UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:October 31, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number:000-25289
TITAN TRADING ANALYTICS INC.
(Exact name of Registrant as specified in its charter)
Alberta, Canada
(Jurisdiction of incorporation or organization)
751, 815 – 8th Avenue SW, Calgary, Alberta, Canada, T2P 3P2
(Address of principal executive offices)
Kenneth Powell, (780) 438-1239,kpowell@titantrading.com,
Unit 120, 4445 Calgary Trail, Edmonton, Alberta, Canada, T6H 5R7
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person )
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Name of each exchange on |
| which registered | |
| N/A | N/A |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares Without Par Value
(Title of Class)
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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
The number of common shares outstanding as of October 31, 2009: 58,317,878.
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 if the Securities Act.
Yes [ ] No [X]
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
| Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-accelerated filer [X] |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP [ ] | International Financial Reporting Standards as issued by the | Other [X] |
| International Accounting Standards Board [ ] |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 [X] Item 18 [ ]
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
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TABLE OF CONTENTS
Titan Trading Analytics Inc.
Form 20-F Annual Report
Table of Contents
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NOTE REGARDING FORWARD–LOOKING STATEMENTS
Certain statements in this document constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Such statements are included, among other places, in this document under the headings “Business Overview”, “Operating and Financial Review and Prospects” and “Trend Information”. Forward-looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. These include, but are not limited to, our history of losses and likelihood of continued losses, our need for additional financing, our desire to acquire certain rights and interests to our software, the potential effect and impact of certain United States and Canadian securities laws on our business activities, the control certain shareholders exercise over us, competition, the market acceptance of our software, our ability to develop and release new software products and services, our dependence upon key personnel, our lack of an experienced sales staff or marketing personnel, the nature of our business, the volatility of the price for our common shares, potential product liability claims, our need for improved intellectual property protection, our common shares being deemed a “penny stock” under United States securities laws, and the potential inability for United States investors to enforce United States judgments against us or our officers or directors and the effect of our PFIC (as defined below) status on our United States shareholders. Additional information concerning these and other factors that could affect our operations or financial results are included in this document under “Item 3.D. – Risk Factors”. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance and achievements or other future events. We are under no duty to update any of our forward-looking statements after the date of this report. You should not place undue reliance on such forward-looking statements.
CURRENCY AND EXCHANGE RATES
The following table sets out the exchange rates, based on the noon buying rates in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York, for the conversion of Canadian dollars into United States dollars in effect at the end of the following periods, and the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods) and the range of high and low exchange rates for such periods.
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U.S. Dollars Per Canadian Dollar
Year Ended October 31,
| 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |
| Average for Period | 0.8603 | 0.9690 | 0.9811 | 0.8831 | 0.8213 | 0.7634 | 0.6880 | 0.6354 |
The following table sets out the high and low exchange rates for one CDN $ expressed in terms of one US$ in effect at the end of the following periods.
U.S. Dollars Per Canadian Dollar
| October | November | December | January | February | March | April | |
| 2009 | 2009 | 2009 | 2010 | 2010 | 2010 | 2010 | |
| High for the Month | 0.9716 | 0.9560 | 0.9611 | 0.9755 | 0.9597 | 0.9888 | 1.0039 |
| Low for the Month | 0.9221 | 0.9308 | 0.9334 | 0.9384 | 0.9316 | 0.9596 | 0.9803 |
At December 31, 2008 the Federal Reserve Bank of New York ceased publishing foreign exchange quotations. As of January 1, 2009 the Company began using the closing rate for foreign exchange published by the Bank of Canada. As of April 30, 2010, the Closing exchange rate of Canadian dollars into United States dollars published by the Bank of Canada was US$.99885 (US$1.00 = CDN$1.0116) .
In this Form 20-F, unless otherwise specified, all monetary amounts are expressed in Canadian dollars.
References to “Titan”, the “Company”, “we” and “us” are references to Titan Trading Analytics Inc.
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PART I
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3: KEY INFORMATION
A. Selected Financial Data
The following tables set forth our financial data for our fiscal years ended October 31, 2009 back to 2005. We derived all figures from our financial statements, which were audited by our independent auditors. This information should be read in conjunction with our financial statements included in this annual report.
Our financial statements included in this annual report and in the table set forth below have been prepared in accordance with generally accepted accounting principles in Canada, which may differ from United States generally accepted accounting principles. A reconciliation to United States generally accepted accounting principles is included in Note 16 to our audited financial statements.
| FISCAL YEAR ENDED: | |||||
| OCT 31, 2009 | OCT 31, 2008 | OCT 31, 2007 (Restated) | OCT 31, 2006 (Restated) | OCT 31, 2005 | |
| REVENUE | - | - | - | - | - |
| EXPENSES | $3,529,427 | $3,081,814 | $2,587,613 | $1,716,500 | $1.343.289 |
| INTEREST/OTH ER INCOME | $678 | $5,829 | $7,975 | - | - |
| NET LOSS FOR YEAR CDN GAAP | $3,528,749 | $3,075,985 | $2,579,638 | $1,716,500 | $1,343,289 |
| NET LOSS FOR YEAR US GAAP | $3,528,749 | $3,075,985 | $2,579,638 | $1,716,500 | $1,343,289 |
| NET LOSS PER SHARE CDN GAAP | ($0.07) | ($0.07) | ($0.07) | ($0.06) | ($0.07) |
| NET LOSS PER SHARE, BASIC AND DILUTED, US GAAP | ($0.07) | ($0.07) | ($0.07) | ($0.06) | ($0.07) |
| NET WORKING CAPITAL | ($241,862) | ($199,946) | ($434,823) | ($104,593) | ($76,993) |
| TOTAL ASSETS CDN GAAP | $869,397 | $1,528,919 | $431,402 | $455,704 | $213,066 |
| TOTAL ASSETS US GAAP | $869,397 | $1,528,919 | $431,402 | $455,704 | $213,066 |
| NET ASSETS | $291,896 | $839,586 | ($252,053) | ($42,158) | ($45,994) |
| CAPITAL STOCK | $13,591,954 | $11,707,655 | $8,795,045 | $6,717,678 | $5,293,505 |
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| FISCAL YEAR ENDED: | |||||
| OCT 31, 2009 | OCT 31, 2008 | OCT 31, 2007 (Restated) | OCT 31, 2006 (Restated) | OCT 31, 2005 | |
| SHARES OUTSTANDING | 58,317,878 | 49,214,345 | 37,813,699 | 30,814,497 | 22,646,399 |
| LONG-TERM OBLIGATIONS | NIL | NIL | NIL | NIL | NIL |
We have not, since our incorporation, paid any dividends on any of our shares and presently have no intention of paying dividends. The future dividend policy will be determined by the Board of Directors on the basis of earnings, financial requirements and other relevant factors.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
The risk factors set forth below are believed to be important in that they may have a material impact upon our future financial performance and could cause actual results to differ materially from those expressed in any forward-looking statement we make. Note that unknown factors, not discussed in this annual report, could also have a material adverse effect on our actual financial and other results. The factors below should be considered in connection with any financial and forward-looking information in this Form 20-F and the cautionary note regarding forward-looking statements contained on pages 3 and 4.
The unprecedented financial events of late 2008 and the resulting global recession continue to have, a significant impact on the business climate in general. The risks below are not the only ones that the Company faces. Some risks are not yet known to the Company and some that the Company does not currently believe to be material could later turn out to be material. All of these risks could materially affect the Company’s business, revenue, operating profit, earnings, net assets and liquidity and/or capital resources.
We have had a history of losses and there is a likelihood of continuing operating losses.
We were incorporated on November 30, 1993, commenced operations in May 1994 and have yet to establish profitable business operations. To date, we have been largely engaged in product research and development and establishing a marketing strategy. Our accumulated deficit through October 31, 2009 is $16,692,290. Our initial products and planned services are just beginning to become available for market release and sale. We thus have a limited operating history and are expected to continue to incur losses and negative cash flow in the immediate future as these new products and services are completed and marketed. Our ability to succeed depends upon us achieving positive cash flow, failing which we will have to seek additional financing, and there can be no assurance that any additional financing will be available on acceptable terms, or at all.
We will need additional financing to fund our operations in the future.
As at October 31, 2009, we had $83,162 cash and receivables totaling $35,180.
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We will need additional financing to fund our operations in the future. There can be no assurance that we will be successful in raising additional funds or that additional financing, if any, can be obtained on terms acceptable to us. Such financing, to the extent that it is available may result in substantial dilution to our shareholders. To the extent such financing is not available, we may not be able to, or may be delayed in, continuing to commercialize our software products and services, and we may have to curtail our operations.
Certain of our software will be used in United States and Canadian financial markets and may result in increased regulation of our business activities.
The manner in which we market, sell and derive revenues from our automated trade selection and order entry software may result in certain United States securities laws regulating our activities, namely the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, and federal and state broker-dealer laws. If we decide to engage in business activities that are regulated by any of such laws, our legal and other compliance costs associated with operating our business will likely increase significantly.
Certain of our shareholders may exercise control over matters voted upon by our shareholders.
Certain of our officers, directors and entities affiliated with us together beneficially owned a significant portion of our outstanding common shares as of April 30, 2010. These shareholders are able to exercise significant influence over matters requiring shareholder approval, including the election of directors and the approval of mergers, consolidations and sales of our assets. This fact may prevent or discourage tender offers for our common shares.
We are in an early stage of development and there is no assurance of market acceptance of our software.
Our revenue model is to exploit automated trade selection and order entry software, as follows:
by establishing a profitable trading operation; and/or
by licensing software and providing support services to third parties.
We are currently exploring several opportunities; however, there can be no assurance we will be successful in our efforts.
Our products and services face significant competition in the marketplace.
A number of our competitors have substantially greater financial, technical and marketing resources. In addition, the market for our software products continues to develop, and additional competitors with substantially greater financial, technical and marketing resources may enter the market and competition may intensify. Current or future competitors may develop software products that are superior to our software products or achieve greater market acceptance.
We will depend on the timely development and release of new software products and services.
The achievement of our business objectives and our future operating results is dependent upon completion and execution of our marketing strategies and on the continued development and successful deployment of our trading software products and services. Timing in this regard is crucial, as other similar services that reach the market prior to ours may capture a significant portion of market share. There can be no assurance that the timing of our business plan will allow us to achieve profitability in our operations.
We Operate in a Highly Competitive Market
The financial services market is intensely competitive and characterized by the existence of larger established trading and trading software companies along with the frequent entry of new competitors and introductions of new software programs, features and technical innovations. Numerous competitors are already established in this marketplace. Many of these companies may have greater resources, and recognition than us. In addition, there can be no assurance that we will be successful in our efforts, or, if successful, that we will have the resources to sustain any early growth or market penetration we may achieve.
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In addition, the market for online trading of stocks and related services accessible to personal computer users is changing rapidly. The applications growth and emergence of the Internet as a low-cost source of worldwide financial market data, subscriptions, trade execution and research services, has already threatened the existence of established data and information vendors, as well as full-service brokers. This creates technical, competitive and business trends, the outcomes of which are uncertain and which may adversely affect our business.
We depend on key personnel.
We depend on key personnel whose loss of service would have an adverse effect. We depend on our Chief Technology Officer, Mr. Gossland, and our President, and Director of U.S. Trading Operations, Mr. Carrozza, for the success of our intended business plan. We do not have current formal employment agreements with Mr. Gossland and Mr. Carrozza. The loss of their services would have a materially adverse effect upon our future operating profits and prospects.
We do not have experienced sales staff or marketing personnel.
We do not have experienced sales staff or marketing personnel to promote the product. We plan to market our software and services through direct sales efforts and word-of-mouth. There can be no assurance that we will be able to attract and retain the necessary personnel as and when required. We may not be able to address all potential markets adequately, without first establishing indirect distribution channels through distributors and selling agents, and there can be no assurance that we will be able to establish or maintain these channels cost effectively.
We intend to develop a securities trading business that may result in us incurring significant trading losses.
In the future, we plan to establish proprietary in-house trading activities, most likely through a subsidiary company or partnership arrangement. Such trading activity will involve a risk that we incur trading losses. Investors, partners and subscribers must expect trading losses in actual trading operations and potentially wide fluctuations in monthly trading performance. This presents an ongoing legal and financial risk, notwithstanding the protection we are afforded by the careful use of industry standard legal disclaimers.
Our intellectual property may not be appropriately protected and we may be infringing upon the proprietary rights of third parties.
We depend on our ability to protect the core proprietary software technologies we have developed. In this regard, we rely on a combination of trade secrets, technical complexity, common law copyright and trademark protection, licensing agreements, password protection and software encryption schemes, as well as on the physical security of our source code. Despite these measures and precautions, it may be possible for an unauthorized third-party to copy our core technologies and either offer them to the marketplace as its own, or to use them without paying. To date, we have not sought to obtain copyright registration or patent protection for any of our software products, though we may do so in the future. There can be no assurance, however, that such registration will be granted if applied for. Also, certain aspects of our software products are not subject to intellectual property protection in law, and to the extent such protection might be available, practical and legal distinctions may apply in different jurisdictions. In addition, there can be no assurance that competitors will not develop similar technology, products and services, and if they do, this could reduce the value of our proprietary technology and our ability to effectively compete.
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Although we believe that we have the right to use all of the intellectual property incorporated in our software products, third parties may claim that our software products violate their proprietary rights, including copyrights and patents. The cost of litigation necessary to defend our right to use the intellectual property incorporated in our software products may be prohibitive. If any such claims are made and found to be valid or we determine it prudent to settle any such claims, we may have to re-engineer our software products or obtain licenses from third parties to continue offering our software products or in whole or in part cease using such technology. Any efforts to re-engineer our software products or obtain licenses from third parties or cease using such technology may not be successful and could substantially increase our costs and have a material adverse effect on our business, financial condition and results of operations.
As a developing company, the market price of our shares may be volatile.
Factors such as news announcements on our financial position, financial results and business developments, technical developments and innovations, competitors or third parties, industry developments in high-technology companies in general or securities trading software companies and securities trading platforms more particularly, on general stock market conditions, changes in interest rates or general economic conditions, unexpected and extreme general stock market price and volume fluctuations, or a lack of share volume liquidity, may individually or collectively have the effect of causing substantial fluctuations in the traded price of our common shares. Changes in the trading price of our shares may be unrelated to our performance or future prospects. In addition, investors in our shares may lose their entire investment if we incur large trading losses or if we fail in our business.
During the 2009 fiscal year, the closing price of our common shares as traded on the TSX Venture Exchange ranged from $0.21 to $0.42.
Our stock is ‘thinly-traded’ meaning that the number of persons interested in purchasing our common stock at or near ask prices may be relatively small.
Titan common stock is “thinly-traded” on the Over-the-Counter Bulletin Board, meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that Titan is a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if Titan came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven development stage company such as Titan or purchase or recommend the purchase of Titan’s shares until such time as it became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent. We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give no assurance that holders of our common shares will be able to sell their shares at or near ask prices or at all if they desire to liquidate their shares.
We may be subject to product liability claims.
We do not maintain product liability insurance against defects in the general performance of our software products. There can be no assurance that we will not be exposed to potential product liability claims in all markets in which we may sell or license our products or offer our services.
Our stock may be deemed a penny stock and additional disclosure requirements may be imposed when trading our common shares.
When the trading price of our common shares is less than US$5.00 per share, trading in our common shares would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a “penny stock”. A broker-dealer is required to deliver to a customer information regarding the risks of investing in penny stocks, its offer and bid prices for the penny stock and the amount of compensation received by the broker-dealer with respect to such transaction. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our common shares, which could reduce the liquidity of our common shares and thereby have a material adverse effect on the trading market for our securities.
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A third-party may be unable to enforce U.S. judgments against us or our officers and directors.
We are incorporated under the laws of Alberta, Canada and, all of our directors and officers, with the exception of Messrs. Terk and Carrozza, are residents of Canada. Consequently, it may be difficult for United States investors to effect service of process within the United States upon us or upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the Exchange Act. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or us predicated solely upon such civil liabilities.
Our U.S. shareholders may face adverse tax consequences resulting from our PFIC status.
We believe that we qualify as a passive foreign investment company (“PFIC”) for the fiscal year ended October 31, 2009 and may qualify as a PFIC in the future with respect to our U.S. shareholders because our only source of income is interest, a passive source of income under the PFIC rules.
See “Item 10.E. Taxation - United States Federal Income Tax Consequences” for a more detailed discussion of material United States federal income tax consequences for U.S. shareholders.
ITEM 4: INFORMATION ON THE COMPANY
A. History and Development of the Company
We were incorporated and validly exist as a corporation under a former Companies Act, as that term is defined in theBusiness Corporations Act(British Columbia), on November 30, 1993 under the name “KBK No. 24 Ventures Ltd.” We changed our name to “Titan Trading Analytics Inc.” by filing of an amendment to our Articles of Incorporation on November 14, 1994. The company began trading publicly on July 24, 1996. We continued the Company under theBusiness Corporations Act (Alberta) on April 26, 2005. Our registered and records office is located at 751, 815 – 8th Avenue SW, Calgary, Alberta, T2P 3P2. Our telephone number is (403) 543-2185.
On November 23, 1994, we incorporated Titan Trading Corp., a wholly owned subsidiary, under a former Companies Act, as that term is defined in theBusiness Corporations Act (British Columbia), as a wholly owned subsidiary. Titan Trading Corp. was continued under theBusiness Corporations Act(Alberta) on August 22, 2006. This subsidiary was originally incorporated with a view to eventually forming a separate trading business, but to date has conducted no business. It has no income, expenses, assets or liabilities and is presently an inactive subsidiary.
We have an additional wholly owned subsidiary, Titan Trading GP Inc. (“Titan GP”), a corporation established under the laws of Alberta, which is the general partner for Titan Trading Limited Partnership 2 (“TTLP2”) a limited partnership formed on January 18, 2006 under the laws of Alberta. TTLP2 was created to raise financing by offering limited partnership interests. Titan GP will receive a management fee and a share in the distributions and the carried interest with the limited partners. The purpose of TTLP2 is to raise financing and then trade the funds using our Titan TickAnalyst software (“TickAnalyst”) and the N1 Expert System software. This activity is not being pursued by the Company at the present time. Any and all trading operations are being conducted by its wholly owned subsidiary, Titan Trading USA, LLC.
Titan GP was also the general partner for Titan Trading Limited Partnership 1 (“TTLP1”), a limited partnership formed on February 14, 2005 under the laws of Alberta. TTLP1 was created to raise financing by offering limited partnership interests and after its two year term, was dissolved in 2007 and the principal investment plus interest was returned to the respective investors.
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Further, we have two U.S. based wholly owned subsidiaries, Titan Trading USA, LLC (“Titan USA”), which is a Delaware limited liability company qualified to do business in New York and Florida and Titan Holdings USA, LLC (“Titan Holdings”), which is a Florida limited liability company. The purpose of Titan USA is raise financing from US subscribers and then trade the funds using the TickAnalyst software.
We have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets.
Our principal capital expenditures and divestitures during the last three financial years are as follows:
| 2009 | 2008 | 2007 | |
| Purchase (sale) of property and equipment | $47,179 | $731,147 | $132,786 |
Other than as set out below, there are no principal capital expenditures currently in progress or anticipated.
In 2008, the Company moved to a new home office in Edmonton, Alberta. The 4,500 square foot data center supports the Company’s market roll-out and redundancy operations, and our server room is housed in a secured 300 foot former bank vault. The server room itself is equipped with rack-mounted multi-core servers, a backup air-conditioning system, an inert-gas fire suppression system, and a 100kw diesel-powered electrical backup system.
There are no divestitures currently in progress.
There has been no indication of any public takeover offers by third parties in respect of our common shares or by us in respect of other companies’ shares during the last or in the current financial year.
B. Business Overview
The Company is a financial software developer that has developed proprietary market timing, trading analytics and automated trading execution software called Titan TickAnalyst (“TickAnalyst”). TickAnalyst, when assembled with other third party components, forms a complete automated trading system capable of transforming real-time market data into executed trading orders. TickAnalyst is now beginning to establish a real-world track record to demonstrate its potential as a revenue source.
The Company continues to expend all of its efforts developing the TickAnalyst software and the operational infrastructure required for full-time commercial use. The Company has yet to establish profitable business operations and has remained in research and development mode since its incorporation on November 30, 1993.
The Company has focused its attention on development of software trading technology during 2003 through 2009. The target market for the business is institutional, high net worth individual investors and trading firms seeking a better than average return on investment and trading returns in their portfolios. The immediate market is primarily in Canada and the United States. Competitors include many other firms that offer trading systems. Titan believes that few of these competitors incorporate a multi-timeframe analysis the way Titan does and none would deliver signals generated by the same algorithm.
As of April 30, 2010 we presently have $79,77437 cash on hand and $90,000 held in a short term investment. We need to raise additional financing by way of private placements in order to continue to develop and exploit our technology as planned.
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The Company is a reporting issuer in Canada and trades in Canada on the TSX Venture Exchange under the symbol “TTA”. The Company is subject to the reporting requirements of the Exchange Act, and is quoted on the Over-the-Counter Bulletin Board under the symbol “TITAF”.
Principal Products, Services and Markets
The target market for the business is institutional, high net worth individual investors and trading firms seeking a better than average return on investment and trading returns in their portfolios. The Company plans to enter into non-exclusive agreements with institutions, trading firms and/or high net-worth individuals to utilize the software for trading and share the profits with those parties, or at a later stage, to license the software as a service directly to such parties under terms. Additionally, we expect to conduct trading operations for our own behalf and/or in joint ventures.
Beginning in 1994 and continuing through 1995, Titan was generally focused on the development of initial software products and therefore conducted few trading or trade-testing activities. From 1996 through to 2002, Titan developed and introduced several software trading products including: (a) NeuralEdge – a neural network based trading system for S&P futures contracts, (b) currency trading signals via fax, (c) VirtualTrader, a discretionary training and testing software application, (d) the “Big Board” trading model, a proprietary setup of indicators and trading screens for discretionary trading, (e) Titan Market Commentary, a web-based stock commentary subscription service, and (f) Titan Market Watch, a web-based stock trading presentation package.
At the end of 2002, the company underwent a change of senior management and development plans. The aforementioned products were put on hold and the company began development of new products.
In June 2003, Titan acquired rights to certain automated trading and analytic software, which it then called the Titan Order Processing Software (“TOPS”), from Cignal Technologies, LLC (“Cignal”) and it has continued to develop an automated trading platform based on TOPS. Cignal is owned by Mr. Philip Carrozza, Titan’s US Director of Trading Operations. The Company has not had any significant revenues in the last 6 fiscal years, ending with 2009.
The TOPS technology evolved into Titan’s current major product, TickAnalyst (“TickAnalyst”). TickAnalyst is now beginning to establish a real-world track record to demonstrate its potential as a revenue source.
TickAnalyst is a fully integrated, scalable algorithmic trading system that incorporates a variety of trading models, including trend-following, countertrend and mean reversion models shown to be effective analytical tools in normal, non-trending and highly volatile markets. Built on Titan’s comprehensive market analysis technologies, TickAnalyst has the capability to analyze data feeds available from a number of the world’s stock exchanges. With ultra high-speed analysis capabilities, TickAnalyst is designed to analyze hundreds of thousands of ticks per second per server and from that analysis generate carefully selected trading signals with a favorable probability of success for each trade.
TickAnalyst is a group of software applications, which may be divided into several parts:
| 1. | Signus, also known internally as the blackbox, used to generate trading signals. |
| 2. | TOMS, Titan’s Order Management Software, used to execute and manage trades. |
| 3. | QuickTick Charting, used for financial data visualization. |
| 4. | TradeViewer, used to display the results of the trading performance. |
| 5. | TopView and TopViewClient, used to distribute the real-time and historical trading signals. |
| 6. | Several back end data management tools used to manage data. |
These parts, when assembled with other third party components, form a complete automated trading system capable of transforming real-time market data into executed trading orders.
The trading system controls the trading decisions while monitoring the data arriving from the real-time data feed and looks for the pre-defined patterns of movement in price, volume, and time. When a particular pattern is found, a trading signal is generated.
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The automatic order execution software is responsible for processing the trading signals and turning them into online trading orders. The orders are sent over the internet to the RediPlus trade execution engines. Several other trade execution engines (RealTick, FIX, ODL, ChoiceFX) are can be interfaced but are not used by Titan at present. The software can operate in simulation mode, where no orders are actually placed; in semi-automatic mode (also known as GreyBox mode), where orders require a manual confirmation step, or in fully automatic mode (also known as BlackBox mode), where orders are executed with no operator intervention.
QuickTick Charting offers fast charts for any trading symbol within its supported exchanges as well as other capabilities designed with the GreyBox trader in mind. After testing is complete, Titan plans to explore various avenues in which the QuickTick Charting system may be made available for use by other trading firms or groups of individual traders for a monthly fee.
A separate product, the Company’s wholly owned market timing software, N1Expert, relies upon the application of artificial intelligence (“AI”) to stock index trading, using neural networks and expert systems. Neural networks constitute an AI-based mathematical pattern recognition technique that allows software to mimic the information processing functions of humans. The software was “taught” to recognize complex patterns through trial and error, without being programmed with specific preconceived rules. This pattern recognition ability allows the software to generate buy and sell signals on the S&P 500 futures contracts to trade large swings on the S&P 500 stock index. We are not actively pursuing the development of this software at this time.
Our present business plan is to market and license our TickAnalyst software, and utilize it for our own trading operations through our wholly owned subsidiary Titan USA.
GreyBox Trading
GreyBox trading refers to a style of trading where electronic trading signals are delivered to the trader, and the trader applies judgment before manually allowing the signals to be executed as trades. Thus, GreyBox mode allows the power of automation to be controlled by human discretion. It is a useful mode for operation while the software is being refined to make it perform with the expertise of a human trader.
The concept behind Titan’s GreyBox trading mode has four elements:
| 1. | present the trader with high quality technical based trading opportunities; |
| 2. | allow the GreyBox trader to have complete control over which trades are executed; |
| 3. | automate the order entry and exit process; and |
| 4. | manage risk on dozens of open positions with automation. |
In each case, the benefit to the trader of our GreyBox mode trading software is to allow that trader to execute a greater number of trades with a greater probability of achieving a profit than without the software. The combination of all four features can dramatically increase the number of trades that even an experienced trader can execute.
BlackBox Trading
BlackBox trading refers to a style of trading where electronic trading signals are delivered to the trader, and the signals are immediately and automatically executed as trades. Thus, BlackBox mode allows the power of automation to be applied with no human discretion. Titan’s goal is to conduct all of its trading operations in BlackBox mode. Achieving BlackBox mode requires a great deal of refinement in the trading systems’ rules and settings so the software can perform with the judgment of a human trader.
The concept behind Titan’s BlackBox trading mode has three options
| 1. | generate high quality technical based trading opportunities; |
| 2. | automate the order entry and exit process; and |
| 3. | manage risk on dozens of open positions with automation. |
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In each case, the benefit of BlackBox mode trading software mode is to allow the system to execute a large number of trades with no decision-making required on the part of the operator.
Milestones
In November 2004, the Company opened an office in West Palm Beach, Florida to be used as a base for Titan’s US trading operations. Mr. Carrozza is a registered broker in Florida, and has twenty-three years experience and is the chief trading architect behind the Company’s trading logic for Titan’s TickAnalyst.
In September 2006, we announced the completion of the software interface to Carlin Financial LLC’s trading platform, which allowed us to offer more trading solutions to a greater number of professional and institutional traders.
In March, 2007, the Companyannounced the formation of a registered broker dealer with National Securities Consulting Group and Janet L. Gentry. The formation of the Broker Dealer will provide avenues for business expansion into the financial services industry. As of December 31, 2009, this process is still ongoing.
In July 2007, the Company completed a test integration of securities exchange data into our wholly owned proprietary charting application. This development allows the Company to offer a turnkey solution in the Multi-asset Direct Market Access (DMA) Platform arena. As a whole, the platform offers more trading solutions to a greater number of buy-side professional and institutional traders.
In August 2007, the Company announced that phase one of the software link between its blackbox trading signal generator and our QuickTick charting application was complete and that a beta-test program of this link was underway.
Also in August, 2007, the Company announced the opening of our new New York Regional Office to assist with our Currency and Commodity Trading Division under our USA Trading Operations. The new office is fully outfitted with redundant internet connections and UPC battery back-ups on key trading systems. This office will offer upgrades in data capabilities as well as a centralized location for the operations team.
In October 2007, the Company announced the completion of our TickAnalyst software. This version of our software is a completely stand alone application, which differentiates it from our previous implementations of our BlackBox software. A 30 day period of in house alpha testing will be followed by a 60 day period of beta testing, prior to the release of the industry ready product. The beta testing period revealed some limitations in the underlying platform, and the fact that some new capabilities would be required.
In November 2007, the Company reported several key operational developments. The first came in the area of our TickAnalyst charting component reliability. An automated program was created to schedule and control many tasks previously handled by human I.T. resources. Many of the types of errors encountered earlier in the testing phase associated with maintaining data properly will now be automatically monitored. This allows errors to be resolved more quickly and also frees resources. Further developments include improvement in Titan’s Order Management Software (“TOMS”), a part of TickAnalyst. TOMS now has the new ability to do a partial exit when a trade is profitable by any of four threshold levels: T1, T2, T3, and T4. This improvement is critical for automated BlackBox trading. This will offer an added edge for both in-house future money management and external end-user functionality.
In January 2008, the Company reported several recent key operational developments. First, the Company announced we had completed the development of Version 2 of our QuickTick Charting application and QuickTick Server. The communications software linking QuickTick Charting with the Server was provided by a third party in Version 1, but it was re-written by our developers for Version 2, as a required step before market launch. The new communications software is designed to be both more reliable and easier to scale up to a large number of users.
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In May, 2008, the Company announced that the new Edmonton, Alberta office backup power system, consisting of a short-term battery-powered UPS with a long-term 100kW diesel-powered electrical backup, performed flawlessly during a multi-hour power failure test. In addition, we also developed a databank hosting 15 terabytes of NYSE and NASDAQ data extending as far back as 2004.
In September 2008, the Company announced that we are advancing towards commercialization through key operational developments. The Company is performing beta and acceptance testing on TickAnalyst, to ensure that our products function properly under historical and live conditions. This testing process utilizes key in-house non-programming staff as well as independent consultants contracted by the Company, working closely with our software engineers for quality assurance of our applications and products. Our testing process, which meets and exceeds standards of the trading system industry, is currently performing a number of testing procedures simultaneously on large amounts of historical data as well as live data, down to the tick level, to test the robustness of its applications under rigorous conditions with the expectation of soon bringing a fully automated production offering to commercialization.
In December 2008, the Company moved to the new home office in Edmonton, Alberta, a 4,500 square foot state of the art data center. The new data center supports the Company’s market roll-out and redundancy operations, and our server room is housed in a secured 300 foot former bank vault. The server room itself is equipped with rack-mounted multi-core servers, a backup air-conditioning system, an inert-gas fire suppression system, and a 100kw diesel-powered electrical backup system.
In February 2009, the Company announced that it has released to its wholly-owned subsidiary, Titan USA, Release Candidate (“RC”) 2.0 of its TickAnalyst software platform. TickAnalyst RC 2.0 has undergone rigorous in-house testing with our engineers and traders at its facilities in London, New York, Atlanta and West Palm Beach. TickAnalyst’s functionality, stability, and scalability have been tested with both real time and historical market data and all expectations and objectives for this release were met or exceeded.
In March 2009, the Company opened a new satellite/regional office in Peterborough, United Kingdom.
In June 2009, The Company announced the completion of development and testing of the second generation of its TickAnalyst software package(“TickAnalyst X2”). TickAnalyst X2, comprised of the signal-processing engine, database-management tools, and charting server applies event triggers and customized analytics across extensive amounts of streaming data, a process also known as Complex Event Processing (“CEP”). The CEP applies Titan’s proprietary model-built logic to two major North American exchanges in real-time. Titan’s proprietary models are designed to perform in all market environments. Model examples include trending and non-trending (mean-reversing) versions with numerous variations of each. TickAnalyst X2 has enabled Titan Trading USA LLC (“TTU”) to implement TTU’s Internal Asset Management business model utilizing the US$5,000,000 placed by Compo Investment Partners LP of New York in a professional leveraged trading account managed by the company’s wholly owned subsidiary Titan Holdings USA LLC. Updates on the status of this revenue and trading model will be made available to the market on a timely basis.
In January 2010, a next generation version of Titan’s TickAnalyst software platform was introduced. Lengthy periods of historical and live testing can begin. This software offers much more flexibility and sophistication over its predecessors in the trading setups and rules that it can implement. The Company continues to use its multi-year database to run historical tests of this most recent version of TickAnalyst to refine the new trading rules and settings, and to run the systems on real-time market data.
Company Personnel
In January 2006, David Terk CPA, B.Sc. was appointed Chief Financial Officer of Titan USA, and the Company entered into a consulting agreement with Tony Robinson to assist Titan USA with foreign exchange trading and risk management.
In April 2006, the Company appointed Eric Davidson, Technical Research Analyst, to lead the research for our GreyBox (semi-automated) Equity Trading Division. Mr. Davidson’s appointment was in preparation for the launch of our proprietary market data analysis platform, TickAnalyst. He is instrumental in the testing, implementation and ongoing operations of our BlackBox (fully automated) Division as TickAnalyst comes online.
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In January 2007, the Company appointed Mr. Harlan Shabshelowitz, of Fall River, Massachusetts, to our advisory board.
In February 2007, the Company appointed William Brad Weber, Research Analyst and Trader, to our West Palm Beach Research and Trading Team to assist with our Equity Trading Division under our USA trading operations.
In March 2007, the Company announced that we appointed Andrew Pappas, Operations Specialist and Proprietary Trader, to our New York Regional Office and Trading Team to assist with our Equity Trading Division under our USA trading operations. As of October 31, 2009, Mr. Pappas is no longer with the company.
In April 2007, the Company announced the appointments of Anthony Savino, Execution Specialist, and Rahim Aziz, GreyBox Trader to our New York Regional Office and trading team to assist with our Equity Trading Division under our USA Trading Operations. As of October 31, 2009, Mr. Savino and Mr. Aziz are no longer with the company.
In February 2008, the Company appointed Parker Seto of New York to our Advisory Board.
In June 2008, the Company appointed John Howell of Fairfax Station, Virginia to our Advisory Board.
In October 2008, the Company announced the addition of a new team member, Manesh Patel, as Proprietary Systems Trader. Mr. Patel has twelve years of active trading experience in the equities, options, and futures markets and holds a Series 3 license. He also holds a Masters in Electrical Engineering with a minor in Economics from the University Of Georgia Institute Of Technology.
In January 2009, the Company appointed Doug Laughlin of Alpharetta, Georgia to our Advisory Board. Mr. Laughlin’s expertise includes sales, marketing, sales management, training, group presentations, trade show management, contract negotiations, hiring and OEM relationships.
In March 2009, the Company announced the addition of Daniel Robinson, as Head of European Trading, to its team. Mr. Robinson has been an investment analyst for Invesdar Global Advisors Ltd., a UK based investment consulting firm with an emphasis on global asset allocation, global hedge fund selection and portfolio construction since 2006. Mr. Robinson has a degree in Business Information Systems from the Nottingham Business School, in the United Kingdom. He also holds the Investment Management Certificate from CFA UK and is working towards level II of the Chartered Alternative Investment Analyst designation. Mr. Robinson will play a key role in the implementation of our internal asset management revenue model on a global scale.
In October 2009, Joseph Francese was elected to the board of directors. Mr. Francese will also serve as a member of Titan’s audit committee. Mr. Francese is Chief Investment Officer (CIO) of PROFORMA Capital Inc. and along with his partners, manages two proprietary high income funds for Institutional and High Net Worth investors. As CIO of PROFORMA, Mr. Francese chairs its investment committee and is responsible for analyzing and monitoring existing and prospective investments, as well as developing investment strategies. Prior to his role as CIO, Mr. Francese came with 15 years of experience working with high net worth investors consulting on over $100 million of investor assets during his advisory career. Mr. Francese serves and advises several local charitable groups and is a Chartered Financial Analyst (CFA) Charterholder.
Marketing and Sales
The Company’s business strategy is to market and license its stock market timing software as an automated trading platform, directly to trading firms, institutional investors, and active traders, through its US subsidiary, Titan USA. Sales will be conducted by direct selling and referrals. Additionally, Titan USA expects to conduct trading operations on its own behalf, in joint ventures, or in partnership with other investors.
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The selling proposition is that the software and service improves trading results in two ways: (1) on the basis that the trading behaviour of the system is modelled after the trading behaviour of an experienced human trader who has shown profitable trading results over time; and (2) the software delivers more of such trading signals per unit time for a trader to review and act upon than would be possible if the trader were acting without the benefit of the software.
Titan conducts its marketing and sales primarily through relationships developed personally by the principals of Titan Trading USA and through introductions made within the trading community by word of mouth. Titan has found this to be a satisfactory means of finding customers at the levels of support currently manageable by the company.
In 2005, the Company announced a joint venture agreement between its wholly owned subsidiary, Titan USA, and a leading financial institution to begin a 90 day beta test of TickAnalyst. This arrangement was concluded because technical issues arose when the firm changed its order execution technology and was subsequently sold to the Royal Bank of Canada.
In June 2006, we announced that Titan Trading USA and New River Assets, of Winston Salem North Carolina, agreed to conduct a live test of Titan’s GreyBox (semi-automated) trading software. The test accounts were to be funded by New River and Titan Trading USA. The test with New River Assets called for a 30 – 60 day trial period followed by an analysis of results. Following the analysis, New River Assets and Titan evaluated the outcome and determined whether it is mutually beneficial to proceed with future projects. The test showed that the 2006 version of the software was too complex for external users and for the hardware at that time. The relationship with New River Assets continues but is on hold.
In December 2006, the Company announced that its wholly owned subsidiary, Titan Trading USA, would expand its trading operations into the derivative markets. Preliminary tests were run on Titan Trading USA’s demo and live futures trading accounts, opened through an expanding relationship with One World Capital Group (New York, N.Y.). Since the announcement, One World Capital Group went out of business, but in 2010, Titan Trading USA’s currency trading continues with Compo Investments.
In March, 2007, the Company announced the launch of an international Forex Proprietary Trading Desk. This multi-tiered trading operation is designed to attract, develop and retain experienced forex traders. This program will utilize our trading software in semi-automated mode and will be managed by our wholly owned subsidiary, Titan USA.
In February, 2008, the Company announced that our currency trading arm received a six-figure capital investment from an accredited third-party investor. The investment marked the beginning of phase two of our currency alternative investment product managed by David Terk of Titan USA. On January 8, 2009, Avidus Trading LLC, a broker which the Company had been using for trading of securities, filed a bankruptcy petition with the Southern District of Florida U.S. Bankruptcy Court. To date the investments have not been recovered.
In August, 2008, the Company announced that it entered into a Consulting Agreement (the “IR Consulting Agreement”) with ARENA Capital Inc. (“ARENA”) based in Edmonton, Alberta, to provide investor relations services to the Company. ARENA provided various services to the Company including financing services, public relations services, investor relations services, shareholder relations services and market maintenance. The term of the IR Consulting Agreement lasted one year, from on August 1, 2008 until July 31, 2009.
In November 2009, The Company announced that it has commenced installation of its TickAnalyst software platform with G-2 Trading LLC (“G-2”) of New York. G-2, formerly RBC Professional Trader Group, with 130 proprietary traders is the first successful commercial client for Titan’s proprietary trading platform. Service and support contracts are to be negotiated after a preliminary test period. It is expected that G-2 will pay a monthly license fee as well as certain incentives based on usage of Titan’s TickAnalyst X2 software platform. G-2 Trading LLC is engaged in all aspects of the trading business. G-2 is committed to empowering its staff of 130 proprietary traders with the most innovative and powerful tools available in the industry allowing its management to carefully grow a top-quality group of professionals.
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In January 2010, the Company reported that Compo Investment Partners LP (“Compo”) of New York has opened an institutional FOREX Trading account to be managed by the company’s wholly owned subsidiary, Titan Holdings USA LLC (“THU”). The account has been placed under the investment control of Titan’s Currency trading team, using Titan’s Trading Technology. Under the terms of the forex trading agreement, THU and Compo will equally share the account’s profits.
In February 2010, the Company reported that its wholly owned subsidiary, Titan Holdings USA LLC (“THU”) opened an institutional proprietary trading desk in New York, NY. The trading desk comprised of 4 proprietary traders is managed by TTU and utilizes Titan’s TickAnalyst and Titan’s money management modeling.
Intellectual Property Rights
Our ability to compete effectively depends in part on our ability to protect our core software technology. We rely on the following for protection of our technology: (1) trade secrets; (2) technical complexity; (3) common law copyright and trademark protection; (4) password protection; (5) software encryption schemes; and (6) the physical security of our source code.
Despite these measures and precautions, and despite the fact that unauthorized persons do not have access to our source code, it may be possible for unauthorized third parties to reverse engineer aspects of our products. We have not attempted to obtain copyright registration for any of our software products, though we may do so in the future. There can be no assurance, however, that registration will be granted if applied for. Moreover, certain aspects of our software products are not subject to intellectual property protection in law, and to the extent that protection is available, its extent may differ from one jurisdiction to another.
Technology License Agreement
Pursuant to an agreement dated June 6, 2003 (the “License Agreement”), Cignal agreed to provide an exclusive 99-year license to the Company of the Cignal Technology and a 25% interest in all net profits third parties (subject to certain licenses being exempt) realize from the use of the Cignal Technology. In consideration therefore, the Company agreed to fund all future development costs associated with the TickAnalyst technology and development of related products. The Company was required to fund successive six month budgets (each budget not to exceed $100,000) relating to proposed developments of the TickAnalyst Technology and related products, failing which Cignal may terminate the license. Pursuant to a related agreement among Dr. Kenneth Powell, Mr. Thomas Kreilein and Mr. Phillip Carrozza dated June 3, 2003, Dr. Powell and Mr. Kreilein agreed to transfer certain common shares and grant an option to purchase additional common shares of the Company to Mr. Carrozza as an inducement to enter into this License Agreement. This agreement purported to provide Mr. Carrozza with the right to terminate the License Agreement if certain trading price benchmarks of the common shares were not met. None of these benchmarks were met but the License Agreement was not terminated within the required time periods.
Software Transfer Agreements
In February 2006, we entered into a software transfer agreement with Mr. Phillip Carrozza and Cignal, with respect to the transfer of certain trading models, suitable for stocks or futures and software-based formulas that implement the trading models and their accompanying indicators. Pursuant to the software transfer agreement, Cignal and Mr. Carrozza were to be issued a total of 3,000,000 common shares, 1,000,000 of which would have been issued on closing and the remaining 2,000,000 would have been issued in 1,000,000 increments in each of 2007 and 2008. Cignal was to be granted 1,000,000 performance warrants. The software transfer agreement provided Cignal with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
We also entered into a software transfer agreement with Michael Gossland, a director and officer of Titan, with respect to the transfer of certain executable programs and software-based formulas. Pursuant to the software transfer agreement, we would have issued Mr. Gossland 1,500,000 common shares and 1,000,000 performance warrants. The software transfer agreement provided Mr. Gossland with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
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A total of 1,000,000 of the performance warrants to be issued to Cignal, Mr. Carrozza and Mr. Gossland were exercisable at a price of $0.50 per share for a six month period commencing November 1, 2007 and the remaining 1,000,000 performance warrants were exercisable at a price of $1.00 per share for a six month period commencing November 1, 2008. The release of these warrants was conditional upon the 20 day average stock price on these dates being no less than $1.00 and $2.00 per share, respectively.
In July 2006, the Company announced that the aforementioned software transfer agreements entered into between the Company, Mr. Carrozza and Cignal and between the Company and Mr. Gossland had been amended and restated (the “Software Transfer Agreements”). The total number of Titan common shares issuable pursuant to the Software Transfer Agreements did not change from 4,500,000 shares; however, these shares will only be issued upon Titan achieving certain gross revenue milestones.
Pursuant to disinterested shareholder approval on October 2, 2009, the Software Transfer Agreements were further amended and the TSX Venture Exchange approved such amendments on November 10, 2009.
According to the amended terms of the Software Transfer Agreement, commencing June 1, 2008, an aggregate of 4,500,000 shares and 2,000,000 performance warrants would be issued based on gross revenues from TickAnalyst as follows:
If, between June 1, 2009 and May 31, 2010, Titan achieves cumulative gross revenue of at least $400k, then 1.5M shares would be released after September 30, 2009. If, in the same period, Titan achieves cumulative gross revenue of at least $800k, an additional 1.5M shares would be released after January 31, 2010. If, in the same period, Titan achieves cumulative gross revenue of at least $1.2M, an additional 1.5M shares would be released after May 31, 2010 and 1.0M performance warrants at $0.50 would be exercisable for the 6 month period June 1, 2010 to November 30, 2010. If, between June 1, 2010 and May 31, 2011 Titan achieves cumulative gross revenue of at least $1.8M, an additional 1.0M performance warrants at $1.00 would be exercisable for the 6 month period of June 1, 2011 to November 30, 2011.
Any Titan common shares not earned by May 31, 2010 will not be eligible for issuance. All of the securities issued would be subject to a four month hold period. Each performance warrant expires at the end of its exercise period.
As of April 30, 2010, the gross revenue milestones have not yet been achieved and therefore, no common shares are issuable and no performance warrants are exercisable. We are currently reviewing possible avenues for restructuring of the Software Transfer Agreements.
In connection with the Software Transfer Agreements, we entered into consulting agreements with each of Cignal and Mr. Gossland, whereby they provided consulting services to us until October 31, 2008. Both Mr. Gossland and Mr. Carrozza continue to provide services to us on a month to month basis.
TickAnalyst has components that are subject to certain rights pursuant to the Software Transfer Agreements described above. Otherwise, the Company wholly owns the TickAnalyst technology in its entirety.
Status of New Products or Services
Titan is constantly refining its trading software to maintain its integrity and marketability. As a result, we will be continuing to incur development costs. Subject to available financing, we anticipate spending approximately $750,000 over the next year on our development efforts. No new products, however, other than those described in this annual report, have been announced to the public.
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Competition
Our principal competitive advantage lies in the unique multi-timeframe system logic comprising the core of the TickAnalyst Technology. Although similar analysis can be done by a properly trained human trader, once automated, a computer can find a much larger number of signals and execute them more efficiently. Management is not aware of any competitors using the same or similar software logic. A second advantage is that we utilize low cost order execution platforms without high start-up or ongoing monthly operational costs.
The financial services market, however, is intensely competitive and characterized by the frequent entry of new competitors and introductions of new software programs, features and technical innovations. Numerous competitors are already established in this marketplace. There can be no assurance that we will be successful in our efforts, or, if successful, that we will have the resources to sustain any early growth or market penetration we may achieve.
There are large numbers of established financial trading and trading software companies. Many are larger than us, have longer operating histories, more established track records, greater name recognition, a larger installed base of customers, and greater financial, technical, sales, marketing and other resources. Moreover, if we achieve significant success in penetrating the financial software market, financially stronger companies may seek to enter this market and compete for market share.
The market for online trading of stocks and related services accessible to personal computer users is changing rapidly. The applications growth and emergence of the Internet as a low-cost source of worldwide financial market data, subscriptions, trade execution and research services, has already threatened the existence of established data and information vendors, as well as full-service brokers. This creates technical, competitive and business trends, the outcomes of which are uncertain.
Government Regulation
To date, governmental regulations have not materially restricted the use or expansion of the Internet. However, the legal and regulatory environment that pertains to the Internet is uncertain is changing. Some of the new and existing laws which may affect our operations are in the areas of:
Sales and other taxes;
User privacy;
Pricing controls;
Characteristics and quality of products and services;
Consumer protection;
Cross-border commerce;
Libel and defamation;
Copyright, trademark and patent infringement; and
Other claims based on the nature and content of Internet materials.
These new and existing laws may impact our ability to market our products and services offered on our website in accordance with our business plans.
We may have to qualify to do business in other jurisdictions. If we make sales of our products or services, we anticipate that sales and our customers will be in multiple states and foreign countries. As our customers may reside in such states and foreign countries, such jurisdictions may claim that we are required to qualify to do business in each such state and foreign country. Failure to qualify in a jurisdiction where required to do so could subject us to taxes and penalties.
If we are successful raising funds and begin trading operations with these funds, we may fall under the provisions of the Investment Company Act of 1940 and other United States and Canadian rules and regulations governing investment companies, investment advisors and broker-dealers. In such case, we may incur significantly higher reporting and regulatory compliance costs. We did not generate revenues in the 4 last fiscal years of 2006 through 2009. Our records do not permit us to include a breakdown of total revenues by category of activity and geographic market for any of these fiscal years. Based upon the information available to us, we believe that most of our customers were located in the United States during these fiscal years.
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C. Organizational Structure
We have four wholly owned subsidiaries: (1) Titan Trading Corp., a corporation formed under the laws of the province of British Columbia, Canada; (2) Titan Trading GP Inc., a corporation formed under the laws of Alberta and extra-provincially registered in British Columbia, the general partner for TTLP2, limited partnerships formed under the laws of Alberta; (3) Titan Trading USA, LLC, a Delaware limited liability company qualified to do business in New York and Florida; and (4) Titan Holdings USA, LLC, a Florida limited liability company.
D. Property, Plants and Equipment
We utilize about 6,500 square feet of office space in Edmonton, Alberta, Great Neck, New York and West Palm Beach, Florida. We have rent obligations of approximately $15,000.00 per month. With the exception of computer equipment located in Edmonton, Alberta, Nanaimo, British Columbia, Great Neck, New York, West Palm Beach, Florida, Atlanta, Georgia and the U.K., we currently do not have any property, plant or equipment located elsewhere.
ITEM 4A: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following should be read in conjunction with our audited financial statements and related notes accompanying this annual report. They have been prepared in accordance with Canadian generally accepted accounting principles. Reference should be made to Note 16 to our audited financial statements which provide a reconciliation to U.S. generally accepted accounting principles.
Critical Accounting Policies
The preparation of our consolidated financial statements and related disclosures in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of these financial statements, and revenue and expenses during the period reported. Estimates include allowance for doubtful accounts, estimated useful life of intangible assets, deferred costs and capital assets, provisions for contingent liabilities, measurement of stock-based compensation, valuation allowance for future tax assets, and reflect management’s best estimates. By their nature, these estimates are subject to uncertainty and the effect on the financial statements of changes in estimates in future periods could be significant. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.
The Company has identified the following critical accounting policies that affect the more significant estimates and judgments used in preparation of its consolidated financial statements.
Research and Development Costs
All research and development costs are expensed as incurred except those that qualify under the Financial Accounting Standards Board Statement (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed”. Research and development costs incurred prior to the establishment of the technological feasibility of a particular software project are expensed as incurred. Software development costs, including costs associated with coding and testing of project related software, are capitalized subsequent to when the technological feasibility of a project is established.
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Capitalized costs are amortized commencing in the period of the product’s commercial release. The determination of whether a project is technically feasible involves establishing, at a minimum, that the Company has a detailed, documented and consistent product and program design, including high risk development issues related to the project, with the necessary resources to complete the project. If a detailed program design is not used, technological feasibility will be established when a product design or working model of the software model, consistent with the product design, is complete and tested.
Stock-based Compensation Plan
The Company grants stock options to employees, officers, directors and persons providing management or consulting services to the Company pursuant to a stock option plan described in Note 9 to the Company’s consolidated financial statements. The Company follows Accounting Standard No. 123 (R), a revision to SFAS 123. The Company estimates the fair value of the stock options granted using the Black-Scholes model and amortizes the fair value on a straight line basis over the vesting period or service period for employees. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date at which the performance commitment is reached. The compensation expense recognized reflects estimates of award forfeitures at the time of grant and revised in subsequent periods if necessary, if actual forfeiture rates differ from those estimates.
Change in Accounting Policy
Effective November 1, 2008, the Company adopted the following new CICA Handbook Sections:
| a) | Section 3064, "Goodwill and Intangible Assets", replaced Section 3062, "Goodwill and Other Intangible Assets", and Section 3450, "Research and Development Costs". This section establishes standards for the recognition, measurement, presentation, and disclosure of goodwill and intangible assets subsequent to its initial recognition by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. This section has been adopted effective November 1, 2008 and has no impact on the consolidated financial statements of the Company. | |
| b) | EIC Abstract 173 “Credit Risk and The Fair Value of Financial Assets and Financial Liabilities”, requires the Company to take into account the Company’s own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applied retrospectively without restatement of prior years to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of EIC 173 did not have an impact on the consolidated financial statements of the Company. |
A. Operating Results
Fiscal Year Ended October 31, 2009 Compared to Fiscal Year Ended October 31, 2008
We incurred a net loss of $3,528,749 for the twelve-month period ended October 31, 2009, as compared to a net loss of $3,075,985 for the comparative period of 2008. The overall increase in net loss in the 2009 fiscal year is due to increased research and development expenses, totaling $1,439,914 and increased amortization expense totaling $186,774 as compared to $871,222 and $147,779 for the same period ending October 31, 2008.
During the fiscal year 2009, general and administration expense increased by $187,484 over the prior year, as compared to $1,730,916 for the same period ending October 31, 2008.
Professional fees for the year ending October 31, 2009 were $97,495, as compared to $147,842 for the same period ending October 31, 2008.
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Other than as described herein, the Company did not experience any large fluctuations from quarter to quarter during 2009. The net loss for the fourth quarter of fiscal year 2009 was $1,263,439, as compared to $1,379,675 for the same period in fiscal 2008.
Prior Period Adjustments
As at October 31, 2007
In the 2007 fiscal year, the Company did not account for $58,451 consulting fee for services provided in fiscal 2007 and invoiced and paid in fiscal 2008. As a result, the Company restated its consolidated balance sheets and statements of shareholders’ equity, as at October 31, 2007 and consolidated statements of operations and comprehensive loss and statements of cash flow for the year ended October 31, 2007. The impact of these changes was an increase in accounts payable and deficit of $58,451, an increase to general and administrative expenses of $90,000 and a decrease in research and development expenses of $31,549.
In fiscal 2007, the Company also failed to identify a U.S. GAAP versus Canadian GAAP difference with respect to the measurement date used for the 300,000 common shares issued to consultants for services rendered. As a result Note 16 of the audited annual financial statements for the year ended October 31, 2008, has been restated to reflect a reduction in the stock-based compensation expense recognized under U.S. GAAP of $54,000.
In the 2006 fiscal year, pursuant to the Software Transfer Agreements, the Company granted 4,500,000 common shares and 2,000,000 common share purchase warrants to two directors of the Company in exchange for the software being developed for the Company. The common shares and common share purchase warrants to be issued are contingent on the Company achieving certain milestones. This is a related party transaction subject to the measurement and disclosure requirements of CICA Section 3840 “Related Party Transactions”. Section 3840 requires monetary related party transactions or non-monetary related party transactions that has commercial substance but is not in the normal course of operations to be measured at the exchange amount when the change in ownership interests in the item transferred or the benefit of a service provided is substantive and the exchange amount is supported by independent evidence. Based on the requirements of Section 3840, the Company has determined the value recognized and expensed with respect to this transaction was not in fact supported by independent evidence as the issuance of the equity instruments in consideration of the software was conditional on the achievement of specified future milestones. Accordingly, the Company has reversed the software development expense of $1,891,479, the fair value of the warrants of $316,479 and the fair value of the common shares of $1,575,000 as a prior period error.
| As | |||||||||
| Previously | |||||||||
| Reported | Restatement | As Restated | |||||||
| As at October 31, 2007 | |||||||||
| Accounts payable | 274,173 | 58,451 | 332,624 | ||||||
| Warrants | 812,255 | (316,479 | ) | 495,776 | |||||
| Contributed surplus | 2,119,682 | (1,575,000 | ) | 544,682 | |||||
| Deficit | (11,920,584 | ) | 1,833,028 | (10,087,556 | ) | ||||
| Year ended October 31, 2007 | |||||||||
| General and administrative | 1,079,507 | 90,000 | 1,169,507 | ||||||
| Research and development | 1,331,369 | (31,549 | ) | 1,299,820 | |||||
| Net loss and comprehensive loss | (2,521,187 | ) | (58,451 | ) | (2,579,638 | ) | |||
| Year ended October 31, 2006 | |||||||||
| Software development | 1,891,479 | (1,891,479 | ) | --- | |||||
| Net loss and comprehensive loss | (3,607,979 | ) | 1,891,479 | (1,716,500 | ) | ||||
| Loss per share | (0.13 | ) | 0.07 | (0.06 | ) |
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Fiscal Year Ended October 31, 2007 Compared to Fiscal Year Ended October 31, 2006
We incurred a net loss of $2,579,638 for the twelve-month period ended October 31, 2007, as compared to a net loss of $1,716,500 for the comparative period of 2006.
During the fiscal year 2007, we focused on the development of software trading programs. Research and development expense increased by $439,364 over the prior year to $1,299,820, compared to $860,456 for the year ended October 31, 2006.
Professional fees increased relating to financial reporting requirements for the multi-jurisdiction filings as well as costs related to private placement financings. Professional fees for the year ending October 31, 2007 were $141,693, in comparison to $153,098 for the same period ending October 31, 2006.
Amortization expense for the year ended October 31, 2007 was $35,951, in comparison to $11,840 for the fiscal year 2006.
All general and administrative expenses increased due to the increased activity on the development of the trading software programs.
Other than as described herein, we did not experience any large fluctuations from quarter to quarter during 2007. The net loss for the fourth quarter of fiscal year 2006 was $725,671, in comparison to $646,423 for the same period in fiscal 2007.
B. Liquidity and Capital Resources
Since our incorporation, we have financed our operations almost exclusively through the sale of our common shares. We expect to finance operations through the sale of common shares in the foreseeable future. There is no assurance that we will be successful in arranging financing on acceptable terms or at all.
As at October 31, 2009, we had $83,162 cash and receivables of $35,180 as compared to $334,954 cash and receivables of $0.00 at our prior fiscal year end.
Equity Placements for the Fiscal Year Ended October 31, 2009
During 2009, the Company completed two private placements of common shares, as described below:
On March 17, 2009, the Company closed off a non-brokered private placement of units (“Units”), which raised CDN$656,260. The Company issued 2,187,533 Units at CDN$0.30 per Unit. Each Unit consists of one common share (“Common Share”) and one-half of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $512,335 and $143,925 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 128%, risk free rate of 1.02%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.45 per Common Share during the first year following the date of closing and at CDN$0.60 per Common Share during the subsequent year and will expire March 17, 2011. The Company paid a total of CDN $44,056 in finder’s fees.
On October 15, 2009, the Company closed of a non-brokered private placement of units (“Units”), which raised CDN$1,389,000. The Company issued 5,556,000 Units at CDN$0.25 per Unit. Each Unit consists of one common share (“Common Share”) and one-half of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $1,180,692 and $208,308 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 88%, risk free rate of 1.68%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.375 per Common Share during the first year following the date of closing and at CDN$0.50 per Common Share during the subsequent year and will expire October 15, 2011. The Company paid a total of CDN $18,376 in finder’s fees.
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During 2009, a total of 1,160,000 options were exercised.
In April 2009, the Company granted 200,000 shares for service to consultants of the Company. The fair value of the shares was determined on the date of grant to be $0.355. As a result the Company has recorded the cost of the shares at $71,000 and has recorded a consulting fee expense of $71,000.
Equity Placements for the Fiscal Year Ended October 31, 2008
In December 2007, the Company issued 3,036,234 units at $0.40 per unit, for aggregate gross proceeds of $1,214,494. Each unit consisted of one common share and one-half of a common share purchase warrant. Of the net proceeds, $941,800 and $272,694 have been allocated to the common shares and warrants, respectively. Each of the 1,518,117 warrants entitled the holder to purchase one common share at $0.60 per share, until expiry on December 7, 2009. Insiders participated in the private placement for total gross proceeds of $364,428.40.
In March 2008, the Company issued 2,000,000 units at $0.255 per unit, for aggregate gross proceeds of $510,000. Each unit consisted of one common share and one-half of a common share purchase warrant. Of the net proceeds, $380,014 and $129,986 have been allocated to the common shares and warrants, respectively. Each of the 1,000,000 warrants entitled the holder to purchase one common share at $0.35 per share, until expiry on March 6, 2010. Insiders participated in the private placement for total gross proceeds of $132,330.
In July 2008, the Company issued 2,035,000 units at $0.30 per unit, for aggregate gross proceeds of $610,500. Each unit consisted of one common share and one-half of a common share purchase warrant. Of the net proceeds, $465,765 and $147,735 have been allocated to the common shares and warrants, respectively. Each of the 1,017,500 warrants entitled the holder to purchase one common share at $0.40 per share, until expiry on July 29, 2010. Insiders participated in the private placement for total gross proceeds of $90,000.
In August 2008, the Company issued 2,500,000 units at $0.30 per unit, for aggregate gross proceeds of $750,000. Each unit consisted of one common share and one common share purchase warrant. Of the net proceeds, $455,560 and $294,440 have been allocated to the common shares and warrants, respectively. Each of the 2,500,000 warrants entitled the holder to purchase one common share at $0.40 per share, until expiry on August 19, 2010. In connection with the financing, Dr. Kenneth Powell, Director, President & CEO of the Company, purchased 2,000,000 units and concurrently sold through the facilities of the TSX Venture Exchange 2,000,000 common shares from his personal holdings to certain investors.
The issue costs relating to the 2008 share placements totaled $103,978.
In order to fund operations for the next 12-month period, sufficient funds will need to be raised through private placements. Upon completion of our business plan we expect to raise additional funds to support the current and future operations over a longer period. Our continuation as a going concern is dependent upon our ability to obtain equity capital and financing for working capital requirements. We have incurred significant operating losses to date and we cannot predict if we will ever earn operating income. As a result, there can be no assurance that we will be successful in raising additional funds or that additional financing, if any, can be obtained on terms acceptable to us. Such financing, to the extent that it is available may result in substantial dilution to our shareholders. To the extent such financing is not available, we may not be able to, or may be delayed in, continuing to commercialize our software products and services, and we may have to curtail our operations. In the event that future financings are not available at terms acceptable to us, the Company believes it has sufficient funds to continue for the next three months with a significant reduction in operations.
C. Research and Development, Patents and Licenses, etc.
The Company has spent the last three fiscal years in Research and Development mode. It has incurred the following R&D expenses.
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| 2009 | 2008 | 2007 | |||||||
| Research and Development Expenses | $ | 1,439,914 | $ | 871,222 | $ | 1,376,351 |
D. Trend Information
With the exception of the information disclosed in “Item 3.D. – Risk Factors”, we do not know of any trends or uncertainties that are likely to have a material effect on the Company or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
E. Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements that require disclosure under this Item 5.
F. Tabular Disclosure of Contractual Obligations
We currently have no contractual obligations that require disclosure under this Item 5.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
As of October 31, 2009, our directors were as follows:
| Name of Director | Age |
| Dr. Kenneth Powell | 64 |
| Michael Gossland | 55 |
| Philip S. Carrozza | 48 |
| Robert Roddick | 65 |
| Dr. Harold Elke | 55 |
| Joseph Francese | 40 |
As of October 31, 2009, our executive officers were as follows:
| Executive Officers | Age | Office |
| Philip S. Carrozza | 48 | President |
| Dr. Kenneth W. Powell | 64 | Chief Executive Officer and Acting Chief Financial Officer |
| Michael Gossland | 55 | Secretary and Chief Technology Officer |
| David Terk | 36 | Chief Financial Officer of Titan USA |
The following describes the business experience of our directors and executive officers, including other directorships held in reporting companies:
Kenneth W. Powell, DDS, B.Sc., is a graduate of the University of Alberta, holding Bachelor of Science (1966) and Doctor of Dentistry (1970) degrees. Since 1970, he has been a self-employed dentist with a dental practice in Edmonton, Alberta. Since December 2002, Dr. Powell has acted as President, Chief Executive Officer and a director of Titan, as well as a director and the Chief Financial Officer of Firestone Ventures Inc., a junior mining exploration company that is reporting in British Columbia and Alberta and trades on the TSX Venture Exchange.
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Michael Gossland, M.Sc., P.Eng., is our Chief Technology Officer, Secretary and a director. Mr. Gossland has held such positions since 1994. In 1976, he was awarded the Harrington Prize for academic excellence in physics, and he received his Master of Science degree from the University of Saskatchewan in 1978. In 1989, he obtained his designation as a Professional Engineer - Electrical Branch (Association of Professional Engineers of Ontario). >From 1986 to 1991, Mr. Gossland was Software Project Manager for Sciex, a division of MDS Health Group Inc. of Toronto, Ontario. In 2003, he joined APEG of BC and transferred his Professional Engineering License from Ontario to British Columbia.
Philip S. Carrozza II, is our Director of U.S. Trading Operations and the President of Cignal. Mr. Carrozza acquired his professional broker’s license in 1987. From 1993 until 1999 when he founded Cignal, he worked with several major trading firms in New York and the Bahamas. Mr. Carrozza is also an attorney and a member of the Massachusetts State Bar.
Robert F. Roddick, Q.C.,has been a partner with Roddick & Peck (Johnson), Barristers and Solicitors, since 1981.
Harold Elke,DDS, B.Sc., is a graduate of the University of Lethbridge, holding Bachelor of Science (1978) and Doctor of Dental Surgery (1982) degrees. Since 1982, he has been a self-employed dentist with a dental practice in the Lethbridge, Alberta area. Dr. Elke has extensive business experience in both Europe and Asia, and in commercial real estate in Canada.
Joseph Francese,is a Chartered Financial Analyst (CFA) Charterholder, is Chief Investment Officer (CIO) of PROFORMA Capital Inc. As CIO, Mr. Francese chairs the investment committee and is responsible for analyzing and monitoring existing and prospective investments, as well as developing investment strategies. Mr. Francese has 15 years experience working with high net worth investors consulting on over $100 million of investor assets during his advisory career.
David Terk, Mr. Terk holds a Certified Public Accountant’s license in the State of New York, and a Bachelor of Science in Accounting from the University of Maryland. After three years in the field of public accounting, Mr. Terk entered the equity trading industry in 1997. Mr. Terk formed the private equity trading firm Valkyrie Management Corporation, where he actively traded equities. In 1998, Mr. Terk helped create Livetrade.com/Alex Moore Inc. Livetrade became one of the first companies to bring direct access Level 2 trading to the Internet. It was there Mr. Terk earned his series 27 license and served as the company’s Financial Operations Principal.
There are no arrangements or understandings between any of our directors or executive officers, pursuant to which they were selected to be a director or executive officer, nor are there any family relationships among any of our directors or officers.
B. Compensation
We are required, under applicable securities legislation in Canada, to disclose to our shareholders details of compensation paid to individual(s) who were acting as, or were acting in a capacity similar to, a chief executive officer or chief financial officer and the three most highly compensated executive officers whose total salary and bonus exceeded $150,000 per annum (the “Named Executive Officers”). The following fairly reflects the annual compensation for services in all capacities to the Company and its subsidiaries in respect of the Company’s Named Executive Officer in our fiscal year ended October 31, 2009.
- Dr. Kenneth Powell – Chief Executive Officer and Acting Chief Financial Officer – $90,000
We are required, under applicable securities legislation in Canada, to disclose to our shareholders details of compensation paid to our directors. The following fairly reflects all material information regarding compensation paid to our directors in our fiscal year ended October 31, 2009.
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In the most recently completed financial year, the Company paid a total of $6,000 cash (plus reimbursement of reasonable expenses) to each of the non-management directors, being Mr. Robert Roddick and Dr. Harold Elke, for services rendered in their capacity as directors.
Consulting Fees
During the fiscal year ended October 31, 2009, the Company paid consulting fees to the following directors for services provided to the Company in the normal course of operations of the business:
Mr. Michael Gossland – $120,000
Mr. Philip Carrozza – USD$120,000
Option Grants
On December 22, 2003, options with an exercise price of $0.10 and an expiry date of December 22, 2008 were granted to the following directors:
Mr. Michael Gossland – 500,000 options(1)
Mr. Philip Carrozza – 500,000 options(1)
Dr. Kenneth Powell – 400,000 options(1)
On February 16, 2005, options with an exercise price of $0.155 and an expiry date of February 16, 2010 were granted to the following directors and/or officers:
Mr. Robert Roddick – 50,000 options(5)
Mr. Michael Gossland – 410,593 options(6)
Ms. Margo Kaufmann – 15,000 options(2)
On March 1, 2005, options with an exercise price of $0.25 and an expiry date of March 1, 2010 were granted to the following directors and/or officers:
Mr. Michael Gossland – 120,000 options(7)
Mr. Phillip Carrozza – 120,000 options(7)
Dr. Kenneth Powell – 120,000 options(7)
Ms. Margo Kaufmann – 185,000 options(2)
Mr. Robert Roddick – 25,000 options(7)
On July 5, 2005, options with an exercise price of $0.135 and an expiry date of July 5, 2010 were granted to the following director:
Mr. Richard Sharples – 50,000 options(3)
On January 8, 2007, options with an exercise price of $0.30 and an expiry date of January 8, 2012 were granted to the following directors and/or officers:
Mr. Michael Gossland – 200,000 options
Mr. Phillip Carrozza – 200,000 options
Dr. Kenneth Powell – 500,000 options
Mr. Robert Roddick – 75,000 options
Dr. Harold Elke – 150,000 options
Mr. David Terk – 100,000 options
On January 28, 2008, options with an exercise price of $0.37 and an expiry date of January 28, 2013 were granted to the following directors and/or officers:
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Mr. Michael Gossland – 100,000 options
Mr. Phillip Carrozza – 100,000 options
Dr. Kenneth Powell – 100,000 options
Mr. Robert Roddick – 50,000 options
Dr. Harold Elke – 50,000 options
Mr. David Terk – 75,000 options
On November 7, 2008, options with an exercise price of $0.36 and an expiry date of November 7, 2013 were granted to the following directors and/or officers:
Mr. Michael Gossland – 25,000 options
Mr. Phillip Carrozza – 25,000 options
Dr. Kenneth Powell – 25,000 options
Mr. Robert Roddick – 25,000 options
Dr. Harold Elke – 25,000 options
Mr. David Terk – 25,000 options
On March 6, 2009, options with an exercise price of $0.33 and an expiry date of March 6, 2014 were granted to the following directors and/or officers:
Mr. Michael Gossland – 200,000 options
Mr. Phillip Carrozza – 200,000 options
Dr. Kenneth Powell – 750,000 options(4)
Mr. Robert Roddick – 75,000 options
Dr. Harold Elke – 75,000 options
Mr. David Terk – 45,000 options
On November 13, 2009, options with an exercise price of $0.25 and an expiry date of November 13, 2014 were granted to the following directors and/or officers:
Mr. David Terk - 300,000 options
On March 3, 2010, options with an exercise price of $0.170 and an expiry date of March 3, 2015 were granted to the following directors and/or officers:
Mr. Michael Gossland – 520,000 options
Mr. Phillip Carrozza – 120,000 options
Dr. Kenneth Powell – 120,000 options(4)
Mr. Robert Roddick – 75,000 options
Dr. Harold Elke – 100,000 options
Mr. Joseph Francese– 50,000 options
| (1) | On August 18, 2008, Mr. Phillip Carrozza exercised 200,000 of his options and Dr. Kenneth Powell exercised 100,000 of his options. On December 22, 2008, Mr. Phillip Carrozza exercised his remaining 300,000 options, Dr. Kenneth Powell exercised his remaining 300,000 options and Mr. Michael Gossland exercised all of his 500,000 options. |
| (2) | Options granted to Ms. Margo Kaufmann expired on March 16, 2006 |
| (3) | On December 28, 2006 Mr. Richard Sharples exercised 37,500 of his options and on January 18, 2007 the remaining 12,500 options expired. |
| (4) | On April 13, 2009, Dr. Kenneth Powell voluntarily surrendered 600,000 of his options. |
| (5) | On September 10, 2009, Mr. Robert Roddick exercised 50,000 of his options |
| (6) | Options granted to Michael Gossland expired on February 16, 2010. |
| (7) | Options granted to Michael Gossland, Philip Carozza, Kenneth Powell and Robert Roddick expired on March 1, 2010. |
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C. Board Practices
Dr. Powell, Mr. Gossland, Mr. Carrozza Mr. Roddick and Dr. Elke have acted as our directors since December 23, 2002, September 15, 1995, June 6, 2003 November 29, 2004 and October 24, 2006, respectively. All such individuals were re-elected as directors and Joseph Francese was elected as a director at our annual general meeting of shareholders held on October 2, 2009.
The directors hold office until the next annual general meeting of the shareholders, at which time they may stand for re-election, or their earlier resignation or removal. We are required to hold an annual general meeting once in every calendar year and not longer than fifteen months from the last annual general meeting.
No directors or officers have service contracts with us, nor are they entitled to any termination benefits, except for the consulting agreements entered into in February 2006, with each of Cignal (a company owned by Phillip Carrozza) and Michael Gossland, whereby they will provide consulting services to us until October 31, 2008. Both Mr. Gossland and Mr. Carrozza continue to provide services to us and we expect to enter in to new consulting agreements, on substantially the same terms of the original agreements, once the Software Transfer Agreements are revised.
Audit Committee
As of April 30, 2010, our Audit Committee was comprised of Mr. Gossland, Mr. Roddick, and Mr. Francese. Mr. Gossland was appointed a Director and member of the Audit Committee in 1996. Mr. Roddick was appointed a Director and member of the Audit Committee on November 29, 2004. Mr. Francese was appointed a Director and member of the Audit Committee on October 2, 2009. Mr. Roddick and Mr. Francese are independent members of the audit committee, and all members are financially literate.
The Audit Committee is responsible for, among other things, monitoring the integrity and adequacy of our financial information, and for recommending to our board of directors their selection of independent auditors for us.
The charter of the Company’s audit committee is as follows:
| I. | Mandate | |
The primary function of the audit committee (the “Committee”) is to assist the board of directors of the Company (the “Titan Directors”) in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by the Company to regulatory authorities and shareholders, the Company’s systems of internal controls regarding finance and accounting, and the Company’s auditing, accounting and financial reporting processes. Consistent with this function, the Committee will encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels. The Committee’s primary duties and responsibilities are to: | ||
• | Serve as an independent and objective party to monitor the Company’s financial reporting and internal control system and review the Company’s financial statements. | |
• | Review and appraise the performance of the Company’s external auditors. | |
• | Provide an open avenue of communication among the Company’s auditors, financial and senior management and the Titan Directors. | |
| II. | Composition |
The Committee shall be comprised of three directors as determined by the Titan Directors, the majority of whom shall be independent directors, pursuant to the policies of the TSX Venture Exchange. |
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At least one member of the Committee shall have accounting or related financial management expertise. It is the goal of the Company that all members of the Committee are financially literate. All members of the Committee that are not financially literate will work towards becoming financially literate to obtain a working familiarity with basic finance and accounting practices. For the purposes of the Company’s Charter, the definition of “financially literate” is the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can presumably be expected to be raised by the Company’s financial statements. | ||
The members of the Committee shall be elected by the Company’s Directors at its first meeting following the annual shareholders’ meeting. Unless a Chair is elected by the Titan Directors, the members of the Committee may designate a Chair by a majority vote of the full Committee membership. | ||
| III. | Meetings | |
The Committee shall meet a least twice annually,or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee will meet at least annually with management and the external auditors in separate sessions. | ||
The minutes of the Committee meetings shall accurately record the decisions reached and shall be distributed to the Audit Committee members with copies to the Company’s Directors, the Chief Financial Officer or such other officer acting in the capacity and the external auditor. | ||
| IV. | Responsibilities and Duties | |
To fulfill its responsibilities and duties, the Committee shall: | ||
Documents/Reports Review | ||
| 1. | Review and update the Charter annually. | |
| 2. | Review the Company’s financial statements, MD&A and any annual and interim earnings, press releases before the Company publicly discloses this information and any reports or other financial information (including quarterly financial statements), which are submitted to any governmental body, or to the public, including any certification, report, opinion, or review rendered by the external auditors. | |
External Auditors | ||
| 1. | Require the external auditors to report directly to the Committee. | |
| 2. | Review annually the performance of the external auditors who shall be ultimately accountable to the Titan Directors and the Committee as representatives of the shareholders of the Company. | |
| 3. | Obtain annually, a formal written statement of external auditors setting forth all relationships between the external auditors and the Company and confirming their independence from the Company. | |
| 4. | Review and discuss with the external auditors any disclosed relationships or services that may impact the objectivity and independence of the external auditors. | |
| 5. | Take, or recommend that the Company’s Directors take, appropriate action to oversee the independence of the external auditors. | |
| 6. | Recommend to the Company’s Directors the selection and, where applicable, the replacement of the external auditors nominated annually for shareholder approval and the compensation of the external auditors. | |
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| 7. | Review with management and the external auditors the terms of the external auditors’ engagement letter. | ||
| 8. | At each meeting, consult with the external auditors, without the presence of management, about the quality of the Company’s accounting principles, internal controls and the completeness and accuracy of the Company’s financial statements. | ||
| 9. | Review and approve the Company's hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company. | ||
| 10. | Review with management and the external auditors the audit plan for the year-end financial statements and intended template for such statements. | ||
| 11. | Review and pre-approve all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by the Company’s external auditors. The pre-approval requirement is waived with respect to the provision of non-audit services if: | ||
| (i) | the aggregate amount of all such non-audit services provided to the Company constitutes not more than five percent of the total amount of revenues paid by the Company to its external auditors during the fiscal year in which the non- audit services are provided; | ||
| (ii) | such services were not recognized by the Company at the time of the engagement to be non-audit services; and | ||
| (iii) | such services are promptly brought to the attention of the Committee by the Company and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the Company’s Directors to whom authority to grant such approvals has been delegated by the Committee. | ||
Provided the pre-approval of the non-audit services is presented to the Committee's first scheduled meeting following such approval, such authority may be delegated by the Committee to one or more independent members of the Committee. | |||
Financial Reporting Processes
| 1. | In consultation with the external auditors, review with management the integrity of the Company's financial reporting process, both internal and external. | |
| 2. | Consider the external auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting. | |
| 3. | Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the external auditors and management. | |
| 4. | Review significant judgments made by management in the preparation of the financial statements and the view of the external auditors as to appropriateness of such judgments. | |
| 5. | Following completion of the annual audit, review separately with management and the external auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information. | |
| 6. | Review any significant disagreement among management and the external auditors regarding financial reporting. | |
| 7. | Review with the external auditors and management the extent to which changes and improvements in financial or accounting practices have been implemented. |
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| 8. | Review certification process. | ||
| 9. | Establish procedures for: | ||
| (i) | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and | ||
| (ii) | the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. | ||
Other
1. Review any related-party transactions.
V. Authority
The Committee may:
| 1. | engage independent outside counsel and other advisors as it determines necessary to carry out its duties; | |
| 2. | set and pay the compensation for any advisors employed by the Committee; and | |
| 3. | communicate directly with the internal and external auditors. |
The Committee shall have unrestricted access to the Company’s personnel and documents and will be provided with the resources necessary to carry out its responsibilities.
Remuneration Committee
We have not appointed a remuneration committee.
D. Employees
We have three employees, and the remainder of services is contracted to consultants. We have three consultants in Canada, six consultants in the United States and one consultant in the United Kingdom. Titan or Titan USA, as appropriate, have entered into intellectual property assignment agreements or consulting agreements with each of its employees and consultants.
E. Share Ownership
As of April 30 2010, we had 58,317,878 common shares issued and outstanding. As of April 30, 2010, our directors and officers beneficially owned the following number of our common shares:
Name | Number of Common Shares Beneficially Owned | Percentage of Outstanding Common Shares† |
| Kenneth Powell | 16,355,805(1) | 28.05% |
| Harold Elke | 4,445,643(2) | 7.62% |
| Philip S. Carrozza | 4,084,385(3) | 7.00% |
| Joseph Francese | 2,950,000(4) | 5.06% |
| Michael Gossland | 1,841,000(5) | 3.15% |
| Robert F. Roddick | 386,833(6) | .66% |
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| Name | Number of Common Shares Beneficially Owned | Percentage of Outstanding Common Shares† |
| David Terk | 337,023(7) | .58% |
| All officers and directors as a group | 30,783,189 | 52.79% |
Notes:
| † | Percentage amounts based on 58,317,878 shares of our common stock outstanding as of April 30, 2010. |
| (1) | Includes | |
(A) 500,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012; | ||
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013; | ||
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013; | ||
(D) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014. | ||
(E) 300,000 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell, issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.38 per share until January 28, 2013; | ||
(F) 187,000 common shares that are held by Mr. Cameron Powell, the son of Dr. Powell; | ||
(G) 167,000 common shares that are held by Mr. Carson Powell, the son of Dr. Powell; | ||
(H) 2,476,397 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell; | ||
(I) 425,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; | ||
(J) 120,580 common shares underlying warrants that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2010; | ||
(K) 150,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010; | ||
(L) 2,000,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on August 14, 2010; | ||
(M) 312,500 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; | ||
(N) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011; | ||
(O) 55,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.45 per common share until March 17, 2010 and $0.60 per common shares until they expire on March 17, 2011; | ||
(P) 15,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011; | ||
(Q) 5,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010; | ||
(R) 15,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011; and | ||
(S) 5,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010. | ||
(T) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15,2011, |
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(U) 10,000 common shares underlying warrants that are held by Cameron Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011
(V) 10,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011
(W) 976,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011,
| (2) | Includes |
(A) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 7,500 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; and
(F) 138,890 common shares underlying warrants that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2010.
(G) 512,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011,
| (3) | Includes |
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 133,334 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $0.50 per common share and expire on November 30, 2010;
(F) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $1.00 per common share and expire on November 30, 2010;
(G) 1,791,571 common shares that are held by Mrs. Loraine Kuppe, the wife of Mr. Carrozza;
(H) 14,285 common shares underlying warrants that are held by Mrs. Lorraine Kuppe, the wife of Mr. Carrozza, that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; and
(I) 5,000 common shares underlying warrants that are held by Mrs. Lorraine Kuppe, the wife of Mr. Carrozza, that are immediately exercisable at an exercise price of $0.45 per common share until March 17, 2010 and $0.60 per common shares until they expire on March 17, 2011.
| (4) | Includes |
(A) 900,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire August 13, 2012;
| (5) | Includes |
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 133,334 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
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(E) 17,000 common shares held in a registered education savings plan for the benefit of Mr. Gossland’s children where Mr. Gossland has a power of attorney;
(F) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $0.50 per common share and expire on November 30, 2010; and
(G) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $1.00 per common share and expire on November 30, 2010.
| (6) | Includes |
(A) 75,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013; and
(D) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 7,500 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010 (F) 12,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011,
| (7) | Includes |
(A) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 75,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 30,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 14,286 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010.
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
As of April 30, 2010, we had 58,317,878 common shares issued and outstanding. As of April 30, 2010, the following shareholders beneficially owned greater than five percent (5%) of our common shares:
Name | Number of Common Shares Beneficially Owned | Percentage of Outstanding Common Shares |
| Kenneth Powell | 16,355,805(1) | 28.05% |
| Harold Elke | 4,445,643(2) | 7.62% |
| Philip S. Carrozza | 4,084,385(3) | 7.00% |
| Karen Powell | 3,443,897(4) | 5.91% |
| Joseph Francese | 2,950,000(5) | 5.06% |
Notes:
(1) Includes
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(A) 500,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 300,000 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell, issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.38 per share until January 28, 2013;
(F) 187,000 common shares that are held by Mr. Cameron Powell, the son of Dr. Powell;
(G) 167,000 common shares that are held by Mr. Carson Powell, the son of Dr. Powell;
(H) 2,476,397 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell;
(I) 425,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010;
(J) 120,580 common shares underlying warrants that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2010;
(K) 150,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010;
(L) 2,000,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on August 14, 2010;
(M) 312,500 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010;
(N) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011;
(O) 55,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell, that are immediately exercisable at an exercise price of $0.45 per common share until March 17, 2010 and $0.60 per common shares until they expire on March 17, 2011;
(P) 15,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011;
(Q) 5,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010;
(R) 15,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011; and
(S) 5,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010.
(T) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15,2011
(U) 10,000 common shares underlying warrants that are held by Cameron Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15,2011
(V) 10,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15,2011,
(W) 976,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011.
Note: Shares reported here as being held by Karen Powell are also reported on a separate line in the table as shares reported for Karen Powell.
| (2) | Includes |
(A) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
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(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 7,500 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; and
(F) 138,890 common shares underlying warrants that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2010.
(G) 512,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011,
| (3) | Includes |
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 16,666 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 133,334 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $0.50 per common share and expire on November 30, 2010;
(F) 500,000 common shares underlying warrants that are exercisable subject to certain milestones as more further described in the Software Transfer Agreementsat an exercise price of $1.00 per common share and expire on November 30, 2010;
(G) 1,791,571 common shares that are held by Mrs. Loraine Kuppe, the wife of Mr. Carrozza;
(H) 14,285 common shares underlying warrants that are held by Mrs. Lorraine Kuppe, the wife of Mr. Carrozza, that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010; and
(I) 5,000 common shares underlying warrants that are held by Mrs. Lorraine Kuppe, the wife of Mr. Carrozza, that are immediately exercisable at an exercise price of $0.45 per common share until March 17, 2010 and $0.60 per common shares until they expire on March 17, 2011.
| (4) | Includes |
(A) 300,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(B) 312,500 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common share and expire on December 7, 2010;
(C) 150,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.35 per common share and expire on March 6, 2011; and
(D) 55,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.60 per common shares until they expire on March 17, 2011.
(E) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15,2011
| (5) | Includes |
(A) 900,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire August 13, 2012
We are authorized to issue an unlimited number of common shares and an unlimited number of preferred shares without par value.
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Each of our issued common shares entitles the holder to one vote in a general meeting of shareholders. There are no disproportionate or weighted voting privileges. Our significant shareholders do not have different voting privileges as compared to our other shareholders.
The preferred shares may from time to time be issued in one or more series. The directors may fix from time to time before such issue, the number of preferred shares which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of preferred shares including, any voting rights, the rate or amount of dividends or the method of calculating dividends, the dates of payment thereof, the terms and conditions of redemption, purchase and conversion if any, and any sinking fund or other provisions. The preferred shares are non-voting.
Of our 160 registered shareholders as at April 30, 2010, 19 were residents of the United States representing 4,471,138 common shares or 7.67% of our 58,317,878issued and outstanding common shares as of that date.
We are not controlled directly or indirectly by any other corporation or any other foreign government or by any other natural or legal person, severally or jointly.
There are no arrangements known to us, the operation of which at a subsequent date, may result in a change in our control.
B. Related Party Transactions
The related party transactions are in the normal course of operations and are recorded at the exchange amount.
Pursuant to an agreement dated June 6, 2003 (the “License Agreement”), Cignal, which is owned and operated by a director and officer of the Company, Mr. Philip Carrozza, agreed to provide an exclusive 99-year license to the Company for the Cignal Technology and a 25% interest in all net profits third parties (subject to certain licenses being exempt) realize from the use of the Cignal technology. In consideration therefore, the Company agreed to fund all future development costs associated with the TickAnalyst Technology and development of related products. The Company was required to fund successive six month budgets (each budget not to exceed $100,000) relating to proposed developments of the TickAnalyst Technology and related products, failing which Cignal could terminate the license. Pursuant to a related agreement among Dr. Kenneth Powell, Mr. Thomas Kreilein and Mr. Phillip Carrozza dated June 3, 2003, Dr. Powell and Mr. Kreilein agreed to transfer certain common shares and grant an option with respect to additional common shares of the Company to Mr. Carrozza as an inducement to enter into this License Agreement. This agreement purported to provide Mr. Carrozza with the right to terminate the License Agreement if certain trading price benchmarks of the common shares were not met. None of these benchmarks were met but the License Agreement was not terminated within the required time periods.
On November 4, 2004, the Company entered into a transaction to purchase the Cignal Technology from Cignal and paid Mr. Carrozza an amount of $62,335. However, the transaction was not completed and the paid amount was classified as a receivable. This amount has been repaid to the Company.
In February 2006, we entered into a software transfer agreement with Mr. Phillip Carrozza and Cignal, with respect to the transfer of certain trading models, suitable for stocks or futures and software-based formulas that implement the trading models and their accompanying indicators. Pursuant to the software transfer agreement, Cignal and Mr. Carrozza were to be issued a total of 3,000,000 common shares, 1,000,000 of which would have been issued on closing and the remaining 2,000,000 would have been issued in 1,000,000 increments in each of 2007 and 2008. Cignal was to be granted 1,000,000 performance warrants. The software transfer agreement provided Cignal with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
We also entered into a software transfer agreement with Michael Gossland, a director and officer of Titan, with respect to the transfer of certain executable programs and software-based formulas. Pursuant to the software transfer agreement, we would have issued Mr. Gossland 1,500,000 common shares and 1,000,000 performance warrants. The software transfer agreement provided Mr. Gossland with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
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A total of 1,000,000 of the performance warrants to be issued to Cignal, Mr. Carrozza and Mr. Gossland were exercisable at a price of $0.50 per share for a six month period commencing November 1, 2007 and the remaining 1,000,000 performance warrants were exercisable at a price of $1.00 per share for a six month period commencing November 1, 2008. The release of these warrants was conditional upon the 20 day average stock price on these dates being no less than $1.00 and $2.00 per share, respectively.
In July 2006, the Company announced that the aforementioned software transfer agreements entered into between the Company, Mr. Carrozza and Cignal and between the Company and Mr. Gossland had been amended and restated (the “Software Transfer Agreements”). The total number of Titan common shares issuable pursuant to the Software Transfer Agreements did not change from 4,500,000 shares; however, these shares will only be issued upon Titan achieving certain gross revenue milestones.
Pursuant to disinterested shareholder approval on October 2, 2009, the Software Transfer Agreements were further amended and the TSX Venture Exchange approved such amendments on November 10, 2009.
According to the amended terms of the Software Transfer Agreement, commencing June 1, 2008, an aggregate of 4,500,000 shares and 2,000,000 performance warrants would be issued based on gross revenues from TickAnalyst as follows:
If, between June 1, 2009 and May 31, 2010, Titan achieves cumulative gross revenue of at least $400k, then 1.5M shares would be released after September 30, 2009. If, in the same period, Titan achieves cumulative gross revenue of at least $800k, an additional 1.5M shares would be released after January 31, 2010. If, in the same period, Titan achieves cumulative gross revenue of at least $1.2M, an additional 1.5M shares would be released after May 31, 2010 and 1.0M performance warrants at $0.50 would be exercisable for the 6 month period June 1, 2010 to November 30, 2010. If, between June 1, 2010 and May 31, 2011 Titan achieves cumulative gross revenue of at least $1.8M, an additional 1.0M performance warrants at $1.00 would be exercisable for the 6 month period of June 1, 2011 to November 30, 2011.
Any Titan common shares not earned by May 31, 2010 will not be eligible for issuance. All of the securities issued would be subject to a four month hold period. Each performance warrant expires at the end of its exercise period.
As of April 30, 2010, the gross revenue milestones have not yet been achieved and therefore, no common shares are issuable and no performance warrants are exercisable. We are currently reviewing possible avenues for restructuring of the Software Transfer Agreements.
Management fees and research and development costs of $332,074, as compared to $442,682 in 2008, were paid to officers and directors of the Company during 2009.
Our directors or officers must disclose in writing to us the nature and extent of any interest they have in a material contract, or proposed material contract, with us. Such disclosure must be made immediately after the director or officer becomes aware of the contract or proposed contract. A director who is required to disclose an interest in a material contract or proposed material contract may not vote on any resolution to approve the contract except in very limited circumstances.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8: FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Our financial statements are set forth under “Item 17. – Financial Statements”.
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Legal Proceedings
To the best of our knowledge, there are no material legal or arbitration proceedings which may have or have had in the recent past significant effects on our financial position, which includes any governmental proceedings pending or known to be contemplated.
Dividend Policy
We have never paid any dividends, and any earnings in the foreseeable future will be re-invested in our development. Under theBusiness Corporations Act (Alberta), the directors of a Company who vote for, or consent to, a resolution authorizing the payment of a dividend if a Company is insolvent or the payment renders the Company insolvent are jointly and severally liable to the Company to restore to the Company any loss or damage suffered by the Company as a result.
B. Significant Changes
There have been no significant changes since the date of the audited financial statements included herein other than those disclosed herein. See “Item 5.B. – Liquidity and Capital Resources”.
ITEM 9: THE OFFER AND LISTING
A. Offer and Listing Details
Our common shares trade on the TSX Venture Exchange under symbol “TTA” and on the Over-The-Counter Bulletin Board under symbol “TITAF”. Our shares have traded on the TSX Venture Exchange, and on its predecessors, the Canadian Venture Exchange, and the Vancouver Stock Exchange.
The following table sets forth the high and low closing prices in Canadian funds of our common shares traded on these Canadian exchanges for the last five fiscal years:
| Period | High | Low |
| Fiscal Year | ||
| November 1, 2004 to October 31, 2005 | $0.44 | $0.085 |
| November 1, 2005 to October 31, 2006 | $0.415 | $0.11 |
| November 1, 2006 to October 31, 2007 | $1.07 | $0.255 |
| November 1, 2007 to October 31, 2008 | $0.67 | $0.29 |
| November 1, 2008 to October 31, 2009 | $0.42 | $0.21 |
| Fiscal Quarter | ||
| November 2007 to January 2008 | $0.57 | $0.31 |
| February 2008 to April 2008 | $0.67 | $0.30 |
| May 2008 to July 2008 | $0.405 | $0.30 |
| August 2008 to October 2008 | $0.45 | $0.29 |
| November 2008 to January 2009 | $0.415 | $0.26 |
| February 2009 to April 21, 2009 | $0.38 | $0.28 |
| May 2009 to July 2009 | $0.39 | $0.21 |
| August 2009 to October 2009 | $0.34 | $0.22 |
| November 2009 to January 2010 | $0.29 | $0.16 |
| February, 2010 to April 30, 2010 | $0.35 | $0.15 |
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| Period | High | Low |
| Month | ||
| October 2009 | $0.34 | $0.23 |
| November 2009 | $0.29 | $0.20 |
| December 2009 | $0.23 | $0.19 |
| January 2010 | $0.22 | $0.16 |
| February 2010 | $0.21 | $0.15 |
| March 2010 | $0.35 | $0.17 |
| April 30 2010 | $0.24 | $0.17 |
Our common shares have been quoted for trading on the Over-The-Counter Bulletin Board since January 12, 2000. The following table sets forth the high and low closing prices in United States funds of our common shares traded on the Over-The-Counter Bulletin Board for the last five fiscal years:
| Period | High | Low |
| Fiscal Year | ||
| November 1, 2004 to October 31, 2005 | $0.38 | $0.06 |
| November 1, 2005 to October 31, 2006 | $0.37 | $0.105 |
| November 1, 2006 to October 31, 2007 | $0.92 | $0.192 |
| November 1, 2007 to October 31, 2008 | $0.72 | $0.26 |
| November 1, 2008 to October 31, 2009 | $0.33 | $0.16 |
| Fiscal Quarter | ||
| November 2007 to January 2008 | $0.55 | $0.29 |
| February 2008 to April 2008 | $0.72 | $0.29 |
| May 2008 to July 2008 | $0.39 | $0.30 |
| August 2008 to October 2008 | $0.47 | $0.26 |
| November 2008 to January 2009 | $0.32 | $0.19 |
| February 2009 to April 21, 2009 | $0.31 | $0.21 |
| May 2009 to July 2009 | $0.31 | $0.16 |
| August 2009 to October 2009 | $0.28 | $0.16 |
| November 2009 to January 2010 | $0.27 | $0.16 |
| February, 2010 to April 30, 2010 | $0.35 | $0.15 |
| Month | ||
| October 2009 | $0.27 | $0.1 |
| November 2009 | $0.27 | $0.16 |
| December 2009 | $020 | $0.16 |
| January 2010 | $0.20 | $0.16 |
| February 2010 | $0.20 | $0.18 |
| March 2010 | $0.32 | $0.15 |
| April 2010 | $0.21 | $0.17 |
B. Plan of Distribution
Not applicable.
C. Markets
Our common shares trade on the TSX Venture Exchange under symbol “TTA” and on the Over-The-Counter Bulletin Board under symbol “TITAF”.
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D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10: ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Articles of Incorporation
We were duly incorporated and validly exist as a corporation under theBusiness Corporations Act (Alberta). Pursuant to the provisions of theBusiness Corporations Act(Alberta), a company may conduct any business that it is not restricted by the terms of its articles or bylaws from conducting. Our articles and bylaws contain no such restrictions.
Our directors are required to disclose to the board of directors the nature and extent of their interest in any proposed transaction or contract and must thereafter refrain from voting in respect thereof. An interested director may be counted in the quorum when a determination as to such director’s remuneration is being considered but may not vote in respect thereof. The directors have an unlimited power to borrow money, issue debt obligations and mortgage or charge our assets provided such actions are conducted bona fide and in our best interests. There are no mandatory retirement ages for directors or any required shareholdings.
All holders of common shares are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board of directors may from time to time determine. All holders of common shares will share equally on a per share basis in any dividend declared by the board of directors. The dividend entitlement time limit will be fixed by the board of directors at the time any such dividend is declared. Each outstanding common share is entitled to one vote on all matters submitted to a vote of our shareholders in general meeting. There are no cumulative voting rights attached to any of our shares and, accordingly, the holders of more than half of the shares represented at a general meeting can elect all of the directors to be elected in a general meeting. All directors stand for re-election annually. Upon any liquidation, dissolution or winding up, all common shareholders are entitled to share ratably in all net assets available for distribution after payment to creditors. The common shares are not convertible or redeemable and have no preemptive, subscription or conversion rights. In the event of a merger or consolidation, all common shareholders will be entitled to receive the same per share consideration.
The rights of shareholders may only be altered by the shareholders passing a special resolution at a general meeting. A special resolution may only be passed when it has been circulated to all shareholders by way of an information circular and then must be passed by two-thirds of the votes cast at the general meeting.
The board of directors may call annual and extraordinary general meetings when required. One or more shareholders holding in aggregate five percent or more of our issued shares may requisition an extraordinary meeting and the directors are required to call such meeting within 21 days of such requisition. Only registered shareholders or persons duly appointed by proxy may be admitted to meetings unless otherwise permitted by the chairman of the meeting.
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There are no national limitations or restrictions on the right to own our common shares.
There are no provisions in our bylaws or articles of association that would have the effect of delaying, deferring or preventing a change in control.
There are no provisions in our bylaws or articles of incorporation that establish any threshold for disclosure of ownership. However, the Alberta and British Columbia Securities Commissions require that persons that are the registered owners of, and/or have voting control over 10% or more of our common shares must file insider reports disclosing securities holdings.
C. Material Contracts
Pursuant to an agreement dated June 6, 2003 (the “License Agreement”), Cignal, which is owned and operated by a director and officer of the Company, Mr. Philip Carrozza, agreed to provide an exclusive 99-year license to the Company for the Cignal Technology and a 25% interest in all net profits third parties (subject to certain licenses being exempt) realize from the use of the Cignal technology. In consideration therefore, the Company agreed to fund all future development costs associated with the TickAnalyst Technology and development of related products. The Company was required to fund successive six month budgets (each budget not to exceed $100,000) relating to proposed developments of the TickAnalyst Technology and related products, failing which Cignal could terminate the license. Pursuant to a related agreement among Dr. Kenneth Powell, Mr. Thomas Kreilein and Mr. Phillip Carrozza dated June 3, 2003, Dr. Powell and Mr. Kreilein agreed to transfer certain common shares and grant an option with respect to additional common shares of the Company to Mr. Carrozza as an inducement to enter into this License Agreement. This agreement purported to provide Mr. Carrozza with the right to terminate the License Agreement if certain trading price benchmarks of the common shares were not met. None of these benchmarks were met but the License Agreement was not terminated within the required time periods.
On November 4, 2004, the Company entered into a transaction to purchase the Cignal Technology from Cignal and paid Mr. Carrozza an amount of $62,335. However, the transaction was not completed and the paid amount was classified as a receivable. This amount has been repaid to the Company.
In February 2006, we entered into a software transfer agreement with Mr. Phillip Carrozza and Cignal, with respect to the transfer of certain trading models, suitable for stocks or futures and software-based formulas that implement the trading models and their accompanying indicators. Pursuant to the software transfer agreement, Cignal and Mr. Carrozza were to be issued a total of 3,000,000 common shares, 1,000,000 of which would have been issued on closing and the remaining 2,000,000 would have been issued in 1,000,000 increments in each of 2007 and 2008. Cignal was to be granted 1,000,000 performance warrants. The software transfer agreement provided Cignal with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
We also entered into a software transfer agreement with Michael Gossland, a director and officer of Titan, with respect to the transfer of certain executable programs and software-based formulas. Pursuant to the software transfer agreement, we would have issued Mr. Gossland 1,500,000 common shares and 1,000,000 performance warrants. The software transfer agreement provided Mr. Gossland with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
A total of 1,000,000 of the performance warrants to be issued to Cignal, Mr. Carrozza and Mr. Gossland were exercisable at a price of $0.50 per share for a six month period commencing November 1, 2007 and the remaining 1,000,000 performance warrants were exercisable at a price of $1.00 per share for a six month period commencing November 1, 2008. The release of these warrants was conditional upon the 20 day average stock price on these dates being no less than $1.00 and $2.00 per share, respectively.
In July 2006, the Company announced that the aforementioned software transfer agreements entered into between the Company, Mr. Carrozza and Cignal and between the Company and Mr. Gossland had been amended and restated (the “Software Transfer Agreements”). The total number of Titan common shares issuable pursuant to the Software Transfer Agreements did not change from 4,500,000 shares; however, these shares will only be issued upon Titan achieving certain gross revenue milestones.
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Pursuant to disinterested shareholder approval on October 2, 2009, the Software Transfer Agreements were further amended and the TSX Venture Exchange approved such amendments on November 10, 2009.
According to the amended terms of the Software Transfer Agreement, commencing June 1, 2008, an aggregate of 4,500,000 shares and 2,000,000 performance warrants would be issued based on gross revenues from TickAnalyst as follows:
If, between June 1, 2009 and May 31, 2010, Titan achieves cumulative gross revenue of at least $400k, then 1.5M shares would be released after September 30, 2009. If, in the same period, Titan achieves cumulative gross revenue of at least $800k, an additional 1.5M shares would be released after January 31, 2010. If, in the same period, Titan achieves cumulative gross revenue of at least $1.2M, an additional 1.5M shares would be released after May 31, 2010 and 1.0M performance warrants at $0.50 would be exercisable for the 6 month period June 1, 2010 to November 30, 2010. If, between June 1, 2010 and May 31, 2011 Titan achieves cumulative gross revenue of at least $1.8M, an additional 1.0M performance warrants at $1.00 would be exercisable for the 6 month period of June 1, 2011 to November 30, 2011.
Any Titan common shares not earned by May 31, 2010 will not be eligible for issuance. All of the securities issued would be subject to a four month hold period. Each performance warrant expires at the end of its exercise period.
As of April 30, 2010, the gross revenue milestones have not yet been achieved and therefore, no common shares are issuable and no performance warrants are exercisable. We are currently reviewing possible avenues for restructuring of the Software Transfer Agreements.
D. Exchange Controls
There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements. See “Item 10.E. – Taxation”.
There is no limitation imposed by Canadian law or by our constituent documents on the right of a nonresident to hold or vote common shares, other than those that are provided in the Investment Canada Act (Canada). The following summarizes the principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian" individuals, governments, corporation or other entities who wish to acquire a "Canadian business" (as defined in the Investment Canada Act), or establish a "new Canadian business" (as defined in the Investment Canada Act) to file either a notification or an application for review with a governmental agency known as "Investment Canada". The Investment Canada Act requires that certain acquisition of control of Canadian business by a "non-Canadian" must be reviewed and approved by the Minister responsible for the Investment Canada Act on the basis that the Minister is satisfied that the acquisition is "likely to be of net benefit to Canada", having regard to criteria set forth in the Investment Canada Act. Only acquisitions of control are reviewable under the Investment Canada Act; however, the Investment Canada Act provides detailed rules for the determination of whether control has been acquired and, pursuant to those rules, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control. Certain reviewable acquisitions of control may not be implemented before being approved by the Minister; if the Minister does not ultimately approve a reviewable acquisition, which has been completed, the acquired Canadian business must be divested. Failure to comply with the review provisions of the Investment Canada Act could result in, amongst other things, an injunction or a court order directing disposition of assets of shares.
E. Taxation
A brief description of certain provisions of the tax treaty between Canada and the United States is included below, together with a brief outline of certain taxes, including withholding provisions, to which United States security holders are subject under existing laws and regulations of Canada. The consequences, if any, of provincial, state and local taxes are not considered.
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The following information is general and security holders should seek the advice of their own tax advisors, tax counsel or accountants with respect to the applicability or effect on their own individual circumstances of the matters referred to herein and of any provincial, state or local taxes.
Certain Canadian Federal Income Tax Consequences
The discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of our common shares for a shareholder of us who is not a resident of Canada but is a resident of the United States and who will acquire and hold our common shares as capital property for the purposes of theIncome Tax Act (Canada) (“Canadian Tax Act”). This summary does not apply to a shareholder who carries on business in Canada through a “permanent establishment” or is otherwise situated in Canada or performs independent personal services in Canada through a fixed base in Canada if the shareholder’s holding in us is effectively connected with such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the regulations thereunder and on an understanding of the administrative practices of Canada Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. It has been assumed that there will be no other relevant amendment of any governing law although no assurance can be given in this respect. This discussion is general only and is not a substitute for independent advice from a shareholder’s own Canadian and U.S. tax advisors.
The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended (“Convention”).
Dividends on Common Shares and Other Income
Under the Canadian Tax Act, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. The Convention limits the rate to 15 percent if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if the shareholder is also a corporation that is the beneficial owner of the dividends and owns at least 10 percent of the voting stock of the payor corporation.
The amount of a stock dividend (for tax purposes) would generally be equal to the amount by which the paid up or stated capital of the Company has increased by reason of the payment of such dividend. We will furnish additional tax information to shareholders in the event of such a dividend.
The tax payable on dividends is to be withheld at source by the Company or people acting on its behalf. The Company is liable for the amount of the tax, penalties and interest if it fails to so withhold. The taxpayer is liable in any event if the Company fails to withhold.
Dispositions of Common Shares
Under the Canadian Tax Act, a taxpayer’s capital gain or capital loss from a disposition of a common share of a Company is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the share and reasonable expenses of disposition. The capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties. Fifty percent of a capital gain is included in income and taxed at ordinary Canadian tax rates. The amount by which a shareholder’s capital loss exceeds the capital gain in a year may be deducted from a capital gain realized by the shareholder in the three previous years or any subsequent year, subject to certain restrictions in the case of a corporate shareholder.
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Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may realize an allowable capital loss on a disposition of “taxable Canadian property.” Our common shares will constitute taxable Canadian property if at any time in the five years immediately preceding the disposition of 25% or more of the issued shares of any class of capital stock of the Company that issued the shares were owned by persons with whom the taxpayer did not deal at arm’s length or the taxpayer together with all such persons did not deal at arm’s length and in certain other circumstances.
The Convention relieves United States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless the value of the shares is derived principally from “real property” situated in Canada.
U.S. Federal Income Tax Consequences
The following is a general discussion of certain possible U.S. federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of our common shares. This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Taxation –Canadian Federal Income Tax Consequences” above).
The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.
This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any U.S. Holder or prospective U.S. Holder of our common shares, and no opinion or representation with respect to the U.S. federal income tax consequences to any such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders and prospective U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of our common shares.
Circular 230 Disclosure
Any tax statement made herein regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for purposes of avoiding any penalties. Any such statement herein is written in connection with the marketing or promotion of the transaction to which the statement relates. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
U.S. Holders.
As used herein, a “U.S. Holder” means a holder of our common shares who is (i) a citizen or individual resident of the U.S., (ii) a corporation created or organized in or under the laws of the U.S. or of any political subdivision thereof, (iii) an estate whose income is taxable in the U.S. irrespective of source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of its substantial decisions or (B) the trust was in existence on August 20, 1996 and has properly elected under applicable Treasury Regulations to continue to be treated as a United States person. If a partnership or other “pass-through” entity treated as a partnership for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax treatment of the partners or owners of such partnership or other pass-through entity generally will depend on the status of such partners or owners and the activities of such partnership or pass-through entity.
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Persons Not Covered.
This summary does not address the U.S. federal income tax consequences to persons (including persons who are U.S. Holders) subject to special provisions of U.S. federal income tax law, including (i) persons who are tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, or brokers, dealers or traders in securities, (ii) persons who have a “functional currency” other than the U.S. dollar, (iii) persons subject to the alternative minimum tax, (xi) persons who own their common shares as part of a straddle, hedging, conversion transaction, constructive sale or other arrangement involving more than one position, (iv) persons who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services, (v) persons that own an interest in an entity that owns common shares, (vi) persons who own, exercise or dispose of any options, warrants or other rights to acquire common shares, (vii) persons who are partners or owners of partnerships or other pass-through entities or (viii) persons who own their common shares other than as a capital asset within the meaning of Section 1221 of the Code.
Distribution on Our Common Shares.
General Rules. U.S. Holders receiving distributions (including constructive distributions) with respect to our common shares are required to include in gross income as a dividend for U.S. federal income tax purposes the gross amount of such distributions (without reduction for any Canadian income tax withheld from such distributions), equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that we have current or accumulated earnings and profits. To the extent that distributions from us exceed our current or accumulated earnings and profits, such distributions will be treated first as a return of capital, to the extent of the U.S. Holder’s adjusted basis in the common shares, and thereafter as gain from the sale or exchange of our common shares. (See more detailed discussion at “Disposition of Our Common Shares” below). Any Canadian tax withheld from a distribution by us may be credited, subject to certain limitations, against the U.S. Holder’s U.S. federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's U.S. federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below).
Currency Gain or Loss. In the case of foreign currency received as a distribution that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, a U.S. Holder that is an individual and whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.
Dividend not Eligible for Reduced Tax Rate. For taxable years beginning after December 31, 2002 and before January 1, 2011, dividends received by U.S. Holders that are individuals, estates or trusts from “qualified foreign corporations,” as defined in Section 1(h)(11) of the Code, generally are taxed at the same preferential tax rates applicable to long-term capital gains. Although not free from doubt, it appears that we would be a “qualified foreign corporation,” as defined in Section 1(h)(11) of the Code if we were not a Passive Foreign Investment Company (“PFIC”). A corporation that is properly described as a PFIC, as defined below, for its taxable year during which it pays a dividend, or for its immediately preceding taxable year will not be treated as a “qualifying foreign corporation” and dividends received by U.S. Holders that are individuals, estates or trusts generally will be subject to U.S. federal income tax at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains).
Dividends not Eligible for Dividends Received Deduction. Dividends paid on our common shares generally will not be eligible for the “dividends received deduction” allowed to corporate shareholders receiving dividends from certain U.S. corporations. Under certain circumstances, a U.S. Holder that is a corporation and that owns shares representing at least 10% of the total voting power and the total value of our outstanding shares may be entitled to a 70% deduction of the “U.S. source” portion of dividends received from us (unless we qualify as a PFIC as defined below). The availability of the dividends received deduction is subject to several complex limitations that are beyond the scope of this discussion, and U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the dividends received deduction.
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Dividend Paid to Shareholder who Made QEF Election may be Exempt from Tax. Generally, shareholders are not subject to additional income taxation on distributions made by a PFIC to the extent of the shareholder’s basis in the corporation’s shares if a Qualified Electing Fund (“QEF”) election is in effect. (Please see the QEF election discussion below.) A shareholder’s basis in this situation is usually equal to the cost of purchasing the shares plus the amount of the corporation’s income that was reported on the shareholder’s return pursuant to the QEF election less any prior distributions made by the corporation to the shareholder. Again, these rules are subject to several exceptions that are beyond the scope of this discussion, and U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding whether dividends paid by us to them will be exempt from federal income tax if a QEF election is made.
Disposition of Our Common Shares.
General Rule. Subject to the PFIC Rules discussed further below, a U.S. Holder will recognize gain or loss upon the sale or other taxable disposition of our common shares equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in our common shares. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if our common shares are held for more than one year.
Reduced Tax Rate. Under current law, preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation (other than a corporation subject to Subchapter S of the Code). Deductions for net capital losses are subject to significant limitations. For U.S. Holders that are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted. Sales of PFIC stock are not eligible for the reduced long-term capital gains rates that are usually applicable to sales of stock unless the shareholder made a QEF election regarding such shares. As discussed below, we believe we are a PFIC.
Management Believes Company is a Passive Foreign Investment Company.
General Discussion. We believe that we qualify as a PFIC, within the meaning of Sections 1291 through 1298 of the Code, for the fiscal year ended October 31, 2008, may have qualified as a PFIC in prior years and may qualify as a PFIC in subsequent years. A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. federal income taxation under one of three alternative tax regimes at the election of each such U.S. Holder. The following is a discussion of these three alternative tax regimes. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, actually or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).
Definition of PFIC. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the U.S. and, for any taxable year, either (a) 75% or more of its gross income is “passive income” or (b) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. “Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. However, gains resulting from commodities transactions are generally excluded from the definition of passive income if “substantially all” of a merchant’s, producer’s or handler’s business is as an active merchant, producer or handler of such commodities. For purposes of the PFIC income test and the assets test, if a foreign corporation owns (directly or indirectly) at least 25% by value of the stock of another corporation, such foreign corporation shall be treated as if it (a) held a proportionate share of the assets of such other corporation, and (b) received directly its proportionate share of the income of such other corporation. Also, for purposes of such PFIC tests, passive income does not include any interest, dividends, rents or royalties that are received or accrued from a “related” person to the extent such amount is properly allocable to the income of such related person which is not passive income. For these purposes, a person is related with respect to a foreign corporation if such person “controls” the foreign corporation or is controlled by the foreign corporation or by the same persons that control the foreign corporation. For these purposes, “control” means ownership, directly or indirectly, of stock possessing more than 50% of the total voting power of all classes of stock entitled to vote or of the total value of stock of a corporation. As stated above, we believe we satisfied both the 75% passive income and the 50% passive assets tests during the fiscal year ended on October 31, 2008 and anticipate meeting both of these tests in the fiscal year that will end on October 31, 2009. There can be no assurance that our determination concerning our PFIC status will not be challenged.
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Generally Applicable PFIC Rules. If a U.S. Holder does not make a timely election to be taxed in conformity with the Mark-to-Market rules or the QEF rules (discussed below) during a year in which it holds (or is deemed to have held) shares issued by us while we are a PFIC (a “Non-Electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reasons of a pledge) of the U.S. Holder’s common shares and (ii) certain “excess distributions” (generally, distributions received in the current taxable year that are in excess of 125% of the average distributions received during the three preceding years or, if shorter, the U.S. Holder’s holding period) by us.
A Non-Electing U.S. Holder generally would be required to pro rate all gains realized on the disposition of his common shares and all excess distributions on his common shares over the entire holding period for the common shares. All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to our first taxable year during such U.S. Holder’s holding period and beginning after January 1, 1987 for which we were a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-Electing U.S. Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-Electing U.S. Holder that is not a corporation must treat this interest charge as “personal interest” which, as discussed above, is wholly nondeductible. The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.
If we are a PFIC for any taxable year during which a Non-Electing U.S. Holder holds our common shares, then we will continue to be treated as a PFIC with respect to such common shares, even if we are no longer definitionally a PFIC. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC.
Mark-to-Market Election. Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold, actually or constructively, marketable stock (as specifically defined in the Treasury Regulations) of a foreign corporation that qualifies as a PFIC may annually elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will generally not be subject to the special taxation rules of Section 1291 discussed above. However, if the mark-to-market election is made by a Non-Electing U.S. Holder after the beginning of the holding period for the PFIC stock, then the Section 1291 rules will apply to certain dispositions of, distributions on and other amounts taxable with respect to our common shares. A U.S. Holder who makes the mark-to market election will include in income for the taxable year for which the election was made an amount equal to the excess, if any, of the fair market value of our common shares as of the close of such tax year over such U.S. Holder’s adjusted basis in such common shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the common shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for our common shares included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior tax year but for the Section 1291 interest on tax deferral rules discussed above with respect to Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A U.S. Holder’s adjusted tax basis in our common shares will be adjusted to reflect the amount included in or deducted from income as a result of a mark-to-market election. A mark-to-market election applies to the taxable year in which the election is made and to each subsequent taxable year, unless our common shares cease to be marketable, as specifically defined, or the IRS consents to revocation of the election.
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QEF Election. A U.S. Holder who elects in a timely manner to treat us as a QEF (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current U.S. federal income tax for any taxable year in which we qualify as a PFIC on the U.S. Holder’s pro rata share of our (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder’s taxable year in which (or with which) our taxable year ends, regardless of whether such amounts are actually distributed.
The effective QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his common shares (or deemed to be realized on the pledge of his shares) as capital gain; (ii) treat his share of our net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of our annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as “personal interest” that is not deductible.
The procedure a U.S. Holder must comply with in making an effective QEF election, and the U.S. federal income tax consequences of the QEF election, will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which we are a PFIC. If the U.S. Holder makes a QEF election in such first year,i.e., a timely QEF election, then the U.S. Holder may make the QEF election by simply filing the appropriate QEF election documents at the time the U.S. Holder files his tax return for such first year. However, if we qualified as a PFIC in a prior year, then in addition to filing the QEF election documents, the U.S. Holder must elect to recognize (i) under the rules of Section 1291 of the Code (discussed herein), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date or (ii) if we are a controlled foreign corporation, the U.S. Holder’s pro rata share of our post-1986 earnings and profits as of the qualification date. The qualification date is the first day of our first tax year in which we qualified as a QEF with respect to such U.S. Holder. The elections to recognize such gain or earnings and profits can only be made if such U.S. Holder’s holding period for our common shares includes the qualification date. By electing to recognize such gain or earnings and profits, the U.S. Holder will be deemed to have made a timely QEF election. A U.S. Holder who made elections to recognize gain or earnings and profits after May 1, 1992 and before January 27, 1997 may, under certain circumstances, elect to change such U.S. Holder’s qualification date to the first day of the first QEF year. U.S. Holders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition to the above rules, under very limited circumstances, a U.S. Holder may make a retroactive QEF election if such U.S. Holder failed to file the QEF election documents in a timely manner.
A QEF election, once made with respect to us, applies to the tax year for which it was made and to all subsequent tax years, unless the election is invalidated or terminated, or the IRS consents to revocation of the election. If a QEF election is made by a U.S. Holder and we cease to qualify as a PFIC in a subsequent tax year, the QEF election will remain in effect, although not applicable, during those tax years in which we do not qualify as a PFIC. Therefore, if we again qualify as a PFIC in a subsequent tax year, the QEF election will be effective and the U.S. Holder will be subject to the rules described above for Electing U.S. Holders in such tax year and any subsequent tax years in which we qualify as a PFIC. In addition, the QEF election remains in effect, although not applicable, with respect to an Electing U.S. Holder even after such U.S. Holder disposes of all of his or its direct and indirect interest in our shares. Therefore, if such U.S. Holder reacquires an interest in us, that U.S. Holder will be subject to the rules described above for Electing U.S. Holders for each tax year in which we qualify as a PFIC.
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Generally, shareholders do not make a QEF election unless they have sufficient information to determine their proportionate shares of a corporation’s net capital gain and ordinary earnings. We have not calculated these amounts for any shareholder and do not anticipate making these calculations in the foreseeable future. Therefore, U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the QEF election before making this election regarding our shares.
Other PFIC Rules. Under Section 1291(f) of the Code, the IRS has issued Proposed Treasury Regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of our common shares in the hands of the transferee and the basis of any property received in the exchange for those common shares would be increased by the amount of gain recognized. However, the specific U.S. federal income tax consequences to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred.
Certain special, generally adverse, rules will apply with respect to our common shares while we are a PFIC whether or not it is treated as a QEF. For example under Section 1298(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such shares.
The PFIC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the PFIC rules, including the advisability of and procedure for making a QEF election or a mark-to-mark election, and how these rules may impact their U.S. federal income tax situation.
Foreign Tax Credit.
A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for U.S. federal income tax purposes with respect to such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from distributions to) the U.S. Holder during that year.
There are significant and complex limitations that apply to the foreign tax credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S. Holder’s “foreign source” income bears to his or its worldwide taxable income. In applying this limitation, the various items of income and deduction must be classified as either “foreign source” or “U.S. source.” Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes or “baskets” of income. Under current law, there are only two baskets, “passive category income” and “general category income”. Foreign taxes assigned to a particular class of income generally cannot offset United States tax on income assigned to another class. Unused foreign tax credits can generally be carried back one year and forward ten years. Dividends distributed by us will generally constitute “foreign source” income, and will be classified as “passive c category income”.
In addition, U.S. Holders that are corporations and that own 10% or more of our voting stock may be entitled to an “indirect” foreign tax credit under Section 902 of the Code with respect to the payment of dividends by us under certain circumstances and subject to complex rules and limitations.
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The availability of the foreign tax credit and the application of the limitations with respect to the foreign tax credit are fact specific, and each U.S. Holder of our common shares should consult their own financial advisor, legal counsel or accountant regarding the foreign tax credit rules.
Information Reporting; Backup Withholding.
Certain information reporting and backup withholding rules may apply with respect to certain payments related to our common shares. In particular, a payor or middleman within the U.S., or in certain cases outside the U.S., will be required to withhold 28% (which rate is scheduled for periodic adjustment) of any payments to a U.S. Holder of our common shares of dividends on, or proceeds from the sale of, such common shares within the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification number (generally on Form W-9) or otherwise fails to comply with, or establish an exemption from, the backup withholding tax requirements. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the information reporting and backup withholding rules applicable to our common shares.
Controlled Foreign Corporation
The above sections of this discussion may not describe the U.S. federal income tax consequences to U.S. Holders resulting from the ownership and disposition of our common shares if we qualify as a “Controlled Foreign Corporation” (“CFC”).
If more than 50% of the total voting power or the total value of our outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly or indirectly, 10% or more of the total voting power of our outstanding shares (each a “10% Shareholder”), we could be treated as a CFC under Section 957 of the Code.
The classification of us as a CFC would effect many complex results, including that 10% Shareholders of us would generally (i) be treated as having received a current distribution of our “Subpart F income” and (ii) would also be subject to current U.S. federal income tax on their pro rata shares of our earnings invested in “U.S. property.” The foreign tax credit may reduce the U.S. federal income tax on these amounts for such 10% Shareholders (See more detailed discussion at “Foreign Tax Credit” above). In addition, under Section 1248 of the Code, gain from the sale or other taxable disposition of our common shares by a U.S. Holder that is or was a 10% Shareholder at any time during the five-year period ending with the sale is treated as a dividend to the extent of our earnings and profits attributable to the common shares sold or exchanged.
If we are classified as both a PFIC and a CFC, we generally will not be treated as a PFIC with respect to 10% Shareholders. This rule generally will be effective for taxable years of 10% Shareholders beginning after 1997 and for taxable years of us ending with or within such taxable years of 10% Shareholders.
We do not believe that we currently qualify as a CFC. However, there can be no assurance that we will not be considered a CFC for the current or any future taxable year.The CFC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the CFC rules and how these rules may impact their U.S. federal income tax situation.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Expert
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Not applicable.
H. Documents on Display
We are required to file reports with the Securities Commissions in the province of British Columbia and the province of Alberta electronically through the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), which can be viewed atwww.sedar.com.
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we file reports, registration statements and other information with the SEC. Our reports, registration statements and other information can be inspected and copies at the public reference facilities maintained by the SEC at the following locations:
| Judiciary Plaza Room 1024 Washington, DC 20549 | 500 West Madison Suite 1400 Chicago, IL 60661 |
Copies of these materials can also be obtained by mail at prescribed rates from the Public Reference Section of the SEC, 100 F Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330.
I. Subsidiary Information
Not applicable.
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because our current cash is held in Canadian dollars, our financial results are expressed in Canadian dollars and our operations are primarily paid for in Canadian dollars, we are not subject to foreign currency fluctuations that would have any material affect on our financial position or results of operations. Also, because of the status of our operations, we do not believe that we are exposed to interest rate risk, commodity price risk or any other relevant market risk at this time.
We do not engage in currency speculation. Our trading activities do not involve money market holdings.
ITEM 12: DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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PART II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There have been no defaults, arrearages or delinquencies with respect to indebtedness or the payment of dividends.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There have been no material modifications to our common shares.
ITEM 15: CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
The Company's President and Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of October 31, 2008. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.
Based on this evaluation, the our President and Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2009, our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our management recognizes that any controls and procedures no matter how well designed or operated, can only provide reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. However, because of the inherent limitations in all control systems, even after the remediation efforts described above, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company, have been detected.
B. Management/Annual Report on Internal Controls over Financial Reporting
The Board of Directors and management of the Company are responsible for establishing and maintaining adequate internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with Canadian GAAP, including a reconciliation to U.S. GAAP.
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 risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management conducted an assessment of the effectiveness of internal controls over financial reporting based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Based on this assessment, management has concluded that internal control over financial reporting was effective as of October 31, 2008 and onwards.
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C. Attestation Report of the Registered Public Accounting Firm
Not applicable.
D. Changes in Internal Control Over Financial Reporting
During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT
Prior to the filing of this report, our board of directors had made the determination that two audit committee financial experts, Mr. Robert F. Roddick and Mr. Joseph Francese serve on the Audit Committee. Also, we believe that Mr. Roddick and Mr. Francese are “independent” under applicable rules of the Securities and Exchange Commission.
ITEM 16B: CODE OF ETHICS
Our board of directors has not adopted a code of ethics that applies to our executive officers as such a code is not required under applicable Canadian laws.
ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Collins Barrow Edmonton LLP (“Collins Barrow”), audited our financial statements for the years ended October 31, 2009 and October 31, 2008.
Audit Fees
Fees billed by Collins Barrow for professional services totaled $65,000 for the year ended October 31, 2009. Fees billed by Collins Barrow for professional services totaled $65,000 for the year ended October 31, 2008. Such fees include fees associated with the audit of our annual financial statements or services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit–Related Fees
None.
Tax Fees
Fees for tax services by Collins Barrow, including fees for review of our consolidated federal income tax return, totaled $0.00 for the 2009 tax year and $0.00 for the 2008 tax year.
All other Fees
During the fiscal years ended October 31, 2009 and October 31, 2008, Collins Barrow did not bill for any products or services other than as described above.
Our audit committee pre-approves audit engagement terms and fees prior to the commencement of any audit work, other than that which may be necessary for our independent registered chartered accountants to prepare the proposed audit approach, scope and fee estimates. Our independent auditors annually submit a written proposal that details all audit and audit related services. Audit fees are fixed and contained in the proposal, and the audit committee reviews the nature and dollar value of services provided under such proposal. Any revisions to such proposal after the engagement has begun are reviewed and pre-approved by our audit committee.
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There were no fees in 2009 that were not pre-approved by our audit committee. All services described above under the captions “Audit Fees”, “Audit-Related Fees” and “Tax Fees” were approved by our audit committee pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).
ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E: PURCHASES OF EQUITY SECURITIES BY AFFILIATED PURCHASERS
| (a) Total Number of Shares (or Units) Purchased | (b) Weighted Average Price Paid per Share (or Units) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |
| November 1, 2008 to November 30, 2008 | Nil | $0.36 | Nil | 150,000(1) |
| December 1, 2008 to December 31, 2008 | 1,400,000(2) | $0.10 | 1,400,000(2) | Nil |
| January 1, 2009 – January 31, 2009 | Nil | N/A | Nil | Nil |
| February 1, 2009 to February 29, 2009 | 20,000 | $.2950 | Nil | Nil |
| March 1, 2009 to March 31, 2009 | Nil | $0.33 | Nil | 1,345,000(3) |
| April 1, 2009 to April 30, 2009 | Nil | N/A | Nil | Nil |
| May 1, 2009 to May 31, 2009 | Nil | N/A | Nil | Nil |
| June 1, 2009 to June 30, 2009 | Nil | N/A | Nil | Nil |
| July 1, 2009 to July 31, 2009 | Nil | N/A | Nil | Nil |
| August 1, 2009 to August 31, 2009 | Nil | N/A | Nil | Nil |
| September 1, 2009 to September 30, 2009 | 50,000(4) | $0.155 | 50,000(4) | Nil |
| October 1, 2009 to October 31, 2009 | 3,020,000(5) | $0.25 | 2,976,000(5) | 1,500,000(5) |
Notes:
| (1) | 150,000 common shares issuable pursuant to stock options granted under our stock option plan of which shall be exercisable in accordance with the plan and shall vest (i) 1/3 within 6 months; (ii) 1/3 within 12 months from the date of the grant and (iii) 1/3 within 18 months from the date of the grant. |
| (2) | 1,400,000 common shares issued pursuant to the exercise of stock options at $0.10 per common share |
| (3) | 1,345,000 common shares issuable pursuant to stock options granted under our stock option plan of which shall be exercisable in accordance with the plan and shall vest (i) 1/3 within 6 months; (ii) 1/3 within 12 months from the date of the grant and (iii) 1/3 within 18 months from the date of the grant. |
| (4) | 50,000 common shares issued pursuant to the exercise of stock options at $0.155 per common share |
| (5) | 2,976,000 common shares issued pursuant to a private placement at $0.25 per common share, and 1,500,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 per common share for the first year following the date of closing and at $.50 during the subsequent year and will expire October 15, 2011. The private placement closed on October 15th,2009, and its closing was publicly announced on October 19, 2009. |
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PART III
ITEM 17: FINANCIAL STATEMENTS
Our audited consolidated financial statements include:
our balance sheets as at October 31, 2009 and October 31, 2008;
statements of operations and comprehensive loss for the periods ended October 31, 2009, 2008 and 2007;
statements of shareholders’ equity for the periods ended October 31, 2009, 2008 and 2007; and
statements of cash flows for the periods ended October 31, 2009, 2008 and 2007.
The consolidated financial statements as at and for the years ended October 31, 2009 and October 31, 2008 were audited by Collins Barrow Edmonton LLP, our Independent Registered Chartered Accountants.
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada and are reconciled to United States generally accepted accounting principles in Note 16. All figures are expressed in Canadian dollars.
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Report of Independent Registered Chartered Accountants
To the Shareholders of
Titan Trading Analytics Inc.
We have audited the consolidated balance sheets of Titan Trading Analytics Inc. as at October 31, 2009 and 2008, and the consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the years in the three year period ended October 31, 2009 and for the cumulative amounts from November 1, 2001 (inception of development stage) to October 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2009 and 2008 and the results of its operations and its cash flows for each of the years in the three year period ended October 31, 2009 and for the cumulative amounts from November 1, 2001 (inception of development stage) to October 31, 2009 in accordance with Canadian generally accepted accounting principles.
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.
| “Collins Barrow Edmonton LLP” | |
| Edmonton, Alberta, Canada | Signed |
| February 15, 2010 | Independent Registered Chartered Accountants |
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Comments by Independent Registered Chartered Accountants for US Readers on Canada-United States of America Reporting Differences.
The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Although we conducted our audit in accordance with both Canadian generally accepted accounting standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the shareholders dated February 15, 2010, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the report of the independent registered Chartered Accountants when the events and conditions are adequately disclosed in the financial statements.
| “Collins Barrow Edmonton LLP” | |
| Edmonton, Alberta, Canada | Signed |
| February 15, 2010 | Independent Registered Chartered Accountants |
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Consolidated Balance Sheets |
| As at October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 2009 | 2008 | |||||
| ASSETS | ||||||
| CURRENT | ||||||
| Cash and cash equivalents | $ | 83,162 | $ | 334,954 | ||
| Short-term investments (Note 4) | 90,000 | 90,000 | ||||
| Due from related party (Note 8) | --- | 30,000 | ||||
| Sundry Receivable | 35,180 | --- | ||||
| Prepaid expenses and other | 27,743 | 34,433 | ||||
| 236,085 | 489,387 | |||||
| Due from related party (Note 8) | --- | 28,754 | ||||
| Deposit | 27,749 | 27,749 | ||||
| Restricted cash (Note 5) | 2,520 | 240,391 | ||||
| Property and equipment (Note 6) | 603,043 | 742,638 | ||||
| $ | 869,397 | $ | 1,528,919 | |||
| LIABILITIES | ||||||
| CURRENT | ||||||
| Accounts payable and accrued liabilities (Note 8) | $ | 181,851 | $ | 120,486 | ||
| Loans and advances (Note 7) | 296,096 | 568,847 | ||||
| 477,947 | 689,333 | |||||
| Deferred lease inducements | 99,554 | --- | ||||
| 577,501 | 689,333 | |||||
| Commitments and Contingency(Note 11) | ||||||
| Going Concern(Note 1) | ||||||
| SHAREHOLDERS’ EQUITY | ||||||
| Share capital (Note 9) | 13,591,954 | 11,707,655 | ||||
| Warrants (Note 9) | 1,115,875 | 1,016,303 | ||||
| Contributed surplus (Note 9) | 2,276,357 | 1,279,169 | ||||
| Deficit | (16,692,290 | ) | (13,163,541 | ) | ||
| 291,896 | 839,586 | |||||
| $ | 869,397 | $ | 1,528,919 |
See accompanying notes
Approved on behalf of the Board:
| “Kenneth W. Powell” | “Robert F. Roddick” | |
| Signed | Signed |
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Consolidated Statements of Operations and Comprehensive Loss |
| As at October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| Cumulative from | ||||||||||||
| 2002 | ||||||||||||
| (inception of | ||||||||||||
| development | ||||||||||||
| 2009 | 2008 | 2007 | stage) | |||||||||
| (Restated – | ||||||||||||
| see Note 2) | ||||||||||||
| EXPENSES | ||||||||||||
| Research and development (Note 8) | $ | 1,439,914 | $ | 871,222 | $ | 1,376,351 | $ | 5,337,604 | ||||
| General and administrative (Note 8) | 1,918,400 | 1,730,916 | 1,092,976 | 7,123,506 | ||||||||
| Amortization | 186,774 | 147,779 | 35,951 | 655,609 | ||||||||
| Bank charges and interest | 12,522 | 7,500 | 39,769 | 96,142 | ||||||||
| Loss on short-term investment | --- | 350,467 | --- | 353,467 | ||||||||
| Loss (Gain) on foreign exchange | (28,183 | ) | (26,070 | ) | 42,566 | (14,086 | ) | |||||
| Loss from operations | 3,529,427 | 3,081,814 | 2,587,613 | 13,552,242 | ||||||||
| Interest and other income | 678 | 5,829 | 7,975 | 15,064 | ||||||||
| Net loss and comprehensive loss | (3,528,749 | ) | (3,075,985 | ) | (2,579,638 | ) | (13,537,178 | ) | ||||
| LOSS PER SHARE – Basic (Note 14) | $ | (0.07 | ) | $ | (0.07 | ) | $ | (0.07 | ) | |||
| WEIGHTED AVERAGE NUMBER OF SHARES USED TO CALCULATE LOSS PER SHARE | 51,951,767 | 44,032,360 | 35,838,813 |
See accompanying notes
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Consolidated Statements of Shareholders’ Equity |
| As at October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| Share | Contributed | ||||||||||||||
| Capital | Warrants | Surplus | Deficit | Total | |||||||||||
| October 31, 2006 | $ | 6,717,678 | $ | 409,510 | $ | 338,572 | $ | (7,507,918 | ) | $ | (42,158 | ) | |||
| Net loss | (2,579,638 | ) | (2,579,638 | ) | |||||||||||
| Expired/forfeited warrants | (11,633 | ) | 11,633 | --- | |||||||||||
| Stock options exercised | 78,904 | (23,342 | ) | 55,562 | |||||||||||
| Warrants exercised | 884,171 | (86,150 | ) | 798,021 | |||||||||||
| Private placement | 865,292 | 184,049 | 1,049,341 | ||||||||||||
| Shares issued | 249,000 | 249,000 | |||||||||||||
| Stock compensation expense | 217,819 | 217,819 | |||||||||||||
| October 31, 2007 (Restated - see Note 2) | 8,795,045 | 495,776 | 544,682 | (10,087,556 | ) | (252,053 | ) | ||||||||
| Net loss | (3,075,985 | ) | (3,075,985 | ) | |||||||||||
| Expired/forfeited warrants | (200,550 | ) | 200,550 | --- | |||||||||||
| Stock options exercised | 47,905 | (14,405 | ) | 33,500 | |||||||||||
| Warrants exercised | 733,783 | (129,017 | ) | 604,766 | |||||||||||
| Private placement | 2,168,586 | 812,430 | 2,981,016 | ||||||||||||
| Warrants modified | (37,664 | ) | 37,664 | --- | |||||||||||
| Stock compensation expense | 548,342 | 548,342 | |||||||||||||
| October 31, 2008 | 11,707,655 | 1,016,303 | 1,279,169 | (13,163,541 | ) | 839,586 | |||||||||
| Net loss | (3,528,749 | ) | (3,528,749 | ) | |||||||||||
| Expired/forfeited warrants | (239,077 | ) | 239,077 | --- | |||||||||||
| Stock options exercised | 169,120 | (49,820 | ) | 119,300 | |||||||||||
| Private placement | 1,644,179 | 338,649 | 1,982,828 | ||||||||||||
| Shares issued for service | 71,000 | 71,000 | |||||||||||||
| Stock compensation expense | 807,931 | 807,931 | |||||||||||||
| October 31, 2009 | $ | 13,591,954 | $ | 1,115,875 | $ | 2,276,357 | $ | (16,692,290 | ) | $ | 291,896 |
See accompanying notes
- 64 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Consolidated Statements of Cash Flows |
| Years ended October 31, 2009, 2008 and 2007 |
| (expressed in Canadian dollars) |
| Cumulative from | ||||||||||||
| 2002 | ||||||||||||
| (inception of | ||||||||||||
| development | ||||||||||||
| 2009 | 2008 | 2007 | stage) | |||||||||
| (Restated - | ||||||||||||
| OPERATING | see Note 2) | |||||||||||
| Net loss | $ | (3,528,749 | ) | $ | (3,075,985 | ) | $ | (2,579,638 | ) | $ | (13,537,178 | ) |
| Adjustments for non-cash items | ||||||||||||
| Amortization | 186,774 | 147,779 | 35,951 | 655,609 | ||||||||
| Research and development | 71,000 | --- | 249,000 | 645,235 | ||||||||
| Stock option expense | 807,931 | 548,342 | 217,819 | 1,786,135 | ||||||||
| Loss on disposal of equipment | --- | --- | --- | 1,021 | ||||||||
| Amortization of leasehold inducements | (15,316 | ) | --- | --- | (15,316 | ) | ||||||
| Net changes in non-cash working capital balances: | ||||||||||||
| Prepaid expenses and deposit | 6,690 | (30,521 | ) | 47,158 | 6,690 | |||||||
| Sundry receivable | (35,180 | ) | --- | --- | (91,616 | ) | ||||||
| Accounts payable and accrued liabilities | 61,365 | (212,138 | ) | 50,843 | 149,145 | |||||||
| (2,445,485 | ) | (2,622,523 | ) | (1,978,867 | ) | (10,400,275 | ) | |||||
| INVESTING | ||||||||||||
| Due from related parties | 58,754 | (58,754 | ) | --- | --- | |||||||
| Loan receivable | --- | --- | --- | (62,735 | ) | |||||||
| Purchase of equipment | (47,179 | ) | (731,147 | ) | (132,786 | ) | (980,703 | ) | ||||
| Restricted cash | 227,409 | (203,972 | ) | --- | 23,437 | |||||||
| Short-term investments | --- | 140,628 | (237,326 | ) | (85,087 | ) | ||||||
| 238,984 | (853,245 | ) | (370,112 | ) | (1,105,088 | ) | ||||||
| FINANCING | ||||||||||||
| Issue of shares capital net of issue costs | 2,102,128 | 3,619,282 | 1,902,925 | 10,638,205 | ||||||||
| Proceeds from leasehold inducement | 114,870 | --- | --- | 114,870 | ||||||||
| Redemption of common shares | --- | --- | --- | (15,000 | ) | |||||||
| Loans and advances | (222,929 | ) | 131,836 | 136,794 | 463,716 | |||||||
| 1,994,069 | 3,751,118 | 2,039,719 | 11,201,791 | |||||||||
| EFFECT OF EXCHANGE RATE CHANGES | (39,360 | ) | 40,940 | 13,474 | 11,317 | |||||||
| INCREASE (DECREASE) IN CASH | (251,792 | ) | 316,290 | (295,786 | ) | (292,255 | ) | |||||
| AND CASH EQUIVALENTS | ||||||||||||
| CASH AND CASH EQUIVALENTS, | 334,954 | 18,664 | 314,450 | 375,417 | ||||||||
| BEGINNING OF PERIOD | ||||||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 83,162 | $ | 334,954 | $ | 18,664 | $ | 83,162 | ||||
| CASH USED IN OPERATING ACTIVITIES INCLUDES: | ||||||||||||
| Bank charges and interest | $ | 12,522 | $ | 7,500 | $ | 39,769 | $ | 96,142 |
See accompanying notes
- 65 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 1. | NATURE OF OPERATIONS AND GOING CONCERN |
Nature of Operations | |
Titan Trading Analytics Inc. (“Titan” or the “Company”) was incorporated on November 30, 1993. The Company is a development stage company that focuses on developing financial software for market timing, trading analytics and automated trading execution. The Company has yet to establish profitable business operations and has remained in research and development mode since its incorporation. Since 2002 the Company has been developing an automated trading platform. Cumulative balances incurred in developing the automated trading platform since 2002 have been presented in the financial statements. The Company currently has two distinct trading products in its line-up, each of which is now beginning to establish a real-world track record to demonstrate its potential as a revenue source. | |
Going concern | |
The consolidated financial statements of Titan have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. | |
Several adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant operating losses over the past several fiscal years as they have not completed the development of their financial software, and has an accumulated deficit of $16,692,290 at October 31, 2009. | |
Management has evaluated the Company’s alternatives to enable it to pay its liabilities as they become due and payable in the current year, reduce operating losses and obtain additional or new financing in order to advance its business plan. Alternatives being considered by management include, among others, obtaining financing from new lenders and the issuance of additional equity. The Company believes these measures will provide liquidity for it to continue as a going concern throughout fiscal 2010. However, management can provide no assurance thereon. | |
These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate because management believes that the actions already taken or planned will mitigate the adverse conditions and events that raise doubts about the validity of the going concern assumption used in preparing these consolidated financial statements. | |
If the going concern assumption was not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. |
- 66 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 2. | CHANGE IN ACCOUNTING POLICY AND PRIOR PERIOD ADJUSTMENT | |
Change in Accounting Policy | ||
| a) | Section 3064, "Goodwill and Intangible Assets", replaced Section 3062, "Goodwill and Other Intangible Assets", and Section 3450, "Research and Development Costs". This section establishes standards for the recognition, measurement, presentation, and disclosure of goodwill and intangible assets subsequent to its initial recognition by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. This section has been adopted effective November 1, 2008 and has no impact on the consolidated financial statements of the Company. | |
| b) | EIC Abstract 173 “Credit Risk and The Fair Value of Financial Assets and Financial Liabilities”, requires the Company to take into account the Company’s own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 is applied retrospectively without restatement of prior years to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of EIC 173 did not have an impact on the consolidated financial statements of the Company. | |
Prior Period Adjustment | ||
In the 2007 fiscal year, the Company failed to account for a $58,451 consulting fee for services provided in fiscal 2007 and not invoiced and paid until fiscal 2008. As a result, the Company has restated its consolidated balance sheets and statements of shareholders’ equity, as at October 31, 2007 and consolidated statements of operations and comprehensive loss and statements of cash flow for the year ended October 31, 2007. The impact of these changes was an increase in accounts payable and deficit of $58,451, an increase to general and administrative expenses of $90,000 and a decrease in research and development expenses of $31,549. | ||
| As | ||||||||||
| Previously | Restatement | As Restated | ||||||||
| Reported | ||||||||||
| As at October 31, 2007 | ||||||||||
| Accounts payable | 274,173 | 58,451 | 332,624 | |||||||
| Deficit | (10,029,105 | ) | (58,451 | ) | (10,087,556 | ) | ||||
| Year ended October 31, 2007 | ||||||||||
| General and administrative | 1,079,507 | 90,000 | 1,169,507 | |||||||
| Research and development | 1,331,369 | (31,549 | ) | 1,299,820 | ||||||
| Net loss and comprehensive loss | (2,521,187 | ) | (58,451 | ) | (2,579,638 | ) |
- 67 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
These consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada. | |
Consolidation | |
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Titan Trading GP Inc., Titan Trading Corp., Titan Holdings USA, LLC and Titan Trading USA, LLC. All inter-company balances and transactions have been eliminated on consolidation. | |
Research and development | |
Research costs are expensed when incurred. Development costs are expensed when incurred prior to the establishment of technical feasibility. Subsequent to the establishment of technical feasibility, the costs associated with the development of a commercial product for which adequate resources exist to market the product are capitalized as software and systems development. Capitalization of development costs ceases when the product is available for general release to customers. There were no development costs capitalized during the year. | |
Property and Equipment | |
Computer equipment is recorded at cost less accumulated amortization and is amortized at 30% declining balance per annum. | |
Office furniture is recorded at cost less accumulated amortization and is amortized at 20% declining balance per annum. | |
Leasehold improvements are recorded at cost less accumulated amortization and are amortized over the lease term. | |
The Company makes periodic reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying value of the assets would be written down to its fair value when undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount. | |
Future income taxes | |
The Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Future tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized. |
- 68 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Foreign currency translation | |
The functional currency of the Company is the Canadian dollar. Monetary assets and liabilities denominated in currencies other than the Canadian dollar are translated using the rate of exchange prevailing at the balance sheet date. Revenues and expenses and other assets and liabilities are translated using the exchange rate prevailing on the transaction date. Gains and losses on translation are included in operations. | |
The Company translates the assets and liabilities of integrated foreign operations to Canadian dollars using the temporal method of translation. Under the temporal method, monetary assets and liabilities are translated at the rate of exchange prevailing at year end, non-monetary assets and liabilities are translated at average rates of exchange during the year, with the exception of amortization which is translated at historical exchange rates. Revenues and expenses are translated at the rates of exchange prevailing when the transactions occurred. Gains and losses resulting from translation adjustments are included in operations. | |
Use of estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The significant estimates used by management include valuation allowances for future income taxes, useful lives for the amortization of property and equipment, fair value of financial instruments, and determining the fair value of stock-based compensation. | |
Loss per share | |
Basic loss per share is computed by dividing the loss available to common shareholders by the weighted average number of common shares outstanding during the year. The computation of diluted loss per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted loss per share by application of the treasury stock method. Diluted loss per share is not presented when it would be anti-dilutive. | |
Cash and cash equivalents | |
Cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, with an original maturity of less than three months at the time of purchase. |
- 69 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Deferred Lease Inducement | |
Lease inducements received in the form of leasehold improvement costs are amortized over the term of the lease as a reduction of rent expense. | |
Stock-based compensation | |
The Company accounts for stock options granted to directors, officers, employees and non-employees using the fair value method of accounting. The fair value of stock options for directors, officers and employees are calculated at the date of grant and is expensed over the vesting period of the options on a straight-line basis. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete, the date at which the performance commitment is reached or the date at which the equity instrument is granted if they are fully vested and non-forfeitable. The Company uses the Black-Scholes model to calculate the fair value of stock options issued, which requires certain assumptions to be made at the time the options are awarded, including the expected life of the option, the expected number of granted options that will vest and the expected future volatility of the stock. As the options are exercised, the consideration paid, along with the amount previously recognized in contributed surplus, is recorded as an increase to share capital. The Company reflects estimates of award forfeitures at the time of grant and revises in subsequent periods, if necessary, when forfeiture rates are expected to change. | |
Non-monetary transactions | |
All non-monetary transactions are measured at the fair value of the asset surrendered or the asset received, whichever is more reliable, unless the transaction lacks commercial substance. The commercial substance requirement is met when the future cash flows are expected to change significantly as a result of the transaction. | |
Variable Interest Entities | |
Variable interest entities ("VIE") are defined under Accounting Guideline 15 "Consideration of Variable Interest Entities" ("AcG 15") as entities that do not have sufficient equity at risk to finance their activities without additional subordinated financial support, or where the equity holders lack the overall characteristics of a controlling financial interest. The guideline requires that the VIE be consolidated with the financial results of the entity deemed to be the primary beneficiary of the VIE's expected losses and its expected residual returns. There are no variable interest entities to be consolidated. | |
Joint Interest Activities | |
Certain of the Company’s trading activities are conducted jointly with another entity. The consolidated financial statements reflect only the Company’s proportionate interest in such activities. Such arrangements are considered to be participation funding and are not considered to be joint ventures. |
- 70 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) | |
Financial Instruments | ||
All financial instruments are initially recorded on the consolidated balance sheet at fair value. They are subsequently valued either at fair value or amortized cost depending on the classification selected for the financial instrument. Financial assets are classified as either "held-for-trading", "held-to- maturity", "available-for-sale" or "loans and receivables" and financial liabilities are classified as either "held-for-trading" or "other financial liabilities". Financial assets and liabilities classified as held-for-trading are measured at fair value with changes in fair value recorded in the consolidated statements of operations except for financial assets and liabilities designated as cash flow hedges which are measured at fair value with changes in fair value recorded as a component of other comprehensive income. Financial assets classified as held-to-maturity or loans and receivables and financial liabilities classified as other financial liabilities are subsequently measured at amortized cost using the effective interest method. Available-for-sale financial assets that have a quoted price in an active market are measured at fair value with changes in fair value recorded in other comprehensive income. Such gains and losses are reclassified to earnings when the related financial asset is disposed of or when the decline in value is considered to be other-than-temporary. Equity instruments classified as "available-for-sale" that do not have a quoted price in an active market are subsequently measured at cost. Purchases and sales of financial assets will be accounted for using trade-date accounting and transaction costs relating to financial instruments will be expensed in the period incurred. | ||
The Company has classified its financial instruments as follows: | ||
• | Cash and cash equivalents, short-term investments and restricted cash are classified as held-for- trading. | |
• | Due from related parties is classified as loans and receivables. | |
• | Accounts payable and accrued liabilities and loans and advances are classified as other financial liabilities. | |
Comprehensive Income | ||
Comprehensive income is the change in equity of a company, during a period, from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company did not have other comprehensive income and accordingly comprehensive loss and net loss are equal. | ||
- 71 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) | |
Future Accounting Pronouncements | ||
| a) | Business Combinations, Consolidated Financial Statements and Non-Controlling Interests | |
In January 2009, the CICA issued Sections 1582 “Business Combinations”, 1601 “Consolidated Financial Statements” and 1602 “Non-controlling Interests” which replaces CICA Sections 1581 “Business Combinations” and 1600 “Consolidated Financial Statements”. Section 1582 is applicable for the Company’s business combinations with acquisition dated on or after November 1, 2011. Early adoption of this Section is permitted. Section 1601 together with Section 1602 establish standards for the preparation of consolidated financial statements. Section 1601 is applicable for the Company’s financial statements for its fiscal year beginning November 1, 2011. Early adoption of this Section is also permitted. If the Company chooses to early adopt any one of these Sections, the other two Sections must also be adopted at the same time. | ||
| b) | International Financial Reporting Standards | |
The ACSB will require all public companies to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company will be required to prepare both current and comparative financial information using IFRS. While the conceptual framework for IFRS and Canadian GAAP are similar, there are significant differences in recognition, measurement and disclosure requirements. While the Company has begun assessing the adoption of IFRS for the fiscal year ended October 31, 2012, the financial impact of the transition to IFRS cannot be reasonably determined at this time. | ||
| 4. | SHORT-TERM INVESTMENTS | |
Short-term investments consist of a $90,000 guaranteed investment certificate bearing interest at prime less 2.00% maturing September 3, 2010, as compared to $90,000 in 2008. The investment is collateral for a $90,000 letter of credit which has been issued by the Company for their leased premises. | ||
| 5. | RESTRICTED CASH | |
Restricted cash consists of amounts held in a trading account for the purpose of trading securities to test the financial trading software that the Company is developing and is not available for current purposes. | ||
- 72 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 6. | PROPERTY AND EQUIPMENT |
| October 31, 2009 | October 31, 2008 | ||||||||||||||||||
| Accumulated | Net Book | Accumulated | Net Book | ||||||||||||||||
| Cost | Amortization | Value | Cost | Amortization | Value | ||||||||||||||
| Computer Equipment | $ | 328,865 | $ | 174,429 | $ | 154,436 | $ | 284,772 | $ | 119,907 | $ | 164,865 | |||||||
| Office Furniture | 88,349 | 29,877 | 58,472 | 85,264 | 15,607 | 69,657 | |||||||||||||
| Leasehold Improvements | 589,908 | 199,773 | 390,135 | 589,907 | 81,791 | 508,116 | |||||||||||||
| $ | 1,007,122 | $ | 404,079 | $ | 603,043 | $ | 959,943 | $ | 217,305 | $ | 742,638 | ||||||||
| 7. | LOANS AND ADVANCES |
| 2009 | 2008 | ||||||
| Loan payable, is due to a Director who is also an officer of the Company. The loan is non-interest bearing, unsecured and has no fixed terms of repayment | $ | 5,198 | $ | --- | |||
| Advance from a third party, bears no interest, is unsecured and is due on demand | 290,898 | 240,391 | |||||
| Advance from a third party, bears no interest, is unsecured and is due on demand. The amount was repaid during the year | --- | 328,456 | |||||
| $ | 296,096 | $ | 568,847 |
| 8. | RELATED PARTY TRANSACTIONS |
Included in the consolidated financial statements are the following related party transactions not disclosed elsewhere: |
| 2009 | 2008 | 2007 | ||||||||
| Management and consulting fees | $ | 94,500 | $ | 184,500 | $ | 167,806 | ||||
| Research and development | 237,574 | 258,182 | 262,958 |
Management and consulting fees paid to an officer of the Company and a company controlled by an officer are reflected in general and administrative expenses.
Research and development fees are paid to directors and companies controlled by directors.
Due from related party is receivable from a director who is also an officer of the Company. The amount due from related party is unsecured, have no terms of repayment, and bears no interest. The amount was received during the year.
- 73 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 8. | RELATED PARTY TRANSACTIONS (continued) |
Included in accounts payable and accrued liabilities is $27,548 (2008 - $5,542) payable to a director of the Company and a company controlled by a director. | |
The related party transactions are in the normal course of operations and are recorded at the exchange amount which is the amount of consideration established and agreed to by the related parties. | |
| 9. | SHARE CAPITAL |
Authorized Share Capital: |
Unlimited number of common shares with no par value.
Unlimited number of preferred shares
Preferred shares may be issued in one or more series and the directors are authorized to fix the number of shares in each series and determine the designation, rights, privileges and conditions attached to the shares of each series.
| Common Shares | Warrants | ||||||||||||
| Shares | Amount | Warrants | Amount | ||||||||||
| Balance, November 30, 1993 | --- | --- | --- | --- | |||||||||
| Issued for cash | 1 | 1 | --- | --- | |||||||||
| Balance, October 31, 1994 | 1 | 1 | --- | --- | |||||||||
| Issued for cash | 4,114,000 | 1,314,900 | --- | --- | |||||||||
| Warrants issued | --- | --- | 125,000 | --- | |||||||||
| Balance, October 31, 1995 | 4,114,001 | 1,314,901 | 125,000 | --- | |||||||||
| Issued for cash | 4,302,000 | 1,055,500 | --- | --- | |||||||||
| Share issuance costs | --- | (141,089 | ) | --- | --- | ||||||||
| Balance, October 31, 1996 | 8,416,001 | 2,229,312 | 125,000 | --- | |||||||||
| Issued for cash | 316,000 | 442,400 | --- | --- | |||||||||
| Warrants issued | --- | --- | 158,000 | --- | |||||||||
| Balance, October 31, 1997 | 8,732,001 | 2,671,712 | 283,000 | --- | |||||||||
| Warrants exercised | 125,000 | 131,250 | (125,000 | ) | --- | ||||||||
| Balance, October 31, 1998 | 8,857,001 | 2,802,962 | 158,000 | --- | |||||||||
| Warrants forfeited | --- | --- | (158,000 | ) | --- | ||||||||
| Balance, October 31, 1999 | 8,857,001 | 2,802,962 | --- | --- | |||||||||
| Issued for cash | 275,965 | 572,976 | --- | --- | |||||||||
| Warrants issued | --- | --- | 250,067 | --- | |||||||||
- 74 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
9. SHARE CAPITAL (continued)
| Common Shares | Warrants | ||||||||||||
| Shares | Amount | Warrants | Amount | ||||||||||
| Balance, October 31, 2000 | 9,132,966 | 3,375,938 | 250,067 | --- | |||||||||
| Issued for cash | 680,000 | 340,000 | --- | --- | |||||||||
| Warrants issued | --- | --- | 680,000 | --- | |||||||||
| Warrants expired | --- | --- | (250,067 | ) | --- | ||||||||
| Balance, October 31, 2001 | 9,812,966 | 3,715,938 | 680,000 | --- | |||||||||
| Issued for cash | --- | --- | --- | --- | |||||||||
| Balance, October 31, 2002 | 9,812,966 | 3,715,938 | 680,000 | --- | |||||||||
| Warrants expired | --- | --- | (680,000 | ) | --- | ||||||||
| Balance, October 31, 2003 | 9,812,966 | 3,715,938 | --- | --- | |||||||||
| Private placements | 3,211,999 | 242,456 | 3,211,999 | 116,544 | |||||||||
| Share issuance costs | --- | (9,800 | ) | --- | --- | ||||||||
| Balance, October 31, 2004 | 13,024,965 | 3,948,594 | 3,211,999 | 116,544 | |||||||||
| Private placements | 5,455,110 | 878,014 | 4,655,014 | 154,561 | |||||||||
| Warrants exercised | 430,000 | 72,240 | (430,000 | ) | (20,640 | ) | |||||||
| Shares issued for debt | 3,736,324 | 472,309 | --- | --- | |||||||||
| Shares issuance costs | --- | (77,652 | ) | --- | --- | ||||||||
| Warrants expired and forfeited | --- | --- | (859,999 | ) | (21,440 | ) | |||||||
| Balance, October 31, 2005 | 22,646,399 | 5,293,505 | 6,577,014 | 229,025 | |||||||||
| Private placements | 6,012,765 | 1,157,590 | 3,006,388 | 345,776 | |||||||||
| Warrants exercised | 2,155,333 | 363,920 | (2,155,333 | ) | (85,947 | ) | |||||||
| Warrants issued in software transfer | --- | --- | 2,000,000 | --- | |||||||||
| Warrants expired and forfeited | --- | --- | (983,500 | ) | (58,274 | ) | |||||||
| Share issuance costs | --- | (97,337 | ) | --- | (21,070 | ) | |||||||
| Balance, October 31, 2006 | 30,814,497 | 6,717,678 | 8,444,569 | 409,510 | |||||||||
| Private placement | 3,311,299 | 957,552 | 1,655,632 | 201,413 | |||||||||
| Warrants exercised | 3,010,403 | 884,171 | (3,010,403 | ) | (86,150 | ) | |||||||
| Stock options exercised | 377,500 | 78,904 | --- | --- | |||||||||
| Warrants expired and forfeited | --- | --- | (581,667 | ) | (11,633 | ) | |||||||
| Shares issued for service | 300,000 | 249,000 | --- | --- | |||||||||
| Share issuance costs | --- | (92,260 | ) | --- | (17,364 | ) | |||||||
| Balance, October 31, 2007 | 37,813,699 | 8,795,045 | 6,508,131 | 495,776 | |||||||||
| Private placement | 9,571,234 | 2,243,139 | 6,035,617 | 841,855 | |||||||||
| Warrants exercised | 1,494,412 | 733,783 | (1,494,412 | ) | (129,017 | ) | |||||||
| Stock options exercised | 335,000 | 47,905 | --- | --- | |||||||||
| Warrants expired and forfeited | --- | --- | (1,358,087 | ) | (200,550 | ) | |||||||
| Warrants modified | --- | (37,664 | ) | --- | 37,664 | ||||||||
| Share issuance costs | --- | (74,553 | ) | --- | (29,425 | ) | |||||||
| Balance, October 31, 2008 | 49,214,345 | 11,707,655 | 9,691,249 | 1,016,303 | |||||||||
| Private placement | 7,743,533 | 1,693,027 | 3,871,767 | 352,233 | |||||||||
- 75 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| Stock options exercised | 1,160,000 | 169,120 | --- | --- | |||||||||
| Warrants expired and forfeited | --- | --- | (1,655,632 | ) | (239,077 | ) | |||||||
| Share issuance costs | --- | (48,848 | ) | --- | (13,584 | ) | |||||||
| Shares issued for services | 200,000 | 71,000 | --- | --- | |||||||||
| Balance, October 31, 2009 | 58,317,878 | 13,591,954 | 11,907,384 | 1,115,875 |
| 9. | SHARE CAPITAL (continued) |
a)Share Capital | |
2009 | |
On March 17, 2009, the Company closed of a non–brokered private placement of units (“Units”), which raised CDN$656,260. The Company issued 2,187,533 Units at CDN$0.30 per Unit. Each Unit consists of one common share (“Common Share”) and one–half of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $512,335 and $143,925 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 128%, risk free rate of 1.02%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.45 per Common Share during the first year following the date of closing and at CDN$0.60 per Common Share during the subsequent year and will expire March 17, 2011. The Company paid a total of CDN $44,056 in finder’s fees. |
- 76 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
On October 15, 2009, the Company closed of a non–brokered private placement of units (“Units”), which raised CDN$1,389,000. The Company issued 5,556,000 Units at CDN$0.25 per Unit. Each Unit consists of one common share (“Common Share”) and one–half of one common share purchase
warrant (a “Warrant”). Of the gross proceeds, $1,180,692 and $208,308 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 88%, risk free rate of 1.68%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.375 per Common Share during the first year following the date of closing and at CDN$0.50 per Common Share during the subsequent year and will expire October 15, 2011. The Company paid a total of CDN $18,376 in finder’s fees.
During 2009, a total of 1,160,000 options were exercised.
In April 2009, the Company granted 200,000 shares for service to consultants of the Company. The fair value of the shares was determined on the date of grant to be $0.355. As a result the Company has recorded the cost of the shares at $71,000 and have recorded a consulting fee expense of $71,000.
- 77 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) | |
During the year, the Company modified the terms of the software transfer agreement entered into in 2006. Effective May 28, 2009, the agreement has been amended as follows: | ||
• | The total number of common shares and the amount of the cumulative gross revenue milestones will not change however the common shares will only be issued upon the Company achieving the milestones by May 31, 2010. Any common shares not earned by May 31, 2010 will not be eligible for issuance. | |
• | The total number of performance warrants and the amount of the gross revenue milestones will not change however the performance warrants will be exercisable upon the Company achieving the gross revenue milestones for the one year period ended May 31, 2010. The exercise prices will remain the same however the exercise period for the first and second tranche will be the six month period commencing June 1, 2010. | |
The fair value of the common shares and warrants and the change in fair value as a result of the modification to the terms of the warrants has not been reflected in the financial statements as the issuance of the shares and warrants are subject to performance conditions which have not been met.
2008
In December 2007, the Company closed a non-brokered private placement of units (”Units”), which raised gross proceeds of CDN$1,214,494. The Company issued 3,036,234 Units at CDN$0.40 per Unit. Each Unit consists of one (1) common share in the capital of Titan and one-half (½) of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $941,800 and $272,694 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 137%, risk free rate of 3.70% and expected life of 2 years. Each whole Warrant will entitle the holder thereof to purchase one common share for a price of CDN$0.60 and will expire December 7, 2009. The securities issued under the private placement are subject to a four-month hold period. Insiders participated in the private placement for total gross proceeds of $363,428. The issue costs relating to this placement totaled $30,536.
On March 6, 2008, the Company closed a fully-subscribed non-brokered private placement of units (“Units”), which raised gross proceeds of CDN$510,000. The Company issued 2,000,000 Units at a price of CDN$0.255 per unit. Each unit consists of one (1) common share in the capital of the Company and one-half (½) of one common share purchase warrant. Of the gross proceeds, $380,014 and $129,986 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 139%, risk free rate of 2.52% and expected life of 2 years. Each whole warrant entitles the holder thereof to purchase one common share for a price of CDN$0.35 and will expire March 6, 2010. The securities issued under the private placement are subject to a four-month hold period. Insiders participated in the private placement for total gross proceeds of $132,330. The issue costs related to this private placement totaled $6,200.
- 78 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) |
On July 29, 2008, the Company closed a fully-subscribed non-brokered private placement of units (“Units”), which raised gross proceeds of CDN$610,500. The Company issued 2,035,000 Units at a price of CDN$0.30 per unit. Each unit consists of one (1) common share in the capital of the Company and one-half (½) of one common share purchase warrant. Of the gross proceeds, $465,765 and $144,735 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 131%, risk free rate of 3.05% and expected life of 2 years. Each whole warrant entitles the holder thereof to purchase one common share for a price of CDN$0.40 and will expire July 29, 2010. The securities issued under the private placement are subject to a four-month hold period. Insiders participated in the private placement for total gross proceeds of $90,000. The issue costs related to this private placement totaled $18,868. | |
On August 19, 2008, the Company closed a fully-subscribed non-brokered private placement of units (“Units”), which raised gross proceeds of CDN$750,000. The Company issued 2,500,000 Units at a price of CDN$0.30 per unit. Each unit consists of one (1) common share in the capital of the Company and one common share purchase warrant. Of the gross proceeds, $455,560 and $294,440 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 131%, risk free rate of 2.74% and expected life of 2 years. Each whole warrant entitles the holder thereof to purchase one common share for a price of CDN$0.40 and will expire August 19, 2010. The securities issued under the private placement are subject to a four-month hold period. Insiders participated in the private placement for total gross proceeds of $600,000. The issue costs related to this private placement totaled $42,072. | |
During the year, the Company modified the exercise price of the 1,392,626 common share purchase warrants issued on December 12, 2006. The warrants have been re-priced from $0.50 to $0.38 representing the current 10 day weighted average trading price of the common shares. All other terms of the warrants remain the same. The warrants expire on December 12, 2008. The increase in fair value of $37,664 as a result of the modification has been re-allocated to the warrants. | |
During the year, the Company modified the terms of a software transfer agreement entered into in 2006. In 2006, the Company signed an agreement with two directors of the Company to issue 4,500,000 common shares and 2,000,000 common share purchase warrants. The 4,500,000 common shares to be issued was contingent on the Company achieving certain milestones by May 31, 2007 as follows: |
| a) | upon the Company achieving $400,000 of cumulative gross revenue, 1/3 of the common shares (1,500,000 common shares) would have been eligible to be issued; | |
| b) | upon the Company achieving $800,000 of cumulative gross revenue, an additional 1/3 of the common shares (1,500,000 common shares) would have been eligible to be issued; and | |
| c) | upon the Company achieving $1.2 million of cumulative gross revenue, an additional 1/3 of the common shares (1,500,000 common shares) would have been eligible to be issued. |
- 79 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) |
A total of 1,000,000 purchase warrants issued were exercisable at $0.50 per share for a six month period commencing June 1, 2007, provided the Company achieved at least $1.2 million of gross revenue for the period June 1, 2006 to May 31, 2007. The remaining 1,000,000 purchase warrants are exercisable at a price of $1.00 per share for a six month period commencing June 1, 2008 provided the Company achieves gross revenue of $1.8 million for the period June 1, 2007 to May 31, 2008. Effective October 2, 2008, the agreement has been amended as follows: |
| • | The total number of common shares and the amount of the cumulative gross revenue milestones will not change however the common shares will only be issued upon the Company achieving the milestones by May 31, 2009 and any common shares not earned by May 31, 2009 will not be eligible for issuance. | |
| • | The total number of performance warrants and the amount of the gross revenue milestones will not change however the performance warrants will be exercisable upon the Company achieving the gross revenue milestones for the one year period ended May 31, 2010. The exercise prices will remain the same however the exercise period for the first and second tranche will be the six month period commencing June 1, 2009. |
The fair value of the common shares and warrants and the change in fair value as a result of the modification to the terms of the warrants has not been reflected in the financial statements as the issuance of the shares and warrants are subject to performance conditions which have not been met.
During 2008, a total of 335,000 options and 1,494,412 warrants were exercised.
Escrowed Shares
As at October 31, 2009 and 2008, there were no common shares held in escrow.
Stock Options
Under the Company’s stock option plan, options to purchase common shares of the Company may be granted to directors, officers, employees and consultants of the Company. These options entitle the holder to purchase one common share at a subscription price that shall not be less than that which may be acceptable to any stock exchange on which the Company’s shares are traded. The number of common shares reserved for issuance, within a one-year period, to any one optionee shall not exceed 5% of the outstanding common shares. The maximum number of common shares reserved for issuance at any time may not exceed 20% of the number of outstanding common shares. The Board of Directors determine the time during which options shall vest and the method of vesting, provided that the options shall not vest on more favourable terms than one-third of the total number of options granted on the date of grant and on each of the 12 month and 18 month anniversaries of the date of grant. Options expire no later than the fifth anniversary of the date of grant. All rights to purchase shares pursuant to the plan terminate: (i) within 90 days of the optionee ceasing to be a director, officer, employee, or consultant; or (ii) within 12 months after the death of an optionee, unless exercised within that period.
- 80 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) |
During fiscal year ending October 31, 2009 the Company issued the following stock options to directors, officers and consultants of the Company:
| Date | # Stock Options | Exercise Price | Expiry Date |
| November 7, 2008 | 525,000 | $0.36 | November 7, 2013 |
| January 26, 2009 | 50,000 | $0.31 | January 26, 2014 |
| March 6, 2009 | 1,990,000 | $0.33 | March 6, 2014 |
| April 21, 2009 | 600,000 | $0.36 | April 21, 2014 |
The following table summarizes the activity of stock options as follows:
| Year | 2009 | 2008 | ||||||||||||||
| Number of | Weighted- | Number of | Weighted- | |||||||||||||
| options | Average | options | Average | |||||||||||||
| Exercise Price | Exercise | |||||||||||||||
| Price | ||||||||||||||||
| Outstanding at beginning of period | 7,810,593 | $ | 0.29 | Outstanding at beginning of period | 5,400,593 | $ | 0.25 | |||||||||
| Granted | 3,165,000 | $ | 0.34 | Granted | 3,460,000 | $ | 0.36 | |||||||||
| Exercised | (1,160,000 | ) | $ | 0.10 | Exercised | (335,000 | ) | $ | 0.10 | |||||||
| Forfeited or expired | (685,000 | ) | $ | 0.41 | Forfeited or expired | (715,000 | ) | $ | 0.29 | |||||||
| Outstanding at end of period | 9,130,593 | $ | 0.33 | Outstanding at end of period | 7,810,593 | $ | 0.29 | |||||||||
| Exercisable at end of period | 6,917,252 | $ | 0.33 | Exercisable at end of period | 5,708,093 | $ | 0.27 | |||||||||
- 81 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) |
The following table summarizes information on stock options outstanding and exercisable at October 31, 2009: |
| Weighted Average | ||||
| Number | Number | Remaining | ||
| Exercise Price | Outstanding | Exercisable | Contractual Life | |
| (years) | ||||
| 0.16 | 410,593 | 410,593 | 0.3 | |
| 0.25 | 680,000 | 680,000 | 0.3 | |
| 0.32 | 360,000 | 360,000 | 1.7 | |
| 0.30 | 1,780,000 | 1,780,000 | 2.2 | |
| 0.69 | 200,000 | 200,000 | 2.7 | |
| 0.50 | 110,000 | 110,000 | 2.8 | |
| 0.37 | 1,250,000 | 1,250,000 | 3.2 | |
| 0.50 | 190,000 | 190,000 | 3.3 | |
| 0.34 | 50,000 | 37,500 | 3.7 | |
| 0.335 | 150,000 | 112,500 | 3.7 | |
| 0.30 | 900,000 | 600,000 | 3.8 | |
| 0.36 | 510,000 | 339,998 | 3.8 | |
| 0.36 | 500,000 | 166,660 | 4.0 | |
| 0.31 | 50,000 | 16,666 | 4.3 | |
| 0.33 | 1,390,000 | 463,335 | 4.3 | |
| 0.36 | 600,000 | 200,000 | 4.4 | |
| 9,130,593 | 6,917,252 |
The Company uses the Black-Scholes option-pricing model to value the options at each grant date under the following weighted-average assumptions:
| 2009 | 2008 | 2007 | ||
| Weighted average grant date fair value per share option | 0.25 | 0.33 | 0.33 | |
| Expected dividend rate | 0% | 0% | 0% | |
| Expected volatility | 120% | 123% | 142% | |
| Risk-free interest rate | 2.36% | 3.32% | 3.95% | |
| Expected life of options in years | 5 yrs. | 5 yrs. | 5 yrs. |
The amounts estimated according to the Black-Scholes option-pricing model may not be indicative of the actual values realized upon the exercise of these options by the holders.
- 82 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 9. | SHARE CAPITAL (continued) Warrants |
The following table summarizes information on warrants outstanding at October 31, 2009: |
| Number | |||||||
| Exercise Prices | Outstanding | Expiry Date | |||||
| $0.60 | 1,518,117 | December 7, 2009 | |||||
| $0.50 | 2,000,000 | November 30, 2010 | |||||
| $0.35 | 1,000,000 | March 6, 2010 | |||||
| $0.40 | 1,017,500 | July 29, 2010 | |||||
| $0.40 | 2,500,000 | August 19, 2010 | |||||
| $0.45 | 1,093,767 | March 17, 2011 | |||||
| $0.38 | 2,778,000 | October 15, 2011 | |||||
| 11,907,384 |
CONTRIBUTED SURPLUS
| 2009 | 2008 | ||||||
| Balance, beginning of year | $ | 1,279,169 | $ | 544,682 | |||
| Stock based compensation | 807,931 | 548,342 | |||||
| Expired and forfeited warrants | 239,077 | 200,550 | |||||
| Exercise of stock options | (49,820 | ) | (14,405 | ) | |||
| Balance, end of year | $ | 2,276,357 | $ | 1,279,169 |
| 10. | FUTURE INCOME TAXES |
Income tax expense differs from the amounts computed by applying the combined income tax rates of 29.08% (2008- 29.74%) to loss before income taxes. The differences are as follows: |
| 2009 | 2008 | ||||||
| Computed tax recovery | $ | (1,026,160 | ) | $ | (914,798 | ) | |
| Deductible share issuance costs | (28,157 | ) | (25,083 | ) | |||
| Foreign rate differential | (20,106 | ) | (35,139 | ) | |||
| Non-deductible expenses | 61,260 | 206,294 | |||||
| Unrecognized losses | 1,013,163 | 768,726 | |||||
| $ | --- | $ | --- |
- 83 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 10. | FUTURE INCOME TAXES (Continued) |
The tax effect of significant temporary differences is as follows: |
| 2009 | 2008 | ||||||
| Operating loss carry-forwards | $ | 3,595,119 | $ | 2,819,387 | |||
| Other temporary differences | 98,064 | 87,947 | |||||
| Future income tax assets before valuation allowance | 3,693,183 | 2,907,334 | |||||
| Valuation allowance | (3,693,183 | ) | (2,907,334 | ) | |||
| Future income tax assets | $ | --- | $ | --- |
The Company has determined that realization is not more likely than not, and therefore, a full valuation allowance against the future income tax assets has been recorded.
The financial statements do not reflect the potential tax reductions which may be available through the application of losses of approximately $13,778,246 carried forward against future years' earnings otherwise subject to income taxes.
The losses expire as follows:
| Loss carry | ||||||||||
| forwards | Loss carry | |||||||||
| in the | forwards | |||||||||
| United | in Canada | Total | ||||||||
| States | ||||||||||
| 2010 | 185,347 | 185,347 | ||||||||
| 2014 | 458,893 | 458,893 | ||||||||
| 2015 | 1,362,971 | 1,362,971 | ||||||||
| 2026 | 173,617 | 3,335,533 | 3,509,150 | |||||||
| 2027 | 318,554 | 2,028,924 | 2,347,478 | |||||||
| 2028 | 668,114 | 1,798,540 | 2,466,654 | |||||||
| 2029 | 335,681 | 3,112,072 | 3,447,753 | |||||||
| Total | 1,495,966 | 12,282,280 | 13,778,246 |
- 84 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 11. | COMMITMENTS AND CONTINGENCY COMMITMENTS |
| a) | The Company has lease agreements for its offices with minimum annual payments until expiration of the leases as follows: |
| Year | Total | ||
| 2010 | $ | 78,768 | |
| 2011 | $ | 78,768 | |
| 2012 | $ | 78,768 |
| b) | Effective May 1, 2006, the Company signed consulting agreements with two consultants. The consultants are to be paid $2,000 per month for their consulting services until termination of the agreement which is 21 days after notice of termination is provided by either party. Each consultant will also be issued 100,000 common shares which will be subject to a four-month hold period on issuance of the shares. | |
| c) | Effective June 1, 2006, the Company signed a consulting agreement with a consultant for development, sales and marketing of the software. The consultant is to be paid $2,000 per month for his consulting services until termination of the agreement which is 21 days after notice of termination is provided by either party. The consultant will also be issued 100,000 common shares which will be subject to a four-month hold period on issuance of the shares. | |
| d) | The Company has consulting agreements with two directors of the Company for $10,000 per month each to maintain, support and improve the software, as well as, to provide general software programming and consulting services. The agreement remains in effect until May 31, 2010. |
CONTINGENCY | |
Through the ordinary course of business, there is a claim pending against the Company. In the opinion of management, the resolution of the lawsuit would not have a material effect on the Company. The likelihood and amount of the claim cannot be determined at this time. | |
| 12. | FINANCIAL INSTRUMENTS |
Financial risk management
The Company’s activities are exposed to a variety of financial risks: credit risk, foreign currency risk, interest rate risk, financial market risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial and economic markets and seeks to minimize potential adverse effects on the Company’s financial performance. Risk management is carried out by financial management in conjunction with overall corporate governance.
- 85 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 12. | FINANCIAL INSTRUMENTS (continued) |
Fair Value | |
The Company's financial instruments consist of cash and cash equivalents, short-term investments, due from related party, restricted cash, accounts payable and accrued liabilities and loans and advances. The fair values of these financial instruments approximate their carrying value due to their short-term nature unless otherwise noted. The fair value of loans and advances cannot be reliably determined as there is no market for loans that are non-interest bearing and have no terms of repayment. | |
Credit Risk | |
The Company is exposed to credit risk in its cash and cash equivalents, short-term investments, due from related parties and restricted cash. The maximum exposure of the credit risk is the full carrying value of the financial instrument. The Company minimizes the credit risk of cash and cash equivalent, short-term investments and restricted cash by only dealing with credit worthy financial institutions. The credit risk associated with the amounts due from related parties is also mitigated as credit is only granted to directors and officers of the Company who historically settle the amounts in a timely manner. | |
Foreign Currency Risk | |
The Company is exposed to currency risk as a result of its operations in the United States. A significant change in the currency exchange rate between the Canadian dollar relative to the US dollar could have a material effect on the Company’s results of operations, financial position or cash flows. The Company does not use derivative financial instruments to reduce its exposure to fluctuations in foreign exchange rates. As at October 31, 2009 the Company is exposed to currency risk through its cash, short-term investments, restricted cash and loans and advances denominated in US dollars. As at October 31, 2009, US denominated cash, restricted cash and loans and advances amounted to US$43,190, $2,339 and $270,000 respectively. Based on the balances at October 31, 2009, net loss will increase or decrease approximately $24,000 given a 10% increase or decrease respectively, in the foreign exchange rate. | |
Interest Rate Risk | |
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate due to changes in market interest rates. It is managements’ opinion the Company is not exposed to any interest rate risk. | |
Financial Market risk | |
The Company’s exposure to financial market risk is limited since there are no significant financial instruments including hedges on currencies or commodities which will fluctuate as a result of changes in market prices. |
- 86 -
| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 12. | FINANCIAL INSTRUMENTS (continued) |
Liquidity Risk | |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations, including commitments, as they become due. In order to manage this risk, the Company forecasts its requirements to determine whether sufficient funds will be available. The Company expects to generate sufficient cash through the issuance of shares or related party loans. As at October 31, 2009, the Company was holding cash of $83,162, short-term investments of $90,000, and had a working capital deficiency of $241,862. | |
| 13. | SEGMENTED INFORMATION |
The Company did not generate any revenues in the current year. All of the Company’s property and equipment is located in Canada and the United States. | |
| 14. | LOSS PER SHARE |
Loss per share is calculated using the weighted-average number of common shares outstanding during the period, which was 51,951,767 (2008 - 44,032,360; 2007 - 35,838,813). The inclusion of the Company’s stock options and share purchase warrants in the computation of diluted loss per common share would have an anti-dilutive effect and is therefore excluded from the computation. Consequently, diluted loss per common share is not disclosed. | |
| 15. | CAPITAL MANAGEMENT |
The Company’s objectives when managing its capital are to safeguard the Company’s ability to pursue research and development of its software and meet its ongoing operating expenditures while at the same time providing adequate capital to fund the Company’s growth, without unwarranted dilution of the current shareholders. | |
The Company defines its capital as its loans and advances and the components of shareholders’ equity. | |
The Company sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it for changes in economic conditions and the risk characteristics of its underlying assets since inception, the Company has financed its liquidity needs through private placements. | |
In order to maximize ongoing research and development of its software, the Company does not pay out dividends. | |
The Company expects its current capital resources will be sufficient to carry out its research and development of the software. | |
The Company is not subject to any externally imposed capital requirements. |
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 16. | RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES |
The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles. There are no material variations between the financial position of the Company and the results of operations and cash flows under Canadian generally accepted accounting principles and United States generally accepted accounting principles (“U.S. GAAP”), except as follows: | |
Research and Development | |
Under U.S. GAAP, all costs incurred to establish technological feasibility of software are expensed as incurred. Costs subsequent to establishing technological feasibility shall be capitalized until the software is available for release to general customers. Under Canadian GAAP, development costs that meet generally accepted criteria for deferral are capitalized and amortized. The Company has not met the criteria of establishing technological feasibility under both Canadian and U.S. GAAP and has not capitalized any development costs. | |
Stock-Based Compensation | |
Under U.S. GAAP, the measurement date for stock-based compensation to non-employees for goods or services rendered should be the earlier of the date on which the recipient completes performance or the date on which a performance commitment is reached. For measurement purposes Canadian GAAP specifies the two conditions under U.S. GAAP described above and also lists a third condition, namely, the date at which the equity instruments are granted if they are fully vested and non-forfeitable at that date. As a result, in fiscal 2007, there is a $54,000 difference in the stock- based compensation recorded for the 300,000 common shares issued to consultants for their services rendered. In fiscal 2009, there is also a $19,000 difference in stock-based compensation recorded for the 200,000 common shares issued to consultants for their services. The impact of these differences is as follows: |
| 2009 | 2008 | 2007 | ||||||||
| (Restated – | ||||||||||
| see Note 2 | ) | |||||||||
| Net loss and comprehensive loss under Canadian GAAP | $ | (3,528,749 | ) | $ | (3,075,985 | ) | $ | (2,579,638 | ) | |
| Stock-based compensation | 19,000 | --- | 54,000 | |||||||
| Net loss and comprehensive loss under U.S. GAAP | $ | (3,509,749 | ) | $ | (3,075,985 | ) | (2,525,638 | ) | ||
| Basic loss per share | $ | 0.07 | $ | 0.07 | $ | 0.07 | ||||
| Diluted loss per share | $ | 0.07 | $ | 0.07 | $ | 0.07 |
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 16. | RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued) |
Impact of Recently Adopted Accounting Standards | |
In May 2008, the FASB issued guidance on “The Hierarchy of Generally Accepted Accounting Principles”. This guidance identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The adoption of this statement did not have a material effect on the Company’s consolidated financial statements. | |
In September 2006, the Financial Accounting Standard Board (“FASB”) issued an accounting pronouncement that defines fair value, establishes a framework for measuring fair value, and enhances disclosure about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption of this standard has not had a material effect on the Company’s consolidated financial statements. | |
In February 2007, the FASB issued an accounting pronouncement which permits entities to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses for which fair value option has been elected will be reported in earnings. The Company did not elect to adopt the fair value option under this statement. | |
In May 2009, the FASB issued an accounting pronouncement establishing general standards of accounting for and disclosure of subsequent events, which are events occurring after the balance sheet date but before the date the financial statements are issued or available to be issued. In particular, the pronouncement requires entities to recognize in the financial statements the effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities may not recognize the impact of subsequent events that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. This pronouncement also requires entities to disclose the date through which subsequent events have been evaluated. The pronouncement was effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of the pronouncements, as required, and adoptions did not have a material effect on the Company’s consolidated financial statements taken as a whole. | |
New Accounting Standards | |
Under Staff Accounting Bulletin 74, the Company is required to disclose certain information related to new US GAAP standards that have not yet been adopted due to delayed effective dates. |
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| TITAN TRADING ANALYTICS INC. |
| (Continued under the Laws of Alberta) |
| “A Development Stage Corporation” |
| Notes to Consolidated Financial Statements |
| Years ended October 31, 2009 and 2008 |
| (expressed in Canadian dollars) |
| 16. | RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued) |
In December 2007 the FASB issued an accounting pronouncement that clarifies that a non- controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statements of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This statement amends current US GAAP with regards to earnings per share; the calculation of the EPS amounts in consolidated statements will continue to be based on amounts attributable to the parent. This pronouncement is effective for fiscal years beginning after December 31, 2008. The Company is currently evaluating the impact of this pronouncement on its consolidated financial position and results of operations. | |
In December 2007 the FASB issued an accounting pronouncement to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This pronouncement establishes principles and requirements for the acquirer to 1) recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest; 2) recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase; 3) determine what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. The effective date of this pronouncement is for fiscal periods beginning on or after December 15, 2008. The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements. | |
In March 2008 the FASB issued an accounting pronouncement that changes the disclosure requirements for derivative instruments and hedging activities by requiring enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items affect an entity’s operating results, financial position, and cash flows. This pronouncement is effective for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted, and the Company is currently reviewing the provisions. However, as the provisions of this pronouncement are only related to disclosure of derivatives and hedging activities, the Company does not believe the adoption of this pronouncement will have a material impact on its operating results, financial position, or cash flows. |
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| ITEM 18: FINANCIAL STATEMENTS |
| See “Item 17 – Financial Statements” |
| ITEM 19: EXHIBITS |
| Exhibit No. | Description |
| 1.1* | Certificate of Incorporation of KBK No. 24 Ventures Ltd. |
| 1.2* | Certificate of Change of Name of KBK No. 24 Ventures Ltd. to Titan Trading Analytics Inc. |
| 1.3*** | Articles of Continuance – Alberta Business Corporations Act |
| 4.1* | Escrow Agreement dated January 5, 1996 among The Montreal Trust Company of Canada, Titan Trading Analytics Inc. and TTN Escrow Capital Corp. |
| 4.2** | Licensing Agreement dated June 6, 2003 between Titan Trading Analytics Inc. and Cignal Technologies LLC |
| 4.3** | Letter Agreement dated June 3, 2003 between Dr. Powell, Mr. Kreilein and Mr. Carrozza |
| 4.4***** | Amended & Restated Software Transfers Agreement between Titan Trading Analytics Inc. and Philip Carrozza and Cignal Technologies, LLC and between Titan Trading Analytics Inc. and Michael Gossland |
| 8.1**** | List of Subsidiaries |
| 12.1 | |
| 13.1 |
* Incorporated by reference to our registration statement on Form 20-F filed with the SEC on June 30, 1999.
** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 28, 2004.
*** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 17, 2005.
**** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 12, 2006.
***** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 1, 2007.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| TITAN TRADING ANALYTICS INC. | ||
| Dated: April 30, 2010 | ||
| By: | /s/ Dr. Kenneth W. Powell | |
| Dr. Kenneth W. Powell, Chief Executive Officer and Acting Chief Financial Officer | ||
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EXHIBIT INDEX
| Exhibit No. | Description |
| 1.1* | Certificate of Incorporation of KBK No. 24 Ventures Ltd. |
| 1.2* | Certificate of Change of Name of KBK No. 24 Ventures Ltd. to Titan Trading Analytics Inc. |
| 1.3*** | Articles of Continuance – Alberta Business Corporations Act |
| 4.1* | Escrow Agreement dated January 5, 1996 among The Montreal Trust Company of Canada, Titan Trading Analytics Inc. and TTN Escrow Capital Corp. |
| 4.2** | Licensing Agreement dated June 6, 2003 between Titan Trading Analytics Inc. and Cignal Technologies LLC |
| 4.3** | Letter Agreement dated June 3, 2003 between Dr. Powell, Mr. Kreilein and Mr. Carrozza |
| 4.4***** | Amended & Restated Software Transfers Agreement between Titan Trading Analytics Inc. and Philip Carrozza and Cignal Technologies, LLC and between Titan Trading Analytics Inc. and Michael Gossland |
| 8.1**** | List of Subsidiaries |
| 12.1 | |
| 13.1 |
______________________
* Incorporated by reference to our registration statement on Form 20-F filed with the SEC on June 30, 1999.
** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May, 28, 2004.
*** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 17, 2005.
**** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 12, 2006.
***** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 1, 2007.
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