives, including cleaner burning natural
gas, and greater redundancy features.




In our
Power Maintenance business, we face some competition from manufacturers of power
generation equipment as well as electrical contractors and small companies that
specialize in service of power generation equipment.  Management
believes that we offer a higher level of service, provided by better trained and
more professional service technicians.  We also believe we offer
technological service tools such as remote monitoring and controls that improve
our service offerings and allow us to act proactively in more
cases.




In our
Energy Efficiency business, we compete with numerous small energy auditors,
energy efficiency companies, and electrical contractors.  We believe
that not all of these companies have the same level of experience with power
generation or utility programs as we do. Few of these competitors provide the
full range of services that Titan Energy does.


16




In our
Demand Reduction business, several companies are also becoming leaders in
uninterruptible power supply system technology, and companies developing and
marketing their proprietary smart grid technologies are also potential
competitors. To a lesser extent, we face competition from small regional
electric engineering firms that specialize in the engineering aspects of the
distributed generation. We believe that we have engineered a solution for
demand reduction programs for industrial and commercial customers, a solution
that offers reliability, reduced costs and improved operational
qualities.




In our
Alternative Energy business we face competition from many companies that
specialize in alternative and renewable energies and have larger marketing and
advertising budgets.  We work with what we believe are the most
diverse and advanced solar technologies, as well as wholesalers that have more
competitive pricing on solar panels and equipment, and so we believe we can
offer better and more customized solutions to best meet our customers’
needs.




Overall,
the markets for our products, services and technologies are competitive and are
characterized by rapidly changing technology, new and emerging products and
services, frequent performance improvements and evolving industry standards. We
expect the intensity of competition to increase in the future because the growth
potential of the energy market has attracted and is anticipated to continue to
attract many new competitors, including new businesses as well as established
businesses from different industries. As a result of increased competition, we
may have to reduce the price of our products and services, and we may experience
reduced gross margins, loss of market share or inability to penetrate or develop
new markets, any one of which could significantly reduce our future revenues and
adversely affect our operating results.




We
believe that our ability to compete successfully will depend upon many factors,
some of which are outside of our control. These factors
include:


•
              the
      performance and features functionality and benefits of our, and of our
      competitors’ products and
services;




•
            the
      value to our customers for the price they pay for our products and
      services;


•
              the
      timing and market acceptance of new products and services and enhancements
      to existing products and services developed by us and by our competitors,
      including the effects of environmental initiatives on new technologies and
      customer preferences;




•
            our
      responsiveness to the needs of our
customers;




•
            the
      ease of use of our, and of our competitors’ products and
      services;




•
            the
      quality and reliability of our, and of our competitors’ products and
      services;




•
            our
      reputation and the reputation of our
  competitors;




•
            our
      sales and marketing efforts;




•
            our
      ability to develop and maintain our strategic relationships;
      and




•
            the
      price of our, and our competitors’ products and services, as well as other
      technological alternatives in the
marketplace.




We
believe that in many of our markets we have established ourselves as a niche
supplier of high quality, reliable products and services and, therefore, compete
favorably with respect to the above factors, other than price. We do not
typically attempt to be the low cost provider. Rather, we endeavor to compete
primarily on the basis of the quality of our products and services. In order to
be successful in the future, we must continue to respond promptly and
effectively to the challenges of technological change and our competitors’
innovations. We cannot provide any assurance that our products and services
will compete favorably in the future against current and future competitors
or that we will be successful in responding to changes in other markets
including new products and service and enhancements to existing products and
service introduced by our existing competitors or new competitors entering the
market.





Many of
our existing and potential competitors have better name recognition, longer
operating histories, access to larger customer bases and greater financial,
technical, marketing, manufacturing and other resources than we do. This may
enable our competitors to respond more quickly to new or emerging technologies
and changes in customer requirements or preferences and to devote greater
resources to the development, promotion and sale of their products and services
than we can. Our competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to potential employees, customers, strategic partners and suppliers and
vendors than we can. Our competitors may develop products and services that are
equal or superior to the products and services offered by us or that achieve
greater market acceptance than our products do. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to improve their ability to
address the needs of our existing and prospective customers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share or impede our ability to acquire market share in new markets. Increased
competition could also result in price reductions, reduced gross margins and
loss of market share, and the inability to develop new businesses. We cannot
provide any assurance that we will have the financial resources, technical
expertise, or marketing and support capabilities to successfully compete against
these actual and potential competitors in the future. Our inability to compete
successfully in any respect or to timely respond to market demands or changes
would have a material adverse effect on our business, financial condition and
results of operations.


17





Regulatory
Issues





Our businesses and operations are
affected by various federal, regional, state, local and foreign laws, rules,
regulations and authorities. While to date, our compliance with those
requirements has not materially adversely affected our business, financial
condition or results of operations, we cannot provide any assurance that
existing and new laws and regulations will not materially and adversely affect
us in the future. Likewise, as promising as we hope some of the new regulations
are for Titan’s business, it is possible that those opportunities may not come
to fruition.  At this time we cannot assess the impact that the new
stimulus package adopted by Congress in February 2009, the American
Recovery and Reinvestment Act, will have on our business and operations or on
our competitors.  Nor can we assure results from the National Action
Plan for Demand Response or dynamic or real-time rates.





Regulation of Electricity.
Rules and regulations within the electricity markets impact how quickly our
projects may be completed, could affect the prices we can charge and the margins
we can earn, and impact the various ways in which we are permitted or may choose
to do business and, accordingly, our assessments of which potential markets to
most aggressively pursue. The policies regarding our distributed generation
solutions, safety regulations and air quality or emissions regulations, which
vary by state, could affect how we do business. For example, some state
environmental agencies may limit the amount of emissions allowed from generators
utilized by our customers. We expect the electric industry to continue to
undergo changes due to the changing and uncertain regulatory
environment.





Regulation of Diesel and Other
Engine Generators. In 1996, the Environmental Protection Agency (EPA)
introduced new emission standards aimed at non-road mobile diesel engines such
as construction and agriculture equipment. Based on the systems’ engine
horsepower rating, generators are rated from Tier 1 to 4, with most
non-emergency diesel engine generators required to arrive at Tier 4 by 2012.
Tier 4 requirements are the most stringent and will most likely increase the
expense, lower profitability, and lengthen returns on investment of back-up
power and demand reduction solutions.





Management
believes that engine design and engineering on the part of the manufacturers
will solve many of these problems and that suitable solutions to its business
applications will be available and affordable.  At the same time, we
believe that this change in emission policy brings significant opportunity for
Titan Energy.   We feel that we have alternative equipment
technologies that will satisfy Tier 4 standards, technologies which actually
offer superior solution such as natural gas engines and smaller units arranged
in parallel configurations.  There will also be a greater need for our
maintenance and service programs as this will be a requirement of the owners and
operators.  And Titan Energy will benefit from the monitoring and
validation technologies what will allow for improved operations and compliance
with the new regulations.


Research and
Development





At this time in our development we have
not spent much money or time in research and development of new technologies or
services.  However, the markets for our products, services and
technology are dynamic, characterized by rapid technological developments,
frequent new product introductions and evolving industry standards. The
constantly changing nature of these markets and their rapid evolution will
require us to continually improve the performance, features and reliability of
our products, services and technology, particularly in response to competitive
offerings, and to introduce both new and enhanced products, services and
technology as quickly as possible and prior to our competitors. We believe our
future success will depend, in part, upon our ability expand and enhance the
features of our existing products, services and technology and to develop and
introduce new products, services and technology designed to meet changing
customer needs on a cost-effective and timely basis.


18





Seasonality





The
demand for equipment and service varies from region to region and by
season.  In the Midwest, we often experience a dramatic slow-down in
orders and completed jobs during the winter months due to ice, snow and cold
weather conditions.  In the Southeast, we often see increased business
activity during times of storms or hurricanes.  Typically we
experience considerably higher revenues in our second and third quarters as
compared to our first and fourth quarters.




Corporate
Background
 
 We were
incorporated in the state of Nevada under the name “Global-Link Enterprises,
Inc.” on November 20, 1998.  On April 7, 2000, we changed our name to
“MLM World News Today, Inc.”  On August 14, 2002, we changed our name
to “Presidential Air Corporation.” On May 2, 2003, our name was changed to “Safe
Travel Care, Inc.” In December 2006, we changed our name to “Titan Energy
Worldwide, Inc.”
  On July
21, 2006, we entered into an agreement and plan of merger with Titan Energy
Development Inc (“TEDI”), the manufacturer of a mobile utility system for
disaster and emergency situations. In exchange for transferring the stock of
TEDI to the Company, the TEDI shareholders received stock consideration
consisting of 1,000,000 newly issued shares of the Company’s Series B Preferred
Stock. These shares were divided proportionately among the TEDI shareholders in
accordance with the respective ownership interest in TEDI immediately before the
completion of the merger. The TEDI shareholders also received 1,000,000 shares
of common stock. On August 13, 2007, the Series B shareholders agreed to convert
their shares early resulting in the Company issuing 1,686,699 shares of common
stock to those shareholders.
 
 On December 28, 2006, the
Company completed the acquisition of Stellar Energy Services, Inc. (“Stellar”),
a distributor and service provider of standby and emergency power generation
systems, whereby Stellar exchanged all of its shares for cash and newly issued
Series C Preferred Stock totaling 750,000 shares. The shareholders of Stellar
also received 1,000,000 shares of Common Stock. On August 13, 2007, the Series C
shareholders agreed to convert their shares early resulting in the Company
issuing 907,809 shares of Common Stock to those shareholders.
  On
October 1, 2007, we designated 10,000,000 shares of Series D Preferred Stock.
This stock was sold to accredited investors between October 3, 2007 and January
31, 2008 as part of the Units the investors purchased in a private placement
offering. These Units consisted of one share of Series D Preferred Stock, one
Class A warrant and one Class B warrant. The offering price per Unit was
$10,000. The Series D Preferred Stock is convertible into 10,000 conversion
shares assuming a conversion price of $1.00, each Class A warrant entitles the
holder to purchase 3,333 shares of Common Stock at an exercise price of $1.20
and each Class B warrant entitles the holder to purchase 3,333 shares of Common
Stock at an exercise price of $1.40.




Available
Information




Our
corporate website is located atwww.titanenergy.com. On the
investor relations section of our website,  we make available, free of
charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and amendments to those reports as soon as reasonably
practicable after we electronically file them with or furnish them to the SEC.
Further, a copy of this Annual Report on Form 10-K is located at the SEC’s
Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information
on the operation of the Public Reference Room can be obtained by calling the SEC
at 1-800-SEC-0330. The SEC maintains an internet site that contains reports,
proxy and information statements and other information regarding our filings
athttp://www.sec.gov.




We
provide notifications of news or announcements regarding our financial
performance, including SEC filings, investor events and press and earnings
releases as part of our investor relations website. The contents of and the
information on or accessible through our corporate website and our investor
relations website is not a part of, and is not incorporated into, this report or
any other report or document we file with or furnish to the
SEC.


19





ITEM
2.  Description of Property





We lease
office space and warehouses at the following locations:




o
                  10315
      Grand River Avenue, Suite 302, Brighton, MI 48116 (our executive offices).
      This is a 1-year lease agreement, at a cost of $600 per month. The
      expiration date for this lease is September
  2010.





o
              6177
      Center St., Suite 103, Omaha, NE 68106. This is a 3-year lease agreement,
      at a cost of $850 per month. This lease expires on February 28,
      2011.





o
              6130
      Blue Circle Drive, Suite 600, Minnetonka, MN 55343. This is a 5-year lease
      with a cost of $4,400 per month. The lease expiration date is November 30,
      2012.





o
              1451
      Northeast 69th Place, Suite 43, Ankeny, IA 50021. This is a 3-year lease
      at a cost of $700 per month. This lease expires on July 31,
      2011.




o
                6967
      Washington Avenue South, Edina, MN 55439. This is a 3-year leases at
      a cost $1211 per month. This lease expires on July 31,
    2012.


o
                    1881
      N. W. 93rd
      Avenue, Doral, FL 33172. This is a sub lease for 18-months at a cost of
      $5,157 per month. This lease expires on November 30,
  2010.




o
              12
      Pottersville Road, Gladstone NJ 07934. This is a 2-year lease at a cost of
      $2,500 per month. This lease expires on December 31,
  2011.





ITEM
            3.  Legal
      Proceedings





None.





ITEM
4.  [REMOVED AND RESERVED]





20





PART
II





ITEM
5.  Market for Common Equity and Related Stockholder
Matters





MARKET
INFORMATION




Since
August 10, 2007, our common stock has been quoted on the OTC Bulletin Board
under the symbol  “TEWI.OB”.  From May 19, 2003 to December 27,
2006, our symbol was “SFTV.OB.”  From December 28, 2006 to August 9,
2007, our symbol was “TEWW.OB.”




The
following table sets forth, for the fiscal quarters indicated, the high and low
bid prices. These quotations reflect the closing inter-dealer prices, without
mark-up, mark-down or commission, and may not represent actual
transactions.





High
                  
                  
                  LowCalendar
      Year 2009First
      Quarter
                  
                  
                  0.1000
                  
                  
                  
                  0.0500Second
      Quarter
                  
                  
                  0.3500
                  
                  
                  
                  0.0600Third
      Quarter
                  
                  
                  0.3500
                  
                  
                  
                  0.1300Fourth
      Quarter
                  
                  
                  0.5200
                  
                  
                  
                  0.1350Calendar
      Year 2008First
      Quarter
                  
                  
                  1.3500
                  
                  
                  
                  0.7200Second
      Quarter
                  
                  
                  0.7500
                  
                  
                  
                  0.2200Third
      Quarter
                  
                  
                  0.4000
                  
                  
                  
                  0.1200Fourth
      Quarter
                  
                  
                  0.1700
                  
                  
                  
                  0.0650





HOLDERS





We had
20,506,097 shares of our common stock outstanding as of March 24, 2010, held by
approximately 286 stockholders of record. The number of record holders was
determined from the records of our transfer agent and does not include
beneficial owners of common stock whose shares are held in the names of various
security brokers, dealers, and registered clearing agencies.





DIVIDENDS





We have
not paid dividends to our stockholders in the last two fiscal years and have no
intention to pay dividends in the foreseeable future.





SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





See “Item
12 - Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.”





RECENT
SALES OF UNREGISTERED SECURITIES





During
the quarter ended December 31, 2009, we issued 500,000 shares of common stock to
an investor relations firm for services to be rendered. The aggregate value of
the stock was $165,000.  We also issued 746,439 shares of common stock
to three individuals as partial settlement of liabilities. The aggregate value
of the stock was $178,273. In addition, we partially settled a litigation matter
by issuing 200,000 shares of stock with a value of $40,000.





The
foregoing shares of stock were issued in reliance on an exemption from
registration set forth in Section 4(2) of the Securities Act of 1933 as
transactions not involving any public offering.





PURCHASES
OF EQUITY SECURITIES BY THE ISSUER





The
following table provides information about purchases by us and our affiliated
purchasers during the quarter ended December 31, 2009 of equity securities that
are registered by us pursuant to Section 12 of the Securities Exchange Act of
1934:


21





Issuer
Purchases of Equity Securities





(a)
                  
                  
                  (b)
                  
                  
                  (c)
                  
                  
                  (d)Total Number of
                    Shares (or Units)
                    Purchased
                  
                  
                  Average Price
                    Paid per Share
                    (or Unit)
                  
                  
                  Total Number of
                    Shares (or Units)
                    Purchased as Part
                    of Publicly
                    Announced Plans
                    or Programs
                  
                  
                  Maximum Number
                    (or Approximate
                    Dollar Value) of
                    Shares (or Units)
                    that May Yet Be
                    Purchased under
                    the Plans or
                    ProgramsOctober
      1 – October 31
                  
                  
                  0
                  
                  
                  $
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0November
      1 – November 30
                  
                  
                  0
                  
                  
                  $
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0December
      1 – December 31
                  
                  
                  0
                  
                  
                  $
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Total
                  
                  
                  0
                  
                  
                  $
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0




ITEM
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.




Statements
included in this Management’s Discussion and Analysis of Financial Condition and
Results of Operations, and in future filings by us with the Securities and
Exchange Commission (the “SEC”), in our press releases and in oral statements
made with the approval of an authorized executive officer which are not
historical or current facts are “forward-looking statements” and are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect our actual results and could cause our actual financial performance
to differ materially from that expressed in any forward-looking statement: (i)
the extremely competitive conditions that currently exist in the market for
companies similar to us, and (ii) the lack of resources to maintain our good
standing status and requisite filings with the SEC. The foregoing list should
not be construed as exhaustive and we disclaim any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.




OUR
BUSINESS




We are a
provider of onsite power generation, energy management and energy efficiency
products and services that are designed to support and improve the performance
of the nation’s electrical utility grid. We operate in an area of the overall
electrical utility infrastructure called Distributed Generation, whereby we
specialize in the deployment of power generation equipment at the consumer’s
facility and the integration of that equipment through monitoring and
communication systems with the needs of the utility’s electrical
grid.  These onsite power generation systems are designed to support a
customer’s critical operations during times of power failure and serve as
demand response systems that work to reduce energy usage and decrease
demand on the electrical grid during peak periods. When managed with the proper
intelligent monitoring systems and controls, Distributed Generation offers a
vital and significant contribution to the development of the nation’s Smart
Grid. We contribute the tools and resources to produce immediate and long-term
improvements in the performance and stability in the energy production and
transmission segments of the electrical grid and to reduce the need for new
power plants.





We
believe that key drivers in our market include an ailing power grid, the need
and demand for reliable power, legislative mandates for back up and emergency
power systems in critical industries and utility-based programs to support the
use of onsite power generation during peak load periods. We provide equipment
and service to a broad market, including: financial institutions,
telecommunication centers, health care facilities, data centers, grocery store
chains, manufacturers, gas stations and others.





In 2006,
we acquired Stellar Energy, a Minneapolis-based provider of power generation
equipment and service. Stellar Energy is now called Titan Energy Systems (‘TES”)
and has expanded its number of sales and service offices to include Nebraska,
Iowa, North and South Dakota, New York, New Jersey and Connecticut. TES provides
our company and its satellite offices with much of its accounting and back
office support.




In 2009,
we acquired the Industrial and Service Division of RB Grove, a 52-year old power
generation provider located in Miami, Florida.  This company is now
called Grove Power Inc. (“GPI”) and will be responsible for our expansion
throughout the Southeastern United States, the Caribbean and Central
America.




22




In 2009,
we acquired a power generation business in New Jersey which gave us purchase
orders, backlog and extensive customer and marketing relationships in New York,
Connecticut and New Jersey.  This business has been involved in
managing several major solar installations as well as electrical generators.
This business has been merged into TES.




In 2009,
we discontinued the operations of Titan Energy Development, Inc.
(“TEDI”).  TEDI was dedicated to producing the Sentry 5000
product.





RESULTS
OF OPERATIONS




Year
Ended December 31, 2009 Compared to the Year Ended December 31,
2008





Sales




Sales for
the year ended December 31, 2009 were $10,626,919 compared to $7,883,347 for the
year ended December 31, 2008. The reasons for the increase were partially
attributable to an increase in sales at our TES subsidiary, which improved from
$7,849,509 in the year ended December 31, 2008 to a record level of
$8,936,913.  This increase was due to strong equipment sales and a
significant increase in sales of our service products.  Another reason
for this increase in sales was the inclusion of GPI, which was acquired on June
1, 2009 and contributed $1.7 million in sales during the last seven months of
2009.





Cost
of Sales




Cost of
sales was $7,750,377 for the year ended December 31, 2009 compared to $5,900,231
for the year ended December 31, 2008. In 2009, we reclassified cost of sales to
only include the costs directly related to the equipment or services sold.
Management believes that this type of classification is more consistent with
reporting made by other companies in our industry. Cost of sales as a percentage
of sales was 73% for the year ended December 31, 2009 compared to 75% for the
year ended December 31, 2008. The improvement in cost of sales equipment was due
to lower material costs compared to 2009. The gross margin on the service
contracts was 54.4% compared to 52.1% for the years ended December 31, 2009 and
2008, respectively. We have continued to improve our pricing for our service
plans as well as extend the terms of our service contracts which we believe
results in higher overall margins on service sales.





Selling
and Service Expenses





Sales and
services expenses includes all of sales and service personnel, benefits related
to these personnel and other costs in support of these functions. The selling
and service expenses were $1,397,928 for the year ended December 31, 2009, or
13.1% of sales, compared to $834,207, or 10.5% in sales, for the corresponding
period in the prior year. The increase in selling and service expenses is
partially attributable to GPI, which accounted for approximately $300,000 of the
total selling and service expense. The other area of increase is due to
additional support personnel that we added to TES in order to support the growth
in that subsidiary. We believe that we now have sufficient support personnel to
support our expected growth in the sales and service side of the company for the
next couple of years and will not need to add any additional administrative
personnel.





General
and Administrative Expenses





The
general and administrative expense category reflects the cost of each
subsidiary’s management, accounting, facilities and office functions. We believe
that these support functions allow us to look at the profitability of each
subsidiary on a standalone basis. General and administrative expenses were
$945,695 for the year ended December 31, 2009, compared to $744,875 for the year
ended December 31, 2008, an increase of $200,820.  The increase was
primarily attributable to the acquisition of GPI, which was acquired June 1,
2009 and contributed $165,000 in general and administrative expenses. In
addition, our bad debt expense increased by approximately $61,000 due to one
major customer that is embroiled in a lawsuit with a third party and has not
been able to pay us for work rendered.





Corporate
Overhead





Included
in corporate overhead expenses are the salaries and travel expenses of our
officers, legal fees, audit fees, investor relations and other costs associated
with being a SEC registrant. Corporate overhead for the year ended December 31,
2009 was $1,184,823 as compared to $1,339,305 for the year ended December 31,
2008, a decrease of $154,482. The decrease was attributable to lower officers’
compensation, reduced support staff salaries and professional fees excluding the
costs related to share-based payments and discontinued operations.




23




Share-Based
Compensation and Payments





This
caption represents the costs associated with stock or stock options as a form of
payment. These costs are non-cash charges and are based on actual stock price at
the time of payment or through the Black-Scholes calculations.





In return
for helping us achieve record sales levels and profitability at the subsidiary
level, all of our employees received stock options for the first time in 2009.
The fair value costs recognized in the year ended December 31, 2009 were
approximately $31,000. This cost represents approximately two months of expense
as the options were granted on November 12, 2009. We also have granted stock
options and stock awards to our legal and investor relations professional
associates in 2009. The total expense in the year ended December 31, 2009 was
approximately $183,614 compared to approximately $25,317 in the year ended
December 31, 2008. We gave larger awards in 2009 and our stock price was
considerably higher, resulting in this increase in share-based
compensation.





Depreciation
and Amortization





The
amounts in this category include depreciation on our fixed assets and
amortization of our intangibles, represented by our customer lists. The expense
for the year ended December 31, 2009 was $170,425 compared to $133,017 in the
year ended December 31, 2008. The higher costs are due to the acquisition of GPI
and our new sales office in New Jersey.





Other
Expenses




Net
interest expense for the year ended December 31, 2009 was $86,758 compared to
$46,545 for the year ended December 31, 2008. The higher expense was
attributable to convertible promissory notes and notes in conjunction with the
acquisition of GPI. The convertible promissory notes have warrants attached and
therefore, under generally accepted accounting principles (“GAAP”), we allocated
a portion of the proceeds to the warrants and account for it as a debt discount.
The amortization of debt discount and financing costs for the year ended
December 31, 2009 were $110,718 compared to the year ended December 31, 2008 of
$12,605. Other expenses include a settlement of a Note Payable through the
issuance of common stock and stock options. The excess of the fair value over
the Note Payable and accrued interest was an inducement of
$163,914.





Discontinued
Operations





In 2009,
management decided to discontinue the primary business of our TEDI subsidiary
which manufactured and marketed a mobile utility system.  This decision was
based on management's assessment that the market for this type of product
had greatly decreased due to changes in the economy and funding from FEMA
kinds of programs as well as the unavailability of company resources that would
be required to market this product.  Also in 2009, we were served with a
lawsuit that alleged that Titan Energy had violated a confidentiality
agreement with another manufacturer for these mobile utility units. Since we had
already decided to discontinue these operations and r





LIQUIDITY
AND CAPITAL RESOURCES




We
incurred a net loss for the year ended December 31, 2009 of $2,892,125 which
includes a non-cash charge for the discontinued operation of TEDI in the amount
of $1,331,800.  At December 31, 2009, we had an accumulated deficit of
$26,255,606 which includes a charge of $9,767,847 for the early extinguishment
of the Series A, B and C Preferred Stock and the issuance of common stock in
2007. In addition, we issued Series D Convertible Preferred Stock with a
beneficial conversion feature which resulted in recording a preferred stock
dividend of $4,076,646.  The accumulated deficit without these
transactions would have been $11,079,313. However, these conditions raise
substantial doubt as to our ability to continue as a going concern. We intend to
continue to find ways to expand our business through increasing equipment and
service sales in existing territories and possibly through completing planned
acquisitions. We believe that revenues and earnings will increase as we grow. We
anticipate that we will incur smaller losses in the near future if we are not
able to expand our business.




During
the year ended December 31, 2009, cash used by continuing operations was
$928,532. We used cash for investing activities of $347,410, primarily for the
acquisition of GPI and our New Jersey sales office. Cash provided by financing
activities was $1,154,544. This included $336,612 of financing provided by the
seller and our principal vendor in the acquisition of GPI.




24




Management
believes that it can be cash positive in 2010 based on the formula of earnings
before income taxes, depreciation and amortization (“EBITDA”) excluding non-cash
share-based compensation and payments. For the year ended December 31, 2009,
using continuing operations this formula produces net cash outflow of $651,864
compared to the net cash outflow for the year ended December 31, 2008 of
$935,272.  This is an improvement of $283,408, or 30%. We believe that
as our business becomes more profitable and we reduce corporate overhead, we can
attain our goal of being cash positive.





At
December 31, 2009, we had $45,401 in cash and short-term
investments. Although our credit facility matures on April 22, 2010, we
believe that that this facility can be renewed or replaced based on our strong
collateral position with receivables and inventory.  In addition, we
believe that, due to our higher stock value and our ability to raise funds,
combined with our effort to improve the profitability of our subsidiaries and
control our expenses, we will have adequate cash flow to operate our
business.





If we
make a strategic acquisition, it will be necessary for us to raise additional
capital. There can be no assurance that additional private or public financings,
including debt or equity financing, will be available as needed, or, if
available, on terms favorable to us. Any additional equity financing may be
dilutive to stockholders and such additional equity securities may have rights,
preferences or privileges that are senior to those of our existing common
stock.





Off-Balance
Sheet Arrangements




None.





Critical
Accounting Policies and Use of Estimates





The
discussion and analysis of our financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with GAAP. The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to revenue recognition, allowance for doubtful accounts,
inventory obsolescence, purchase price allocations related to business
combinations, expected future cash flows including growth rates, discount rates,
terminal values and other assumptions and estimates used to evaluate the
recoverability of long-lived assets and goodwill, estimated fair values of
intangible assets and goodwill, amortization methods and periods, certain
accrued expenses and other related charges, stock-based compensation, contingent
liabilities, tax reserves and recoverability of our net deferred tax assets and
related valuation allowance. We base our estimates on historical experience and
various other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates if past
experience or other assumptions do not turn out to be substantially accurate.
Any differences may have a material impact on our financial condition and
results of operations.





We
believe that of all of our significant accounting policies, which are described
in Note 1 to our consolidated financial statements contained
in  this Annual Report on Form 10-K, the following accounting
policies involve a greater degree of judgment and complexity. Accordingly, these
are the policies we believe are the most critical to aid in fully understanding
and evaluating our financial condition and results of operations.





Revenue
Recognition





We
recognize revenue when the significant risks and rewards of ownership have been
transferred to the customer pursuant to applicable laws and regulations,
including factors such as when there has been evidence of a sales arrangement,
delivery has occurred, or services have been rendered, the price to the buyer is
fixed or determinable, and collectability is reasonably assured.  For
equipment sales, we recognize revenue when the equipment has been delivered to
the customer and the customer has taken title and risk of the equipment. For
service and parts sales, we recognize revenue when the parts have been installed
and over the period in which the services are performed.





Intangible
Assets





We
evaluate intangible assets and other long-lived assets for impairment at least
on an annual basis and whenever events or changes in circumstances indicate that
the carrying value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets and other long-lived assets is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss. We determined that the intangible assets
related to TEDI were impaired in the third quarter of 2009. See Note 2 to the
Consolidated Financial Statements.




25




Income
Taxes





We
account for income taxes under the asset and liability method, whereby deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.




Effective
January 1, 2009, we adopted guidance regarding accounting for uncertainty in
income taxes. This guidance clarifies the accounting for income taxes by
prescribing the minimum recognition threshold an income tax position is required
to meet before being recognized in the financial statements and applies to all
federal or state income tax positions. Each income tax position is assessed
using a two step process. A determination is first made as to whether it is more
likely than not that the income tax position will be sustained, based upon
technical merits, upon examination by the taxing authorities. If the income tax
position is expected to meet the more likely than not criteria, the benefit
recorded in the financial statements equals the largest amount that is greater
than 50% likely to be realized upon its ultimate settlement.As of December 31, 2009
and December 31, 2008, we had no unrecognized tax benefits due to uncertain tax
positions.




None of
our federal or state income tax returns is currently under examination by the
Internal Revenue Service (“IRS”) or state authorities.  However fiscal
years 2006 and later remain subject to examination by the IRS and respective
states.





Loss
per Share





The basic income (loss) per common
share is computed by dividing net income (loss) available to common stockholders
by the weighted average number of common shares outstanding.  Diluted
income per common share is computed similar to basic income per share except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. The loss for common
shareholders is increased for any preferred dividends. As of December 31, 2009, we had
potentially dilutive shares related to outstanding stock options, warrants and
convertible securities that were not included in the calculation of loss per
share, because their effect would have been anti-dilutive.





Share-Based
Compensation





We use
the fair value method of accounting for share-based payments. Accordingly, we
recognize the cost of employee services received in exchange for awards of
equity instruments based on the grant date fair value of those
rewards.  Options or share awards issued to non-employees are valued
using the fair value method and expensed over the period services are
provided.





Accounting
Pronouncements





In June
2009, the Financial Accounting Standards Board (FASB) issued its final Statement
of Financial Accounting Standards (SFAS) No. 168 –The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162 . SFAS No. 168 made
the FASB Accounting Standards Codification (the Codification) the single source
of U.S. GAAP used by nongovernmental entities in the preparation of
financial statements, except for rules and interpretive releases of the SEC
under authority of federal securities laws, which are sources of authoritative
accounting guidance for SEC registrants. The Codification is meant to simplify
user access to all authoritative accounting guidance by reorganizing
U.S. GAAP pronouncements into roughly 90 accounting topics within a
consistent structure; its purpose is not to create new accounting and reporting
guidance. The Codification supersedes all existing non-SEC accounting and
reporting standards and was effective for the company beginning July 1,
2009. Following SFAS No. 168, the FASB will not issue new standards in
the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead, it will issue Accounting Standards Updates. The FASB will
not consider Accounting Standards Updates as authoritative in their own right;
these updates will serve only to update the Codification, provide background
information about the guidance, and provide the bases for conclusions on the
change(s) in the Codification.




Accounting
Standards Updates Not Yet Effective





In
October 2009,the
FASB issued an update to its revenue recognition standards that (1) removes the
objective-and-reliable-evidence-of-fair-value criterion from the separation
criteria used to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, (2) replaces references
to “fair value” with “selling price” to distinguish from other fair value
measurement guidance,(3)
provides a hierarchy that entities must use to estimate the selling price, (4)
eliminates the use of the residual method for allocation, and (5)
expands the ongoing disclosure requirements. The
new standard is effective for us beginning January 1, 2011 and can be
applied prospectively or retrospectively. Management is currently evaluating the
effect that adoption of this update will have, if any, on our financial position
and results of operations when it becomes effective in 2011.





Other
Accounting Standards Updates which are not effective until after December 31,
2009 are not expected to have a significant effect on our consolidated financial
position or results of operations.




26




ITEM
8.  Financial Statements




TITAN
ENERGY WORLDWIDE, INC.


Consolidated
Financial Statements and


Report
of Independent Registered Public Accounting Firm


December
31, 2009 and 2008




Table
of Contents




PageReport
      of Independent Registered Public Accounting Firm
                  F-1Consolidated
      Balance Sheets
                  F-2Consolidated
      Statements of Operations
                  F-3Consolidated
      Statements of Changes in Stockholders’ Equity
                  F-4Consolidated
      Statements of Cash Flows
                  F-6Notes  to
      Consolidated Financial Statements
                  F-7




27




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




BOARD
OF DIRECTORS AND STOCKHOLDERS


TITAN
ENERGY WORLDWIDE, INC.




We have
audited the accompanying consolidated balance sheets of Titan Energy Worldwide,
Inc. and Subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders’ equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Titan Energy Worldwide, Inc.
and Subsidiaries as of December 31, 2009 and 2008, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.




The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company’s recurring losses and
accumulated deficit raise substantial doubt about its ability to continue as a
going concern. Management’s plans as to these matters are also discussed in Note
1. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.




/s/ UHY
LLP


Southfield,
MI


March 31,
2010




F-1




Titan
Energy Worldwide, Inc.


CONSOLIDATED
BALANCE SHEETS


December
31, 2009 and 2008





2009
                        
                        
                        2008ASSETSCurrent
      assetsCash
      and cash equivalents
                        
                        $
                        45,401
                        
                        
                        $
                        327,166Accounts
      receivable less allowance for doubtful accounts of  $120,000 and
      $44,000 , respectively
                        
                        
                        1,846,125
                        
                        
                        
                        1,349,105Inventory,
      net
                        
                        
                        881,830
                        
                        
                        
                        703,941Other
      current assets
                        
                        
                        230,948
                        
                        
                        
                        161,432Total
      current assets
                        
                        
                        3,004,304
                        
                        
                        
                        2,541,644Property
      and equipment, net
                        
                        
                        257,985
                        
                        
                        
                        225,389Customer
      and distribution lists, net
                        
                        
                        774,833
                        
                        
                        
                        1,134,720Goodwill
                        
                        
                        1,184,132
                        
                        
                        
                        1,599,160Other
      assets
                        
                        
                        20,608
                        
                        
                        
                        7,302Total
      assets
                        
                        $
                        5,241,862
                        
                        
                        $
                        5,508,215LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                        
                        $
                        1,388,838
                        
                        
                        $
                        1,007,843Accrued
      liabilities
                        
                        
                        578,549
                        
                        
                        
                        298,566Customer
      deposits and deferred revenue
                        
                        
                        234,190
                        
                        
                        
                        3,504Short-
      term credit facility
                        
                        
                        607,558
                        
                        
                        
                        449,558Notes
      payable - current portion
                        
                        
                        351,048
                        
                        
                        
                        107,527Current
      portion of convertible debt, net of unamortized discount
                        
                        
                        480,198
                        
                        
                        
                        -Total
      current liabilities
                        
                        
                        3,640,381
                        
                        
                        
                        1,866,998Notes
      payable, less current portion
                        
                        
                        19,769
                        
                        
                        
                        -Convertible
      debt, net of unamortized discount
                        
                        
                        63,958
                        
                        
                        
                        -Total
      long-term debt
                        
                        
                        83,727Total
      liabilities
                        
                        
                        3,724,108
                        
                        
                        
                        1,866,998Commitments
      and ContingenciesStockholders’
      equityPreferred
      Stock Series D: 10,000,000 authorized , $.0001 par value, issued and
      outstanding 794 and 657 shares, respectively
                        
                        
                        1
                        
                        
                        
                        1Common
      stock: 1,800,000,000 shares authorized, $.0001 par value, 17,153,495
      and 15,732,056 shares issued, respectively
                        
                        
                        1,716
                        
                        
                        
                        1,573Treasury
      stock, at cost, held 2,740,000 shares of common stock
                        
                        
                        (1,370,000
                        )
                        
                        
                        -Additional
      paid-in capital
                        
                        
                        29,141,643
                        
                        
                        
                        27,003,124Accumulated
      deficit
                        
                        
                        (26,255,606
                        )
                        
                        
                        (23,363,481
                        )Total
      stockholders’ equity
                        
                        
                        1,517,754
                        
                        
                        
                        3,641,217Total
      liabilities and stockholders’ equity
                        
                        $
                        5,241,862
                        
                        
                        $
                        5,508,215





See
accompanying notes to consolidated financial statements




F-2




Titan
Energy Worldwide, Inc.


CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the Years Ended December 31, 2009 and 2008




2009
                                
                                
                                2008Sales
      of equipment
                                
                                $
                                7,660,207
                                
                                
                                $
                                5,764,891Sales
      of service and parts
                                
                                
                                2,966,712
                                
                                
                                
                                2,118,456Total sales
                                
                                
                                10,626,919
                                
                                
                                
                                7,883,347Material
      cost and labor for equipment
                                
                                
                                6,397,147
                                
                                
                                
                                4,884,495Material
      cost and labor for service and parts
                                
                                
                                1,353,190
                                
                                
                                
                                1,015,737Total cost of sales
                                
                                
                                7,750,337
                                
                                
                                
                                5,900,231Gross profit
                                
                                
                                2,876,582
                                
                                
                                
                                1,983,116Operating
      Expenses:Selling
      and service expenses
                                
                                
                                1,397,928
                                
                                
                                
                                834,207General
      and administrative expenses
                                
                                
                                945,695
                                
                                
                                
                                744,875Corporate
      overhead
                                
                                
                                1,184,823
                                
                                
                                
                                1,339,305Share
      based compensation and payments
                                
                                
                                183,614
                                
                                
                                
                                25,317Depreciation
      and amortization
                                
                                
                                170,425
                                
                                
                                
                                133,017Total operating expenses
                                
                                
                                3,882,485
                                
                                
                                
                                3,076,721Other
      ExpensesInterest
      expense, net
                                
                                
                                86,758
                                
                                
                                
                                46,545Share
      based inducement to settle a Note Payable
                                
                                
                                163,914
                                
                                
                                
                                -Amortization
      of debt discount and financing costs
                                
                                
                                110,718
                                
                                
                                
                                12,605Gain  on
      sale of fixed assets
                                
                                
                                (1,973
                                )
                                
                                
                                -Total other expense, net
                                
                                
                                359,478
                                
                                
                                
                                59,150Loss
      from continuing operations
                                
                                
                                (1,365,320
                                )
                                
                                
                                (1,152,756
                                )Discontinued
      Operation (Note 2)Losses
      from operation of discontinued business, net of tax
                                
                                
                                (1,339,592
                                )
                                
                                
                                (571,348
                                )Losses
      from  settlement of litigation, net
      of  tax
                                
                                
                                (187,213
                                )
                                
                                
                                -Net loss from discontinued business
                                
                                
                                (1,526,805
                                )
                                
                                
                                (571,348
                                )Net loss
                                
                                
                                (2,892,125
                                )
                                
                                
                                (1,724,104
                                )Dividend
      from beneficial conversion feature on Series D Preferred
    Stock
                                
                                
                                -
                                
                                
                                
                                (593,162
                                )Net
      loss  available to common shareholders
                                
                                $
                                (2,892,125
                                )
                                
                                $
                                (2,317,266
                                )Weighted
      average number of shares outstanding
                                
                                
                                14,617,452
                                
                                
                                
                                15,558,222Basic
      and diluted (loss) per common share from continuing
    operations
                                
                                
                                (0.09
                                )
                                
                                
                                (0.11
                                )Basic
      and diluted (loss) per common shares from discontinued
      operations
                                
                                
                                (0.11
                                )
                                
                                
                                (0.04
                                )Total
      basic and diluted (loss) per common share
                                
                                $
                                (0.20
                                )
                                
                                $
                                (0.15
                                )




See
accompanying notes to consolidated financial statements.




F-3




Titan
Energy Worldwide, Inc.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


For
the Years Ended December 31, 2009 and 2008




Common Stock
                          
                          
                          Preferred Stock
                          
                          
                          Treasury sharesShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          AmountBalance
      December 31, 2007
                          
                          
                          15,398,205
                          
                          
                          $
                          1,540
                          
                          
                          
                          417
                          
                          
                          $
                          1
                          
                          
                          
                          -
                          
                          
                          
                          -Stock
      issued for conversion of notes
                          
                          
                          23,962
                          
                          
                          
                          2Stock
      issued for services
                          
                          
                          265,000
                          
                          
                          
                          27Stock
      issued for compensation
                          
                          
                          6,667
                          
                          
                          
                          2Proceeds
      from issuance of common stock
                          
                          
                          38,222
                          
                          
                          
                          4Preferred
      stock issuance
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          240Warrants
      issued with Preferred Series DBeneficial
      conversion feature related to Preferred Series DCost
      of issuance of Preferred Series D sharesNet
      loss for the yearBalance
      December 31, 2008
                          
                          
                          15,732,056
                          
                          
                          
                          1,573
                          
                          
                          
                          657
                          
                          
                          
                          1
                          
                          
                          
                          -
                          
                          
                          
                          -Stock
      issued for conversion of notes
                          
                          
                          646,439
                          
                          
                          
                          65Stock
      issued for services
                          
                          
                          575,000
                          
                          
                          
                          58Stock
      issued as part of a legal settlement
                          
                          
                          200,000
                          
                          
                          
                          20Stock
      option issued in the acquisition of Grove PowerStock
      option issued for compensationStock
      options issued for servicesRepurchase
      of common stock with Preferred Series D shares and
warrants
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          137
                          
                          
                          
                          
                          
                          
                          
                          (2,740,000
                          )
                          
                          
                          (1,370,000
                          )Warrants
      issued with Convertible debtWarrants
      issued with 2 year Convertible debtNet
      loss for the yearBalance
      December 31, 2009
                          
                          
                          17,153,495
                          
                          
                          $
                          1,716
                          
                          
                          
                          794
                          
                          
                          $
                          1
                          
                          
                          
                          (2,740,000
                          )
                          
                          $
                          (1,370,000
                          )




See
accompanying notes to consolidated financial statements.




F-4




Titan
Energy Worldwide, Inc.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


For
the Years Ended December 31, 2009 and 2008 (Continued)





Additional Paid in
                  Capital
                
                
                Accumulated
                  Deficit
                
                
                TotalBalance
      December 31, 2007
                
                $
                24,169,118
                
                
                $
                (21,046,104
                )
                
                $
                3,124,444Stock
      issued for conversion of notes
                
                
                29,966
                
                
                
                
                
                
                
                29,968Stock
      issued for services
                
                
                43,021
                
                
                
                
                
                
                
                43,048Stock
      issued for compensation
                
                
                1,066
                
                
                
                
                
                
                
                1,066Proceeds
      from issuance of common stock
                
                
                
                
                
                
                
                
                
                
                4Preferred
      stock issuance
                
                
                1,445,909
                
                
                
                
                
                
                
                1,445,909Warrants
      issued with Preferred Series D
                
                
                741,341
                
                
                
                
                
                
                
                741,341Beneficial
      conversion feature related to Preferred Series D
                
                
                593,162
                
                
                
                (593,162
                )
                
                
                -Cost
      of issuance of  Preferred Series D shares
                
                
                (20,459
                )
                
                
                
                
                
                
                (20,459
                )Net
      loss for the year
                
                
                
                
                
                
                (1,724,104
                )
                
                
                (1,724,104
                )Balance
      December 31, 2008
                
                
                27,003,124
                
                
                
                (23,363,481
                )
                
                
                3,641,217Stock
      issued for conversion of notes
                
                
                155,208
                
                
                
                
                
                
                
                155,273Stock
      issued for services
                
                
                187,311
                
                
                
                
                
                
                
                187,369Stock
      issued as part of a legal settlement
                
                
                39,980
                
                
                
                
                
                
                
                40,000Stock
      option issued in the acquisition of Grove Power
                
                
                32,000
                
                
                
                
                
                
                
                32,000Stock
      option issued for compensation
                
                
                31,383
                
                
                
                
                
                
                
                31,383Stock
      options issued for services
                
                
                96,156
                
                
                
                
                
                
                
                96,156Repurchase  of
      common stock with  Preferred D shares and
    warrants
                
                
                1,370,000
                
                
                
                
                
                
                
                -Warrants
      issued with Convertible debt
                
                
                187,822
                
                
                
                
                
                
                
                187,822Warrants
      issued with 2 year Convertible debt
                
                
                38,659
                
                
                
                
                
                
                
                38,659Net
      loss for the year
                
                
                
                
                
                
                (2,892,125
                )
                
                
                (2,892,125
                )Balance
      December 31, 2009
                
                $
                29,141,643
                
                
                $
                (26,255,606
                )
                
                $
                1,517,754




See
accompanying notes to consolidated financial statements.




F-5




Titan
Energy Worldwide, Inc.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the Years Ended December 31, 2009 and 2008


2009
                                    
                                    
                                    2008Operating
      activities:Net
      loss
                                    
                                    $
                                    (2,892,125
                                    )
                                    
                                    $
                                    (1,724,104
                                    )Loss
      from discontinued operation
                                    
                                    
                                    (1,339,592
                                    )
                                    
                                    
                                    (571,348
                                    )Loss
      from settlement of litigation
                                    
                                    
                                    (187,213
                                    )
                                    
                                    
                                    -Loss
      from continuing operations
                                    
                                    
                                    (1,365,320
                                    )
                                    
                                    
                                    (1,152,756
                                    )Adjustments to reconcile net loss to net cash used in operating
      activities:Compensation
      paid by issuance of stock
                                    
                                    
                                    31,383
                                    
                                    
                                    
                                    25,367Depreciation
      and amortization
                                    
                                    
                                    220,446
                                    
                                    
                                    
                                    208,164Amortization
      of debt discount and financing costs
                                    
                                    
                                    110,718
                                    
                                    
                                    
                                    12,605Impairment
      of intangibles
                                    
                                    
                                    1,146,087
                                    
                                    
                                    
                                    -Stock
      and assets given in a legal settlement
                                    
                                    
                                    185,713
                                    
                                    
                                    
                                    -Stock
      and Stock Options for services
                                    
                                    
                                    152,231
                                    
                                    
                                    
                                    -Settlement
      of debt by issuing stock
                                    
                                    
                                    163,914
                                    
                                    
                                    
                                    -Changes
      in operating assets and liabilities:Accounts
      Receivables
                                    
                                    
                                    (199,059
                                    )
                                    
                                    
                                    (259,260
                                    )Inventory
                                    
                                    
                                    (89,133
                                    )
                                    
                                    
                                    (105,734
                                    )Other
      assets
                                    
                                    
                                    (102,903
                                    )
                                    
                                    
                                    2,836Accounts
      payable
                                    
                                    
                                    (135,815
                                    )
                                    
                                    
                                    125,717Accrued
      liabilities
                                    
                                    
                                    116,463
                                    
                                    
                                    
                                    (505,425
                                    )Customer
      deposits
                                    
                                    
                                    203,181
                                    
                                    
                                    
                                    (69,399
                                    )Net
      cash used in continuing operations
                                    
                                    
                                    (928,532
                                    )
                                    
                                    
                                    (1,684,755
                                    )Net
      cash used in discontinued operations
                                    
                                    
                                    (160,367
                                    )
                                    
                                    
                                    (604,458
                                    )Net
      cash used in operating activities
                                    
                                    
                                    (1,088,899
                                    )
                                    
                                    
                                    (2,289,213
                                    )Investing
      activities:Purchase
      of  fixed assets
                                    
                                    
                                    (106,412
                                    )
                                    
                                    
                                    (154,838
                                    )Net
      assets acquired from R.B. Grove, Inc.
                                    
                                    
                                    (183,544
                                    )
                                    
                                    
                                    -Net
      Asset purchased for  the New York sales office
                                    
                                    
                                    (70,000
                                    )
                                    
                                    
                                    -Proceeds
      from sales of fixed assets
                                    
                                    
                                    12,546
                                    
                                    
                                    
                                    -Net
      cash used by continuing operations in investing activities
                                    
                                    
                                    (347,410
                                    )
                                    
                                    
                                    (154,838
                                    )Financing
      activities:Proceeds
      from issuance of Preferred Series D shares
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,166,786Purchase
      of common stock warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (170,000
                                    )Net
      change short term revolving line of credit, net of costs
                                    
                                    
                                    148,835
                                    
                                    
                                    
                                    31,887Proceeds
      provided by Vendor financing
                                    
                                    
                                    250,000
                                    
                                    
                                    
                                    -Proceeds
      provide by seller financing
                                    
                                    
                                    86,612
                                    
                                    
                                    
                                    -Proceeds
      from issuance of notes payable, net of costs
                                    
                                    
                                    669,097
                                    
                                    
                                    
                                    -Net
      cash provided by continuing operation in financing
    activities
                                    
                                    
                                    1,154,544
                                    
                                    
                                    
                                    2,028,653(Decrease)
      in cash and cash equivalents
                                    
                                    
                                    (281,765
                                    )
                                    
                                    
                                    (415,398
                                    )Cash
      and cash equivalents, beginning of year
                                    
                                    
                                    327,166
                                    
                                    
                                    
                                    742,564Cash
      and cash equivalents, end of year
                                    
                                    $
                                    45,401
                                    
                                    
                                    $
                                    327,166





See
accompanying notes to consolidated financial statements.




F-6




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1 - BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Background





Titan
Energy Worldwide, Inc. (the “Company”) was incorporated on December 28, 2006 in
the state of Nevada and was formerly known as “Safe Travel Care, Inc.,” a Nevada
corporation.





Safe
Travel was originally incorporated under the name “Global-Link Enterprises,
Inc.” in the state of Nevada on November 20, 1998. On February 4, 2000, the
Company filed a Certificate of Name Change with the state of Nevada to change
the Company’s name to “MLM World News Today, Inc.” which was granted on April 7,
2000. On August 14, 2002, the Company changed its name to “Presidential Air
Corporation.”





On May 2,
2003, the Company executed an agreement to acquire all of the assets of “Safe
Travel Care, Inc.,” a California general partnership, and changed the Company’s
name from Presidential Air Corporation to “Safe Travel Care, Inc.”





On July
21, 2006, Safe Travel Care, Inc. entered into an agreement and plan of merger
with Titan Energy Development, Inc. (“TEDI”) (“the Merger Agreement”). TEDI is a
manufacturer and distributor of emergency on site survival equipment called the
Sentry 5000®. In
exchange for transferring TEDI to Safe Travel Care, Inc., the TEDI shareholders
received stock consideration consisting of 1,000,000 newly issued shares of the
Company’s preferred stock (the “Merger”), which were divided proportionately
among the TEDI shareholders in accordance with their respective ownership
interests in TEDI immediately before the completion of the Merger. The TEDI
shareholders also received 1,000,000 shares of the Company’s common stock
(“Common Stock”). The Company changed its name to “Titan Energy Worldwide, Inc.”
on December 26, 2006. See Note 2, as TEDI was discontinued effective September
30, 2009.





On
December 28, 2006, the Company acquired Stellar Energy Services, Inc., a
Minnesota corporation (“Stellar”), whereby Stellar exchanged all its common
shares for 750,000 newly issued shares of the Company’s preferred stock, plus a
Note payable to Stellar shareholders of $823,000. The Stellar shareholders also
received 1,000,000 shares of Common Stock. Stellar provides products and
services to protect an industry’s critical equipment from power outages,
over/under voltage or transient surges and harmonic distortion Stellar is
operating as Titan Energy Systems, Inc (“TES”).





On August
1, 2007, the Company's Articles of Incorporation were amended to effect an up to
fifty (50) to one (1) reverse stock split of the issued and outstanding shares
of Common Stock. As a result, a fifteen (15) to one (1) reverse split took
effect on August 10, 2007. The result of this split was to reduce the
outstanding shares of Common Stock from approximately 11,602,777 as of August 9,
2007 to approximately 773,518 shares as of August 10, 2007.





On August
10, 2007, the Company changed its trading symbol to “TEWI.OB,” and is currently
trading on the OTCBB.





Effective
August 13, 2007, the Company agreed to the conversion of its Series A Preferred
Stock into Common Stock according to the formulas set forth in the Certificate
of Designation. Each share of Series A Preferred Stock converted 200:1 into
shares of Common Stock. In addition, the Company converted the Series B
Preferred Stock into Common Stock at $2.00 per share and shares of Series C
Preferred Stock into Common Stock at $1.50 per share. The effective date for
these transactions was August 13, 2007 and the amount of Common Stock increased
by 10,664,508 shares. The price of the Common Stock, based on the five days
closing price before the effective date was $1.07. The Series B and Series C
stockholders had an option to take a Note due on August 13, 2008 with 11%
interest. In total, the Company has issued Notes totaling $159,882. Since these
preferred shares were not yet convertible under the original conversion terms,
these transactions have been accounted for as an extinguishment of the
convertible preferred shares resulting in charges to retained earnings of
$9,767,847 in 2007 for the excess of the fair market value of the Common Stock
issued over the recorded amount of the preferred stock.





On June
11, 2009, the Company, through its wholly owned subsidiary, Grove Power, Inc., a
Florida corporation (“GPI”) acquired certain assets and assumed liabilities of
R.B. Grove, Inc.’s Industrial and Service Divisions. The purchase price was
effective June 1, 2009. The purchase price consisted of a cash payment of
$214,827 and an $86,612 secured promissory note at 8% interest rate due December
11, 2010. The seller also received five year warrants to purchase 200,000 shares
of the Company’s common stock at a price of $0.01 per share. The Company
determined the fair value of these warrants to be $32,000.





On
November 1, 2009, the Company acquired certain assets and assumed liabilities
for a sales office in New Jersey. This business has open orders at date of
acquisition of approximately $3,000,000. The Company agreed to pay the owner
$150,000. This sales office has been consolidated with the Titan Energy Services
operations.




F-7




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




At
December 31, 2009 and December 31, 2008, the Company had no Preferred Stock
Series A, B and C outstanding. The description of these securities is as
follows:





Preferred
Stock, Series A, authorized 10,000,000, $.0001 par value


Preferred
Stock, Series B, authorized 10,000,000, $.0001 par value


Preferred
Stock, Series C, authorized 10,000,000, $.0001 par value





Following
is a summary of the Company’s significant accounting policies.





Principles
of Consolidation





The
financial statements include the accounts of the Company and its 100% owned
subsidiaries, TES and GPI. TEDI operations have been classified as a
discontinued business.





Reclassifications





In 2009,
the Company’s presentation of the Statement of Operations has been changed to be
more informative and comparable to companies in our industry. Cost of sales only
includes the costs directly related to the equipment or services sold. Sales and
services expenses includes all salesmen, service personnel for support, benefits
related to these personnel and other costs in support of these functions.
General and administrative expenses includes the accounting and management level
support directly related our operating subsidiaries, it also includes facility
costs and consulting services. Corporate overhead includes the officers of TEWI,
accounting and legal fees, investor relations and filing costs associated with
being a SEC registrant. Share-based payments include stock options and stock
payments to employees and key consultants, which are non-cash charges.
Depreciation and amortization includes operating charges against fixed assets
and customer and distribution lists. Other Expense, net, primarily consists of
interest expense and the amortization of debt discounts and financing fees.
Certain
items in 2008 have also been reclassified to conform to this
presentation.





Basis
of Presentation





The
accompanying Consolidated Financial Statements (“Financial Statements”) have
been prepared by management in accordance with U.S. generally accepted
accounting principles (“GAAP”) for financial information and applicable rules
and regulations of the Securities and Exchange Commission (the
“SEC”).





Going
Concern





The
accompanying financial statements assume the Company will continue as a going
concern. The Company incurred a net loss for the year ended December 31, 2009 of
$2,892,125 which includes a non-cash charge for the discontinued operation of
TEDI in the amount of $1,331,800. At December 31, 2009, the Company had an
accumulated deficit of $26,255,606 which includes a charge of $9,767,847 for the
early extinguishment of the Series A, B and C Preferred Stock and issuance of
Common Stock in 2007. In addition, the Company issued Series D Convertible
Preferred Stock with a beneficial conversion feature which resulted in recording
a preferred stock dividend of $4,076,646. The accumulated deficit without these
transactions would have been $11,079,313. However, these conditions raise
substantial doubt as to the Company’s ability to continue as a going concern.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern. Management has taken the following steps that it believes will
be sufficient to provide the Company with the ability to continue its
operations:





·
            Management
      has acquired companies that it believes will provide positive cash
      flow.


·
            Management
      has been able to raise $680,000 through a convertible debt offering during
      2009


·
            Management
      plans to raise additional capital in 2010 through debt or equity
      offerings.


·
            The
      Company’s loss from operations was reduced by $88,000 as compared to the
      year ended December 31, 2008. This loss reduction would have been greater
      by $195,700 excluding non-cash
charges.


·
            The
      Company has discontinued the operations of one of its subsidiaries, Titan
      Energy Development, Inc.




F-8




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Supplemental
Cash Flow Information Regarding Non-Cash Transactions





During
the years ended December 31, 2009, and 2008, the Company has entered into
several non-cash transactions in order to provide financing for the Company in
order to conserve cash. The table below shows the transactions that occurred
during the past two years.





2009
                  
                  
                  2008Stock
      Options issued to settle a note
                  
                  $
                  125,000
                  
                  
                  $
                  -Stock
      issued for services
                  
                  $
                  145,000
                  
                  
                  $
                  43,028Stock
      issued to convert long-term debt
                  
                  $
                  -
                  
                  
                  $
                  29,968Stock
      issued in settlement of accounts payable
                  
                  $
                  100,000
                  
                  
                  $
                  -Stock
      warrants issued in the acquisition of R. B. Grove
                  
                  $
                  32,000
                  
                  
                  
                  -





Interest
payment for the years ended December 31, 2009 and 2008 were $41,022 and $32,417
respectively.





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.





Revenue
Recognition





The
Company recognizes revenue when the significant risks and rewards of ownership
have been transferred to the customer pursuant to applicable laws and
regulations, including factors such as when there has been evidence of a sales
arrangement, delivery has occurred, or services have been rendered, the price to
the buyer is fixed or determinable, and collectability is reasonably assured. For
equipment sales, the Company recognizes revenue when the equipment has been
delivered to the customer and the customer has taken title and risk of the
equipment. For service and parts sales, the Company recognizes revenue when the
parts have been installed and over the period in which the services are
performed.





Cash
Equivalents





For
purposes of reporting cash flows, the Company considers all short-term
investments with an original maturity of three months or less to be a cash
equivalent.





Concentration
of Credit Risk





Financial
instruments which subject the Company to concentrations of credit risk include
cash and cash equivalents. The Company maintains its cash in well-known banks
selected based upon management’s assessment of the bank’s financial stability.
Balances may periodically exceed the Federal Deposit Insurance Corporation limit
(which is currently $250,000, but will decrease to $100,000 on December 31,
2010); however, the Company has not experienced any losses on
deposits.





Property
and Equipment





Property
and equipment are recorded at cost, net of accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which range from three to seven years. Expenditures
for major renewals and betterments that extend the original estimated economic
useful lives of the applicable assets are capitalized. Expenditures for normal
repairs and maintenance are charged to expense as incurred. The cost and related
accumulated depreciation of assets sold or otherwise disposed of are removed
from the accounts, and any gain or loss is included in operations.





2008
                        
                        
                        2007Furniture
      and office equipment
                        
                        $
                        159,316
                        
                        
                        $
                        153,393Vehicles
                        
                        
                        108,380
                        
                        
                        
                        61,703Tools
      and Shop Equipment
                        
                        
                        125,788
                        
                        
                        
                        93,647Rental
      equipment
                        
                        
                        97,983
                        
                        
                        
                        97,983Accumulated
      Depreciation
                        
                        
                        (233,482)
                        
                        
                        
                        (181,337
                        )Net
      Property and Equipment
                        
                        $
                        257,985
                        
                        
                        $
                        225,389Depreciation
      Expense
                        
                        $
                        76,306
                        
                        
                        $
                        62,871




F-9




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Intangible
Assets





The
Company evaluates intangible assets and other long-lived assets for impairment
at least on an annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its estimated
future cash flows.





Recoverability
of intangible assets and other long-lived assets is measured by comparing their
net book value to the related projected undiscounted cash flows from these
assets, considering a number of factors including past operating results,
budgets, economic projections, market trends and product development cycles. If
the net book value of the asset exceeds the related undiscounted cash flows, the
asset is considered impaired, and a second test is performed to measure the
amount of impairment loss. The Company determined that the intangible assets
related to TEDI were impaired in the third quarter of 2009. See Note
2.





The
Company has acquired with each of its acquisitions customer and distribution
lists that have been classified as an intangible asset requiring amortization.
The Company believes that the useful life of these intangibles range from 5-10
years. The accumulated amortization at December 31, 2009 and December 31, 2008
was $240,858 and $157,237, respectively. The Company expects amortization
expense for the next five years as follows: 2010-$126,619; 2011-$126,619;
2012-$126,619; 2013-$126,619; 2014-$111.619.





Advertising
Costs





Advertising
costs includes trade shows, demo and literature which are expensed as incurred.
The advertising costs for the years ended December 31, 2009 and 2008 were
$26,623 and $37,477, respectively.





Income
Taxes





The
Company accounts for income taxes under the asset and liability whereby deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled




Effective
January 1, 2009 the Company adopted guidance regarding accounting for
uncertainty in income taxes. This guidance clarifies the accounting for income
taxes by prescribing the minimum recognition threshold an income tax position is
required to meet before being recognized in the financial statements and applies
to all federal or state income tax positions. Each income tax position is
assessed using a two step process. A determination is first made as to whether
it is more likely than not that the income tax position will be sustained, based
upon technical merits, upon examination by the taxing authorities. If the income
tax position is expected to meet the more likely than not criteria, the benefit
recorded in the financial statements equals the largest amount that is greater
than 50% likely to be realized upon its ultimate settlement.As of December 31, 2009 and
December 31, 2008 the Company had no unrecognized tax benefits due to uncertain
tax positions.





None of
the Company’s federal or state income tax returns is currently under examination
by the Internal Revenue Service (“IRS”) or state authorities. However fiscal
years 2006 and later remain subject to examination by the IRS and respective
states.





Loss
per Share





The basic income (loss) per common
share is computed by dividing net income (loss) available to common stockholders
by the weighted average number of common shares outstanding. Diluted income per
common share is computed similar to basic income per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. The loss for common shareholders
is increased for any preferred dividends. As of December 31, 2009, the Company
had potentially dilutive shares related to outstanding stock options, warrants
and convertible securities that were not included in the calculation of loss per
share, because their effect would have been anti-dilutive.




F-10




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





Share-Based
Compensation





The
Company uses the fair value method of accounting for share-based payments.
Accordingly, the Company recognizes the cost of employee services received in
exchange for awards of equity instruments based on the grant date fair value of
those rewards. Options or share awards issued to non-employees are valued using
the fair value method and expensed over the period services are
provided.





Fair
value of financial instruments





The
Company uses the following methods and assumptions to estimate the fair value of
derivative and other financial instruments at the relative balance sheet
date:





·
            Short-term
      financial statements (cash equivalents, accounts receivable and payable,
      short-term borrowings, and accrued liabilities) - cost approximates fair
      value because of the short maturity
period.


·
            Long-term
      debt - fair value is based on the amount of future cash flows associated
      with each debt instrument discounted at our current borrowing rate for
      similar debt instruments of comparable
terms.





Segment
Reporting





The
Company operated in a single business segment.





Recent
Accounting Pronouncements





In June
2009, the Financial Accounting Standards Board (FASB) issued its final Statement
of Financial Accounting Standards (SFAS) No. 168 –The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162 . SFAS No. 168 made the FASB
Accounting Standards Codification (the Codification) the single source of U.S.
GAAP used by nongovernmental entities in the preparation of financial
statements, except for rules and interpretive releases of the SEC under
authority of federal securities laws, which are sources of authoritative
accounting guidance for SEC registrants. The Codification is meant to simplify
user access to all authoritative accounting guidance by reorganizing U.S. GAAP
pronouncements into roughly 90 accounting topics within a consistent structure;
its purpose is not to create new accounting and reporting guidance. The
Codification supersedes all existing non-SEC accounting and reporting standards
and was effective for the company beginning July 1, 2009. Following SFAS No.
168, the FASB will not issue new standards in the form of Statements, FASB Staff
Positions, or Emerging Issues Task Force Abstracts; instead, it will issue
Accounting Standards Updates. The FASB will not consider Accounting Standards
Updates as authoritative in their own right; these updates will serve only to
update the Codification, provide background information about the guidance, and
provide the bases for conclusions on the change(s) in the
Codification.




Accounting
Standards Updates Not Yet Effective





The
following are new accounting standards and interpretations that may be
applicable in the future to the Company.




In
October 2009,the FASB
issued an update to its revenue recognition standards that (1) removes the
objective-and-reliable-evidence-of-fair-value criterion from the separation
criteria used to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, (2) replaces references
to “fair value” with “selling price” to distinguish from other fair value
measurement guidance,(3)
provides a hierarchy that entities must use to estimate the selling price, (4)
eliminates the use of the residual method for allocation, and (5) expands the
ongoing disclosure requirements. The new standard is effective for the Company
beginning January 1, 2011 and can be applied prospectively or retrospectively.
Management is currently evaluating the effect that adoption of this update will
have, if any, on the Company’s financial position and results of operations when
it becomes effective in 2011.





Other
Accounting Standards Updates not effective until after December 31, 2009 are not
expected to have a significant effect on the Company’s consolidated financial
position or results of operations.





NOTE
2 – DISCONTINUED OPERATIONS





In 2009,
management decided to discontinue the primary business of TEDI subsidiary which
was the manufacture and marketing of a mobile utility system.  This was
based on management's assessment that the market for this type of product
had greatly decreased due to changes in the economy and funding from FEMA
kinds of programs as well as the unavailability of resources that would be
required to market this product.  Also in 2009, we were served with a
lawsuit that alleged that Titan Energy had violated a confidentiality
agreement with another manufacturer for these mobile utility units.  Rather
than incur the legal and related expenses of going to trial, management agreed
to settle the lawsuit without admitting any wrongdoing by us or our management.




F-11




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





The
Company’s subsidiary TEDI was dedicated to producing the product that was the
subject of this dispute. Based on this settlement and the Company’s decision to
no longer be involved in this business, the Company has decided to discontinue
the operations of TEDI. The Company has recorded the estimated loss on the
settlement based on the recorded value of the assets and the fair market value
of the common stock to be approximately $187,213 at December 31, 2009. The
settlement agreement was effective as of November 1, 2009.





The
Company had reviewed the customer list and goodwill at September 30, 2009
related to the TEDI subsidiary. The Company tests for impairment whenever events
occur or circumstances change that would more likely than not reduce the fair
value of these assets below its carrying value. When the Company purchased the
TEDI subsidiary it had a new product for the emergency response industry. The
Company has agreed to a non-compete clause for five years and therefore there is
no foreseeable cash flow to justify the fair value of these assets. The Company
has taken a non-cash impairment charge on intangible assets of $1,146,087 at
September 30, 2009. For the year ended December 31, 2009 the revenue and net
loss from the operations of TEDI was $19,825 and $193,505, respectively. In the
year ended December 31, 2008 the revenue was $1,401,099 and the net loss from
TEDI operations was $415,360. All assets have been written down to fair value
and the only remaining assets of TEDI are negligible.





The
following table summarizes the carrying amounts at December 31, 2009 and
December 31, 2008 of the major classes of assets and liabilities of the
Company’s businesses classified as discontinued operations:





December 31,
                  
                  
                  December 31,2009
                  
                  
                  2008AssetsCash
                  
                  $
                  745
                  
                  
                  $
                  259,745Inventory
                  
                  
                  -
                  
                  
                  
                  157,962Other
      current assets
                  
                  
                  -
                  
                  
                  
                  16,007Total
      current assets
                  
                  
                  745
                  
                  
                  
                  433,714Customer
      list (net of amortization)
                  
                  
                  -
                  
                  
                  
                  505,769Goodwill
                  
                  
                  -
                  
                  
                  
                  690,339Other
      asset
                  
                  
                  -
                  
                  
                  
                  2,172Total
      Assets
                  
                  $
                  745
                  
                  
                  $
                  1,631,994LiabilitiesAccounts
      payable
                  
                  
                  53,082
                  
                  
                  
                  74,982Accrued
      liabilities
                  
                  
                  5,079
                  
                  
                  
                  13,796Total
      Liabilities
                  
                  $
                  58,061
                  
                  
                  $
                  88,778





NOTE
3 – INVENTORY, NET





Inventory
is stated at the lower of cost, determined by a first in, first out method, or
market. Inventory is adjusted for estimated obsolescence and written down to net
realizable value based upon estimates of future demand, technology developments
and market conditions. Inventories are comprised of the following:





2009
                    
                    
                    2008Parts
                    
                    $
                    448.618
                    
                    
                    $
                    376,246Work
      in process
                    
                    
                    223,810
                    
                    
                    
                    185,172Finished
      goods
                    
                    
                    279,402
                    
                    
                    
                    197,523Obsolescence
      reserve
                    
                    
                    (70,000
                    )
                    
                    
                    (55,000
                    )Total
                    
                    $
                    881,830
                    
                    
                    $
                    703,941




F-12




TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





NOTE
4 - NOTES PAYABLE





Notes
Payable consists of the following at December 31, 2009 and 2008:


2009
                
                
                2008Revolving
      line of credit, prime plus 2.0% with minimum interest rate of 7.5% and due
      April 22, 2009
                
                $
                607,558
                
                
                $
                449,558Promissory
      note payable, bearing interest at 11% due April 1, 2009
                
                
                -
                
                
                
                103,969Convertible
      notes payable, bearing interest at 8% due June to August
    2010
                
                
                580,000
                
                
                
                -Convertible
      notes payable bearing interest at 10% due November to December
      2011
                
                
                100,000
                
                
                
                -Promissory
      note payable bearing interest at 6% due May 2, 2010
                
                
                250,000
                
                
                
                -Secured
      promissory note interest at 8% due December 11, 2010
                
                
                86,612
                
                
                
                -Other
      Loans
                
                
                34,205
                
                
                
                3,558Less
      Unamortized Discount
                
                
                (135,844
                )
                
                
                -Total
                
                
                1,522,531
                
                
                
                557,085Less
      current portion
                
                
                1,438,804
                
                
                
                557,085Long
      -term Debt
                
                $
                83,727
                
                
                $
                -





The
convertible notes payable due in November and December of 2011 were issued with
200,000 detachable warrants to purchase the Company’s common stock at $.25 per
share. The proceeds received from these notes were allocated to the promissory
note and the warrants at their relative fair values of $61,461 and $38,659,
respectively, with the warrant fair value being determined using the
Black-Scholes method. The value allocated to the warrants was recorded as a debt
discount and will be amortized into interest expense over the life of the
promissory notes. The note holders will have the option of converting their
notes into common stock based on the principal balance plus accrued interest
multiplied by 4.





The
convertible notes payable due between June and August, 2010 were issued with
1,160,000 detachable warrants to purchase the Company’s common stock at $.01 per
share. The proceeds received from these notes were allocated to the promissory
note and the warrants at their relative fair values of $390,839 and $189,161,
respectively, with the warrant fair value being determined using the
Black-Scholes method. The warrants are exercisable through June and August of
2014. The value allocated to the warrants was recorded as a debt discount and
will be amortized into interest expense over the life of the promissory notes.
The note holders will have the option of converting their notes into common
stock based on the fair value of the common stock and if they elect this option
they will receive an additional 10 warrants at $.01 for each $1,000 invested in
the note. Included in these notes is a $25,000 note payable to the former CEO of
the Company.





The
secured promissory note payable was part of the consideration given to the
Seller of the RBG assets purchased by Grove Power Inc. (“GPI”). The security for
this note is all the assets that were purchased.





On August
5, 2009, a major vendor agreed to exchange $250,000 of accounts payable
currently due related to the acquisition of GPI for a promissory note payable
due May 2, 2010. This note payable has the personal guaranty of the CEO and
President, the former CEO and the COO.





Borrowings
under the Revolving Line of Credit are subject to a borrowing base formula
consisting of 75% of the accounts receivable balances fewer than 90 days plus
50% of the inventories, up to a maximum of $125,000. The Company was in default
on this loan at December 31, 2009 for making intercompany advances to TEWI. The
lender reduced the available credit to $823,000 by the amount of the
intercompany advances. On February 28, 2010 TEWI repaid the intercompany
balance, thereby curing the default.





The
Company issued 11% Promissory Notes to former holders of shares of the Company’s
Series B Preferred Stock. These Notes were due August 13, 2008 and are not
convertible and do not have any warrants. The Company may elect to prepay
without penalty. On October 16, 2009, the Company reached a settlement agreement
to retire the promissory note and the accrued interest for 646,969 shares of the
Company’s common stock and a stock option for 500,000 shares of common stock
with a guaranteed value of $.25 per share. The total value of the common shares
and options was $280,273. The excess over the promissory note and accrued
interest has been expensed as an inducement for the retirement of
$163,914.




F-13


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)





NOTE
5 – ACCRUED LIABILITIES





Accrued
liabilities consist of the following at December 31, 2009 and 2008:





2009
                
                
                2008Accrued
      Compensation
                
                $
                178,245
                
                
                $
                115,409Accrued
      Interest
                
                
                34,630
                
                
                
                4,355Accrued
      Other
                
                
                366,674
                
                
                
                178,802Total
      accrued liabilities
                
                $
                578,549
                
                
                $
                298,566





NOTE
6 - INCOME TAXES





The
Company’s effective income tax rate of 0.0% differs from the federal statutory
rate of 34% for the reason set forth below for the years ended December
31:


2009
                
                
                2008Continuing
      OperationsIncome
      taxes at the statutory rate
                
                $
                (464,208
                )
                
                $
                (593,612
                )Valuation
      Allowance
                
                
                391,803
                
                
                
                358,250Permanent
      differences and other
                
                
                72,405
                
                
                
                235,362Total
      income taxes of continuing operations
                
                $
                -
                
                
                $
                -Discontinued
      OperationsIncome
      taxes at the statutory rate
                
                $
                (519,114
                )
                
                $
                (194,258
                )Valuation
      Allowance
                
                
                112,415
                
                
                
                169,693Permanent
      differences and other
                
                
                406,699
                
                
                
                24,566Total
      income taxes of discontinued operations
                
                $
                -
                
                
                $
                -





Deferred
tax assets and liabilities reflect the net effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. The Company’s temporary
differences are attributable to the net operating loss carry forward and
depreciation and amortization.





The
Company has a net operating loss carry forward of approximately
$10,000,000.





The
Company may offset net operating loss carry forwards against future taxable
income through the year 2029. No tax benefit has been reported in the financial
statements as the utilization of the tax benefits related to the carry-forward
is not assured. Accordingly, the potential tax benefits of the net operating
loss carry-forwards are offset by valuation allowance of the same
amount.





NOTE
7 – RETIREMENT PLAN





All
eligible employees are covered under the Company’s 401(k) pension and profit
sharing plan. The Company did not make any contribution to the pension and
profit sharing plan for the plan year ended December 31, 2009. For the year
ended December 31, 2008, the Company made profit sharing contributions of
$29,670.





NOTE
8 - SERIES D CONVERTIBLE PREFERRED STOCK





On
October 3, 2007, the Company issued a private placement memorandum to sell up to
$10,000,000 of Units consisting of one share of Series D Convertible Preferred
Stock, one Class A warrant and one Class B warrant. Each Unit was offered at
$10,000. The holder of the Convertible Preferred Stock may convert at any time
and is required to convert their preferred stock 24 months after issuance, in
whole or in part, into shares of Common Stock. Assuming an initial conversion
price of $1.00, each one (1) share of Preferred Stock is convertible into 10,000
shares of Common Stock. Each Class A Warrant and Class B Warrant entitles the
holder to purchase three thousand three hundred and thirty-three (3,333) shares
of Common Stock with exercise prices of $1.20 and $1.40,
respectively.


F-14


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Units
were offered by the Company on a “reasonable efforts” basis only to “accredited
investors” (as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended), on a minimum of 100 Units ($1,000,000), and
a maximum of 1,000 Units ($10,000,000). The offering closed on January 31, 2008.
The Company had closings for cash gross proceeds of approximately $6.0 million.
Approximately $513,000 of 11% Promissory Notes and accrued interest was
converted into the Offering at a 10% discount from the Offering price. Net cash
proceeds to the Company were approximately $5.2 million. The proceeds from the
closings have been used to retire debt, repurchase stock warrants and fund
inventory and operating costs.





The Units
offered include warrants and a beneficial conversion feature as the Series D
Preferred Stock was convertible and in the money at closing dates. The Company
has determined the value of the warrants to be $2,135,434 and the value of
Series D Preferred stock to be $3,521,558. The Company has valued the beneficial
conversion feature at $4,076,646. This amount is treated as a preferred stock
dividend with the amount increasing paid in capital and reducing retained
earnings. In the year ended December 31, 2008, the increase in the preferred
dividend was $593,162.





In an
Event of Liquidation (as defined below) of the Company, holders of any
then-unconverted shares of Preferred Stock will be entitled to immediately
receive accelerated redemption rights in the form of a Liquidation Preference
Amount. The Liquidation Preference Amount shall be equal to 125% of the sum of:
(I) the Stated Value ($10,000) of any then-unconverted shares of Preferred Stock
and (ii) any accrued and unpaid dividends thereon. An “Event of Liquidation”
shall mean any liquidation, dissolution, or winding up of the Company, whether
voluntary or involuntary, as well as any change of control of the Company which
shall include, for the purposes hereof, sale by the Company of either (x)
substantially all of its assets or (y) that portion of its assets which
comprises its core business technology, products or services.





NOTE
9 – TREASURY SHARES





On June
30, 2009, the Company offered to the common shareholders that were converted in
the Series D Convertible Preferred stock offering the opportunity to exchange
the common shares received into units of Series D Preferred Stock. A total of
2,740,000 shares of common stock were repurchased for 137 Units of Series D
Preferred Stock and 456,621 of detachable Class A Warrants and 456,621 of
detachable Class B Warrants. This transaction has been accounted for using the
Black–Scholes method to determine the value of the detachable warrants. This
method resulted in a cost of the treasury shares of $1,370,000, which is the sum
of the value of the Series D Preferred Stock of $1,285,553, and the fair value
of the warrants of $84,467.





NOTE
10 – STOCK OPTIONS





The
Company issued stock options to employees, consultants and to a note holder in
settlement of an outstanding note during 2009. These options were not issued
under any plan that required stockholder approval. The Company believes that
such stock options align the interest of its employees with the shareholders.
Stock option awards are granted with an exercise price equal to the market price
of the Company’s common stock at date of grant.  Options granted to
consultants have a five year contractual term. The options granted to employees
have from a 3 year contractual term to no expiration date, however we would
expect that all options will be exercised within 10 years. All options issued
are non-qualified options. There are two options totaling 1,500,000 shares that
are guaranteeing a minimum value of $0.25 a share and which represent the fair
value. For all other options the Company uses the Black-Scholes method to
evaluate the options. The risk free rate for periods within the contractual life
of the option is based on the U.S. treasury yield curve in effect at time of
grant. Below are the parameters in determining the fair value of these
options.





Excepted
      volatility
                  
                  
                  90%-142
                  %Weighted
      average volatility
                  
                  
                  135
                  %Vesting
      Periods (in years)
                  
                  
                  0-4Expected
      term (in years)
                  
                  
                  2-5Expected
      dividends
                  
                  
                  0
                  %Risk
      free rate
                  
                  
                  .5%-2.2
                  %





A summary
of activity as of December 31, 2009 and changes during the year the year then
ended is presented below:


F-15


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Weighted
                  
                  
                  Weighted
                    AverageAverage
                  
                  
                  Remaining
                  
                  
                  GrantExercise
                  
                  
                  Contractual
                  
                  
                  DateShares
                  
                  
                  Price
                  
                  
                  Terms
                  
                  
                  Fair ValueOutstanding
      at January 1, 2009
                  
                  
                  -Granted
                  
                  
                  7,055,000
                  
                  
                  $
                  0.24
                  
                  
                  
                  9
                  
                  
                  $
                  1,434,185ExercisedForfeited
                  
                  
                  (10,000
                  )
                  
                  $
                  0.10Outstanding
      at December 31, 2009
                  
                  
                  7,045,000
                  
                  
                  $
                  0.24
                  
                  
                  
                  9
                  
                  
                  $





As of
December 31, 2009, all the options outstanding are non-vested. There is
approximately $1.2 million of unrecognized compensation and share based expense
arrangements that have been granted. These costs will be recognized over the
weighted average period of 2.75 years. At December 31, 2009 the aggregate
intrinsic value of the stock options were $1,479,450.





NOTE
11 – COMMON STOCK TRANSACTIONS





In the
year ended December 31, 2009, the Company entered into several transactions
resulting in issuing common stock. The following is a description of these
transactions:





·
            The
      Company issued 200,000 shares as part of the legal settlement with ERBUS.
      This stock cannot be sold by ERBUS for at least one year as agreed upon in
      the settlement agreement. The fair value for this stock was $0.20, a fair
      value of $40,000. This amount was charge to discontinued
      operations.


·
            The
      Company issued 100,000 shares to a vendor in partial settlement of the
      account payable outstanding. The fair value of the stock was $0.23, a fair
      value of $23,000. This amount resulted in a $3,620 charge to discontinued
      operations. The Company has a payable of $25,000 still outstanding at
      December 31, 2009 to this vendor.


·
            The
      Company issued 500,000 shares to TEWI’s new investor relations firm. The
      fair value of the stock was $0.33 per share resulting in a fair value of
      $165,000. Our contract with the investor relation firm is for a one year.
      We will amortize the charge over the year period and the charge to expense
      in 2009 was $39,575.


·
            The
      Company entered into agreement to pay off a note and the accrued interest
      with the holder through the issuance of common stock and stock options.
      The Company issued 646,969 shares with a fair value of $0.23 for a total
      value of $155,000. This amount along with stock option fair value of
      $125,000 resulted in an inducement of $163,914 that is included in other
      expenses in 2009.


·
            During
      the third quarter ended September 30, 2009 the Company issued 100,000
      shares of common stock to an investor relations firm for services to be
      provided. The fair value of the common stock on the day it was issued
      was$0. 29 a share. This fair value of $29,000 was charged to expense in
      the third quarter.


·
            Also,
      in the third quarter, an investor relations firm returned 125,000 shares
      of common stock that were issued in July 2008. The issuance of this stock
      resulted in expense over 2008 and 2009.The stock was returned as the
      investor relations firm did not perform on its contract which was
      terminated. The Company has retired this stock and recognized a gain for
      the fair value of $31,250.





During
the third quarter of 2008, the Company paid several consultants and a former
employee in stock for their services. The aggregate number of common shares
issued was 271,667. The price per share was based on the current market value at
time of issuance, approximately $0.16 per share.





During
the first quarter of 2008, the Company settled an 11% Promissory Note by
converting the Note to common stock. This transaction resulted in the issuance
of 23,962 common shares. The price for conversion was based on the current
market price for the stock of $1.25 per share.





NOTE
12 - COMMON STOCK WARRANTS





The total
number of warrants issued for the year ended December 31, 2009, and for the year
ended December 31, 2008, was 2,517,492 and 1,750,736, respectively. None of the
warrants have been exercised this year. During the third quarter, the Company
repriced certain warrants to a group of brokers due to the fall in our Company’s
stock price and our need to retain these brokers to work with us to complete
certain transactions with their clients. The warrants for 345,877 common shares
were amended from an exercise price ranging from $0.625 to $1.25 per share to an
exercise price of $0.10 per share.  The following table shows the
warrants outstanding at December 31, 2009:


F-16


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Number of
                
                Exercise
                
                ExpirationWarrants
                
                Price
                
                Date1,360,000
                
                $
                0.01
                
                Jun-14390,127
                
                $
                0.10
                
                Jun-141,172,500
                
                $
                0.35
                
                Jan-12200,000
                
                $
                0.25
                
                Dec-14
      - Feb 15553,800
                
                $
                0.50
                
                April-July
      2012183,147
                
                $
                0.63
                
                Jun-1244,256
                
                $
                0.63
                
                Jan-1363,725
                
                $
                0.75
                
                Sep-10158,000
                
                $
                0.75
                
                Dec-122,646,411
                
                $
                1.20
                
                Jan-13777,135
                
                $
                1.25
                
                Jan-132,646,411
                
                $
                1.40
                
                Jan-13





NOTE
13 – OPERATING LEASES





The
Company leases office space and warehouses. Rent expense for the years ended
December 31, 2009 and 2008 was $175,887 and $142,645. Future minimum rental
payments required under the non-cancelable operating leases are as follows: 2010
- $266,946; 2011 - $125,744; and 2012 - $79,260.





NOTE
14 – FAIR VALUE





GAAP
provides a single definition of fair value, together with a framework for
measuring it, and requires additional disclosure about the use of fair value to
measure assets and liabilities. GAAP also emphasizes that fair value is a
market-based measurement, not an entity-specific measurement, and sets out a
fair value hierarchy with the highest priority being quoted prices in active
markets. The fair value measurements are disclosed by level within that
hierarchy. The fair value measurements are effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years.  The Company adopted the provisions of fair
value measurements as of January 1, 2009 for assets and liabilities measured at
fair value on a non-recurring basis and as of January 1, 2008 for assets and
liabilities measured at fair value on a recurring basis. Hierarchical levels are
directly related to the amount of subjectivity associated with the inputs to
fair valuation of these assets and liabilities, are as follows:





Level 1 —
Inputs were unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date.


Level 2 —
Inputs (other than quoted prices included in Level 1) were either directly or
indirectly observable for the asset or liability through correlation with market
data at the measurement date and for the duration of the instrument’s
anticipated life.


Level 3 —
Inputs reflected management’s best estimate of what market participants would
use in pricing the asset or liability at the measurement date. Consideration was
given to the risk inherent in the valuation technique and the risk inherent in
the inputs to the model.





Determining
which hierarchical level an asset or liability falls within requires significant
judgment.  The Company will evaluate its hierarchy disclosures each
quarter.  The following table summarizes the financial instruments
measured at fair value in the Consolidated Balance Sheet as of December 31,
2009:





Fair Value MeasurementsLevel 1
                          
                          
                          Level 2
                          
                          
                          Level 3
                          
                          
                          TotalPrepaid
      Investor Relations
                          
                          $
                          165,000
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          165,000


F-17


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  NOTE
15 – ACQUISITION





On June
11, 2009, the Company, through its wholly owned subsidiary, Grove Power, Inc.
(“GPI”) a Florida corporation, entered into an asset purchase agreement with
R.B. Grove Inc. (“RBG”). Under this agreement, GPI acquired certain assets and
assumed certain liabilities of RBG’s Industrial and Service Departments
(collectively referred to herein as the “Business”) effective June 1, 2009. The
Business is engaged in the marketing, selling, distribution and servicing of
backup and emergency power equipment in the state of Florida and the Caribbean
Islands. The fair value of the consideration paid, assets acquired and
liabilities assumed at June 1, 2009 were as follows:





June 1, 2009Fair
      value of considerationCash
      payment
                      
                      $
                      214,827Note
      payable for 18 months at 8%
                      
                      
                      86,612200,000
      Common Stock Warrants exercisable at .01 for
      five  years
                      
                      
                      32,000Fair
      value of consideration
                      
                      $
                      333,439Fair
      value of assets acquiredAccount
      receivables
                      
                      $
                      297,961Inventory
                      
                      
                      370,409Fixed
      Assets
                      
                      
                      26,860Fair
      value of assets acquired
                      
                      $
                      695,230Fair
      value of liabilities assumedAccounts
      payable
                      
                      $
                      576,685Accrued
      liabilities
                      
                      
                      26,130Customer
      Deposits
                      
                      
                      27,506Fair
      value of liabilities assumed
                      
                      $
                      630,321Net
      fair value of assets
                      
                      $
                      64,909Excess
      consideration over fair value of net assets
                      
                      $
                      268,530Intangible
      assetsFair
      value of customer list
                      
                      $
                      90,000Goodwill
                      
                      $
                      178,530





The fair
value of the customer list was based on the present value of the gross margin on
service contracts over the next five years that are renewable, at the customer
option, on an annual basis. The fair value was adjusted for estimated lost
contracts during the next five years. The goodwill in this transaction is
attributable to an educated workforce that has sold this product for many years
and the synergies related to TESI controls and procedures. The goodwill is
expected to be fully deductible for tax purposes.





The sales
and operating income included in the Consolidated Financial Statements since the
acquisition date of June 1, 2009 were $1,690,007 and $2,245. The acquisition
related costs recorded in Corporate Overhead were approximately $51,000 from
continuing operations.





The
following unaudited pro forma financial information presents the combined
results of the Company and GPI as if the acquisition had occurred on January 1,
2008 and does not include the loss from discontinued operations of $1,526,805
and $571,348 for the year ended December 31, 2009 and 2008, respectively. The
unaudited pro forma financial information is not necessarily indicative of what
the Company’s consolidated results of operations actually would have been had
the Company completed the acquisition at the beginning of each period. In
addition, the unaudited pro forma financial information does not attempt to
project the future results of operations of the combined
company.


F-18


TITAN
ENERGY WORLDWIDE, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Year ended December 31,2009
                
                
                2008Revenue
                
                $
                12,002,201
                
                
                $
                11,004,921Cost
      of Sales
                
                
                8,848,881
                
                
                
                8,201,589Gross
      profit
                
                
                3,153,320
                
                
                
                2,803,332Selling
      and service expense
                
                
                1,553,720
                
                
                
                1,229,411General
      and administrative expenses
                
                
                955,508
                
                
                
                913,478Corporate
      overhead
                
                
                1,184,823
                
                
                
                1,379,015Sharw
      base compensation and payments
                
                
                183,614
                
                
                
                25,317Depreciation
      and amortization
                
                
                180,686
                
                
                
                133,017total
      operating expenses
                
                
                4,069,351
                
                
                
                3,680,238Loss
      from Operation
                
                
                (916,031
                )
                
                
                (876,906
                )Interest
      Expense
                
                
                375,679
                
                
                
                93,441Loss
      on sale of fixed assets
                
                
                (1,973
                )
                
                
                -Net
      from continuing business
                
                
                (1,289.737
                )
                
                
                (970,347
                )Preferred
      dividend from beneficialConversion
      feature on Series D
                
                
                -
                
                
                
                (593,162
                )Net
      loss available to common shareholders
                
                $
                (1,289,737
                )
                
                $
                (1,563,509
                )Weighted
      average number shares
                
                
                14,617,452
                
                
                
                15,558,222Basic
      and diluted net loss per shareholder
                
                $
                (0.09
                )
                
                $
                (0.10
                )





NOTE
16 – SUBSEQUENT EVENT –PROMISSORY NOTES





In
January of 2010, the Company has issued $445,000 convertible notes due in
January of 2012 which includes 890,000 warrants at $.25 per share. These notes
were part of a small private offering the Company made in November 2009. The
Company allocated the proceeds to the convertible notes of $233,470 and the
unamortized  debt discount of $211,530. The debt will be amortized as
additional interest expense over the term of the notes. The note holders have
the option of converting their notes into common stock based on the principal
balance plus accrued interests multiplied by 4.





NOTE
17 – SUBSEQUENT EVENT - COMMON STOCK





In
accordance with our Preferred Series D stock after 24 months a holder could
elect to convert it stock to common shares based on the lesser of (i) $1.00 (ii)
a price per share equal to the volume weighted average closing price for the
twenty trading days prior to a conversion. As of March 24, 2010, a total of 335
Preferred Series D shares have been converted into 5,965,277 common shares. In
addition, we have issued common shares of 1,288,287 for the exercise of
1,385,000 warrants in the first quarter through March 30, 2010. These exercises
were done on a cashless basis.





The
Company has performed a review of events subsequent to the balance sheet date
and except for the matters described above in Notes 16 and in this note, no
other matters require disclosure.


F-19


ITEM
9.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure




None.




ITEM
9A(T): Controls and Procedures




Evaluation
of Disclosure Controls and Procedures




We
maintain a set of disclosure controls and procedures, as defined in Section
13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), that are designed to ensure that information required to be disclosed by
us in the reports filed by us under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. We carried out
an evaluation, under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered by this
report.




Notwithstanding
the foregoing, there can be no assurance that the Company’s disclosure controls
and procedures will detect or uncover all failures of persons within the Company
to disclose material information otherwise required to be set forth in the
Company’s periodic reports. There are inherent limitations to the effectiveness
of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can
only provide reasonable, not absolute, assurance of achieving their control
objectives.




Management’s
Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Internal control over financial reporting is a process designed 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. Internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of our assets; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
the financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures are being made only with proper
authorizations; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.




Our
management, under the supervision of and with the participation of the Chief
Executive Officer and the Chief Financial Officer, assessed the effectiveness of
our internal control over financial reporting as of December 31, 2009 based on
criteria for effective control over financial reporting described in Internal
Control — Integrated Framework issued by the COSO. Based on this assessment, our
management concluded that our internal control over financial reporting was
effective as of December 31, 2009.





This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.




Changes
in Internal Control over Financial Reporting





No
changes in the Company’s internal control over financial reporting have occurred
during the quarter ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





ITEM
9B.  Other Information




None.


28





PART
III




ITEM
10.  Directors, Executive Officers and Corporate
Governance




Our
directors and executive officers are:





Name
                      
                      Age
                      
                      Position
                      
                      Position Held SinceJeffrey
      W. Flannery
                      
                      53
                      
                      Chairman,
      Chief Executive Officer and Director
                      
                      Chairman:
      2005;
                        CEO:  2005-2007,
      2009Thomas
      Black
                      
                      46
                      
                      Chief
      Operating Officer, Secretary and Director
                      
                      2006James
      J. Fahrner
                      
                      58
                      
                      Chief
      Financial Officer and Director
                      
                      2007




A
description of our directors’ business experience during the past five years is
set forth below.




Jeffrey Flannery, Chairman, CEO and
Director, Titan Energy Worldwide, Inc. Mr. Flannery has been the
Company’s Chairman since December 15, 2005 and the Company’s Chief Executive
Officer since July 2009, when he was appointed to replace John Michael
Tastad.  Mr. Flannery previously had served as the Company’s CEO from
December 2005 until October 2007.  Mr. Flannery also has served as the
Company’s Chief Financial Officer from December 2005 until May
2007.  From 1994 to 2004, Mr. Flannery was the founder and Chief
Executive Officer of Enhanced Information Systems, Inc., an online home health
care provider for the pharmacy industry, Vice President of Development for IUSA,
an information technology company, and Vice President of Corporate
Communications for Center For Special Immunology, a public company dedicated to
medical treatments for immune disorders. As President of FLC Partners, Inc., an
advisory company, Mr. Flannery has provided financial consulting and business
development services for many public and private companies.  Mr.
Flannery has served on the Boards of the following public companies: Axia Group
Inc. (2005-2006) and Interact Holdings Group, Inc. (2005-2006).  Mr.
Flannery received his B.A. in Philosophy from the University of California, Los
Angeles. The Board believes that Mr. Flannery has the experience,
qualifications, attributes and skills necessary to serve on the Board because of
his experience with several companies that were in the public markets as a
start-up venture, and the fact that he provided leadership and strategic
direction to the Company as its founder.





Thomas Black, Chief
Operating Officer and Director, Titan Energy Worldwide, Inc.Mr. Black has served as a Director of
Titan Energy Development Inc. since its inception in 2003 and as President from
April 2005 to July 2009.  Mr. Black was Vice President of Sales for
DTE Energy Technologies from 2001 to 2003. DTE Energy Technologies is an
unregulated subsidiary of DTE Energy whose business was designing, engineering,
manufacturing and distributing cogeneration products and services. Mr. Black has
over 25 years of experience in co-generation, standby and continuous power
systems, complex electrical switches and switching systems. He is experienced in
general management, engineering, operations, sales and marketing, and sales
training. He has a Bachelors Degree in Industrial Management from Lawrence
Technological University. The Board believes that Mr.Black has the experience,
qualifications, attributes and skills necessary to serve on the Board because of
his over 25 years of experience inthepower generation business,hisleadershipqualitiesandthe fact that he has extensiveknowledge of the Company
and its business.





James Fahrner, Chief Financial
Officer and Director, Titan Energy Worldwide, Inc.Mr. Fahrner has been
the Chief Financial Officer of the Company since May 2007 and currently works as
a consultant.  A seasoned financial executive with 38 years of
experience in accounting, audit internal control, cash flow management, purchase
accounting, budgeting and forecasting, Mr. Fahrner was Senior Consultant for
Callaway Partners from 2006 until his employment with the Company in May 2007.
From 2000 to 2006, he was the Controller for DTE Energy Technology. Mr. Fahrner
has his B.S. in Mathematics from Eastern Michigan University. He is a Certified
Public Accountant, and a member of the AICPA and MACPA organizations.The Board believes that
Mr. Fahrner has the experience, qualifications, attributes and skills necessary
to serve on the Board because of his over 38 years of experience being a
financial executive or an auditor for several public companies and his
extensive knowledge of accounting and securities and exchange matters as they
affect the Company and its business.





Involvement
in Certain Legal Proceedings





None.





Section
16(A) Beneficial Ownership Reporting Compliance




Under
Section 16(a) of the Exchange Act, our directors and certain of our officers,
and persons holding more than 10 percent of our common stock are required to
file forms reporting their beneficial ownership of our common stock and
subsequent changes in that ownership with the Securities and Exchange
Commission. Such persons are also required to furnish us with copies of all
forms so filed.


29




Based
solely upon a review of copies of such forms filed on Forms 3, 4, and 5, we are
not aware of any person who during the year ended December 31, 2009, was a
director, officer, or beneficial owner of more than ten percent of our common
stock, and who failed to file, on a timely basis, reports required by Section
16(a) of the Securities Exchange Act of 1934.




Code
of Ethics




We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The code of ethics is designed to deter
wrongdoing and to promote:




·
            Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;


·
            Full,
      fair, accurate, timely, and understandable disclosure in reports and
      documents that we file with, or submit to, the SEC and in other public
      communications made by us;


·
            Compliance
      with applicable governmental laws, rules and
  regulations;


·
            The
      prompt internal reporting of violations of the code to an appropriate
      person or persons identified in the code;
and


·
            Accountability
      for adherence to the code.




A copy of
our code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions previously has been filed with the
SEC.




We will
provide to any person without charge, upon request, a copy of our code of
ethics. Any such request should be directed to our corporate secretary at 55800
Grand River Avenue, Suite 100, New Hudson, MI 48165, telephone number (248)
446-8557.





Nominating,
Audit or Compensation committees




The
Company does not have Nominating, Audit or Compensation committees.





ITEM
11.  Executive Compensation




Compensation
of Executive Officers




The
following table sets forth, for the fiscal years ended December 31, 2009 and
2008, all compensation paid by the Company, including salary, bonuses and
certain other compensation, if any, to its Chief Executive Officer and the two
most highly compensated executive officers other than the CEO. The executive
officers listed in the table below are sometimes referred to as the “named
executive officers” in this Form 10-K.




Summary
Compensation Table for 2009 and 2008


Year
                                                
                                                Salary
                                                  ($)
                                                
                                                
                                                Bonus
                                                  ($)
                                                
                                                
                                                Stock
                                                  Awards
                                                  ($)
                                                
                                                
                                                Options
                                                  Awards
                                                  ($)
                                                
                                                
                                                Non-
                                                  Equity
                                                  Incentive Plan
                                                  Compensation
                                                  ($)
                                                
                                                
                                                Change in
                                                  Pension Value
                                                  and Non-
                                                  qualified
                                                  Deferred
                                                  Compensation
                                                  Earnings
                                                  ($)
                                                
                                                
                                                All Other
                                                  Compensation
                                                  ($)
                                                
                                                
                                                Total
                                                  ($)Jeffrey W. Flannery
      (1)Chairman,
      and
                                                
                                                2008
                                                
                                                
                                                81,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                27,000
                                                
                                                
                                                
                                                108,000Chief
      Executive Officer
                                                
                                                2009
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                87,206
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                153,000
                                                
                                                
                                                
                                                240,206John Tastad(2)
                                                
                                                2008
                                                
                                                
                                                180,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,550
                                                
                                                
                                                
                                                182,550Former
      President and former Chief Executive Officer
                                                
                                                2009
                                                
                                                
                                                148,392
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                15,000
                                                
                                                
                                                
                                                163.392Thomas Black(3)COO
      and Former President
                                                
                                                2008
                                                
                                                
                                                180,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,150
                                                
                                                
                                                
                                                183,1502009
                                                
                                                
                                                183,950
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                87,206
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                271,156James Fahrner(4)
                                                
                                                2008
                                                
                                                
                                                135,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                8,585
                                                
                                                
                                                
                                                143,585Chief
      Financial Officer
                                                
                                                2009
                                                
                                                
                                                34,688
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                87,206
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                71,425
                                                
                                                
                                                
                                                193.319




30





1)
            On
      July 22, 2009, Mr. Flannery was appointed the Chief Executive Officer,
      replacing John Michael Tastad.  Mr. Flannery resigned his
      employment and became a consultant.  The amount under All Other
      Compensation for 2008 and 2009 represents payment as a
      consultant.2)
            On
      July 22, 2009, Mr. Tastad resigned as the Chief Executive Officer of the
      Company and was appointed President, replacing Thomas Black. On
      October 30, 2009, Mr. Tastad resigned as President and Director.  All
      Other Compensation for 2008 represents our matching contribution to the
      401(k) plan. The All Other Compensation in 2009 represents a three month
      consulting contract for the transition period.3)
            All
      Other Compensation for 2008 represents our matching contribution to the
      401(k) plan.4)
            On
      April 1, 2009, Mr. Fahrner resigned his employment and became consultant
      to the Company, although he retained his title of Chief Financial Officer.
      All Other Compensation for 2008 represents our matching contribution to
      the 401(k) plan and his car allowance of $6,000.  All Other
      Compensation for 2009 represent payments as a
  consultant.





Compensation
of Directors




We have
no formal or informal arrangements or agreements to compensate our directors for
services they provide as directors of the Company.





Employment
Agreements




The
Company has the following employment agreements:




Thomas Black. Mr. Black signed
an employment agreement with the Company effective as of January 1, 2007 to
serve as the Company’s President and Chief Operating Officer. The employment
agreement is for a four-year term, with a base salary of $175,000 for the
remainder of 2006 to cover back pay owed to Mr. Black, $175,000 for 2007
and $200,000 for 2008, 2009 and 2010. Mr. Black also shall be entitled to
an incentive bonus for fiscal years 2007 and 2008 as determined by the Board of
Directors. He also is entitled to stock options pursuant to the Company’s Option
Plan, which will be issued as soon as the Company’s new option plan is adopted,
as well as a monthly car allowance. His monthly car allowance has never been
paid and no amounts are accruing. Mr. Black is not entitled to any payments in
the event of a change of control of the Company.




The
Company does not have an employment agreement with its CEO and Chairman, Jeffrey
Flannery and its Chief Financial Officer, James Fahrner.




Confidentiality
Agreements




None.


31





ITEM
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters




Securities
Authorized for Issuance under Equity Compensation Plans




None.




Security
Ownership of Certain Beneficial Owners and Management




The
following table sets forth, as of March 24, 2010, information concerning
ownership of our securities by




o
            Each
      person who beneficially owns more than five percent of the outstanding
      shares of our common stock;o
            Each
      director;o
            Each
      named executive officer; ando
            All
      directors and officers as a group.





Beneficial
ownership is determined in accordance with the rules of the SEC and includes any
shares which the person has the right to acquire within 60 days through the
exercise of any stock option, warrant or other right.





Common Stock
                                Beneficially OwnedName and Address of Beneficial Owner (1)
                              
                              Number
                              
                              
                              Percent (2)Jeffrey
      W. Flannery, Chairman
                              
                              
                              2.900,650
                              
                              
                              
                              14.15
                              %Thomas
      Black, President and Chief Operating Officer
                              
                              
                              1,610,172
                              
                              
                              
                              7.85
                              %James
      J. Fahrner, Chief Financial Officer
                              
                              
                              242,401
                              (3)
                              
                              
                              1.18
                              %All
      directors and executive officers as a group (three
persons)
                              
                              
                              4,753,223
                              
                              
                              
                              23.17
                              %John
      M. Tastad
                              
                              
                              3,091,000
                              
                              
                              
                              15.07
                              %Wholesale
      Realtors Supply
                              
                              
                              2,499,900
                              (4)
                              
                              
                              11.62
                              %Carl
      Rountree
                              
                              
                              2,479,232
                              (5)
                              
                              
                              11.71
                              %Eckhart
      Grohmann Revocable Trust of 1985
                              
                              
                              2,390,738
                              (6)
                              
                              
                              11.29
                              %




1)
            Unless
      otherwise indicated, the address for each of these stockholders is c/o
      Titan Energy Worldwide, Inc., 10315 Grand River Avenue, Suite 320,
      Brighton, MI 48116. Also, unless otherwise indicated, each person named in
      the table above has the sole voting and investment power with respect to
      his shares of our common and preferred stock beneficially
      owned.




2)
            Based
      on 20,506,907 shares of common stock outstanding as of March 24,
      2010.




3)
            Mr.
      Fahrner  was a the holder of 1 unit from the Company’s Private
      Offering, consisting of one share of Series D Preferred Stock; one Class A
      warrant to purchase 3,333 shares at $1.20 exercise price; and one Class B
      warrant to purchase 3,333 shares at $1.40 exercise price. The Series D
      Preferred Stock has a 10,000-to-1 conversion ratio into shares of Common
      Stock. The Class A and Class B Warrants are immediately
      exercisable.  Mr. Fahrner converted his Preferred D shares into
      19,957 shares of common stock. The figure above also reflects 6,666 shares
      of common stock in the ownership figure even though none of the warrants
      have been exercised.




4)
            Wholesale
      Realtors Supply is the holder of 150 units from the Company’s Private
      Offering, consisting of an aggregate of 150 shares of Series D Preferred
      Stock; 150 Class A warrants, each to purchase 3,333 shares at a $1.20
      exercise price; and 150 Class B warrants, each to purchase 3,333 shares at
      a $1.40 exercise price. The Series D Preferred Stock has a 10,000-to-1
      conversion ratio into shares of Common Stock. The Class A and Class B
      Warrants are immediately exercisable. The figure above reflects the
      1,500,000 shares of common stock in the ownership figure even though no
      conversion of Series D Preferred Stock has taken place. The Series D
      Preferred Stock votes on an as-converted basis. The figure above also
      reflects 999,900 shares of common stock in the ownership figure, even
      though none of the warrants have been exercised. The address for Wholesale
      Realtors Supply is 40 Old Lancaster Rd., #614, Merion Station, PA
      19066.




5)
            Carl
      Rountree is the holder of 100 units from the Company’s Private Offering,
      consisting of an aggregate of 100 shares of Series D Preferred Stock; 100
      Class A warrants, each to purchase 3,333 shares at a $1.20 exercise price;
      and 100 Class B warrants, each to purchase 3,333 shares at a $1.40
      exercise price. The Series D Preferred Stock has a 10,000-to-1 conversion
      ratio into shares of Common Stock. The Class A and Class B Warrants are
      immediately exercisable.  Mr. Rountree has converted his
      Preferred D shares into 1,812,632 shares of common stock. The figure above
      also reflects 666,600 shares of common stock in the ownership figure, even
      though none of the warrants have been exercised. The address for Mr.
      Rountree is c/o APS Financial, 1301 Capital of Texas, Suite B-220, Austin,
      TX 78746.




32




6)
            Eckhart
      Grohmann Revocable Trust of 1985 is the holder of an aggregate of 100
      units from the Company’s Private Offering, consisting of an aggregate of
      100 shares of Series D Preferred Stock; 100 Class A warrants, each to
      purchase 3,333 shares at a $1.20 exercise price; and 100 Class B warrants,
      each to purchase 3,333 shares at a $1.40 exercise price. The Series D
      Preferred Stock has a 10,000-to-1 conversion ratio into shares of Common
      Stock. The Class A and Class B Warrants are immediately
      exercisable.  The Trust has converted its Preferred D shares
      into 1,724,737 shares of common stock.  The Series D Preferred
      Stock votes on an as-converted basis. The figure above also reflects
      666,600 shares of common stock in the ownership figure, even though none
      of the warrants have been exercised. The address for the Trust is 6990 No.
      Barnett Lane, Milwaukee, WI 53217.





Change
in Control Arrangements




There are
no arrangements, known to us, including any pledge by any person of our
securities, the operation of which may at a subsequent date result in a change
in control of the Company.




ITEM
13.  Certain Relationships and Related Transactions.




None.




Promoters
and Control Persons




Not
applicable.





Parents




None.




ITEM
14.  Principal Accounting Fees and Services




Audit
Fees




The
aggregate fees billed by UHY LLP for professional services rendered for the
audit of our annual financial statements and reviews of quarterly financial
statements included in Form 10Qs and 10Q-SBs for the years ended December 31,
2009 and 2008 were $46,000 and $41,000, respectively.




Audit-Related
Fees




The
aggregate fees billed by UHY LLP for professional services rendered for the
audit of proposed acquisition candidates for the fiscal years ended December 31,
2009 and 2008 were $25,910 and $43,000, respectively.




Tax
Fees




There
were no fees billed by UHY LLP for tax related fees in the last two fiscal
years.





All
Other Fees




There
were no other fees in 2009. In 2008, the other fees billed by UHY LLP were
$3,000 for review of the draft of a Registration Statement on Form
S-1.





UHY LLP
leases all of its personnel, who work under the control of UHY LLP partners,
from wholly owned subsidiaries of UHY Advisors, Inc., in an alternative practice
structure.


33





ITEM
15.    Exhibits





Exhibit
      No.
                  
                  Identification
      of Exhibit3.1*
                  
                  Amended
      and Restated Articles of Incorporation, filed with the Nevada Secretary of
      State on December 26, 2006.3.2*
                  
                  Bylaws4.1*
                  
                  Certificate
      of Designation establishing our Series D Preferred Stock filed February
      26, 200810.1*
                  
                  Agreement
      and Plan of Merger with Titan Energy Development, Inc., dated July 21,
      200610.2*
                  
                  Stock
      Purchase and Exchange Agreement with Stellar Energy Services, Inc., dated
      December 28, 200610.3*
                  
                  Employment
      Agreement dated January 1, 2007 between Titan and Thomas
    Black10.4*
                  
                  Employment
      Agreement dated May 1, 2007 between Titan and James
  Fahrner14*
                  
                  Code
      of Ethics21**
                  
                  Subsidiaries23.1**
                  
                  Consent
      of UHY LLP31.1**
                  
                  Certification
      of Jeffrey W. Flannery, Chief Executive Officer of the Company, pursuant
      to 18 U.S.C. §1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2**
                  
                  Certification
      of James J. Fahrner, Chief Financial Officer of the Company, pursuant to
      18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1**
                  
                  Certification
      of Jeffrey W. Flannery, Chief Executive Officer of the Company, pursuant
      to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2**
                  
                  Certification
      of James J. Fahrner, Chief Financial Officer of the Company, pursuant to
      18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.




*
              Previously
      filed.





**
            Filed
      herewith.


34





SIGNATURES




In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.





TITAN
      ENERGY WORLDWIDE, INC.Dated:
      March 31, 2010
                By:
                /s/
      Jeffrey W. FlanneryJeffrey
      W. Flannery
                  Chairman
      and Chief Executive
Officer




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.




Signature
                                
                                Title
                                
                                Date/s/
      James J. Fahrner
                                
                                Chief
      Financial Officer (Principal Financial Officer) and
    Director
                                
                                March 31,
      2010James
      J. Fahrner/s/
      Jeffrey W. Flannery
                                
                                Chief
      Executive Officer (Principal Executive Officer), Chairman and
      Director
                                
                                March 31,
      2010Jeffrey
      W. Flannery/s/
      Thomas R. Black
                                
                                Chief
      Operating Officer and Director
                                
                                March 31,
      2010Thomas
      R. Black


35





EXHIBIT
INDEX





Exhibit
      No.
                  
                  Identification
      of Exhibit3.1*
                  
                  Amended
      and Restated Articles of Incorporation, filed with the Nevada Secretary of
      State on December 26, 2006.3.2*
                  
                  Bylaws4.1*
                  
                  Certificate
      of Designation establishing our Series D Preferred Stock filed February
      26, 200810.1*
                  
                  Agreement
      and Plan of Merger with Titan Energy Development, Inc., dated July 21,
      200610.2*
                  
                  Stock
      Purchase and Exchange Agreement with Stellar Energy Services, Inc., dated
      December 28, 200610.3*
                  
                  Employment
      Agreement dated January 1, 2007 between Titan and Thomas
    Black10.4*
                  
                  Employment
      Agreement dated May 1, 2007 between Titan and James
  Fahrner14*
                  
                  Code
      of Ethics21**
                  
                  Subsidiaries23.1**
                  
                  Consent
      of UHY LLP31.1**
                  
                  Certification
      of John M. Tastad, Chief Executive Officer of the Company, pursuant to 18
      U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.31.2**
                  
                  Certification
      of James J. Fahrner, Chief Financial Officer of the Company, pursuant to
      18 U.S.C. §1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1**
                  
                  Certification
      of John M. Tastad, Chief Executive Officer of the Company, pursuant to 18
      U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.32.2**
                  
                  Certification
      of James J. Fahrner, Chief Financial Officer of the Company, pursuant to
      18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.




*
              Previously
      filed.





**
            Filed
      herewith.