AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 31st, 2001
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
ANNUAL REPORT
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
ECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2000.
TITAN TRADING ANALYTICS INC.
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(Exact name of Registrant as specified in its charter)
INAPPLICABLE
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(Translation of Registrant's name into English)
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PROVINCE OF BRITISH COLUMBIA, CANADA
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(Jurisdiction of incorporation or organization)
201 SELBY STREET, NANAIMO, BRITISH COLUMBIA, CANADA V9R 2R2
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Name of each exchange
Title of each class on which registered
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NONE
Securities registered or to be registered pursuant to Section
12(g) of the Act.
COMMON SHARES WITHOUT PAR VALUE
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(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
NONE
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Indicate the number of outstanding shares of each of the
registrant's classes of capital or common stock as of the close
of the period covered by the annual report.
COMMON SHARES WITHOUT PAR VALUE: 9,812,966 as of March 31, 2001
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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 which financial statement item the
registrant has elected to follow.
Item 17 X Item 18 __
Except as otherwise noted, all dollar amounts are presented in
Canadian dollars.
Exchange Rates: As at October 31, 2000 the median bidding
exchange rate of Canadian dollars into United States dollars was
$1.5118 Canadian to $1.00 US.
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TABLE OF CONTENTS
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Part I Page No.
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Item 1. Description of Business......................4
Item 2. Description of Property......................24
Item 3. Legal Proceedings............................25
Item 4. Control of Titan.............................25
Item 5. Nature of Trading Market.....................26
Item 6. Exchange Controls and Other Limitations
Affecting Securities Holders.................27
Item 7. Taxation.....................................28
Item 8. Selected Financial Data......................30
Item 9. Management's Discussion and Analysis of
Financial Condition and Results of
Operations...................................32
Item 10. Directors and Officers of Titan..............47
Item 11. Compensation of Directors and Officers.......49
Item 12. Options to Purchase Securities from Titan....50
Item 13. Interest of Management in Certain
Transactions.................................56
Part II
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Item 14. Description of Securities to be
Registered...................................59
Part III
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Item 15. Defaults Upon Senior Securities..............60
Item 16. Changes in Securities and Changes in
Security for Registered Securities...........60
Part IV
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Item 17. Financial Statements.........................60
Item 18. Financial Statements.........................78
Item 19. Exhibits.....................................78
Signature Page...............................79
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-KSB contains forward-looking statements. In some
cases, you can identify forward-looking statements by terminology
such as "may", "will", "should", "could", "expects", "plans",
"intends", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of such terms and other
comparable terminology. Our forward-looking statements include,
without limitation, statements about our market opportunity, our
strategies, competition, expected activities and expenditures as
we pursue our business plan, and the adequacy of our available
cash resources. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance
or achievements. The information set forth under the headings
"Description of Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations",
identify important additional factors that could materially
adversely affect our actual results and performance. All forward-
looking statements attributable to us are expressly qualified in
their entirety by the foregoing cautionary statement. Moreover,
neither we nor anyone else assumes responsibility for the
accuracy and completeness of such statements. We undertake no
obligation to publicly update any forward-looking statements for
any reason, even if new information becomes available or other
events occur in the future.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Titan is a financial software developer and an online publisher
of unique stock market timing and trading analytics software. We
have been in a research and development stage since May 1994.
During the fiscal year ended October 31, 2000, we changed our
business plans to focus on development of an online version of
our stock market trading analytics and charting software
solution. Our software helps identify and time profitable big cap
US stock trade entries and exits. We have also developed a neural
network pattern recognition software position trading technology
that accurately classifies short term stock market trends and
market risk.
Similar well established neural network technology is used by the
worldwide banking industry to monitor and detect credit card
fraud in real time on over 300 million credit cards.
We have published neural network based stock market timing
commentaries on the Internet for the last three years. We believe
we have already established with our online subscribers, the
profitability and validity of our stock market timing methods.
Our challenge now is to finally become profitable ourselves based
on exploiting what we believe is a now somewhat proven stock
market trading technology.
Subject to obtaining adequate financial resources and our ability
to at all times comply with Canadian and US regulatory
requirements, we plan to commercially exploit our proprietary
trading software technology in two ways:
1. by establishing a profitable stock trading operation and money
management business using our trading technology. We view this as
the shortest, best path to overall profitability and a key
element in our overall business plan, and
2. by marketing a monthly paid subscription service for
professional and private stock traders, publishing an online
chart analytics software trading solution that helps users
identify high probability stock trades in real time on big cap
Nasdaq and NYSE stocks.
The target market for our business includes an estimated 3.4
million online stock traders. It also includes thousands of
potential institutional and sophisticated investors seeking
better than average investment and trading returns in their stock
portfolios.
We presently have $750,000 in cash on hand and fund management
commitments for another $600,000 to trade in a managed account.
We need to raise additional financial resources by way of the
issuance of convertible debentures and private placements in
order to fully exploit our technology as planned. The current
plan is to raise an additional US$5.75 million by a combination
of convertible debentures and a private placement of our common
shares.
Titan is a full reporting issuer in Canada and the United States.
Our common shares are listed for trading in the United States on
the OTC Bulletin Board and in Canada on the Canadian Venture
Exchange. To date we have raised $3,715,938 in equity capital and
made expenditures of approximately $2.9 million developing our
business and trading software technology.
We recently completed development of a new online stock chart
technical analysis application for short term technical decision
support in the trading of big cap North American stocks. In
November 2000, we made our first sale of three annual licenses to
two stockbrokers and a private trader at a $6,000 annual license
fee each. This followed 18 months actual use of the prototype
software by the licensees.
A simpler, lower cost, online based version of this application,
accessible with a standard Internet web browser, has now been
developed and is in the final stage of testing. The current plan
is to offer technical analysis decision support software services
to stock brokers and private traders, by monthly subscription. We
also plan to use our software in a yet to be established in-house
proprietary stock trading operation.
The Company is presently negotiating for the supply of the stock
market data for the planned monthly subscription service. We are
still working to complete the technical interfaces necessary to
maintain a reliable, scalable monthly subscription based business
model. This work is expected to be complete during May 2001, but
there is no assurance further delays will not be experienced.
We are still finalizing development of the online version of our
big cap stock trading application. This online service provides
custom trading indicators and a chart based method of identifying
"high probability" short-term stock trades. It incorporates stock
screening and hot sector analysis on US stocks. It does not
involve any kind of trade execution capability, nor does it
involve the provision of any kind of financial advice. It
provides real-time and end-of-day technical stock chart analytics
and all trading decisions are those of the user.
The initial response to the online version by users has been
positive, based on the first review of the online beta versions
starting in December 2000.
The new online version of the product is expected to be licensed
for prices ranging between US$59 and US$159 per month, depending
on the features selected.
Our present existing share structure is as follows:
Issued share capital 9,812,966 common shares
Reserved for future issuance 2,435,067 common shares
Fully diluted 12,248,033 common shares
Included in the issued shares are 3,000,000 shares which are
beneficially owned by management, which are presently locked in
escrow and subject to earn out, before they can be traded. The
shares are controlled by TTN Escrow Capital Corp; a private
British Columbia company owned 2/3 by Michael Paauwe and 1/3 by
Michael Gossland.
Titan is managed by computer technology entrepreneur Michael
Paauwe, president, age 50, an honors graduate of the British
Columbia Institute of Technology in financial management
(finance) and a 1980 graduate Certified General Accountant (CGA)
who retired from CGA membership in 1998. Michael Gossland is the
vice president and secretary, age 47. Gossland has a Master of
Science degree in Physics and is a registered Professional
Engineer. John Austin is the general manager, age 51, with a
Bachelor of Business Administration degree. Jennifer Gee is the
chief financial officer. Ms. Gee has 15 years experience in the
financial administration of public companies.
We have published a stock market commentary on its website
located at www.titantrading.com for over three years. We have
established and archived a large record of published stock market
timing calls, based on our neural network stock market trading
indicators.
The company has developed a suite of trading software programs,
including a proprietary timing model of the US stock market,
based on neural networks. It was developed for use by stock index
traders, and typically trades recurring stock market patterns
that last between 2 and 15 days duration. We also publish a 'big
picture' longer term stock market analysis in published
commentaries.
Marketing and sales strategy:
Titan's business strategy is to market the new online trading and
charting analytic platform directly to North America stock
brokers and active traders. We later plan to market it as a
wholesale content provider to other financial institutions and
websites. Initially, sales will be conducted by direct selling,
offering brokerage firms corporate packages based on per trader
monthly licenses to the online trading analytics. The selling
proposition is that the service pays for itself through improved
trade results for clients and in-house traders. It helps preserve
capital under management through improved market analytics and
improved trade results.
The usefulness of the online trading platform is apparent upon
demonstration in real time. Titan plans to achieve market
penetration of the brokerage and private trader market by
offering free trials of the service. The system can be activated
by the issuance of a temporary password over the telephone. An
Internet connection and standard web browser is required to
access the application. No data feeds are required, no software
download is required and no training is required to get started
with evaluation. Advanced simulator training at Titan's
facilities is also available for prospective corporate
subscribers. We have found that once a user is used to watching
the online trading indicator chart functions and is used to
trading with it in real time, it is very difficult to go back to
conventional methods of analytics. This free trial strategy is
expected to improve market penetration, once the marketing roll
out is fully engaged.
The company also plans to exploit its trading technology under
license directly, in a managed fund business to be launched by an
affiliate.
HISTORY OF BUSINESS DEVELOPMENT
Titan was incorporated by registration of its Memorandum and
Articles under the Company Act of the Province of British
Columbia, Canada on November 30, 1993 under the name "KBK No. 24
Ventures Ltd." The Company changed its name to "Titan Trading
Analytics Inc.," by filing of an amendment to its Articles on
November 14, 1994. Titan's principal business office is 3473
Ellis Place, Nanaimo, British Columbia, and its registered and
records office is located at 30 Front Street, Nanaimo, British
Columbia.
Up to the period ended March 31st, 2001 Titan raised a total of
$3,715,938 in share capital through the sale of its Common
Shares. Up to January 31st, 2001 the Company has invested
approximately $2.8 million in the development of its business and
technology. The balance of the funds raised as of January 31,
2001, totaling $1,071,541, is represented in the balance sheet as
current assets, software and systems development and capital
assets. Cash balances as at March 31, 2001 total approximately
$750,000.
On November 23, 1994, Titan incorporated Titan Trading Corp.
("TTC") under the Company Act of the Province of British
Columbia, Canada, as its wholly owned subsidiary. TTC was
originally incorporated with a view to eventually forming a
separate trading business, but to date has conducted no business.
TTC has no income, expenses, assets or liabilities and is
presently an inactive subsidiary.
EMPLOYEES
The following is a brief description of the Titan's non-officer
employees:
John Austin is General Manager and has been a full time employee
of Titan since November 1995. As of December 1, 2000 Mr. Austin
was appointed to the Board of Directors. Since graduating with a
degree in Business Administration from Utah State University in
1972, Mr. Austin has held a number of marketing, service and
sales management positions, including marketing manager for
Teranet IA Inc.(TNT) between 1987 and 1991, where he was involved
in the research and development of trading software. Between 1992
and 1994 he was engaged in the establishment, development and
sale of several private businesses. Mr. Austin manages the
development of Titan's stock screening technology, is designated
chief stock trader and provides technical support of all online
subscription services.
Greg Kennedy joined Titan as a full-time Manager of Marketing and
Sales on November 17, 1998 and resigned from employment with the
Company on of January 23, 2001 for health reasons. Mr. Kennedy is
a registered stockbroker with 8 years experience in that
business. He is expected to offer consulting with the company in
the future, health permitting.
Jennifer Gee is the Chief Financial Officer of Titan. Ms. Gee has
15 years experience administering financial reporting in a public
company environment.
In addition to the above noted employees, Titan's President
Michael Paauwe and Vice President and Secretary, Michel Gossland
are remunerated as independent contractors. Both these officers
are contracted for the equivalent of full time work. The current
business plan of the Company contemplates establishing
operational headquarters in the United States in the future and
hiring a marketing management and sales administration team to
administer sales and marketing of the online financial
subscription service.
For information regarding Titan's officers and directors, see
Item 10.
1998-99 FISCAL PERIOD OPERATIONAL PLAN
Planned expenditures of $1,250,000 outlined in last year's
operational plan for advertising and marketing staffing were cut
as we altered our plans budgets upon completion of final market
testing. The decision was also influenced by the large financial
losses reported by many of our Internet based competitors.
Planned expenditures on a high speed Internet server installation
and on additional software R&D, totaling $245,000, were made as
outlined.
With the scale and timing of planned business expenditures
conditional upon additional equity placements of its securities
over the next 12 to 18 months, Titan expects to make the
following planned expenditures in its business:
1. $250,000 to $350,000 on print media advertising.
2. $450,000 for additional staffing to effect a marketing launch
of the planned monthly subscription service.
3. $145,000 to $195,000 in ongoing software and systems research
and development.
If the capital plans of the Company are fully realized during the
next twelve months, expenditure levels could vary significantly
from those set out above.
PRINCIPAL PRODUCTS AND SERVICES
The main focus of the present business plan is to test, develop,
publish and market the paid monthly subscription service as noted
above. We also plan to establish our in-house trading business.
The trading methods, indicators and software developed by Titan
to be used in the planned Internet Subscription Service, are
intended to allow subscribers to more effectively trade US stocks
based on methods developed by Titan.
Titan's published trading indicators measure short term market
trends and price momentum over several days more accurately than
most standard existing real time and end of day technical market
trading indicators, based on tests conducted by Titan. This is
expected to provide subscribers with a short-term market timing
advantage to improve short term market timing decisions and to
better identify trading risks.
The accuracy of Titan's stock market indicators has not been
independently verified. Rather, the accuracy is based on Titan's
own in-house computer testing on historical and real time data
and a large body of published and archived real time market calls.
Titan's stock market timing software development centers around
the application of Artificial Intelligence ("AI") to stock index
trading, using neural networks and expert systems. Various
trading models of the S&P 500 stock index have been developed and
extensively tested.
Neural networks are an AI based mathematical pattern recognition
technique that allows software to mimic the information
processing functions of humans. The software "learns" to
recognize complex patterns through trial and error, without being
programmed with specific, preconceived rules. AI based software
trading software can be taught complex relationships between sets
of variables and use them to find market correlations and
relationships that humans cannot easily see on their own.
Titan's website subscription service allows potential users to
benefit from the many years of testing and substantial
expenditures on research, software and systems development by
Titan.
The fact that Titan is able to provide extensively tested trading
solutions to users provides a competitive advantage that the
Company believes it can exploit at a profit once adequate
resources are in place for advertising, marketing and sales.
We have ended our affiliation as an Omega solution provider as
reported in previous filings, concentrating on final stage
software development of our own online trading software and
subscription platform.
Competitive Assessment
In this final development stage and prior to the current main
product launch, we have updated reviews of market conditions, as
well as the business status and financial condition of our main
competitors. Market and business conditions in general have
deteriorated for most of our prospective customers. Current
monthly financial losses of many of our immediate competitors,
have risen dramatically to unsustainable levels. We believe this
is improving our own relative position, as we have continued to
keep staffing and overhead at low levels comparatively during
development. Our monthly cash burn rate and overall cost
structure is much lower than our main Canadian and US
competitors. This should help us with future equity financings.
Our lower breakeven point and better cost structure will
potentially allow us to achieve profitability earlier in a
marketing cycle than many of our competitors. The current market
and business shakeout, as well as the technological and
competitive trends in the Internet is still re-defining the
competitive landscape. We believe these factors will ultimately
strengthen our competitive position, particularly with a
successful start of our planned in-house trading operations and
with new financings to help finally launch the subscription
business.
Our core competencies now include three key elements of an
integrated real time stock market trading technology:
1. Breakthrough neural network based market timing indicators to
accurately classify short term stock market risk and related
S&P500 stock index mechanical trading models. These proprietary
indicators and systems have been operating accurately in real
time now for four years. The validity is well documented. During
2000 we published a number of spectacular stock market timing
calls. These included early detection of the pending bear market
for stocks. We also identified the top of the Nasdaq market to
within 3 days of the actual top, in advance. This was just prior
to the beginning of the now well known +60% Nasdaq market
collapse. Our indicators and trading models also identified many
profitable stock market market rallies at the onset. We helped
our trial subscribers stay on the sidelines preserving their
capital during some of the worst downdrafts in recent stock
market history. Most recently and during all of the year 2000, as
in previous years as well, our systems and published signals
dramatically outperformed the S&P500. This index is the leading
US stock market index and the performance benchmark used by
professional money managers worldwide.
2. We developed new proprietary stock screening methods for
screening and selecting baskets of high volume big cap stocks.
During 2000 this new screening system regularly selected ranked
stock portfolios that demonstrated a tendency to outperform
returns for the stock market as a whole. The stock basket
screening and selection system fits well with our stock market
timing systems to form an integrated stock position trading
capability that allow us and our subscribers to diversify and
reduce trading risk. We expect this capability will benefit us
and our subscribers well into the future.
3. We were able to develop the online version of our chart
analytics trading software that is accessible by anybody over the
Internet. Initial response by test users indicates the potential
for thousands of subscribers to this easy to use trading
analytics package. By imbedding proprietary trading indicators
into the online stock charts, traders can more easily identify
high probability stock trades in real time on big cap stocks. The
software features pattern recognition analytics on key stock
indexes, hot stock sectors and big cap stocks. The latest version
integrates the market timing methods and stock screening, to
provide a total online trading solution. That product is targeted
for use in-house, and by subscribing stock brokers, professional
and private stock traders who follow the larger North American
stocks.
We have built on the proven profitability of an earlier but more
complex PC based version that was expensive, technically complex
and impractical to market. That prototype system was deployed for
stock trading use in a commercial brokerage operation in 1999. On
December 1st, 2000, we announced the sale of these first three PC
based versions at an annual license fee of $6,000 per trader. Our
current online version is highly scalable, reliable, easy to use,
cost effective to distribute and requires minimal ongoing
technical support. Subject to the completion of an economic and
reliable market data supply and distribution agreement, we are
now very close to the marketing launch of the new online product.
During 2000 we completed the installation of a fully e-commerce
capable high-speed server to facilitate our planned online
subscription business. That system is now fully operational and
also serves as a dedicated email server.
The scope of our planned marketing launch will be determined in
part by the extent of our success in raising additional equity
capital. One of the main difficulties and challenges for
management is to balance the capital needs of the current
business plan against the dilutive effect of any major new equity
financing at the current historically low stock price levels. We
are determined to maintain a strong working capital position to
fund our ongoing operations. Our primary operational goal is a
balanced best path to profitability. We are confident our new
financing efforts, although challenging in current market
conditions, will be met with more success during the current
period.
PRINCIPAL MARKETS AND METHODS OF DISTRIBUTION
We plan to offer the new paid monthly subscription service to
full service stock brokerage and online trader markets through an
established internet web site presence, trade shows, direct
advertising in trade periodicals, direct seminars and mail
campaigns, and by direct sales. Eventually we plan to establish
wider channels of distribution with the support of distributors
and agents.
COMPETITION AND COMPETITIVE STRATEGY
The worldwide financial software and information services
marketplace is crowded and intensely competitive. Strong growth
has been reported in the online Internet trading segment of the
marketplace. The emergence of high volume discount brokerage
services and online Internet trading has changed the industry
business model and expanded the activities of online stock
traders dramatically. CBSMarketWatch.com now estimates that there
are about 3.4 million online traders, down from 4.4 million
online traders reported in mid 2000. Recently the online trading
segment has come under more widespread competition. The near term
financial outlook is more difficult and more uncertain due to the
deterioration of stock market conditions and the estimated market
losses totaling over $4 trillion in market capitalization losses
during the past 12 months.
The marketplace for the planned Internet Subscription Service
remains crowded and intensely competitive. There are a wide
variety of products providing direct competition to our software.
There is a constant threat of new entrants into the market in all
areas of the financial software marketplace. We consider our
market timing software, stock screening software and planned
online subscription platform to be our principal products. The
main identified competitors to these two products are listed in
the following paragraphs.
COMPETITION FOR PLANNED INTERNET SUBSCRIPTION SERVICE
The financial services sector of the Internet is extremely
competitive. Titan estimates that there are over 100 internet
sites of various size and capability that might be considered in
one way or another to be competitors.
A) COMPETITIVE ANALYSIS OF FULL PAY SERVICES
1. TradeStationPro.com: This is a $300 per month paid
subscription site. It provides high quality technical analysis,
historic back-testing and linked trading platform to an online
affiliate broker-dealer. This leading competitor has previously
sold over $100 million in trading analytics software to private
traders. The group trades on the Nasdaq under the symbol TRAD.
2. Anthony@Pacific. This is a paid subscription site with various
options available: Silver service: $85 per month, $950 per year,
1 hour delayed calls via e-mail. No site access; Gold service:
$400 per month, $4,150 per year, Real-time calls via browser
window and e-mail; Platinum service $1,000 per month, $10,000 per
year. Quoted prices may be out of date.
3. Trading Places.net. This is a $279.95 per month paid
subscription service for real time trading desk news alerts, and
access to live trading (chat) room 24 hours per day. There is a
cost of $399.95 per month for real time market hours training for
day traders, real time news and trade alerts, and full access to
live trading room. Quoted prices may be out of date.
4. Pristine Daytrader. This is a $125.00 per month service that
offers pay per view via Stockhouse Online. It includes a
database of over 9,000 securities to determine which ones appear
to be offering the best opportunities and then outlines specific
trading strategies to take advantage of them. This service
includes intra-day updates. It also offers a Pristine Lite
service at $19.95 per month, designed for the developing trader.
Quoted prices may be out of date.
B) COMPETITIVE ANALYSIS OF LOW COST OR FREE WEB SITES
1. Clearstation.com. This is a financial advisory web site that
helps investors make investment decisions by identifying and
interpreting stock trends. This site is owned by the financial
services enterprise the E-Trade Group, which trades on Nasdaq.
2. The Street.com. This well known established financial
publisher once owned in part by the New York Times, is a
subscription service that provides financial reporting services
which include full site access, daily emails and a weekend wrap
up. The basic service is $9.95 per month or $99.95 per year.
Quoted prices may be out of date. The company trades on the
Nasdaq under the symbol "TSCM".
3. Stox.com. This is a low cost quote service that offers an
online datafeed at a cost of $39.95 per month and wholesales its
subscription service through marketing alliances such as TD
Waterhouse Group and others. It is a public company that trades
under the symbol "URL" on the Canadian Venture Exchange (CDNX).
4. Smallcapcenter.com. This is a low cost web site for analytics
and information on emerging small cap stocks. The current trend
of the site appears to be toward being more of a paid advertising
and stock promotion site, rather than a trading analytics site.
It is a public company that also offers web development services
for financial sites other than its own. It trades on the OTC BB
exchange in the US under the trading symbol "SWEB".
THE TARGET MARKET AND MARKET SIZE ESTIMATES:
There are estimated to be over 250,000 full service stockbrokers
in the United States and 3.4 million private online traders.
Eight major firms that employ approximately 100,000 stockbrokers
dominate the full service broker segment. These include Merrill
Lynch, Solomon Smith Barney, Morgan Stanley Dean Witter, Charles
Schwab, AG Edwards, Paine Webber, Prudential Securities, and
Raymond James. The following analysis examines the main
competitors and competitive factors affecting these segments of
the two main target markets.
COMPETITIVE ASSESSMENT - BROKER MARKET SEGMENT
Competing subscription services, or services serving the same
target market, include such services such as Dorsey Wright, Wall
Street Strategist, the Pristine Daytrader, JagNotes, Multex
Investor and others. None are exactly similar to Titan's service.
The Wall Street Strategist is a long established broker market
competitor with established market penetration.
Wall Street Strategist "WSST" claims to have a subscriber base of
4000 existing full service brokers from 250 brokerage houses. The
WSST service does not provide stock market timing.
There are hundreds of small Internet based stock subscription
services on the Internet. Most are low quality under-financed
sites. They fracture the marketplace with too many choices for
the new uninformed private trader. Titan's strength in competing
in the private trader market segment is that we offer a higher
quality total solution, that can be delivered in a convenient
way.
a. www.clearstation.com
One of the two main competitors for the private trader market
segment is considered to be Clearstation.com, purchased in 1999
by E-Trade for a reported $160 million. To date, this small
company has implemented a simple service and established a
community for private stock traders. This is an Internet based
subscription service that competes directly with the new service
TradeStationPro.com. It offers an easy to use, convenient site,
with established online peer community, and established market
share and brand recognition. It also has the co-branding and
financial strength affiliation of the E-Trade Group.
b. TradeStationPro.com.
Also listed above, this second private trader segment competitor
is Miami USA based TradeStation Technologies (Nasdaq symbol
TRAD). This competitor offers an established analytical trading
platform through their website TradeStationpro.com. Previously as
Omega Research, TRAD is an established market leader that
recently merged with Online Trading in a +$300 million merger
announced last year. TRAD has recently altered course with its
new Internet delivery strategy, in response to changing market
conditions. We have followed a similar course. TRAD's marketing
strategy is exploit its TS 2000i software online over the
Internet. The software is complex for the average trader and the
service is expensive.
TRAD has proven marketing experience, strong financial resources
and an installed base of 35,000 existing customers. TRAD publicly
reports a recent monthly rate of telephone responses to ads of
15,000 to 20,000 traders per month looking for stock market
trading solutions.
TRAD is viewed as our main competitor. Titan's strategy is to
deliver a competing online trading subscription service to
brokers and private stock traders that is lower cost, less
technically complex, much easier to learn and use, faster online,
and more profitable for the user.
INTELLECTUAL PROPERTY RIGHTS
Titan's ability to compete effectively depends in part on its
ability to protect its core software technology. Titan relies for
protection of its technology on a combination of: (1) trade
secrets; (2) technical complexity; (3) common law copyright and
trademark protection; (4) non-disclosure agreements; (5) password
protection; (6) software encryption schemes; and (7) the physical
security of its source code.
Despite these measures and precautions, it may be possible for
unauthorized third parties to copy Titan's website subscription
information and redistribute it to others. Titan has not to date
attempted to obtain copyright registration for any of its
software products, though it may do so in the future. There can
be no assurance, however, that registration will be granted if
applied for. Moreover, certain aspects of Titan's 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.
Titan has not applied for patents nor does it plan to apply for
or receive any patent protection for any of its software products
or product parts, under Canadian or US law.
TRADING AND TESTING ACTIVITIES
Beginning in 1994 and continuing through 1995, Titan was
generally focused on the initial development of its software
products and therefore did no trading or testing activities. In
1996 through 1999, as development continued, Titan began system
testing its trading software. System testing, as used in this
document, refers to Titan's own use of the software to trade
securities at a time when the particular software was still under
development. System testing expenses are a trading system
research and development activity of Titan, associated with
testing, validating and completing the final testing and
development of a trading system. Direct costs of carrying out
test trades using the trading system, including commissions costs
of the trades and the net gains and losses from such trades, are
included in this expense category. It does not include any costs
of the software development itself or any other costs associated
with demonstrating the software to a prospective customer.
By April of 1998, the Stock Index Trader software and World
Currency Trader software (as described above) were
substantially tested and thus reference to any income and losses
made from trading after this time is described in the financials
as "Trading" income or loss rather than as "System testing"
income or loss. The table below provides a summary of trading
and testing income and losses, by year, using this distinction.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Trading 0 $(29,687) $ 70,607 0 0
System Testing 0 $(17,391) $(42,490) $56,761 $(57,934)
Net gain or loss 0 $ 47,078 $ 28,117 $56,761 $(57,943)
The 1999 trading loss reflected above in the sum of $29,687 was a
loss on foreign exchange in the US dollar denominated trading
accounts due to a rising Canadian dollar in the year. Trading
software for stock indexes and currencies was installed in
Titan's computers in April 1998, and a trading program has been
carried out since that time to demonstrate the software
technologies and under development.
In September 1998 the Titan commenced testing online stock day-
trading activities over the internet for the Titan's account with
Titan funds as part of its planned VirtualTrader training and
trader development services program. This program was later
expanded to include training of experienced third party stock
traders trading their own company funds at Wolverton Securities
Ltd., a registered brokerage in British Columbia. This trading
involved the use of in-house day-trader software to trade high
volume NASDAQ, AMEX and NYSE stocks in short-term intra-day
trading, based on methods developed and practiced in the
VirtualTrader trading simulator. Daytrading is considered high
risk due to market volatility, trade slippage problems,
occasional internet execution errors, normal random short-term
price movements, and the margin leverage involved. In general
these same risks apply to all of the company's trading
activities, except that with stock daytrading, slippage losses
and internet execution errors present a far higher proportional
cost and risk that when position trading stock indexes or
currencies.
All System testing losses noted above since April 1998 are from
stock daytrading activities. As mentioned previously, all
trading activities by Titan have now been discontinued.
BREAKDOWN OF TOTAL SALES AND COSTS TO DATE
Titan's total revenue from sales and operations during the past
five fiscal years by category of activity was as follows:
FYE October 31, 2000
Software and Subscriptions Sales $ 26,505
Trading Income (Loss) $ 0
Interest and other Income $ 15,605
----------
Total $ 42,110
FYE October 31, 1999
Software Sales and Licensing $ 38,921
Trading Income (loss) $ (29,687)*
Interest and other Income $ 28,821
----------
Total $ 38,055
*There was $17,391 in System testing Losses (separately reported
as an expense) during this period
FYE October 1998.
Software Sales & Licensing $ 53,051
Trading Income $ 70,607*
Interest and other Income $ 41,457
----------
Total $ 165,115
*There was $42,490 in System testing Losses during this period
( separately reported as an expense).
FYE October 1997
Software Sales & Licensing $ 36,040
System testing $ 56,761
Interest and Other Income $ 58,581
---------
Total $ 151,382
FYE October 1996
Software Sales & Licensing $ 21,213
System testing $ 0*
Interest and other Income $ 35,290
--------
Total $ 56,503
*There was $ 57,934 in System testing Losses during this period,
separately reported as an expense.
All sales are to unaffiliated customers, and because of the
limited amount of revenue generating activities and immateriality
no breakdown has been made into geographic markets or as to
differences in contribution made by revenue to total operating
losses over the past three fiscal years.
Note that software sales reported in the audited financial
statements to the end of fiscal year ended October 31, 1998 and
earlier include revenue received from beta test versions of
software programs and from software products in early stages of
market testing. System testing income reported in the financial
statements represents trading income derived from company trading
software still under development. System testing expenses
reported in the financial statements under expenses represents
trading losses from trading software still in a testing and
development stage. See also "Breakdown of Total Sales and Costs
to Date" under Item 1, "Description of Business".
Once management has determined that a particular trading software
system has been satisfactorily tested in actual trading
operations, income from that point forward is reported as trading
income or loss, as the case may be.
STATUS OF NEW PRODUCTS OR SERVICES
The focus of the present business plan is to test, develop,
publish and market a paid monthly subscription service to its
daily stock market indicators and market commentaries through its
internet website. This service has not yet been offered to the
general public. Titan is constantly refining and developing its
trading software to maintain its integrity and marketability. As
a result there is and will be an on-going research and
development effort with associated costs to Titan. Titan
anticipates spending approximately $195,000 over the next 18
months on research and development efforts. Moreover, new
products are constantly being investigated and sought within the
general area of the current products developed by Titan. No new
products, however, other than those described in this filing have
been formally announced to the public.
ACCOUNTING POLICY ON PRODUCT RESEARCH AND DEVELOPMENT
Titan's accounting policy on software development is to
capitalize Software and Systems Development and amortize that
cost over the expected useful life of the software. Research and
Development, on the other hand, is fully expensed in the year
incurred. Titan distinguishes Software and Systems Development
from Research and Development in that Software and Systems
Development involves expenditures on the development of software
that creates an asset, the economic benefit of which is expected
to extend into several future periods.
System testing is an expense category that represents a research
and development activity associated with the development of
trading software. There was no activity in this account in the
current period reported and all of the Company's trading software
is now considered out of development.
The policy of the Company is that while trading software is in a
development stage, the costs of test trading such trading
software, including all trading gains and losses and all
transaction costs, are booked in the accounts as system testing
expense or recovery, as the case may be. Once the trading
software is fully developed, all gains or losses from trading
with the software are reflected in the accounts as trading income
or trading loss as the case may be.
The following table reflects the inclusion of the following
system testing expenses (recovery) by year: 1998 system testing
expenses - $42,490, 1997 system testing recovery ($56,761), 1996
system testing expenses - $57,934.
As noted above, Titan's policy is to maintain an ongoing program
of Software and Systems Development and Research and Development
in order to maintain the quality and competitiveness of its
products, services and trading efforts. The following represent
total expenditures by Titan on Systems and Software Development,
which costs are capitalized as incurred and then subject to
amortization, as well as Research and Development expenses, and
include the costs of system testing expenses and expense recovery
incurred or realized on trading systems under development, during
each of the past three fiscal years:
Software and R&D expense System testing Total
Systems Development (recovery)
FYE 10/00 $226,423 $ 0 $ 0 $226,423
FYE 10/99 $141,778 $46,800 $ 17,391 $205,969
FYE 10/98 $198,718 $ 3,483 $ 42,490 $244,691
FYE 10/97 $146,134 $ 3,483 $(56,761) $ 92,856
FYE 10/96 $129,935 $ 7,436 $ 57,934 $195,305
--------
$965,244
The planned software and systems development expenditures
budgeted for fiscal year 2001 is $145,000.
DISTINCTIVE AND SPECIAL CHARACTERISTICS OF OPERATION
In the North American financial software industry it is a
regulatory requirement and practice, to which the Titan adheres,
to make no representations that any user will or is likely to
achieve profits or suffer losses similar to those described in
any product literature or in any published historical trading
simulations, computer test results, or trading simulator software
practice sessions.
Even though Titan does not believe it is under the jurisdiction
of the United States Commodities and Futures Trading Commission
("CFTC"), Titan conducts its business in a manner consistent with
the rules and regulations of the CFTC with respect to sales of
trading system software and commodity futures trading activities
that may take place within the United States. In the past,
Titan's sales procedures provide for the inclusion of a
Disclosure Statement in product license agreements, manuals and
promotional literature in the form prescribed by the CFTC. In
addition, Titan's standard form of license agreement governing
use of its software and services, includes warnings as to the
risk of reliance on hypothetical trading results, and as to the
risk of trading losses. Terms of license and sale provide that
nothing contained in the Titan's software products or related
user manuals, represents, or is intended to represent, the
furnishing of financial advice by the Titan, its officers, agents
or employees. Users are warned that the pattern recognition
software and services merely provide educational, technical
trading information, neural network indicator readings, and
buy/sell signals for the decision support of users who remain
responsible for their own actions as the result of use of the
product or service, and that any use of the products and services
in the absence of acknowledgment of these terms, is unauthorized.
Titan is not a registered member of the National Futures
Association (NFA) and does not conduct a commodity trading
business in the United States. Consequently, Titan does not
presently come under the direct regulatory jurisdiction of that
industry governing body.
Titan does not sell trading systems. Titan is not presently
registered with the CFTC or NFA as a Commodity Trading Advisor
(CTA) and does not offer commodity trading advice or presently
solicit or trade third-party managed accounts. Titan may plan to
conduct such business in the future and may eventually become
registered as a CTA in the United States and or in Canada.
These plans would first require the passage by management of a
CTA examination, registration and appropriate filings which Titan
has no yet begun. There can be no assurance that Titan will ever
submit or obtain such CTA registration in the ordinary course of
its business, nor may the Company ever be required to do so.
Should Titan become a CTA or manage or trade third-party managed
accounts in the future, which it does not presently do, or if
Titan begins to conduct trading operations in the future in the
United States, which it does not currently do, Titan would then
be directly governed by the regulations and administrative
policies of the CFTC and the NFA. Titan would accordingly
register with the CFTC as may be required at such time that such
future activities might take place.
Titan is not presently registered, or required within its current
business operations to be registered as an investment advisor
with any government or regulatory body in the United States,
Canada or elsewhere.
As noted above, on or before Titan offers its full new planned
Internet Subscription Service to the general public in the United
States, it plans to register as an Investment Advisor with the
United States Securities and Exchange Commission.
RISK FACTORS AFFECTING THE BUSINESS OF THE COMPANY
The risk factors set-forth below are believed to be important in
that they may have a material impact upon the Titan's future
financial performance and could cause actual results to differ
materially from those expressed in any forward-looking statement
made by or on behalf of the Titan. All material risk factors
known to Titan are discussed below, however, note that unknown
factors, not discussed in this filing, could also have a material
adverse effect on Titan's actual financial and other results.
1. Short operating history and likelihood of continuing operating
losses. Titan commenced operations in May 1994, and has to date
been largely engaged in product research and development and
establishing its new product development and marketing strategy.
Titan's accumulated deficit to October 31, 2000 is $2,434,450.
Titan's initial products and planned services are just beginning
to become available for market release and sale. Titan thus has a
limited operating history and is expected to continue to incur
start up losses and negative cash flow in the immediate future as
these new products and services are completed and marketed.
Titan's ability to succeed depends upon it eventually achieving
positive cash flow, failing which it may have to seek additional
financing, and there can be no assurance that any additional
financing will be available on acceptable terms, or at all.
2. Early stage of development and no assurance of market
acceptance of the Titan's paid monthly subscription services.
Titan's planned Internet Subscription Service is in an early
stage of development. Although a small level of subscriptions
have been effected on the beta test site and there is an
established market for similar products and planned services,
there can be no assurance of market acceptance of Titan's
subscription services.
3. Dependence on the timely development and release of new
software products and services. Achievement of Titan's
objectives, and its future operating results, are dependent upon
completion of its marketing programs and on the success of its
new online financial services. Timing in this regard is crucial,
as other similar services that reach the market prior to Titan's
service may be able to obtain and maintain business that would
have otherwise gone to Titan. There can be no assurance that
Titan's timing and business plan will be sufficiently successful
to achieve sustained profitability in its operations.
4. Dependence on key personnel. Titan depends on its key
officers, including its founder and President, Michael Paauwe,
and its Vice President and Manager of Software Development,
Michael Gossland, and the general manager John Austin. Although
Titan has key man life policies in place for Paauwe and Gossland,
there is no key man life insurance on John Austin and loss of any
of the ongoing services of these three individuals would have a
materially adverse effect on future operating profits and
prospects.
5. Dependence on in-house direct sales and the lack of any
existing established indirect sales and distribution channels.
Titan plans to market its services through direct sales efforts.
The does not presently have in-house staffing of experienced
sales and marketing personnel. There can be no assurance that the
Titan will be able to attract and retain the necessary personnel
as and when required. The Titan 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 it will be able to establish
or maintain these channels cost effectively.
6. Extensive competition and rapid technological change. The
online financial services market 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. Titan will seek to establish its market position
through the sale of subscriptions to its trading solutions and by
making its service available at reasonable cost to customers
through direct and indirect marketing channels. However, there
can be no assurance that the Titan will be successful in this
effort, or, if successful, that Titan will have the resources to
sustain any early growth or market penetration it may achieve.
There are large numbers of established financial trading and
trading software companies. Many are larger than Titan, 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 Titan achieves significant success in
penetrating the online financial services 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 PC users is changing rapidly. The recent
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 threatening 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.
7. Potential Trading Losses. Under its present business plan,
Titan now plans to establish proprietary in-house trading
activities, most likely in a subsidiary company. Such trading
activity by Titan always involves a risk of trading losses even
when conducted by experienced practitioners. The historic
results of Titan's website published market calls trading
performance are not as accurate and dependable a measure of
profitability as actual trading results. Past performance cannot
be guaranteed or necessarily assumed to continue in the future.
Potential investors 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 to Titan, notwithstanding the protection afforded
the Company by the careful use of industry standard legal
disclaimers regarding its own trading activities or its
subscription services.
8. Limited intellectual property protection and physical
security. Titan depends on its ability to protect its core
proprietary software technology. In this regard, Titan relies on
protection of its technology by a combination of trade secrets,
technical complexity, common law copyright and trademark
protection, non-disclosure agreements, password protection and
software encryption schemes, and on the physical security of its
source code. Despite these measures and precautions, it may be
possible for unauthorized third parties to copy Titan's published
financial information and offer it to the marketplace as its own,
or use the service and not pay for it. To date, Titan has not
sought to obtain copyright registration or patent protection for
any of its software products, though it 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 the Titan's
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 the
Titan's proprietary technology and its ability to effectively
compete. There is an ongoing risk of financial losses due to
piracy of Titan's subscription services.
9. Possible high degree of volatility in the future price of
Titan's stock. Factors such as news announcements on technical
developments, innovations by Titan, its competitors or third
parties, industry developments in high-technology companies in
general, 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
liquidity, may individually or collectively have the effect of
causing substantial fluctuations in the traded price of the
Titan's shares. Changes in the trading price of its shares may be
unrelated to Titan's performance or its future prospects. In
addition, investors in Titan's shares may lose their entire
investment if Titan or any of its future subsidiaries incur large
trading losses in the future or if Titan fails in its business.
10. Control by existing officers and directors. Titan's executive
officers and directors currently own or control an aggregate of
3,117,501 of the issued and outstanding shares of the Titan which
represents approximately 31.77% of the outstanding shares as at
March 31, 2001. As a result, these shareholders will continue to
be able to control the composition of Titan's board of directors
and to have a significant influence over its affairs. This
concentration of ownership may have the effect of delaying,
deferring or preventing a future change of control of Titan.
Under certain circumstances, this type of limitation may be
considered to be potentially adverse to the interests of other
shareholders.
11. Dependence on financial industry. Titan is affected by
general economic and regulatory conditions affecting national and
international financial markets. A worldwide economic downturn,
therefore, may have an adverse effect on Titan's business, future
operating results or financial condition. The recent widespread
business failure of large numbers of publicly listed Internet
companies, as well as the general current state of the stock
market as at the date of this filing, are expected to have an
adverse affect on the ability to fully fund the capital
requirements of the business plan. While management has been able
to secure $340,000 in new private placements of common shares in
the past quarter to fund the business plan and has engaged the
services of investment bankers to assist in securing additional
working capital, there can be no assurance that these efforts
will continue to be successful in the immediate future and this
may have an adverse affect on the future business of the Company.
12. Possible changes in derivatives market and the regulatory
environment. The Titan's software provides pattern recognition
and market timing information related to stocks, stock indexes
and possibly to index related derivatives. Derivatives
instruments have been involved in a number of well publicized
recent financial losses, including those involving Barings Bank
and Orange County, in California, and more recently, Long Term
Capital Management, among others. Such losses have led to
increased governmental scrutiny and potential new regulation of
hedge funds and derivatives markets generally. Any new regulatory
requirements affecting the sale or distribution of trading
related services may have the effect of imposing new and
unexpected costs on Titan and this may affect future expenses and
operating results. There remains an ongoing risk of potential
adverse impact of possible new governmental regulations on
Titan's business.
13. Technological change. The online financial services
marketplace is characterized by constant and rapid technological
change. There is no assurance that Titan will be able to sustain
the cost of the research and development efforts required to
continue to compete and keep pace with this technological change.
If Titan cannot continue to compete on a technical basis, this
may have a potentially adverse and material effect on its
operating results and financial condition.
14. Potential product liability claims. The Titan does not
maintain product liability insurance against bugs or defects in
the general performance of its software products that are used to
provide information in its financial subscription service. In
accordance with common industry practice, the subscription
license agreements entered into in connection with its products
and services that all these risks are borne solely and entirely
by the customer. There can be no assurance that these provisions
will protect Titan from all potential product liability claims in
all markets in which it may sell its products or offer its
services.
15. Dependence on Third Party software products. Titan's
VirtualTrader training software and certain elements in the
provision of its services, may depend in part on the continued
existence of a serviceable TradeStation 4.0 and 2000i software
product. While Titan has taken steps to reduce reliance on these
products, there is a risk that future technical support may
change substantially or be discontinued completely, which might
have a temporary negative impact on Titan's operating results and
financial condition, to the extent that such reliance continues
in the future. This same general risk applies to all third party
software products used in Titan's business.
16. Year 2000 potential negative business impact and risks. The
Year 2000 (Y2K) computer problem was considered last year to have
a potentially material adverse and unpredictable affect on
Titan's operations, as more fully disclosed previously under
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
These risks are now minimized by the passage of time since the
start of the year 2000 and these risks are expected to continue
to diminish over time.
ITEM 2. DESCRIPTION OF PROPERTY
Titan owns no real property or real property rights. Titan's
business offices are rented facilities in various locations in
Nanaimo, British Columbia, Canada. Due to the set-up of Titan's
operations, many business functions are undertaken from
confidential, remote locations in British Columbia, not owned by
Titan.
Titan's proprietary financial trading software products and
technologies generally fall into five main categories:
Proprietary stock index trading indicators and general US stock
market timing software. These are Titan designed neural network
and expert system software based custom trading indicators and
software based trading methods, installed on a computer with the
third-party software program TradeStation 4.0. The software is
designed to provide short-term, predictive market timing
information on the US stock market indexes (such as the S&P 500
index), based on advanced pattern recognition methods which in
general, are automated, mathematically based methods of
recognizing recurring market patterns, based on the use
artificial intelligence techniques including expert systems and
neural networks. The trading indicators are designed for trading
US stocks and stock indexes, including stock futures contracts
on the S&P500, OEX, NYSE and NASDAQ markets, and they may also
provide market timing information for those indices for US stock
traders and investors. Last year Titan developed its own
proprietary stock screening software which produces lists of
NASDAQ and NYSE stocks that meet predefined technical trading
criteria, also used in the planned Subscription Service. The
company has also developed an online analytical graphics program
for trading high volume big cap NASDAQ and NYSE stocks (see
DESCRIPTION OF BUSINESS).
Proprietary world currency trading software. These are Titan
designed software based trading methods for trading world
currencies including the Japanese Yen, the German Mark, replaced
by the Euro, the Swiss Franc and the British Pound. To operate,
the software needs to be installed on a computer with the third
party software programs TradeStation. The methods are designed
for intermediate term trading. Trades are typically held for
weeks or months. The currency trading methods can also be easily
adapted to trading in any other high volume world currencies.
VirtualTrader product software written in Microsoft Visual Basic
4.0 and Omega's Easy Language software running in TradeStation
4.0.
Proprietary software testing and trading system development
tools. These are proprietary software programs written in
Microsoft Visual Basic 4.0 and 5.0, programmed into Microsoft
Excel, or written in Omega's Easy Language trading system
development language. They are basically a group of software
utilities, authored and owned by Titan, consisting of a series of
specialized trading system development software tools that are
used in Titan's ongoing software research and development
programs to perform data manipulation, custom system testing,
mathematical functions and code development and software
debugging capabilities not available in off-the-shelf software.
This software now provides Titan with the advantages of rapid
systems research, systems testing, software debugging and trading
system validation and deployment.
Internet web site and all server based Apache and Unix based
email and e-commerce software for running Titan's web site.
Titan has a body of custom software developed for its web site
that facilitates ongoing maintenance. This software is mainly
written in PERL scripts and includes all the custom graphics and
other HTML code for the web site. New e-commerce software was
developed in 2000 to manage secure online credit card
transactions in connection with the new Internet Subscription
Service, together with subscriber database management systems and
website security software.
ITEM 3. LEGAL PROCEEDINGS
Titan is not currently a party to any material legal proceedings;
nor, to Titan's knowledge, are there any legal proceeding pending
or threatened of which Titan would be a party, or any of its
property or assets are likely to be subject.
ITEM 4. CONTROL OF TITAN
As far as is known to Titan, and except as disclosed in this
filing, Titan is not directly or indirectly owned or controlled
by any other corporation or by any foreign government.
The following table sets forth as of March 31, 2001 information
with respect to record ownership of (a) any person or company who
is known to Titan to be the owner of more than 10% of any class
of the Titan's voting securities, and (b) the total amount of any
class of the Titan's voting securities owned by the officers and
directors as a group.
- -----------------------------------------------------------------
(1) (2) (3) (4)
Title or class Identity of Amount Owned Percent of Class
Person or Group
- -----------------------------------------------------------------
Common Shares TTN Escrow 3,000,000 30.57%
without par value Capital Corp
- -----------------------------------------------------------------
Common Shares Directors and 3,117,501 31.77%
without par value Officers as a Group
Note 1: TTN Escrow Capital Corp. ("TTN") is a private company
owned by Michael Paauwe (66.67%) and Michael Gossland (33.33%),
who are the only officers and directors of TTN.
As of the date hereof, there are no arrangements known to Titan,
the operation of which may at a subsequent date result in a
change in control of the Titan.
ITEM 5. NATURE OF TRADING MARKET
Titan's shares are listed and traded on the Canadian Venture
Exchange, called the "CDNX". The CDNX website can be viewed at
www.cdnx.ca.
Titan's shares are not currently trading on any US stock exchange
nor on the over-the-counter market, and, accordingly, there is
currently no public market for Titan's common stock in the United
States.
There can be no assurance that any market will develop after the
effective date of this Registration Statement. Titan plans to
list its securities on the US NASD Over The Counter ("OTC")
Bulletin Board market during the next few months, but no
assurance can be given that an NASD OTC Bulletin Board listing
will occur.
Trading in Titan's shares commenced in Canada on the Canadian
Venture Exchange on July 24, 1996. The following table sets-
forth the high and low sales prices for Titan's shares for the
quarterly periods shown, expressed in Canadian Dollars and the
trading volume in number of shares for the applicable time
period.
- ------------------------------------------------------------
(1) (2) (3) (4)
Year and Month High Low Volume
- ------------------------------------------------------------
November 1, 2000 -
January 31, 2001 1.20 0.55 603,548
August 1, 2000 -
October 31, 2000 1.85 0.61 591,505
May 1, 2000 -
July 31, 2001 2.45 1.45 622,330
February 1, 2000 -
April 30, 2000 4.05 1.75 912,332
November 1, 1999 -
January 31, 2000 4.25 1.00 1,773,038
August 1, 1999 -
October 31, 1999 1.75 0.96 500,020
May 1, 1999 -
July 31, 1999 2.15 1.10 728,038
February 1,1999 -
April 30, 1999 1.25 0.88 556,100
November 1,1998 -
January 31, 1999 1.35 0.85 425,400
August 1, 1998 -
October 31, 1998 1.48 1.20 294,800
May 1, 1998 -
July 31, 1998 1.55 1.41 455,350
February 1, 1998 -
April 30, 1998 1.49 1.30 765,926
November 1, 1997 -
January 31, 1998 1.44 1.25 224,900
August 1, 1997 -
October 31, 1997 1.60 1.20 622,490
May 1, 1997 -
July 31, 1997 1.35 1.05 406,200
February 1, 1997 -
April 30, 1997 1.60 1.30 812,400
November 1, 1996 -
January 31, 1997 1.85 1.43 814,950
As of March 9th, 2001 there are an estimated 650,000 common
shares representing 6.62% of Titan's outstanding shares held of
record 83 persons residing in the United States. Titan
estimates, but is not sure, that there may be a total of 85
beneficial holders of its common shares holding approximately
700,000 shares of its stock in the United States, held in both
registered and unregistered form.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS
Except as discussed in Item 7 as to taxes and withholding, the
Titan is not aware of any Canadian federal or provincial laws,
decrees, or regulations that restrict the export or import of
capital, including foreign exchange controls, or that affect the
remittance of dividends, interest or other payments to non-
resident holders of Titan's shares.
Titan is not aware of any limitations on the right of non-
Canadian owners to hold or vote the common shares imposed by
Canadian federal or provincial law or by the Memorandum or
Articles of the Titan.
The Investment Canada Act (the "Act") governs acquisitions of
Canadian businesses by non-Canadian persons or entities. The Act
provides, among other things, for a review of an investment in
certain Canadian businesses having in excess of $25 million in
gross assets.
The Act provides that a United States investor can hold up to 1/3
of the issued and outstanding capital of a Canadian corporation
without being deemed a "control person", and that a United States
investor holding greater than 1/3 but less than 1/2 of the issued
and outstanding capital of a Canadian corporation is deemed to be
a control person subject to a rebuttable presumption to the
contrary (i.e. providing evidence of another control or control
group holding a greater number of shares). If a United States
investor wishes to acquire "control" of a Canadian corporation,
that investor would be required to obtain approval if the asset
value of the corporation is greater than $178 million Canadian.
If the asset value of the corporation at the time of the proposed
acquisition is less than $178 million Canadian, the investor
wishing to acquire "control" need only file a form indicating his
or her intentions. The Act also provides that if United States
investors collectively hold greater than 50% of the issued and
outstanding shares of the corporation, there is a rebuttable
presumption that the corporation's status has changed to that of
an American corporation. The effect of the change in status is
that if the control of the Titan is deemed to be held by United
States investors, and if Titan then wished to make investments of
greater than $178 million Canadian in Canada, it would need
governmental approval.
Certain transactions involving Titan's Common Shares would be
exempt from the Investment Canada Act, including: (a) an
acquisition of Common Shares made in connection with the person's
business as a trader or dealer in securities; (b) an acquisition
of control in connection with the realization of a security
interest granted for a loan or other financial assistance, and
not for any purpose related to the provisions of the Investment
Canada Act; and (c) an acquisition of control by reason of an
amalgamation, merger, consolidation or corporate reorganization,
following which the ultimate direct or indirect control in fact
of Titan, through the ownership of voting interests, remains
unchanged.
Provisions of the Investment Canada Act are complex, and any non-
Canadian contemplating an investment to acquire control of Titan
should consult professional advisors as to whether and how the
Investment Canada Act might apply.
ITEM 7. TAXATION
The following paragraphs set-forth a summary of all material
information regarding Canadian income taxation in connection with
the ownership of Titan's shares. Note that these tax
considerations are stated in general terms and should not be
considered to be a substitute for independent professional advice
on the subject of taxation of Canadian shares held by US
stockholders. There may also be relevant state, or local tax
considerations that are not discussed here.
Titan's management believes that the following general summary
fairly describes the principal federal income tax consequences
applicable to a holder of Titan's common shares who is a resident
of the United States and who is not a resident of Canada and who
does not use or hold, and is not deemed to use or hold, his
common shares in connection with carrying on a business in Canada
(a "non-resident holder").
This summary is based upon the current provisions of the Income
Tax Act (Canada) (the "ITA"), the regulations there under (the
"Regulations"), the current publicly announced administrative
assessing policies of Revenue Canada, Taxation, and all specific
proposals (the "Tax Proposals") to amend the ITA and Regulations
announced by the Minister of Finance (Canada) prior to the date
hereof. The description is not exhaustive of all possible
Canadian federal income tax consequences, and, except for the Tax
Proposals, does not take into account or anticipate any changes
in law, whether by legislative, governmental or judicial action,
nor does it take into account provincial or foreign tax
consideration which may differ significantly from those discussed
here.
DIVIDENDS
Dividends paid or credited on Titan's shares to a non-resident
holder will be subject to withholding tax. The Canada-U.S.
Income Convention (1980) provides that the normal 25% withholding
tax rate is reduced to 15% on dividends paid or credited or
deemed paid on shares of a corporation resident in Canada (such
as Titan) to a resident of the United States, and also provides,
pursuant to a recently ratified protocol, for a further reduction
of this rate to 5% for dividends paid or credited on or after
January 1, 1997 if the beneficial owner of the dividends is a
corporation which is a resident of the United States and owns at
least 10% of the voting shares of the Company paying the
dividend.
If a Non-Resident Security Holder carries on business in Canada
through a "permanent establishment" or performs independent
personal services from a fixed base in Canada, and the holding of
shares in respect of which the dividends are paid is effectively
connected with such permanent establishment or fixed base, the
limitations set out in the preceding paragraph will not apply.
Instead, the dividends will be taxed using the rates and rules of
taxation generally applicable to residents of Canada.
A "permanent establishment" of a Non-Resident Security Holder can
generally be described as a fixed place of business through which
the business of a resident is wholly or partly carried on.
CAPITAL GAINS
A non-resident of Canada is not subject to the tax under the ITA
in respect of a capital gain realized upon the disposition of a
share of a class that is listed on a prescribed stock exchange
unless the share represents "taxable Canadian property" to the
holder thereof. A common share of the Titan will be taxable
Canadian property to a non-resident holder if, at any time during
the period of five years immediately preceding the disposition,
the non-resident holder, persons with whom the non-resident
holder did not deal at arm's length, or the non-resident holder
together with persons with whom he did not deal at arm's length,
owned 25% or more of the issued shares of any class or series of
the Titan.
Where a resident of the United States meets the 25% ownership
tests described above, the person's capital gains realized on the
disposition of Titan's shares will be subject to Canadian income
tax if the value of Titan's shares is principally attributed to
real estate, including the right to explore for or exploit
mineral deposits, sources and other natural resources. Where a
resident of the United States meets the 25% ownership test but
the Titan fails the value of assets test, that person's capital
gains realized on the disposition of Titan's shares would be
eligible for exemption under the Canada - U.S. Income Tax
Convention (1980) (the "Treaty") unless the U.S. resident had
resided in Canada at any time in the ten-year period immediately
preceding the disposition and was resident in Canada for 120
months during any 20 year period preceding the disposition.
DEEMED DISPOSITION ON DEATH
Where a resident of the United States owns shares that are
taxable Canadian property as discussed above, that person will be
liable for Canadian income tax on his capital gains or losses
accrued to the date of death. Where the decreased transfers the
property to his or her spouse or a qualifying spouse trust, the
deceased's representative may be eligible to apply to defer the
tax on the accrued gain pursuant to the Treaty. Where the
application is accepted, the surviving spouse would pay tax on
the capital gain accrued to the subsequent date of death.
ITEM 8. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial
information of Titan (stated in Canadian dollars) prepared in
accordance with Canadian generally accepted accounting principles
(Canadian GAAP). The table also summarizes certain corresponding
information prepared in accordance with United States generally
accepted accounting principles (US GAAP). The information in the
table was extracted from the more detailed financial statements
for the fiscal year ended October 31, 1996 through the fiscal
year ended October 31, 2000, inclusive, and the related notes,
and should be read in conjunction with the financial statements
and with the information appearing under the heading "Item 9 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Reference is made to Note 9 of Titan's October 31, 2000 financial
statement included herewith for a discussion of the material
differences between Canadian GAAP and US GAAP, and their effects
on Titan's financial statements. To date, Titan has not generated
sufficient cash flow from operations to fund ongoing operational
requirements and cash commitments. Titan has financed its
operations principally through the sale of its equity securities
and its ability to continue operations is dependent on the
ability of Titan to increase revenues from operations or to
obtain additional financing or a combination of both. See "Item 9
- - Management's Discussion and Analysis of Financial Condition and
Results of Operations."
SUMMARY OF FINANCIAL DATA
- -----------------------------------------------------------------
Fiscal Years ended October 31
2000 1999 1998 1997 1996
- ----------------------------------------------------------------
Revenue $ 26,205 $ 9,234 $123,658 $ 92,801 $ 21,213
Expenses $701,179 $653,804 $557,517 $293,615 $291,805
Interest & Other
Income $ 15,605 $ 28,821 $ 41,457 $ 58,581 $ 35,290
Net Loss for the year
Canadian GAAP $659,069 $614,983 $392,402 $142,233 $235,302
US GAAP $659,069 $746,860 $392,402 $142,233 $235,302
Net Loss Per Share(1)
Canadian GAAP $(.07) $(.07) $(.04) $(.02) $(.03)
US GAAP $(.11) $(.13) $(.07) $(.03) $(.06)
Net Working
Capital $604,196 $742,989 $1,340,017 $1,672,725 $1,579,827
Total Assets
Canadian GAAP $958,935 $1,050,074 $1,672,903 $1,924,638 $1,776,793
US GAAP $958,935 $1,050,074 $1,672,903 $1,924,638 $1,776,793
Long Term
Obligations $NIL $NIL $NIL $NIL $NIL
_________________________________________________________________
Calculated based on the average weighted number of shares
outstanding on a non-diluted basis. 3,000,000 escrow shares,
which are issuable based on future financial performance (see
ITEM 4. CONTROL OF TITAN ) are excluded from the average weighted
number of shares outstanding on a non-diluted basis, in
calculating net loss per share under US GAAP, but are included in
the same calculation under Canadian GAAP. However, this does not
affect Net Loss for the year and therefore that figure in the
table above remains the same under both US GAAP and Canadian
GAAP.
To date, Titan has paid no dividends on its shares, and does not
anticipate doing so in the foreseeable future. The declaration
of dividends on Titan's Common Shares is within the discretion of
Titan's board of directors and will depend upon, among other
factors, earnings, capital requirements, and the operating and
financial condition of Titan.
EXCHANGE RATES
As at October 31, 2000 the median bidding exchange rate of
Canadian dollars into United States dollars was $1.5118 Canadian
to $1.00 United States.
The following table sets forth, for the periods and dates
indicated, certain information concerning exchange rates of
United States and Canadian dollars. All the figures shown
represent noon buying rates for cable transfers in New York City,
certified for customs purposes by the Federal Reserve Bank of New
York. The average rate means the average of the exchange rates on
the last day of each month during a year. The source of this data
is the Federal Reserve Bulletin and Digest.
Period Period End Average High Low
- ------- ------------- --------- -------- ---------
(CDN$/US$)
1994 1.4030 1.3699 1.4078 1.3103
1995 1.3655 1.3689 1.4238 1.3285
1996 1.3697 1.3644 1.3822 1.3310
1997 1.4288 1.3894 1.4398 1.3357
1998 1.5375 1.4892 1.5770 1.4075
1999 1.4440 1.4827 1.5095 1.4440
2000 1.5273 1.5161 1.5950 1.4954
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 POTENTIAL NEGATIVE BUSINESS IMPACT AND RISKS
GENERAL OVERVIEW OF REVENUE AND EXPENSES
Titan is still a development stage company. We presently receives
income from the following sources; subscription income and
interest and other income. Subscriptions income is from trial and
test accounts, started during the second quarter of 2000 from
the initial test website. A small number of paying subscribers
and about 450 trial subscribers to our market commentaries
secured. This product that was never marketed. Advertising and
marketing of this service was never commenced. VirtualTrader software
is no longer sold and is used only for in-house training and testing.
Interest and other income reported in the financial statements
totals $85,883 for the three years ended October 31, 2000. The
interest income earned on cash balances is from Titan's own cash,
and includes interest earned on short-term money market funds and
short term treasury bills on corporate cash balances. Titan does
not presently trade any third-party funds, nor does it hold in
its control any cash balances from any third parties. Brokerage
accounts were closed last year and all trading activities were
discontinued pending new equity financings, a legal restructuring
and review of any required regulatory filings.
In prior periods, income or losses from trading of fully
developed and tested trading software was reported when earned,
as trading income or trading loss, in each period. Income or
losses from trading software still in development was reported in
the financial statements as system testing income or expense, in
each period, as was the case. There was no such trading activity
in the year 2000.
Trading Income was first reported in the fiscal year ended
October 31, 1998 after the World Currency Trader software and
Stock Index Trader software systems completed development and
were fully installed in April 1998. A trading program was
carried out, in part, to show the functionality and effectiveness
of the software technologies developed. Trading income from stock
index and currency trading reported in fiscal year ended October
31, was $70,607 in the Fiscal Year Ended October 31, 1998 with a
loss of $29,687 reported in 1999, due to a foreign exchange loss
on the US denominated trading account balances.
As noted in the TRADING AND TESTING ACTIVITIES section, in the
past periods, while trading software was in a research and
development stage, there was a final period of actual online
testing which involves executing trades based on information
provided by the trading indicators or models in order to finally
validate or ultimately reject a developed trading method and the
related software. During this final testing and validation
activity stage and before the software development was considered
completed in all material respects, all related trading activity
was booked in the company's accounts as System testing expenses.
Once that particular software or trading indicator was finally
technically validated by real time testing in actual trading
activity, only then was the development considered completed.
Any continued trading activity results beyond that point based on
that software was booked in the accounts as Trading Income or
Trading Losses. Titan relies on the extensive development
experience and expertise of Michael Paauwe and Michael Gossland
in making the determinations that a particular trading method,
system or indicator development is complete.
All Titan trading indicators and software was considered to be in
the developmental stage until April 1998 when the company
reported that development of the stock futures and currencies
systems was considered complete. All stock index and currency
trading activities since that date, whether resulting in a gain
or a loss, have been booked in the accounts as Trading Income or
Loss. All trading activity results which related to the stock
daytrading development project, which took place from the August
1998 to the announced termination on April 1, 1999, were recorded
as System testing because the systems were still in a testing and
development stage up to the date the project was ended.
In order to aggregate all net gains or net losses from all
trading activity, including System testing , net results are
shown by year in the section and table entitled TRADING AND
TESTING.
In analyzing Expenses incurred in operations by source, the
largest components of expenses are the regular salaries and
benefits for staff, the ongoing monthly contracted management
fees, and professional fees representing mainly accounting and
legal expenses. The next largest expense item is for
amortization, which is a non-cash outlay that covers amortization
of software and system development costs, as well as depreciation
on office computer systems. Advertising, marketing and promotion
expenses, travel and investor relations expenses are recurring
cash expenses incurred in the ordinary course of the business of
Titan. Expenses for office, rent, telephone and bank charges are
relatively small constant monthly costs. System testing expenses
reported in 1999 represents the losses mainly from commissions
on a test account on a discontinued stock daytrading project.
Directors fees are paid to the two outside directors and have
averaged a total of $5,000 per year.
Daily market commentary and related short term stock market
trading indicators have been published on Titan's website on a
demonstration basis at no cost to visitors since October 1996.
Traffic to the website generated 45,000 hits (website page views)
in May 1999, rising from 27,000 hits in October 1998. By
February 2000 traffic rose to a high of 172,000 hits on the site.
During mid 2000 we abandoned efforts to generate traffic to our
website, as no economic benefit resulted. We came to view the
typical Internet based traffic/advertising model used by our
competitors to be wholly uneconomic. We have never adopted the
Internet advertising model for our website and we decided not to
try to compete with all the free financial sites, many of which
have since suffered substantial financial losses or gone out of
business. During 2000, we switched to an email delivery model as
we tested our Platinum Alert subscription service. After further
market testing we cancelled all planned advertising and the
marketing campaigns entirely and started to develop the online
version of our pattern recognition based short term stock trading
platform, now called the Titan MarketWatch.
CANADIAN GAAP vs. US GAAP
Titan's consolidated financial statements are prepared in
accordance with generally accepted accounting principles used in
Canada (Canadian GAAP). Material differences resulting from the
application of generally accepted accounting principles in the
United States (US GAAP) are described in Note 9 to the October
31, 2000 fiscal year end audited financial statements provided
under Item 17. Unless expressly stated otherwise, all references
to dollar amounts in this section are in Canadian dollars in
accordance with Canadian GAAP. In the case of the Titan, a
material impact of the differences between Canadian GAAP and US
GAAP in the financial statements relates to the existence of the
3,000,000 escrow shares and the fact that these shares are not
considered issued under US GAAP for purposes of calculating the
net loss per share. Therefore, as noted in the discussion below,
the net loss per share is increased under US GAAP versus that
shown under Canadian GAAP.
Note 9 to the audited fiscal year ended October 31, 1999
financial statements of Titan discusses the material differences
between Canadian GAAP and US GAAP, and their effect on Titan's
financial statements. Generally, under US GAAP, the loss per
share is calculated on the basis that the weighted average number
of shares outstanding during the year excluding shares that are
subject to escrow restrictions, unless the conditions for
issuance are currently met or will be met by the mere passage of
time. Titan has 3,000,000 escrowed shares that are subject to
release on the basis of an earn out formula and not merely by the
passage of time and this has resulted in the calculation of a
greater loss per share under US GAAP than is the case under
Canadian GAAP.
The existence and terms of release of the escrow shares affects
the net loss per share calculations in the reconciliation between
Canadian GAAP and US GAAP, due to the fact that under US GAAP,
shares conditionally issuable are not to be used in the average
number of shares outstanding in the calculation of net loss per
share. Under Canadian GAAP these escrow shares are used in the
calculation of the average number of shares outstanding for
purposes of the net loss per share calculations. The result is
that net loss for the year is the same under both Canadian GAAP
and US GAAP but the net loss per share differs according to the
reduced number of average shares outstanding as used in the loss
per share calculations. The resulting differences in the loss per
share calculations are as set forth in the financial statements
for the FYE October 31, 2000 and in the table referred to above
in Item 8 - "Selected Financial Data".
In addition, under US GAAP, the granting of stock options to
directors, officers and employees may give rise to differences in
the charge to income for compensation. Titan has prepared its
financial statements in accordance with APB 25 under which stock
options are measured by the intrinsic value method whereby
directors, officers and employee compensation cost is limited to
the excess of the quoted market price at date of grant over the
option exercise price. Since the exercise price equaled the
quoted market price at the dates the stock options were granted,
there was no compensation cost to be recognized. Had Titan
valued the options using a fair market value method (as required
under SFAS 123) such as the Black-Scholes option pricing model,
there would be an increase in employee and director compensation
costs charged to income of $NIL in 2000, $131,877 in 1999, and
$Nil in 1998, 1997 and 1996. Thus, in the case of Titan, US GAAP
results in an increase to compensation totaling $131,877, as
described more fully in Note 9 to the audited fiscal year ended
October 31, 2000 financial statements of Titan. This difference
is also reflected in the loss per share calculations as set-forth
in the table referred to above in Item 8 - "Selected Financial
Data", together with the impact of the escrow shares, as noted in
the discussion above.
ANNUAL REPORT OVERVIEW OF BUSINESS OPERATIONS FOR THE YEAR
During 2000 we completed the final phase of development of
Titan's proprietary stock market trading analytics software. We
advanced the state of our published neural network based stock
market timing systems and realtime stock charting analytics
software to a truly world class level. Our stock market trading
systems and our new online chart analytics platform represent the
culmination of five years of development effort and over $2.5
million in expenditures during the development stage. During the
current fiscal year we will deploy these technologies in a newly
established in-house proprietary trading operation and we expect
to finally launch the online subscription business targeted at
brokerage operations and private online traders. Our goal is to
accomplish this objective without incurring massive losses. Our
mandate is to effect the best path to profitability and we intend
to maintain a resolve to succeed in that objective.
Our core competencies now include three key elements of an
integrated real time stock market trading technology:
Breakthrough neural network based market timing indicators to
accurately classify short term stock market risk and related
S&P500 stock index mechanical trading models. These proprietary
indicators and systems have been operating accurately in real
time now for four years and the validity is well documented.
Similar technology is being used successfully by the worldwide
banking industry to accurately monitor and detect credit card
fraud on over 300 million credit cards.
During 2000 we published a number of spectacular stock market
timing calls. These included early detection of the pending US
bear market. We also identified the top of the Nasdaq market to
within 3 days of the actual top, in advance. This was just prior
to the beginning of the now well known +60% Nasdaq market
collapse. These indicators and trading models also picked many
profitable market rallies at the onset. We helped our trial
subscribers stay on the sidelines preserving their capital during
some of the worst downdrafts in recent stock market history. In
2000, as in previous years, our systems and published signals
dramatically outperformed the S&P500. This index is the leading
US stock market index and the performance benchmark used by
professional money managers worldwide.
We developed new proprietary stock screening methods for
screening and selecting baskets of high volume big cap stocks.
During 2000 this new system regularly selected ranked stock
portfolios that showed a tendency to outperform returns for the
stock market as a whole. The stock basket screening and selection
system fits well with our stock market timing systems to form an
integrated stock position trading capability that allow us to
diversify our trading and reduce trading risk.
We were able to develop of an online version of our chart
analytics trading software that is accessible by anybody over the
Internet. Initial response by test users indicates the potential
for thousands of subscribers to this easy to use trading
analytics package. By imbedding colour-coded proprietary trading
indicators right into the online stock charts, traders can more
easily identify high probability stock trades in real time on big
cap stocks. The software provides powerful online pattern
recognition analytics on key stock indexes, hot stock sectors and
big cap stocks. The latest version integrates the market timing
methods and stock screening techniques, to provide an effective
total online trading solution. That product is targeted for use
by stock brokers and private stock traders who follow the larger
North American stocks.
Our main goal for the 2000 year was to develop a commercially
viable online stock trading analytics subscription platform that
could serve the needs of active traders. We built on the proven
profitability of an earlier but more complex PC based version
that was expensive, technically complex and impractical to
market. That prototype system was deployed for stock trading use
in a brokerage operation in 1999. On December 1st, 2000, we
announced the sale of these first three PC based versions at an
annual license fee of $6,000 per trader. We have now created a
simpler online version that is highly scalable, reliable, easy to
use, cost effective to distribute and which requires minimal
ongoing technical support. Subject to the completion of the data
supply and exchange distribution agreements, we are now much
closer to being in a position to carry out a successful marketing
launch of the online product.
During 2000 we also completed the installation of an e-commerce
capable high speed server to facilitate our planned online
subscription business. That system is now fully operational and
also serves as a dedicated email server.
We completed a private placement of $550,147 on May 1st, 2000 to
secure working capital for marketing and operations. We expected
to get a marketing launch underway before the end of the fiscal
period. Product testing, market issues, legal and regulatory
obstacles led to unexpected delays, and the product had to be
reconfigured. The final decision to deploy the online charting
analytics application which integrates features of the existing
Platinum alert market timing systems, created a number of tasks
to complete prior to a marketing launch. This timing uncertainty
is typical of a development stage technology company. These
delays and the deterioration in the Company's stock price as the
Internet dot.com sector collapsed and the bear market took hold,
have added to the frustration of management and all of our
shareholders. We are very confident that we will work through
this difficult period and emerge even stronger and with a much
more solid foundation upon which to build future shareholder
value.
In January 2001 we announced two new private placement financings
totaling $340,000. Management's participation in this financing
is a testament to our confidence in Titan's future. We also
amended our stock options plan to assist in future financings and
to reduce compensation costs going forward. These latest
financings were essential to preserve success going forward. We
have been in an extended period of capital funding negotiations
to secure the funds necessary to implement our business plan.
This has become a priority now that we have such an exciting new
product offering.
With the scale and timing of planned business expenditures
conditional upon additional equity placements of its securities
over the next 12 to 18 months, Titan expects to make the
following planned expenditures in its business:
4. $250,000 to $350,000 on print media advertising.
5. $450,000 for additional staffing to effect a marketing launch
of the planned monthly subscription service.
6. $145,000 to $195,000 in ongoing software and systems research
and development.
If the capital plans of the Company are fully realized during the
next twelve months, expenditure levels could vary significantly
from those set out above.
The scope of our marketing launch will be determined in part by
the extent of our success in raising additional equity capital.
One of the main difficulties and challenges for management is to
balance the capital needs of the current business plan against
the dilutive effect of any major new equity financing at the
current historically low stock price levels. We are determined to
maintain a strong working capital position to fund our ongoing
operations. Our primary operational goal is a balanced best path
to profitability. We are confident that with the help and
patience of our shareholders, we will succeed in establishing
future profitability and a rising share value. We have an
enormous opportunity and solid business fundamentals. We expect
future success given the special advantage our products provide
to the customers we serve.
In our circulated Annual Report we urged all of our shareholders
to stay with Titan and preserve the course through this next most
exciting stage of our corporate plan. At current share prices,
Titan now represents a better investment than at any time in our
history. We have an exciting and proven product group, we have
completed our development cycle, we have no corporate debt, we
have capable and experienced human resources, and strong efforts
underway to build our working capital to implement the shortest
path to profitability. We think the future looks bright indeed.
Outlook for 2001
This will be the year that our business fundamentals will start
to become more obvious to outside investors. We hope to expand
our staff to build up marketing capabilities and momentum in all
aspects of our endeavors. New milestones achieved this year
brought us close to establishing a strategy that we believe
defines the best path to profitability in the near term for
Titan. We are preserving our capital through cost containment
and we will continue to seek new equity investment on suitable
terms.
Our mission is to build a high performance, online financial
service enterprise, using our world class trading technology to
build ever-increasing long term profitability and shareholder
value. We have continued to make excellent progress in developing
our core trading technology and have created a very valuable
foundation. Many of our shareholders have benefited from our
publications and market timing technology and more recently
through testing of our new online trading analytics systems. We
now need to translate that benefit to thousands of potential
paying subscribers.
The year 2000 was a difficult year for our stock due in large
part to generally grim stock market conditions, the collapse of
the Internet sector and the decline in stock prices of most
technology stocks. However, the adverse stock market conditions
should help drive new demand for our new online products and
services, as the current environment requires newer profitable
trading methods and better analytical tools.
The good companies will emerge from the current difficult
economic times as stronger companies. We are confident that Titan
will be one of them. We want to thank our shareholders for their
patience and confirm management's full commitment to restoring
and building shareholder value in 2001 and beyond.
RESULTS OF OPERATIONS
FYE OCTOBER 31, 2000 COMPARED TO FYE OCTOBER 31, 1999
The company remained in a development stage during the fiscal
year ended October 31, 2000. The loss for the year was $659,069,
or $.07 per share. This compares to a loss of $614,983 or $.07
per share, for the fiscal period ended October 31, 1999. Total
expenses were higher in part due to a sharp increase in investor
relations expenses during the period which rose to $111,582,
compared to $19,233 the year before. Management fees for the
period rose to $114,322 compared to $61,308 in 1999, as the Board
approved a one time in five-year management bonus payment in lieu
of an absence of any pension contributions to senior management.
Professional fees dropped to $31,126 compared to $79,770 in the
1999 year, during which we incurred substantial expenses clearing
SEC registration of our securities in the United States. The
largest single expense in 2000 was for amortization of our
software and systems development costs that totaled $188,584.
This compares to amortization of $180,532 in the 1999 fiscal
period. We made expenditures of $226,423 in new software and
systems development in the current year. This compares to
$141,778 in the year 1999. We generally write these costs off
over a three-year period. This period's amortization cost was
higher due to a write-off of prior year charges on components of
software not included in current product offerings. The overall
increases were mainly due to our increased Internet related web
server investments and the new online charting software
development initiatives.
Total revenue for the year was only $26,505. This was generated
testing the Platinum alert stock screening subscription model,
which we never formally launched. This compares to total revenue
of $38,921 from software sales in 1999 on products we no longer
sell. Interest and other income totaled $15,605, compared to
$28,821 in the prior year.
$474,615 cash was used in operations during the year, compared to
$410,854 the previous year. 28.6% of the operating loss for the
year was from amortization expense, which is a non-cash outlay.
LIQUIDITY AND CAPITAL RESOURCES - OCTOBER 31, 2000
At the end of the year the Company had total assets of $958,935,
cash balances of $610,398 and net working capital of $604,196.
The existing working capital of the Company is considered by
management to be insufficient to carry out the present business
plan. In order to sustain future operations in the scale
necessary to effectively carry out our business plan and achieve
our revenue goals, further equity capital will be required to
supplement existing resources. In January 2001 we announced new
equity financings of $340,000. Negotiations on further new equity
financings are underway and we expect to announce new initiatives
during the second quarter of 2001.
FYE OCTOBER 31, 1999 COMPARED TO FYE OCTOBER 31, 1998
The company remained in a development stage during the fiscal
year ended October 31, 1999. The loss for the year was $614,983,
or $.07 per share. This compares to a loss of $392,402 or $.04
per share, for the fiscal period ended October 31, 1998. Total
expenses were higher in part due to increased costs of $79,770
for professional fees associated with filing and clearing the US
SEC registration. This is compared to ordinary course outlays for
annual professional fees of $17,934 in the previous year.
Salaries and benefits doubled during this period to $122,099 in
1999 compared to $63,224 in 1998. This resulted from additional
staffing and higher rates of remuneration being paid, in order to
bring pay rates closer to industry standards in our business.
Research and development expenses increased to $46,800 in 1999,
compared to only $3,483 in 1998. This R&D included increased
software research costs associated with new website software and
US stock screening software. It excludes $141,778 in software and
systems development expenditures during the period, capitalized
by the company and subject to amortization. Amortization expenses
increased to $180,532, compared to $140,258 in the previous year.
This was due to our increased Internet based investment and
development initiatives.
Advertising, marketing and promotion expenses dropped this period
due to marketing expenditures being postponed, as a result of the
delays in completing new website and stock screening software.
The new website software took several months longer than expected
to complete and get ready for market. Our business plan timetable
was also adversely impacted by the required management resources
to complete and clear the SEC filings, which were finally
completed in December 1999. It took eleven months from the time
of the initial filing and several revisions to ultimately get
clearance on our Form 20-F United States registration with the
SEC.
Total revenue for the year was only $38,055, including interest
and other income of $28,821. This compares to total revenue
$165,115 in 1998. The reduced revenue is the result of
significant changes in our Internet product and marketing
strategy and in our business plans as noted. Trading income was
flat for the year, compared to a gain of $70,607 in 1998. Stock
daytrading activities ended in April 1999 and in the third
quarter we ended all in-house trading activities to satisfy
regulatory issues and avoid potential regulatory conflicts
related to our status as a public company. After the decision to
end trading operations, we focused all our corporate resources on
the Internet product development and marketing strategy.
The future for potential revenues from trading related activities
will be established by newly structured strategic alliances and a
revised legal and operational structure. These plans will allow
us to exploit our trading technology directly, without potential
regulatory conflict. This restructuring will take several months
to completely implement. The reported 1999 trading loss of
$29,687 was from foreign exchange losses on US dollar trading
accounts, not from trading gains and losses. 1998 trading income
was $70,607. Trading gains made earlier this year were offset by
currency trading losses in the third quarter. Titan is not a
broker-dealer, investment advisor, or an investment company, as
defined by Canadian or United States rules. As a result of the
recurring regulatory issues raised in this connection during the
1999 SEC review, all in-house trading activity by Titan in its
present structure has been suspended until a revised business
plan for this aspect of our business and the required legal
restructuring is implemented.
$410,854 cash was used in operations during the year, compared to
$258,904 the previous year. $141,778 was invested in software and
system development. 29.3% of the operating loss for the year was
from amortization expense, which is a non-cash outlay.
LIQUIDITY AND CAPITAL RESOURCES - OCTOBER 31, 1999
As at October 31, 1999 the Company had total assets of
$1,050,074, cash balances of $761,007 and net working capital of
$742,989, compared to total assets of $$1,672,903, cash balances
of $1,363,818 and net working capital of $1,340,017 as of October
31, 1998.
During the twelve month period ended October 31, 1999 there was a
decrease in cash of $602,809 of which $410,854 was from cash used
in operations and $162,577 was from investing activities.
$141,778 was invested in software and systems and $20,799 in
acquisition of capital assets, mainly computer systems. There was
no cash raised from financing activities during this period.
Total assets dropped to $1,050,074 compared to $1,672,903 at FYE
October 31, 1998 due to the net loss for the period. The net loss
for the fiscal period ended October 31, 1999 was $614,983
compared a net loss of $392,402 for FYE October 31, 1998. Losses
are expected to continue for the next several quarters.
In order to sustain future operations in the scale necessary to
effectively carry out our business plans and achieve our revenue
goals, further equity capital will be required to supplement
existing resources. This will allow us to establish US
headquarters, add key management staff and fully launch our
marketing and sales campaigns. Negotiations toward that end will
be ongoing in the immediate future.
With the scale and timing of planned business expenditures
conditional upon additional equity placements of its securities
over the next 12 to 18 months, Titan expects to make the
following minimum planned expenditures in its business:
$500,000 on television, radio and Internet based advertising,
$100,000 on high speed redundant Internet server, &
communications equipment
$750,000 for additional staffing to effect a marketing launch of
the subscription service.
$145,000 in ongoing software and systems research and development
The Company plans to initially raise between $1.5 million and
$2.5 million in new equity capital to fund the expanded marketing
and sales program for the new online subscription service within
the next six months. If these capital plans of the Company are
fully realized during the next twelve months, expenditure levels
could exceed those levels set out above.
By reference to the working capital resources and liquidity risks
outlined above, Titan has insufficient current liquidity and
working capital resources sufficient to sustain the operations in
accordance with present business plans for the next 12 months,
without obtaining the additional equity financing referred to
above. As a contingency plan, expenditures will be adjusted in
accordance with the timing and level of equity financing actually
raised by the Company during the next several months.
As Titan does not as yet have net income from its operations and
does not currently have an existing credit facility, liquidity
beyond the next 12 months depends on its ability to either
generate earnings in the future, access the capital markets or
enter into joint venture agreements. The ability of the Company
to access the capital markets or to enlist new joint venture
partners is determined in part by the success or failure of its
current and prospective sales.
Negotiations are in process at the date of this filing and the
Company expects to be able to announce progress in new financings
within days or weeks of this filing.
Titan does not know of any other trends, demands, commitments,
events or uncertainties that will result in, or that are
reasonably likely to result in, Titan's liquidity either
materially increasing or decreasing at present or in the
foreseeable future, except as disclosed in this filing.
Long term Management Contracts with Michael Paauwe & Associates
and Michael Gossland & Associates were re-negotiated after year-
end. New contracts were approved by the Board of Directors and
entered into effective January 2, 2000. In summary these
contracts make expenditure commitments of $22,000 per month to
December 2003 and additional amounts if not renewed at that time.
Titan has not entered into any other material commitments for
capital expenditures as of the end of the latest fiscal year end
or the subsequent interim period to the date of this filing,
except as disclosed above and does not anticipate any significant
capital purchases other than discussed above.
Titan is not aware of any material trends, favorable or
unfavorable, in its capital resources other than as discussed
here, and does not anticipate any material changes in the mix of
the relative use of these resources.
FYE OCTOBER 31, 1998 COMPARED TO FYE OCTOBER 31, 1997
At the end of this last fiscal year end reporting period, Titan
had cash balances of $1,363,816 and net working capital of
$1,340,017, compared to cash balances of $1,667,530 and net
working capital of $1,672,725 at October 31, 1997.
Total revenue for the year increased to $123,658 (not including
$41,457 in Interest and other income) compared to $92,801 ( not
including $58,581 in Interest and other income) in the previous
year arising from small increases in software sales and trading
income.
Total assets dropped to $1,672,903 from $1,924,638 at October 31,
1997. This reflects a net loss in operations for the fiscal year
ended October 31, 1998 of $392,402, or $.04 per share, compared
to a net loss of $142,233, or $.02 per share in the year ended
October 31, 1997. The cash loss in operations for the fiscal
period ended October 31, 1998 was $287,898 compared to $61,560 in
the fiscal year ended October 31, 1997. The $226,338 increased
cash loss in operations came about as a result of the following
factors, in combination. Advertising, marketing and promotion
expenses jumped by $81,142 over the prior period as marketing
efforts to introduce Titan and its products to the institutional
sector were scaled up. Management fees and salaries and benefits
also increased during the period compared to the last year by
$36,110. Investor relations expenses were incurred for the first
time in the amount of $31,888 as a result of the costs of
presentations to stock brokers and potential investors in Europe
and in offshore financial markets. System testing expenses of
$42,490 were incurred, an increase from $NIL the previous year,
which sum included new increased costs from VirtualTrader
related stock day trading activities. These increased expenses
include and reflect the costs of hundreds of small scale test
trades being conducted over the internet with related commission
costs, to develop, test and validate the stock day trading
software under development. These costs do not include any costs
to demonstrate the software to potential customers but relate
strictly to net losses inclusive of commissions from test trading
hundreds of 100 lot ( the purchase of 100 shares) NASDAQ stock
trades during the development project, subsequently abandoned in
April 1999.
Pay scales of a key employee were increased and management fees
expense and software and systems development costs increased as
the result of re-negotiated base monthly contract rates effective
January 1, 1998 (see "Related Party Transactions") for officers
Paauwe and Gossland . First time management bonuses of $20,000
were paid to each of Gossland and Paauwe, and directors' fees
totaling $5,000 were paid to the two outside directors Paul
Shatzko and Robert Shatzko. Marketing and general corporate
promotions expenses rose compared to prior periods due to efforts
to increase corporate business exposure in the US and Europe.
Payments averaging approximately US$8,000 per month since
December 1997 covering marketing promotions expenses were made to
an independent contractor who is an associate of one of the
directors. This covered general corporate promotion, initial
marketing efforts and customer and shareholder liaison expenses
in connection with the promotion and licensing of the World
Currency Trader software systems in London England, negotiations
on promotions with public relations firms in Europe, discussions
and negotiations with US market makers for sponsorship on a US
bulletin board listing for Titan, promotion to offshore
investment groups of the World Currency Trader software systems,
presentations of Titan's technology to Canadian banks, Canadian
brokerages and high net-worth investors, negotiations on product
reseller arrangements with US firms, evaluation, monitoring and
reporting on the growth of new online trading and the impact on
VirtualTrader development, and ongoing monthly market research
and reporting.
During this period Titan licensed its World Currency Trader
software for a period of twelve months to an international money
manager based in London. This resulted in the securing of an
independent testimonial as to the profitability of the World
Currency Trader software when applied to currency hedging in
international stock portfolio management following use by this
client. This testimonial is expected to form the basis for
future European software marketing efforts..
Expenditures on software and systems development during the
period were $198,718. This compares to expenditures of $146,134
in the fiscal year ended October 31, 1997. These expenditures on
software and systems development were primarily the result of
developing the stock day-trading and position trading simulations
capability of the VirtualTrader software and the costs of
solving related stock market data conversion problems necessary
to facilitate the development of that that application. Of the
total software and systems development expenditures of $198,718
reported during this period, an estimated $138,000 is attributed
to developing the stock trading capabilities and solving the
related data conversion problems. Out of the balance of $60,718
in expenditures, an estimated $41,000 is allocated to
VirtualTrader software debugging and $19,718 to final development
of the Stock Index Trader software. No portion of these costs are
attributable to losses from trades, which are reported under
System testing as noted above.
The main development project on the VirtualTrader stock day-
trading software application neared completion during this
period. Trading income improved over prior period testing results
because the position trading software went formally online in
April of 1998. Trading income of $70,607 offset system testing
expenses for the year of $42,490. Actual trading operations
started to contribute to operations. In sum, the better
contribution to operations from trading during this period in the
sum of $70,607 is the result of having substantially completed
trading system development of the stock index trading software
effective in April 1998.
Cash balances were supplemented by the exercise in May 1998 of
$131,250 in broker warrants by Yorkton Securities Inc. of
Calgary, Alberta, Canada. These agent warrants were still
outstanding from the agency agreement related to the initial
public offering completed in British Columbia in July, 1996. This
exercise of broker warrants contributed funds to increase
expenditures on travel, corporate promotion and investor
relations. Travel, marketing and promotion expenditures increased
as the result of efforts to promote Titan's software and systems
technology to new potential US Canadian and European
institutional clients.
A first stage direct mail campaign on the VirtualTrader
software product was initiated during the second quarter with
limited results. The effectiveness of advertising and marketing
programs to date on sales of the VirtualTrader software into the
futures trading market segment has been limited. The market size
of this segment is small and this is reflected in the relatively
small level of software sales to date.
During late 1998 the focus of further applications and software
development work on the VirtualTrader shifted to electronic, high
volume NASDAQ and NYSE stock day-trading applications.
Development of this new application resulted in unplanned delays,
extra software testing and larger development expenditures in the
most recent fiscal year. As noted above, total expenditures on
software and systems development increased by $52,584.00 over the
previous year. This was all attributable to the stock daytrading
development project.
Applications work on the VirtualTrader stock trading
application neared completion during the final quarter ending
October 1998, and as noted above, actual online system testing
started in September 1998.
FYE OCTOBER 31, 1997 COMPARED TO FYE OCTOBER 31, 1996
As of October 31, 1997 total assets were $1,924,638, up from
total assets of $1,776,793 as of October 31, 1996. Titan had cash
balances of $1,667,530 and net working capital of $1,672,725
compared to cash balances of $1,590,589 and net working capital
of $1,579,827 as of October 31, 1996. This reflects a net loss in
operations for the period of $142,233 or $.02 per share compared
to a net loss of $235,302 or $.03 per share for the fiscal year
ended October 31, 1996.
Share capital issuance during the period totaled $302,400 as the
result of a private placement that was completed in December
1996. The cash loss in operations for the period was $57,936
compared to $198,074 in the fiscal year ended October 31, 1996.
Total revenue jumped to $92,801 from $21,213 the previous year.
This was mainly the result of improved trading results, including
a $56,761 increase in system testing income. There was also a
large reduction in system testing expenses, which fell to NIL
during this period, compared to $57,934 in the prior period. In
addition, cash losses were reduced by an increase in Interest and
Other Income, which rose to $58,581 from $35,290 the prior year,
as the result of larger average monthly cash balances in working
capital, following the initial public offering in July 1996 and
the private placement of common stock in the sum of $302,400
completed in December 1996. These factors, in combination,
produced the net reduction of $140,138 in the cash loss for the
period, over the previous fiscal year.
As noted under Research and Development Policy, Titan capitalizes
software under development and amortizes these costs over the
expected life of the software. Expenditures on software and
systems development during the period were $146,134. This
compares to expenditures of $129,935 in the year ended October
31, 1996. There was a small contribution during fiscal year end
1997 of $56,761 from demonstration trading gains, as compared to
a loss of $57,934 the previous year. This was mainly the result
of reduced R&D type test trading that often resulted in losses.
Ordinary course trading draw-downs experienced in the early part
of the 1997 fiscal year caused by stock index trading losses were
offset by gains realized later in the year from more profitable
currency trades, largely the result of swings in the price of
world currencies relative to the US dollar.
A milestone in software development was achieved during the 1997
fiscal year with the completion of the first commercial version
of the VirtualTrader advanced trading simulator. Titan remained
in an early stage of product and system development and market
testing during this period. The development stage continued as
the focus of Titan's resource allocation shifted to exploitation
of the VirtualTrader technology for in-house trading operations
work.
Fifty Nine percent (59%) of the operating loss for FYE 1997 was
from amortization expense, a non-cash outlay. This includes the
normal write-off of software and systems development costs, as
well as the normal depreciation of computer systems and office
equipment, details of which are disclosed in the notes to the
financial statements provided herewith.
FYE OCTOBER 31, 1996 COMPARED TO FYE OCTOBER 31, 1995
As of October 31, 1996 total assets were $1,776,793, up from
total assets of $977,238 as of October 31, 1995. Titan had cash
balances of $1,590,589 and net working capital of $1,579,827,
compared to cash balances of $873,552 and net working capital of
$902,720 as of October 31, 1995. This reflects a net loss in
operations for the period of $235,302 compared to a net loss of
$315,403 in the fiscal year ended October 31, 1995. The $80,101
reduction in net loss for the period was the result of a $10,048
increase in software sales, a $25,800 increase in interest income
from the larger cash balances and a reduction of $44,253 in
operating expenses. Included in the expense reduction was $18,000
in management fees which were allocated to share issue costs
associated with the initial public offering. Share subscriptions
received and Share capital issuance during the period totaled
$1,165,500 as the result of an initial public offering that was
completed in July 1996. Share issue costs associated with the
initial public offering totaled $141,089. The cash loss in
operations for the period was $198,074 compared to $304,299 in
the year ended October 31, 1995. Expenditures on software and
systems development during the period were $129,935.
During this period, Titan's operations were generally in a full-
time R&D mode. It completed development of an initial version of
its real-time, online intra-day pattern recognition based stock
index trading system as part of its stock index trader series
software (" Stock Index Trader software") development, and
produced the first demo software versions of this product.
A number of fees connected with the filing of Titan's preliminary
prospectus for its initial public offering in British Columbia
and Alberta were incurred, along with increased marketing related
expenses incurred as a result of the appointment of a manager of
sales and marketing and the creation of a new product market
testing program.
During the two month period from April 1 to May 31, 1996, Titan
continued with its program of market and product testing and
completed development of a prototype of an advanced software
based trading simulator in connection with the stock index
series, Neural Tape Reader research and development. A
substantial amount of management time and effort was also taken
up with matters related to the filing of the Prospectus and
initial public offering during this period.
Net working capital and deferred share issue costs on May 31,
1996, prior to the July 1996 initial public offering, amounted to
approximately $800,000.
In August 1996, regulations relating to the sale of commodities,
futures and options trading software in the United States were
changed by the Commodities Futures Trading Commission ("CFTC").
Legal proceedings were commenced in the US against certain
unregistered and allegedly unscrupulous vendors of trading
software. As a result of these actions and the related adverse
publicity, customer demand dropped immediately, and the market
environment quickly became uncertain. Titan thereafter canceled
plans to market its Stock Index Trader software series software,
incorporating it instead as a component of the VirtualTrader
software development. This action had the effect of reducing
expected software sales revenues until the development of the new
marketable software could be completed.
ITEM 10 DIRECTORS AND OFFICERS OF TITAN
The following table sets forth, as of March 31, 2001, the names
of the directors and executive officers of Titan, the offices
held by them, and their terms of office as a director or officer.
Directors are elected by the shareholders for one year terms and
until their successors have been duly elected, and officers are
appointed by and serve at the pleasure of the Board of Directors.
Paul Shatzko is Robert Shatzko's father, and trader Joe Shatzko
is Paul Shatzko's son and Robert Shatzko's brother. In addition,
TTN Escrow Capital Corp. a 30.57% shareholder of Titan, is owned
by Michael Paauwe (66.67%) and Michael Gossland (33.33%), who are
officers and directors of the Titan. There are no other family
relationships between any director or executive officer and any
other director or executive officer.
- ------------------------------------------------------------------
Name and Position with Titan Commencement of Service
municipality
of residence
- ------------------------------------------------------------------
Michael B. Paauwe President & Director May 1, 1994
Nanaimo,
British Columbia
Michael Gossland Vice President, Secretary, Sept 1, 1994
Nanaimo, Manager of Software Dev.
British Columbia & Director
Paul Shatzko Director Dec 1, 1994
West Vancouver,
British Columbia
Robert Shatzko Director April 15, 1996
San Mateo,
California
John Austin Director Dec 1, 2000
Nanaimo,
British Columbia
Jennifer Gee Chief Financial Officer Dec 1, 1994
Nanaimo,
British Columbia
Michael B. Paauwe, the founder, President and a director of
Titan, graduated in 1974 with an honors Diploma of Technology in
Financial Management (Finance) from the British Columbia
Institute of Technology, receiving the BCIT Alumni Silver Medal
for Finance, and the Dow Jones and Company - Wall Street Journal
Silver Medal for Security Analysis. After a further course of
studies, and a period of training as a tax accountant with
Revenue Canada Taxation, Mr. Paauwe was employed as a tax auditor
with the British Columbia Ministry of Finance from November 1975
to December 1983. Mr. Paauwe received a professional designation
as a Certified General Accountant in British Columbia in 1980,
retiring his membership in May of 1998.
Through his management and financial consulting firm, Michael B.
Paauwe and Associates (a sole Proprietorship), Mr. Paauwe
provides management, trading research and product development
services to Titan under a contract services agreement. Mr. Paauwe
devotes the majority of his time to the business and affairs of
the Titan.
Michael Gossland, M. Sc., P. Eng., is the Vice President,
Secretary, a Director, and the Manager of Software Development of
Titan. Mr. Gossland has provided full time services under
contract to Titan since September 1, 1994. In 1976, he was
awarded the Harrington Prize for academic excellence in physics,
and he received his M.Sc. degree from the University of
Saskatchewan in 1978. In 1979, he obtained his designation as a
Professional Engineer - Electrical Branch (Association of
Professional Engineers of Ontario) and from 1986 to 1991 he was
Software Project Manager for Sciex, a division of MDS Health
Group Inc., of Toronto.
Since September, 1994, through Michael Gossland and Associates (a
sole proprietorship), Mr. Gossland has been providing engineering
and software development services to Titan under a contract
services agreement. Mr. Gossland devotes the majority of his time
to the business and affairs of the Titan.
Paul Shatzko, M.D. a radiologist who formerly practiced in North
and West Vancouver, British Columbia, is a director of the Titan.
Since 1988 Dr. Shatzko has been the President of Mountain
Province Mining Inc.("MPV"), which in March 1995 made a major
diamond pipe discovery in the North West Territories. MPV trades
on the VSE, Toronto Stock Exchange and on the NASDAQ. Dr. Shatzko
has held this position on a full time basis since August, 1995.
Prior to that, he devoted part of his time to the office of
President of MPV, and in addition practiced his profession as a
radiologist.
Dr. Shatzko has been involved over a number of years as a
director or officer of several other publicly traded companies,
and in addition to Titan and MPV is presently a director of
Camphor Ventures Inc.
( VSE symbol "CFV"), Gee-Ten Ventures Inc. (VSE symbol "GTV")
and Amex Ventures Inc. (VSE symbol "AEX") . Dr. Shatzko devotes
the time to the affairs of Titan as is considered necessary to
perform his functions as a director.
Robert Shatzko, a member of the California State Bar and a trial
lawyer, is a director of the Titan. Mr. Shatzko obtained a
bachelor of arts degree with honors in political science from
Loyola Marymount University in Los Angeles, California in 1986,
and the degree of Juris Doctor from the McGeorge School of Law of
the University of The Pacific in Sacramento, California, in 1992.
He practices as a trial attorney with the law firm of Clapp,
Moroney, Bellagamba, Davis & Vucinich in Menlo Park, California.
Mr. Shatzko devotes time to the affairs of Titan as is necessary
to perform his functions as a director.
John Austin is General Manager and has been a full time employee
of Titan since November 1995. As of December 1, 2000 Mr. Austin
was appointed to the Board of Directors. Since graduating with a
degree in Business Administration from Utah State University in
1972, Mr. Austin has held a number of marketing, service and
sales management positions, including marketing manager for TNT
between 1987 and 1991, where he was involved in the research and
development of trading software. Between 1992 and 1994 he was
engaged in the establishment, development and sale of several
private businesses. Mr. Austin manages the development of Titan's
stock screening technology and provides technical support of all
online subscription services.
Jennifer Gee, Titan's Chief Financial Officer, was an independent
business and marketing consultant in Nanaimo, since September 1,
2000 Ms. Gee has become an employee working four days a week.
From 1984 until May 1994, Ms. Gee was the financial controller
for TNT and has worked for Titan as Chief Financial Officer since
June 1994.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
During the fiscal year ended October 31, 2000, the following
executive officers received compensation from Titan for
management, marketing, engineering, research and development, and
consulting services. See Item 13 - "Interest of Management In
Certain Transactions". The compensation amounts identified below
are reported in Canadian dollars.
- ----------------------------------------------------------
Name and Position FYE October 2000
- ----------------------------------------------------------
Michael B. Paauwe, $ 161,334
president
Michael Gossland,
vice president, secretary, $ 150,500
manager of software
development
John Austin
Director $ 60,000
Jennifer Gee $ 17,109
chief financial officer
Directors Fees (see below) $ 5,000
Total Compensation
to Directors & Officers $ 393,943
The value of unexercised stock options held by Named Executive
Officers Michael Paauwe and Michael Gossland are as follows as at
October 31, 2000: Michael Paauwe: 345,000 stock options and
Michael Gossland: 345,000 stock options. Subsequent to the
fiscal year end, one time bonuses were approved by the Board of
Directors and paid to Michael Gossland and Michael Paauwe in
February 2000 in the amounts of $36,000 and $44,000 respectively.
A bonus of $2,500 was paid to Jennifer Gee in December 1999.
Titan compensates directors who are not also officers of the
company ("Outside Directors") $2,500 per year for serving on the
board. Consequently, Outside Directors Robert and Paul Shatzko
received payment of $2,500 each, in each of the last three fiscal
years.
Titan does not compensate directors who are also officers of the
company for acting as directors, and Titan has not set-up or paid
out on any pension, retirement or similar plans for directors or
officers.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM TITAN AND
SUBSIDIARIES
OPTIONS
Amendment to Stock Option Plan in accordance with CDNX policy
The Company has in place an existing Stock Option Plan for the
purposes of attracting and motivating the Company's directors,
officers, employees, employees of the Company's management
company, consultants and other persons providing ongoing services
to the Company, as contemplated under applicable securities
legislation (collectively the "Optionees"). These are intended to
strengthen shareholder value and advance the Company's interests
by affording such persons with an opportunity to acquire an
equity interest in the Company through stock options.
In order to make the Company's existing and shareholder approved
Stock Option Plan correspond to the new stock option policies of
the Canadian Venture Exchange (the "Exchange"), the board of
directors of the Company has, subject to the acceptance of the
Exchange and shareholder approval, adopted an amended and
restated stock option plan (the "Amended Plan"). On March 2nd,
2001, the Company received conditional acceptance by the Exchange
of the announced repricing and term amendments to options for
1,250,000 shares made by the Board previously under the existing
Plan, subject to disinterested shareholder approval. The Amended
Plan incorporates the following changes:
1. In accordance with current Exchange policies, vesting of
stock options will now be permitted to occur over a period of 18
months (instead of 24 months) in equal quarterly installments,
provided that where a stock option is granted for a term of less
than 18 months the applicable vesting requirements shall be at
the discretion of the board of directors, subject to the
acceptance of the Exchange;
2. In accordance with current Exchange policies, the exercise
price of stock options granted under the Amended Plan may now be
fixed at a discount from the market price of the Company's
shares;
3. In accordance with current Exchange policies, the period
within which an option must be exercised by an optionee after
ceasing to be a director, officer or employee of the Company has
been extended from 30 days to 90 days, provided that options
granted to individuals engaged in investor relations activities
will continue to expire within 30 days after such individual
ceases to be employed to provide such activities;
4. In accordance with current Exchange policies, shareholder
approval to the granting of an option to an "insider" will no
longer be required, however, "disinterested shareholder" approval
for any material amendment to an option held by an "insider" such
as a reduction in the exercise price or extension of the expiry
date thereof must continue to be obtained prior to the exercise
of such options.
In all other material respects, the Amended Plan is the same as
the Company's existing Stock Option Plan. A copy of the Amended
Plan is available to any member of the Company upon request.
Under the policies of the Exchange, the Amended Plan must be
approved by the "disinterested shareholders" of the Company prior
to becoming effective. For the purposes of the policies of the
Exchange "disinterested shareholder" approval requires the
approval of a majority of votes cast at a shareholders' meeting
other than votes attaching to securities beneficially owned by
insiders to whom shares may be issued pursuant to the Amended
Plan and their associates. To management's knowledge, as of the
date of this Information Circular, a total of 3,120,101 shares of
the Company are held by insiders of the Company to whom options
may be granted under the Amended Plan, which shares will not be
eligible to be voted for the purposes of approving the Amended
Plan.
The existing Stock Option Plan allows a maximum of 1,771,400
shares reserved for issuance inclusive of existing options under
the Plan, representing 20% of the issued and outstanding shares
of the Company at the time the existing Stock Option Plan was
approved.
The Amended Plan will allow a maximum of 1,936,593 shares
reserved for issuance inclusive of existing options under the
Plan, or 20% of the issued and outstanding shares as of the date
hereof.
Under the policies of the Exchange, the Company may grant options
to purchase up to 20% of the issued and outstanding shares of the
Company at any one time. It is management's intention to grant
further options only when necessary or desirable to promote the
long term best interests of the Company and only where such
options are permissible under the policies of the Exchange. The
Company may eliminate the necessity of obtaining shareholder
authorization for each specific grant of options during the
ensuing year by obtaining shareholder approval to increase the
number of shares reserved for issuance under the Amended Plan at
this time. This will reduce ongoing legal and the administrative
costs of the Amended Plan. Under the policies of the Exchange,
such authorization must be approved by the disinterested
shareholders of the Company.
The Company intends, concurrently with the adoption of the
Amended Plan, to amend all outstanding options granted pursuant
to the original Plan to comply with the Amended Plan:
(a) amend 255,000 options granted on January 16, 2001 pursuant
to the existing Plan exercisable at $0.61 per share until January
16, 2006 to be pursuant to the Amended Plan.
amend the exercise price of 1,250,000 existing stock options to
$0.61 per share and to extend the term of the existing stock
options to January 16, 2006 and amend those granted pursuant to
the original Plan to be pursuant to the Amended Plan.
Accordingly, at the Meeting the disinterested shareholders of the
Company will be asked to consider and, if thought advisable, pass
the following resolutions. The management designees, if named as
proxy, intend to vote in favour of the following resolutions:
RESOLVED, as an ordinary resolution, THAT;
1. The Amended and Restated Stock Option Plan (the "Amended
Plan") be and the same is hereby adopted and approved and that
the directors of the Company be and are hereby authorized to take
all steps as are deemed necessary or advisable by the directors,
to do all such further acts as are required to be done and make
any further amendments or revisions to the Amended Plan, without
further shareholder approval, as may be required by the Canadian
Venture Exchange or any other stock exchange upon which the
Company's shares may be listed for trading from time to time, in
order to cause the Amended Plan to fully comply with the
requirements of the Canadian Venture Exchange or such other
exchange and to fully carry out this resolution; and
2. the directors of the Company be and are hereby authorized
to grant from time to time at their discretion options to
purchase up to a maximum of 1,936,593 common shares of the
Company under the Amended Plan, subject to the policies of the
Exchange.
3 the directors of the Company be and are hereby authorized
to amend the existing 255,000 stock options granted pursuant to
the original Plan to be pursuant to the Amended Plan.
4. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 345,000 stock
options granted to Michael Paauwe [195,000 stock options at $1.00
until April 30, 2004 pursuant to the original Plan and 150,000
stock options at $0.90 until July 31, 2001 granted prior to the
Plan] to the amended price of $0.61 per share and to extend the
term of the existing stock options to January 16, 2006 and then
amend the stock options granted pursuant to the original Plan to
be pursuant to the Amended Plan.
5. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 345,000 stock
options granted to Michael Gossland [195,000 stock options at
$1.00 until April 30, 2004 pursuant to the original Plan and
150,000 stock options at $0.90 until July 31, 2001 granted prior
to the Plan] to the amended price of $0.61 per share and to
extend the term of the existing stock options to January 16, 2006
and then amend the stock options granted pursuant to the original
Plan to be pursuant to the Amended Plan.
6. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 290,000 stock
options granted to Paul Shatzko [50,000 stock options at $1.00
until April 30, 2004 pursuant to the original Plan and 240,000
stock options at $0.90 until July 31, 2001 granted prior to the
Plan] to the amended price $0.61 per share and to extend the term
of the existing stock options to January 16, 2006 and then amend
the stock options granted pursuant to the original Plan to be
pursuant to the Amended Plan.
7. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 130,000 stock
options granted to Robert Shatzko [30,000 stock options at $1.00
until April 30, 2004 pursuant to the original Plan and 100,000
stock options at $0.90 until July 31, 2001 granted prior to the
Plan] to the amended price $0.61 per share and to extend the term
of the existing stock options to January 16, 2006 and then amend
the stock options granted pursuant to the original Plan to be
pursuant to the Amended Plan.
8. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 110,000 stock
options granted to John Austin [35,000 stock options at $1.00
until April 30, 2004 pursuant to the original Plan and 75,000
stock options at $0.90 until July 31, 2001 granted prior to the
Plan] to the amended price $0.61 per share and to extend the term
of the existing stock options to January 16, 2006 and then amend
the stock options granted pursuant to the original Plan to be
pursuant to the Amended Plan.
9. the directors of the Company be and are hereby authorized
to amend the exercise price and expiry date of the 30,000 stock
options granted to Jennifer Gee [10,000 stock options at $1.00
until April 30, 2004 pursuant to the original Plan and 20,000
stock options at $0.90 until July 31, 2001 granted prior to the
Plan] to the amended price $0.61 per share and to extend the term
of the existing stock options to January 16, 2006 and then amend
the stock options granted pursuant to the original Plan to be
pursuant to the Amended Plan.
The amendments referred to above comply with the present policies
of the Canadian Venture Exchange and are subject to receipt of
all necessary regulatory or stock exchange approvals. On March 2,
2001, the Company received conditional approval by the Canadian
Venture Exchange to the proposed option repricing and term
amendments set forth herein.
Certain of the directors and officers, as well as employees who
are not directors or officers of Titan, have been granted
incentive stock options to purchase Common Shares of Titan at
various prices. As of October 31, 2000 the following total
number of Company stock options are outstanding:
- -----------------------------------------------------------------
Holders Number of Exercise Price Expiration Date
Common Shares
- -----------------------------------------------------------------
Directors and 825,000(i) $0.90 July 2001
officers as
a group 425,000(i) $1.00 April 2004
---------
Total 1,250,000
Employees who
are not
directors or 72,852(ii) $0.85 January 2004
officers 6,250(ii) $1.00 January 2004
------
Total 79,102
(i) As stated above on March 2, 2001 the Company received
conditional acceptance by the Exchange and is subject to
disinterested shareholder approval, 1,250,000 shares are to be
repriced to $0.61 per share, with the term amended to expire
January 16, 2006.
(ii) These stock options expired on February 23, 2001, one month
following Greg Kennedy's resignation from employment with the
Company for health reasons on January 23, 2001.
As of April 9, 2001 the following total number of Company stock
options are outstanding:
- -----------------------------------------------------------------
Holders Number of Exercise Price Expiration Date
Common Shares
- -----------------------------------------------------------------
Directors and 1,250,000 $0.61 January 16, 2006
Officers as a
group 255,000* $0.61 January 16, 2006
----------
Total 1,505,000
* Stock Options granted January 16, 2001 and conditionally
approved by CDNX March 2, 2001
PRIVATE PLACEMENTS
As of April 9, 2001 the following shares were issued from
Treasury:
(iii)Common Shares issued February 21, 2001 from Treasury.
Announced date January 11, 2001(iii)
No. of Shares 550,000
Per Share $0.50
No. of Warrants 550,000
Exercise Price $0.61
Term 2 years
(iv)Common Shares issued March 20, 2001 from Treasury.
Announced date January 29, 2001(iv)
(Amended Mar 2, 2001)
No. of Shares 130,000
Per Share $0.50
No. of Warrants 130,000
Exercise Price $0.61
Term 2 years
Included in the Private Placements is the following share units
issuance to officers, directors and former employees*:
Directors and Officers 103,000 units
Former Employees* 30,000 units
Total to Directors and Officers
and former employees* 133,000 units
Total to relatives of company officers,
directors, and former employees* 164,000 units
Total 297,000 units
WARRANTS
Warrants outstanding as at October 31, 2000
250,067 warrants $2.55 to May 29, 2001 $3.00 to Sept 19, 2001
Warrants outstanding as at March 31, 2001
250,067 warrants $2.55 to May 29, 2001 $3.00 to Sept 19, 2001
550,000 warrants $0.61 to January 10, 2003
130,000 warrants $0.61 to January 28, 2003
Total 930,067 warrants
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
MATERIAL TRANSACTIONS
It is Titan's policy in related-party transactions is to try to
ensure that the cost and payment terms of related party
transactions reflect costs of similar arm's-length transactions,
in accordance with normal Canadian business practices and with
due consideration for the impact of Canadian income taxes
requirements. Canadian income tax asset acquisition and
disposition rules deem non-arm's length transactions to be
accounted for as if completed at fair market value and can impose
tax penalties where such transactions are not recorded in the
accounts at the fair market value. Titan completes all non-arm's
length transactions at fair market value as a matter of policy to
avoid any such taxation issues.
The following are descriptions of all material transactions
between Titan and its management.
From May 1994 to October 31, 1995, through his independent
management and financial consulting firm, Michael B. Paauwe and
Associates (a sole proprietorship), Mr. Paauwe (the President and
a director) provided corporate and financial management, trading
software research and product development contract services to
Titan under an oral arrangement, pursuant to which he received a
monthly fee of $5,000 until December 31, 1994, and of $6,000
thereafter, plus reimbursement of expenses. On November 1, 1995
the terms of the arrangement were reduced to writing, and have
continue since that time to the present. A long term Management
Contract with Michael Paauwe & Associates was re-negotiated after
year-end. The new contract were approved by the Board of
Directors and entered into effective January 2, 2000. This
contract makes expenditure commitments of $12,000 per month to
December 2003 and additional amounts if not renewed at that time.
From September 1994 to October 31, 1995, through his independent
software design and engineering consulting firm, Michael Gossland
and Associates, Mr. Gossland (an officer and director) provided
software engineering and development contract services to Titan
under an oral arrangement, pursuant to which he received a
monthly fee of $5,000 until December 31, 1994, and of $6,000
thereafter, plus reimbursement of expenses. Effective November 1,
1995 the terms of the arrangement were reduced to writing, and
have continue since that time to the present. A long term
Management Contract with Michael Gossland & Associates was re-
negotiated after year-end. The new contract were approved by the
Board of Directors and entered into effective January 2, 2000.
This contract makes expenditure commitments of $10,000 per month
to December 2003 and additional amounts if not renewed at that
time.
Except for the description of the services to be performed
thereunder, the written agreements between Titan and Paauwe and
the Titan and Gossland (the "Services Agreements") contain
identical provisions. Each has an initial term of three years,
subject to renewal for further terms of two years, at a monthly
fee to be agreed from time to time (the "Fee"), but currently not
less than $12,000 and $10,000 per month respectively, plus
reimbursement of expenses. Each of the Agreements also provides
for the payment of an annual bonus (the "Bonus") of $8,640 and
$7,200 respectively. Titan may terminate these Services
Agreements at any time on 30 days written notice. If it
terminates otherwise than for a material and substantial failure
to perform the agreed services by Paauwe or Gossland, as the case
may be, the Services Agreements provide for payment of a lump sum
equal to 12 times the Fee then in effect plus any unpaid Bonus
(the "Lump Sum") if terminated during the initial term, and an
amount to be negotiated, but not less than the Lump Sum, if
terminated thereafter. The latter provision applies as well to a
failure by Titan to renew the Services Agreement. If terminated
for a material and substantial breach of their obligations,
Paauwe and Gossland, as the case may be, have a 30 day period in
which to cure the breach. The Services Agreements may be
terminated by Paauwe and Gossland, as the case may be, on 120
days written notice to the Titan. The Services Agreements also
contain confidentiality provisions, and provisions for the
arbitration of disputes.
Pursuant to an agreement dated September 15, 1995 (the "Gossland
Agreement"), Michael Gossland (officer and director) assigned to
Titan at his transaction cost, all of his right, title and
interest in all software copyrights, product trademarks and
related assets in respect of NeuralEdge and Neural$. The assets
assigned, which included the object and source codes, were
acquired pursuant to an agreement dated July 28, 1995 with
Teranet IA Incorporated and were subsequently assigned to Titan
at Mr. Gossland's cost of $20,000, of which $10,000 represented
an advance royalty payment in respect of sales of the DOS-based
version of NeuralEdge and Neural$, and certain components
thereof. In view of Titan's decision not to proceed with the
marketing of the DOS-based version of these products, there is no
future royalty obligation payable by Titan pursuant to the
Gossland Agreement.
Note that these transactions were recorded in the Titan's
accounts at cost and no gain was realized by Michael Gossland on
the assignment to Titan of the software copyrights, product
trademarks and related assets in respect of NeuralEdge and
Neural$. In addition, of the $10,000.00 of prepaid royalties in
1995 in this transaction, $6,000.00 was recovered from a third
party in 1996 and the balance of $4,000.00 was written off in
1998. Finally, it should be noted that this transaction had no
impact on the reconciliation between Canadian and US GAAP.
In June 1994, Titan acquired certain computer equipment, and in
September 1994 it acquired certain software assets and related
products from Michael B. Paauwe (President and director), at his
depreciated cost of $2,400 and $3,500, respectively.
Titan rents certain office space from a Mr. Paauwe's spouse at a
monthly rental of $350 and from Mr. Gossland at a monthly rental
of $250. The aggregate rents paid during FYE October 31, 1995
were $4,200 and $3,000 respectively. These rental agreements
continue to the present time at the same monthly rental amount,
which is comparable to third-party market rates for similar
office space in the areas. Effective in 1999 these monthly rental
rates were increased to $450 and $350 per month respectively.
In addition, during the fiscal year ended October 31, 1995, Titan
paid $30,000 to an associate of Paul Shatzko (a director) for
marketing consulting services under an arrangement which is no
longer in effect. The consulting services were rendered over a
10-month period which ended in October 1995. The services
included a preliminary market assessment of the institutional
segment of the market, assessment of the competition in the
private trader segment of the market, and analysis of financial
industry information technology trends related to Titan's
business plan.
In 1998 the, Services Agreements for Michael Gossland and Michael
Paauwe were both re-negotiated with the board of directors of
Titan and amended agreements were entered into effective January
1, 1998. The amended agreements provide for monthly compensation
of $7,667 per month for Paauwe, and $7,250 per month for
Gossland, up from $6,000 each. In addition, both Paauwe and
Gossland were paid a one time bonus payment of $20,000 each. In
all other respects, the Services Agreements remain the same as
disclosed above.
The Services Agreements were automatically renewed on November 1,
1998 and now have renewable two year terms effective from that
date, in accordance with the terms of the original agreements
described above. These contracts were renegotiated again
effective January 2, 2000, as noted above.
During the nine months ended July 31, 1998 Titan paid US$70,000
and during 1999 Titan paid US$25,000 to an associate of Paul
Shatzko (a director) for marketing consulting and promotion
services rendered during that period and US$30,000 for the period
August 1, 1998 to December 31, 1998. The services involved
marketing and promotions activities, including: (1) initial
marketing efforts; (2) customer and shareholder liaison services
in connection with the promotion and licensing of software in
London England; (3) negotiations on promotions with public
relations firms in Europe and the US; (4) meetings, discussions
and negotiations with potential US market makers for sponsorship
on a US bulletin board; (5) promotion to offshore investment
groups; (6) presentations to Canadian banks, Canadian brokerages
and high net worth investors; (7) negotiations on product
reseller arrangements with US firms; (8) evaluation and reporting
on the growth of new online trading and its impact on product
development; and (9) ongoing market research and reporting.
In addition, certain officers and directors have an interest in
the stock options as more particularly described above.
INDEBTEDNESS OF DIRECTORS AND OFFICERS AND THEIR ASSOCIATES
During the last four years, there has been no recorded
indebtedness of any of the directors or officers, or any
associates of the directors or officers, to the Titan.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
The class of capital stock of Titan being registered hereby is
the Titan's common shares.
The issued and outstanding share capital of the Titan is
summarized as follows:
The authorized capital of Titan consists of 100,000,000 common
shares without par value. As of October 31, 2000, 9,132,966
common shares were issued and outstanding. If all outstanding
options to purchase common shares were exercised, the issued
common share capital of Titan would be 10,462,068 shares. The
holders of the common shares are entitled to vote at all meetings
of shareholders, to receive dividends if, as and when declared by
the directors, and to participate ratably in any distribution of
property or assets on the liquidation, winding up or other
dissolution of Titan. The common shares have no pre-emptive or
conversion rights. Titan may, by way of a resolution of the
Directors and in compliance with The Company Act, purchase any of
its shares at the price and upon the terms specified in the
resolution. No share purchase shall be made if Titan is
insolvent at the time of the proposed purchase or if the proposed
purchase would render Titan insolvent. Unless otherwise
permitted under The Company Act, Titan must make its offer to
purchase such shares pro rata to every shareholder who holds
shares of the class or kind, as the case may be, to be purchased.
The common shares are non-assessable, and not subject to further
calls by Titan.
A total of 3,000,000 common shares ("Escrow Shares") are held in
escrow by the Montreal Trust Company of Canada ("Montreal
Trust"), 510 Burrard Street, Vancouver, British Columbia, V6C
3B9, pursuant to an escrow agreement (the "Escrow Agreement")
dated January 5, 1996 by and between Titan, Montreal Trust, and
TTN Escrow Capital Corp., a private British Columbia company the
outstanding voting shares of which are held 66.67% by Michael
Buchanan Paauwe and 33.33% by Michael Gossland. The Escrow
Shares were purchased for cash at a price of $0.01 per share.
They represent approximately 33.87% of the issued and outstanding
common shares.
In general, the Escrow Agreement was devised to create a long-
term incentive for the beneficial owners of the shares (Michael
Paauwe and Michael Gossland) to act in the long-term interest and
for maximum profitability of Titan, in accordance with the
policies of the Canadian Venture Exchange. The shares are
subject to an earn-out formula based on cumulative net positive
cash flow as described below, and cannot be released for trading
until thresholds of net profitability are reached. Any escrow
shares not released after ten years are automatically canceled.
The Escrow Agreement has been attached as an Exhibit hereto.
The Escrow Shares are subject to the direction or determination
of the Canadian Venture Exchange. The Escrow Agreement provides
that the Escrow Shares may not be traded in, dealt with or
released without the consent of the Canadian Venture Exchange.
Any Escrow Shares not released from escrow by June 21, 2006 will
be canceled at that time.
Release of Escrow Shares from escrow will take place in
accordance with a formula prescribed by Policy 3-07 of the
British Columbia Securities Commission ("Policy 3-07"), applied
to Titan's cumulative cash flow from operations as disclosed in
its audited financial statements from time to time. In short,
Policy 3-07 requires that Titan first achieve cumulative cash
flow per share of $0.46 or an aggregate cumulative cash flow of
$1,380,000 before the Escrow Shares can be released. For these
purposes, "cash flow" means net income or loss before tax,
adjusted to add back depreciation, amortization of goodwill and
deferred research and development costs (excluding general and
administrative costs) and any other amounts permitted or required
by the Canadian Venture Exchange. "Cumulative cash flow" at any
time means the aggregate cash flow in the period from September
1, 1995 to that time, net of any negative cash flow.
The holder of the Escrow Shares has agreed for so long as they
remain in escrow to waive its rights: (i) to vote on a resolution
to cancel any of them; (ii) to receive dividends, and (iii) to
participate in the assets and property of Titan on a winding up
or dissolution.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Titan has not defaulted on any payment with respect to any
indebtedness.
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR
REGISTERED SECURITIES AND USE OF THE PROCEEDS
There have been no changes made to the rights of the holders of
Titan's securities.
PART IV
ITEM 17. FINANCIAL STATEMENTS
The financial statements of Titan have been prepared on the basis
of Canadian generally accepted accounting principles.
Differences between Canadian and U.S. generally accepted
accounting principles are set out in Note 9 to the audited
financial statements dated October 31, 2000.
Copies of the audited Financial Statements for the fiscal period
ended October 31, 2000 follow.
5-1591I
April 4, 2001
Titan Trading Analytics Inc.
3473 Ellis Place
Nanaimo, B.C.
V9T 4Y6
Dear Sirs:
We understand that Titan Trading Analytics Inc. ("the company")
will be filing a Form 20-F Annual Report with the United
States' Securities and Exchange Commission and also will be
filing an Annual Information Form with the British Columbia
Securities Commission.
As requested, we hereby consent to the filing of the audited
consolidated balance sheets of the company as at October 31,
2000 and 1999 and the consolidated statements of operations
and deficit and cash flows for each of the years in the three
year period ended October 31, 2000 including our auditors'
report to the Shareholders of the company dated January 29,
2001 thereon as part of the above filing packages.
If you have any further requirements, please contact us.
Yours truly,
COLLINS BARROW
Chartered Accountants
Per: "James R. Church"
James R. Church
JRC/clc
TITAN TRADING ANALYTICS INC.
CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 2000
AUDITORS' REPORT
To the Shareholders of
Titan Trading Analytics Inc.
We have audited the consolidated balance sheets of Titan
Trading Analytics Inc. as at October 31, 2000 and 1999
and the consolidated statements of operations and deficit
and cash flows for each of the years in the three year
period ended October 31, 2000. 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 generally accepted
auditing standards. 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, 2000 and 1999 and
the results of its operations and cash flows for each of the
years in the three year period ended October 31, 2000 in
accordance with generally accepted accounting principles in
Canada. As required by the Company Act (British Columbia),
we report that, in our opinion, these principles have been
applied on a consistent basis.
"COLLINS BARROW"
CHARTERED ACCOUNTANTS
Vancouver, Canada
January 29, 2001
TITAN TRADING ANALYTICS INC.
(Incorporated under the laws of British Columbia)
CONSOLIDATED BALANCE SHEET
OCTOBER 31
ASSETS 2000 1999
Current assets
Cash, due from brokers,
and short-term investments $ 610,398 $ 761,007
Accounts receivable 5,769 3,729
Prepaid expenses 5,476 746
---------- ----------
621,643 765,482
Software and systems
development (note 3) 292,695 240,689
Capital assets (note 4) 44,597 43,903
---------- ----------
$ 958,935 $1,050,074
LIABILITIES
Current liabilities
Accounts payable and accrued
Liabilities $ 17,447 $ 22,493
SHAREHOLDERS' EQUITY
Share capital (note 5) 3,375,938 2,802,962
Deficit (2,434,450) (1,775,381)
---------- ---------
941,488 1,027,581
---------- ---------
$ 958,935 $1,050,074
Approved by the Directors
"Michael B. Paauwe" Director
- -------------------------
"Michael Gossland" Director
- -------------------------
See accompanying notes to the consolidated financial statements.
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
Year Ended October 31
--------------------------------
2000 1999 1998
---- ---- ----
Software and subscription
sales $ 26,505 $ 38,921 $ 53,051
Trading income (loss) --- (29,687) 70,607
--------- --------- ---------
Expenses
Advertising, marketing and
Promotion 90,676 75,847 129,299
Amortization 188,584 180,532 140,258
Bank charges 2,850 1,818 2,408
Capital taxes --- 500 6,157
Directors' fees 5,000 5,000 5,000
Foreign exchange loss 7,686 --- ---
Investor relations 111,582 19,233 31,888
Management fees 114,322 61,308 65,055
Office and miscellaneous 20,786 18,001 12,567
Professional fees 31,126 79,770 17,934
Rent 5,374 5,424 6,177
Research and development --- 46,800 3,483
Salaries and benefits 105,056 122,099 63,224
System testing --- 17,391 42,490
Telephone 9,275 6,877 4,118
Travel 8,862 12,438 27,459
--------- --------- ---------
701,179 653,038 557,517
--------- --------- ---------
(674,674) (643,804) (433,859)
Interest and other income 15,605 28,821 41,457
--------- --------- ---------
Net loss for the year (659,069) (614,983) (392,402)
Deficit, beginning of
the year (1,775,381) (1,160,398) (767,996)
---------- ---------- ---------
Deficit, end of the year $(2,434,450) $(1,775,381)$(1,160,398)
Net loss per share (note 7(e)) $(.07) $(.07) $(.04)
See accompanying notes to the consolidated financial statements.
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended October 31
---------------------------------
2000 1999 1998
---------------------------------
Cash flows from (used in)
operating
Net loss for the year $(659,069) $(614,983) $(392,402)
Adjustments for:
Amortization 188,584 180,532 140,258
Foreign exchange loss (gain) 7,686 29,378 (35,754)
-------- -------- --------
(462,799) (405,073) (287,898)
Net change in non-cash working
balances
Decrease (increase) in
Receivable (2,040) 2,065 16,840
Decrease (increase) in
prepaid expenses (4,730) --- 2,737
Increase (decrease) in
accounts payable and accrued
liabilities (5,046) (7,846) 9,417
-------- -------- --------
Cash used in operating
activities (474,615) (410,854) (258,904)
-------- -------- --------
Cash flows used in investing
activities
Software and systems
development (226,423) (141,778) (198,718)
Acquisitions of capital assets (14,861) (20,799) (13,096)
-------- -------- --------
Cash used in investing
activities (241,284) (162,577) (211,814)
-------- -------- --------
Cash flows from financing
activities
Issuance of common shares 572,976 --- 131,250
-------- -------- --------
Cash from financing activities 572,976 --- 131,250
-------- -------- --------
Foreign exchange gain (loss)
on cash held in foreign
currency (7,686) (29,378) 35,754
-------- -------- --------
Net decrease in cash
during the year (150,609) (602,809) (303,714)
Cash, due from brokers, and
short-term investments,
beginning of the year 761,007 1,363,816 1,667,530
-------- -------- --------
Cash, due from brokers, and
short-term investments,
end of the year $610,398 $761,007 $1,363,816
-------- -------- --------
See accompanying notes to the consolidated financial statements.
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
1. General information
The company is considered to be in the development stage. The
company is developing an online stock market trading analytics
application for stock traders that it intends to market to third
parties and use itself.
2. Significant accounting policies
These financial statements are prepared in accordance with
accounting principles generally accepted in Canada which do
not differ from those established in the United States, except
as disclosed in note 9.
a) Consolidation - The financial statements include the accounts
of the company and of its wholly-owned subsidiary, Titan Trading
Corp.
b) Short-term investments - Short-term investments are carried
at the lower of cost or market. Gains and losses from trading
short-term investments are recognized as income on the trade
date.
c) 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 or a product to be used
internally are capitalized as software and systems development.
Capitalization of development costs ceases when the product is
available for general release to customers or once internal
utilization commences.
d) Software and systems development - Software and systems
development costs are amortized on a product by product basis at
the greater of (i) the ratio of gross revenues over aggregate
anticipated gross revenues or (ii) straight-line over the
remaining estimated economic life of the related products.
The estimated economic life of the company's products does not
exceed three years.
e) Capital assets - Capital assets are recorded at cost and
amortized at the following annual rates:
Computer equipment - 30% declining balance
Furniture and equipment - 20% declining balance
f) Software and subscription sales - Revenue arising from
software and subscription sales is recognized at the time of
the sale unless the company is obligated to provide services in
the future in which case a portion of the revenue is deferred
until the services have been performed.
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
g) Stock option plan - No compensation expense is recognized
when stock or stock options are issued to employees. Any
consideration paid by employees on exercise of stock options or
purchase of stock is credited to share capital.
h) Foreign currency translation - Foreign currency transactions
are translated using the temporal method, whereby:
i) monetary items are translated at the rate of exchange
in effect at the balance sheet date;
ii) non-monetary items are translated at historical
exchange rates; and
iii) revenue and expense items are translated at the average
rate of exchange for the year.
i) 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. Significant areas requiring the use of
management estimates relate to the determination of useful lives
of software and systems development and capital assets for
purposes of calculating amortization.
j) Cash and cash equivalents - Cash and cash equivalents
includes highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an
insignificant risk of changes in value. Investments with an
original maturity of more than three months are not included in
cash and cash equivalents.
3. Software and systems development
2000 1999
Cost $842,988 $616,565
Accumulated amortization (550,293) (375,876)
-------- --------
$292,695 $240,689
-------- --------
Software and system development cost is comprised of:
2000 1999
Computer services $38,019 $35,645
Contract services 696,432 474,562
Other 73,622 71,443
Rent 10,200 10,200
Salaries 24,715 24,715
------- -------
$842,988 $616,565
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
4. Capital assets
2000
-----------------------------------
Accumulated
Cost Amortization Net
-----------------------------------
Computer equipment $107,673 $73,180 $34,493
Furniture and equipment 17,777 7,673 10,104
-----------------------------------
$125,450 $80,853 $44,597
-----------------------------------
1999
-----------------------------------
Accumulated
Cost Amortization Net
-----------------------------------
Computer equipment $93,454 $61,460 $31,994
Furniture and equipment 17,135 5,226 11,909
-----------------------------------
$110,589 $66,686 $43,903
-----------------------------------
5.Share capital
Number
of Shares Amount
-------------------------
Authorized
100,000,000 common shares,
without par value
Issued
Issued for cash during the
period ended October 31, 1994 1 $ 1
Issued for cash 4,114,000 1,314,900
-------------------------
Balance, October 31, 1995 4,114,001 1,314,901
Issued for cash 4,302,000 1,055,500
Share issue costs --- (141,089)
-------------------------
Balance, October 31, 1996 8,416,001 2,229,312
Issued for cash 316,000 442,400
-------------------------
Balance, October 31, 1997 8,732,001 2,671,712
Issued for cash 125,000 131,250
-------------------------
Balance, October 31, 1998 and 1999 8,857,001 2,802,962
Issued for cash 275,965 572,976
-------------------------
Balance, October 31, 2000 9,132,966 $3,375,938
-------------------------
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
5. Share capital - continued
3,000,000 of the common shares issued during 1996 are held in
escrow with their release being subject to regulatory approval.
The release from escrow is based upon the policies of the British
Columbia Securities Commission and is based on cumulative cash
flow as defined during the ten-year period ending October 31,
2005.
The company established a stock option plan in 1999 to provide
options to directors, officers and employees for up to 1,771,400
common shares.
Directors, Officers and Common Share
Employee Stock Options Purchase Warrants
----------------------------------------------
Outstanding,
November 1, 1998
Number 830,000 ---
Exercise price $0.90 to July 2001 ---
Issued during 1999 ---
Number 90,000 vesting over
two years
Exercise price $0.85 to January 2004
Number 435,000 vesting over
two years
Exercise price $1.00 to April 2004 ---
Exercised during 2000
Number (25,898)
Exercise price 5,000 at $0.90
17,148 at $0.85
3,750 at $1.00
Issued during 2000
Number --- 250,067
Exercise price $2.55 to May 2001
$3.00 to November
2001
-------------- --------------
Outstanding,
October 31, 2000 1,329,102 250,067
See note 10.
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
6. Income taxes
The financial statements do not reflect the potential tax
reductions which may be available through the application of
losses of $2,511,000 carried forward against future years'
earnings otherwise subject to income taxes.
The losses expire as follows:
2001 $ 67,000
2002 322,000
2003 373,000
2004 248,000
2005 470,000
2006 598,000
2007 725,000
-----------
2,803,000
Losses attributable to expensing
software and systems development costs
for income tax purposes (292,000)
-----------
$2,511,000
-----------
7. Other information
a) Related party transactions
Included in the consolidated statement of operations and deficit
are the following transactions with officers and directors and
related individuals:
2000 1999 1998
------------------------------
Management fees $114,322 $61,308 $65,055
Rent $ 5,100 $ 5,100 $ 4,200
Research and development $ --- $16,041 $ ---
Software and systems development costs incurred during 2000
includes $213,652 (1999 - $112,292) paid to officers and
directors.
At October 31, 2000, $736 (1999 - $10,022) due to officers and
directors is included in accounts payable and accrued
liabilities.
Share issue costs for 1996 include $18,000 paid to an officer
and director.
Effective January 2, 2000 contract services agreements with
officers were amended to require the company to pay monthly
fees of $22,000 to December 2003 and additional amounts if not
renewed at that time.
The related party transactions are in the normal course of
operations and are recorded at the amount paid.
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
7. Other information - continued
b) Financial instruments
The company's financial instruments consist of cash, due from
brokers, and short-term investments, accounts receivable, and
accounts payable. It is management's opinion that the company
is not exposed to significant interest, currency or credit risks
arising from these financial instruments. The fair values of
these financial instruments approximate their carrying values,
unless otherwise noted.
c) Geographic information
Substantially all of the company's software and subscription
sales are to customers in the United States.
d) Foreign exchange gains and losses
Foreign exchange gains and losses arising because of changes in
the exchange rate between Canadian and United States currency
arose because of holding short-term investments. Trading income
(loss) includes foreign exchange losses of $29,378 in 1999 and
foreign exchange gains of $18,897 in 1998.
e) Loss per share
The net loss per share is calculated on the basis of the weighted
average number of shares outstanding during the year which for
2000 was 8,895,091 (1999 - 8,857,001; 1998 - 8,775,837).
f) Cash used in operating activities includes:
2000 1999 1998
Bank charges and interest paid $(2,850) $(1,818) $(2,407)
Interest received $15,604 $32,773 $45,329
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
8. Cumulative results of operations and cash flows
The company's consolidated revenue and expenses from
incorporation on November 30, 1993 to October 31, 2000 are:
Software and subscription sales $ 186,895
Trading income 40,920
Expenses
Advertising, marketing and promotion 454,390
Amortization 646,069
Bank charges 11,107
Capital taxes 11,507
Consulting 30,000
Directors' fees 15,000
Foreign exchange loss 7,686
Investor relations 162,703
Management fees 365,874
Office and miscellaneous 92,570
Professional fees 169,074
Rent 38,470
Research and development 266,020
Salaries and benefits 391,388
System testing 61,054
Telephone 34,448
Travel 94,149
----------
2,851,509
----------
(2,623,694)
Interest and other income 189,244
----------
Net loss for the period and deficit accumulated
during the development stage $(2,434,450)
----------
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
8. Cumulative results of operations and cash flows - continued
The company's cash flows from incorporation on November 30, 1993
to October 31, 2000 are:
Cash flows from (used in) operating
activities
Net loss for the period $(2,434,450)
Adjustments for:
Amortization 646,069
Foreign exchange loss 5,876
-----------
(1,782,505)
Net change in non-cash working capital
balances
Increase in accounts receivable (5,769)
Increase in prepaid expenses (5,476)
Increase in accounts payable and
accrued liabilities 17,447
-----------
Cash used in operating activities (1,776,303)
Cash flows used in investing activities
Software and system development (842,988)
Acquisitions of capital assets (140,373)
-----------
Cash used in investing activities (983,361)
Cash flows from (used in) financing activities
Share subscriptions received and
issuance of common shares 3,517,027
Share issue costs (141,089)
-----------
Cash from financing activities 3,375,938
Foreign exchange loss on cash held in
foreign currency (5,876)
-----------
Net increase in cash during the period $ 610,398
-----------
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
9. United States accounting principles
a) Balance sheet
There are no differences between United States generally accepted
accounting principles and Canadian generally accepted accounting
principles that would result in material changes to the balance
sheet.
b) Short-term investments
Under United States generally accepted accounting principles,
short-term investments are recorded at market value. At
October 31, 2000 and 1999, there were no differences between
the cost and the market value of the short-term investments.
c) Escrow shares
Under United States generally accepted accounting principles,
the 3,000,000 common shares held in escrow are considered
contingent shares because the conditions for issuance are not
currently met and will not be met by the mere passage of time.
When these shares are released from escrow, to the extent their
fair market value exceeds their issuance price, compensation
expense would be recognized by the company.
d) Share issue costs
Under United States generally accepted accounting principles,
share issue costs paid to employees are required to be expensed.
Accordingly, share issue costs of $18,000 paid to an officer and
director in 1996 would result in an increase in management fees
expense in 1996.
e) Cost of sales
Under United States generally accepted accounting principles
cost of sales are required to be separately disclosed. The
cost of sales for software sales and trading income is
comprised of:
2000 1999 1998
-----------------------------
Amortization of software and
systems development $174,417 $160,236 $125,142
Delivery 1,866 2,419 3,924
------------------------------
$176,283 $162,655 $129,066
f) Foreign currency translation
The application of the temporal method of foreign currency
translation has not resulted in material differences from
United States generally accepted accounting principles.
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
9. United States accounting principles - continued
g) Loss per share
Under United States generally accepted accounting principles,
the loss per share is calculated on the basis that the weighted
average number of shares outstanding during the year excludes
shares which are considered contingent shares. On that basis:
2000 1999 1998
-------------------------------
Weighted average number of
Sharesoutstanding 5,895,091 5,857,001 5,775,837
-------------------------------
Net loss per share $(.11) $(.11) $(.07)
h) Stock options
Under United States generally accepted accounting principles,
granting of stock options to directors, officers and employees
may give rise to a charge to income for compensation. The
company has prepared its financial statements in accordance
with APB 25 under which stock options are measured by the
intrinsic value method whereby directors, officers and
employee compensation cost is limited to the excess of the
quoted market price at date of grant over the option exercise
price. Since the exercise price equalled the quoted market price
at the dates the stock options were granted, there was no
compensation cost to be recognized. Had the company fully
adopted the recommendations of SFAS 123 and valued the options
using a fair market value method such as the Black-Scholes option
pricing model, there would be an increase in employee and
director compensation costs charged to income of $131,877 in
1999 ($NIL in 2000 and 1998). The weighted average grant date
fair market value of options granted in 1999 was determined using
the Black-Scholes option pricing model assuming a risk-free
interest rate of 6.50%; an option life of 5 years; an expected
volatility of 36% and that no dividends would be paid until after
the expiry date of the options.
For purposes of these calculations, the estimated fair value of
the options were amortized to expense over the vesting periods.
2000 1999 1998
--------------------------------
Net loss under United
States Generally accepted
accounting principles $(659,069) $(614,983) $(392,402)
Increase in directors',
officers', and employees'
compensation --- (131,877) ---
---------------------------------
Net loss if SFAS 123 adopted $(659,069) $(746,860) $(392,402)
---------------------------------
Net loss per share if SFAS
123 adopted $(.11) $(.13) $(.07)
TITAN TRADING ANALYTICS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
10. Subsequent events
The following events occurred subsequent to October 31, 2000:
a) The company issued 550,000 common shares and 550,000 share
purchase warrants for proceeds of $275,000. Each share purchase
warrant entitles the holder to acquire one common share at $0.61
until February 2003.
b) The company received subscriptions for 130,000 common shares
and 130,000 share purchase warrants for proceeds of $65,000.
Each share purchase warrant entitles the holder to acquire one
common share at $0.61 for a two year period. The issuance of the
common shares and share purchase warrants is subject to
regulatory approval.
c) The company amended existing directors, officers and employee
stock options for 1,250,000 common shares such that they are
exercisable at $0.61 per share to January 16, 2006. In addition,
the company granted additional stock options for 255,000 common
shares exercisable at $0.61 per share to January 16, 2006. These
actions are subject to shareholder approval.
ITEM 18. FINANCIAL STATEMENTS
Inapplicable
ITEM 19. EXHIBITS
None
Signature page follows.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Titan certifies that it meets all of
the requirements for filing on Form 20-F and has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
TITAN TRADING ANALYTICS INC.
(Registrant)
SIGNED "MICHAEL B. PAAUWE"
- ----------------------------
MICHAEL B. PAAUWE
PRESIDENT AND DIRECTOR
(Authorized Signatory)
DATE: March 31, 2001