FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities and Exchange Commission Washington, D.C. 20549
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended April 30, 2005
---------------
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______ to ________
Commission File Number: 0-25024
-------
TITAN TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEW MEXICO 85-0206831
----------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
3206 Candelaria Road NE, Albuquerque, NM 87107
----------------------------------------------
(Address of principal executive offices)
(505) 884-0272
--------------------------
(Issuer's telephone number)
N/A
----------------------------------------
(Former name, former address, and former
three-months, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section
13 of 15(d) of the Exchange Act during the past 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
The number of shares of the registrant's common stock outstanding as of
May 13, 2005 was:
No Par Value Common 43,303,558
------------------- ----------
Transitional Small Business Format: Yes No X
--- ---
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Titan Technologies, Inc.
BALANCE SHEET
April 30, 2005
(UNAUDITED)
ASSETS
Current Assets
Cash $ 50,358
Accounts receivable 10,000
-----------
Total Current Assets 60,358
-----------
Property and Equipment, at cost
Furniture and fixtures 3,077
Machinery 7,706
-----------
10,783
Less accumulated depreciation (10,409)
-----------
Net property and equipment 374
-----------
Other Assets 609
-----------
$ 61,341
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 727
Other accrued liabilities 476
-----------
Total Current Liabilities 1,203
-----------
Stockholders' Equity
Common stock - no par value; authorized, 50,000,000 shares;
43,320,558 shares issued and 43,303,558 shares outstanding 3,583,332
Treasury stock, 17,000 shares, at cost --
Accumulated (deficit) (3,523,194)
-----------
60,138
-----------
$ 61,341
===========
See the accompanying notes to the financial statements.
2
Titan Technologies, Inc.
STATEMENTS OF OPERATIONS
For The Three Months Ended April 30,
(UNAUDITED)
2005 2004
------------ ------------
REVENUES $ 180,000 $ --
------------ ------------
COSTS AND EXPENSES
General and administrative 65,192 63,012
Outside services 485 20,350
Depreciation 108 184
------------ ------------
65,785 83,546
------------ ------------
Income (loss) from operations 114,215 (83,546)
------------ ------------
Provision for income taxes -- --
------------ ------------
Net income (loss) $ 114,215 $ (83,546)
============ ============
Weighted average common shares outstanding -
Basic and diluted 43,202,715 40,562,308
============ ============
Basic and diluted income (loss) per
common share $ 0.00 $ (0.00)
============ ============
See the accompanying notes to the financial statements.
3
Titan Technologies, Inc.
STATEMENTS OF OPERATIONS
For The Nine Months Ended April 30,
(UNAUDITED)
2005 2004
------------ ------------
REVENUES $ 180,000 $ --
------------ ------------
COSTS AND EXPENSES
General and administrative 210,143 202,854
Outside services 6,690 39,340
Depreciation 322 550
------------ ------------
217,155 242,744
------------ ------------
(Loss) from operations (37,155) (242,744)
------------ ------------
Provision for income taxes -- --
------------ ------------
Net (loss) $ (37,155) $ (242,744)
============ ============
Weighted average common shares outstanding -
Basic and diluted 42,209,043 40,397,668
============ ============
Basic and diluted (loss) per
common share $ (0.00) $ (0.01)
============ ============
See the accompanying notes to the financial statements.
4
Titan Technologies, Inc.
STATEMENTS OF CASH FLOWS
For The Nine Months Ended April 30,
(UNAUDITED)
2005 2004
--------- ---------
Cash flows from operating activities
Net cash (used in) operating activities $ (224,061) $(167,634)
--------- ---------
Cash flows from investing activities
Net cash provided by investing activities -- --
--------- ---------
Cash flows from financing activities
Decrease in account payable - related party (25,000) --
Proceeds from sale of common stock 201,900 89,600
--------- ---------
Net cash provided by financing activities 176,900 89,600
--------- ---------
Net (decrease) in cash (47,161) (78,034)
Cash at beginning of period 97,519 111,879
--------- ---------
Cash at end of period $ 50,358 $ 33,845
========= =========
See the accompanying notes to the financial statements.
5
Titan Technologies, Inc.
Notes to Financial Statements
April 30, 2005
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information. They do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. Operating results for the periods
presented are not necessarily indicative of the results that may be expected for
the full year. For further information, refer to the financial statements and
notes thereto, included in the Company's Form 10-KSB as of and for the two years
ended July 31, 2004.
Note 2. Earnings Per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards ("SFAS") 128, "Earnings per Share." Basic
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares and dilutive common stock equivalents
outstanding. During the periods presented, common stock equivalents were not
considered, as their effect would be anti-dilutive.
Note 3. Going Concern
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature. For the
nine months ended April 30, 2005 the Company incurred a net loss of $37,155. In
addition the Company has no revenue producing operations.
The Company's ability to continue as a going concern is contingent upon its
ability to secure financing and attain profitable operations. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered in a highly
regulated industry.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
6
Note 4. Stockholders' Equity
During the nine months ended April 30, 2005 the company sold 2,223,750 shares of
common stock for cash proceeds aggregating $201,900.
During the nine months ended April 30, 2005 the Company issued 5,000 shares of
common stock in settlement of accounts payable in the amount of $1,800.
Effective October 30, 2004, the Company granted options to purchase 1,350,000
shares of its common stock to employees at an exercise price of $0.12 per share,
the fair market value of the stock at the date of the grant. The options are
exercisable over a five year period commencing on the grant date and continuing
through October 2009.
The effect of applying SFAS No. 123 pro forma net (loss) is not necessarily
representative of the effects on reported net income (loss) for future years due
to, among other things, the vesting period of the stock options and the fair
value of additional stock options in future years. The fair value of the options
granted is estimated at $.07 per option on the date of grant using the
Black-Scholes option pricing model with the following assumptions: no dividend
yield, volatility of 69%, a risk-free interest rate of 3%, and expected lives of
5 years from date of vesting.
For purposes of pro forma disclosure, the estimated fair value of the options is
charged to expense in the period that the options were granted. The Company's
pro forma information is as follows for the nine months ended April 30, 2005:
Pro forma net (loss) $(131,635)
=================
Pro forma (loss) per share -
Basic and diluted $ (.00)
=================
Note 5. Licensing Agreements
On February 20, 2003 the Company entered into a license agreement for technology
related to tire recycling covering the following territories; the State of
Texas, Austria, and Brazil. The Agreement called for payments aggregating
$1,000,000. In addition, the company was entitled to a production royalty of $4
per ton on tires processed.
On June 4, 2003 the terms of the agreement were modified. Under the terms of the
modified license agreement the Company was to receive payments aggregating
$2,000,000, $10,000 of which was received as of April 30, 2003; $990,000 of
which was to have been paid upon the licensor reaching certain construction
milestones; and $1,000,000 of which was to have been paid as production
royalties.
As an enticement to enter into the license agreement the Company was to grant
the licensee a 5-year stock purchase warrant for 1,000,000 shares of common
stock at $0.30 per share upon the licensee remitting a payment aggregating
$330,000 to the Company from achieving certain construction milestones. As of
the date of this report the construction milestones have not been met and the
warrant had not been granted.
The license agreement and stock purchase warrant dated February 20, 2003, as
modified on June 4, 2003, terminated by its terms due to non-performance by the
licensee.
7
On April 2, 2004 and again on October 30, 2004, the Company entered into an
Agreement with a group of investors, to provide for the construction of three
tire recycling plants in Mexico. The Company received a non-refundable deposit
of $180,000, which was recorded as deferred revenue at October 31, 2004. Under
the terms of the agreement, the Company was to receive a payment of $500,000.
$300,000 was to be credited to the licensing fee ($100,000 for each of the
three initial recycling plants) and the remaining $200,000 for an exclusive
license agreement for the Republic of Mexico. The original agreement was
verbally extended from September 30, 2004 to March 31, 2005, whereupon it was
terminated effective March 31, 2005 due to non-performance by the Licensee.
Accordingly, the previously deferred license fee associated with this agreement
has been recognized effective March 31, 2005.
Note 6. Subsequent Event
On May 17, 2005, the Company entered into a License Agreement with certain
individuals for an exclusive territory including all of North America, Central
America and South America. The License Agreement includes construction
deadlines, payments to Titan for the purchase of stock and technology license
fees, and ownership by Titan of a portion of each of the proposed plants.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
As a result of activities by management, general and administrative expenses
increased $7,289 to $210,143 for the nine months ended April 30, 2005 compared
to the nine months ended April 30, 2004 primarily due to the increase in legal
and accounting, and travel.
As a result of activities by management, general and administrative expenses
increased $2,180 to $65,1932 for the three months ended April 30, 2005 compared
to the three months ended April 30, 2004 primarily due to the increase in legal
and accounting, and travel.
As a result of activities of management, outside services expenses decreased
$32,650 to $6,690 for the nine months ended April 30, 2005 compared to the nine
months ended April 30, 2004.
As a result of activities of management, outside services expenses decreased
$19,865 to $485 for the three months ended April 30, 2005 compared to the three
months ended April 30, 2004.
With respect to existing plants constructed in Korea (not currently operating
because of financial failure of parent companies unrelated to the Company's
technology) and Taiwan (not currently operating because of the unavailability of
tires) using the Company's technology, no licensing fees or royalties have been
received by the Company. The Company is optimistic that royalties will be
received in the future from the operator/sub-licensee of the Taiwan plant, if it
should begin to operate again, but there can be no assurance that this will
occur or what the amounts will be.
In recent months, the Company has been concentrating its efforts on licensing
its technology in the United States because it believes that its tire recycling
technology has been proven at commercial scale through operation of the Asian
plants. Current discussions with prospective U.S. licensees involve payment of
an up-front licensing fee and on-going production royalties on a negotiated
basis, depending on the scope of the licensing agreement.
See Note 5 Licensing Agreements, above.
8
Financial Condition
- -------------------
The Company's liquidity decreased in the nine months ended April 30, 2005 as
cash decreased by $47,161 since July 31, 2004. Operations used $44,061 compared
to the same period of the prior year in which operations used $167,634. Proceeds
from the sale of common stock were $201,900 during the nine months ended April
30, 2005 compared to $89,600 for the same period in 2004.
Management has taken the following steps in the past and will consider taking
them again, if necessary, to address the financial and operating condition of
the Company which it believes will be sufficient to provide the Company with the
ability to continue in existence.
Improve marketing efforts for recycling plants and bring plastics recycling
technology to a marketable product.
Reduce operating and administrative expenses, and issue stock and notes payable
where possible for payment of expenses.
Defer payment of officer salaries if required.
The most recent Licensing Agreement signed May 17, 2005, if performed, will
provide sufficient cash to operate the Company.
Management believes that these steps, if taken, will allow the Registrant to
continue as a going concern together with results of on going efforts to raise
working capital through licensing agreements and joint ventures. However, there
are significant risks associated with the registrant's business development and
there can be no assurance that its efforts will be successful or that it will be
able to raise sufficient working capital to survive as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in this report is recorded, processed,
accumulated and reported to management, including the principal executive and
financial officer to allow timely decisions regarding the required disclosure.
As of the end of the period covered by this report, Company's management, with
the participation of its principal executive and financial officer, performed an
evaluation of the effectiveness of the design and operation of these disclosures
controls and procedures. The principal executive and financial officer has
concluded that such disclosure controls and procedures are effective in ensuring
that required information is disclosed in the Company's reports.
9
(b) Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the
evaluation date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
At the date of this report there are no known legal proceedings pending or
judgments against the Registrant or against any director or officer of the
Registrant in their capacity as such.
Item 2. Changes in Securities
During the nine months ended April 30, 2005 the Company sold common stock to
seventeen investors, who qualify as an accredited investors within the meaning
of Rule 501(a). The following table illustrates the dates of the transaction,
the number of shares and the proceeds from the sale.
Date Shares Issued Cash Received
----------- ------------- --------------
10/04/04 150,000 $ 15,000
11/19/04 187,500 15,000
12/07/04 100,000 10,000
12/20/04 75,000 6,000
12/22/04 400,000 50,000
01/03/05 87,500 7,000
01/07/05 348,750 27,900
02/03/05 25,000 2,000
02/08/05 800,000 64,000
03/22/05 50,000 5,000
----------- ----------
2,223,750 $ 201,900
=========== ==========
We relied on Section 4(2) of the Securities Act of 1933 for exemption from the
registration requirements of the Securities Act. Each investor was furnished
with information concerning our formation and operations, and had the
opportunity to verify the information supplied and ask questions of Management.
Additionally, we obtained a representation from each of the acquiring persons
representing the intent to acquire the securities for the purpose of investment
only, and not with a view toward the subsequent distribution thereof. Each of
the certificates representing the common stock carry a legend restricting
transfer of the securities represented.
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
10
Item 5. Other Information
Subsequent Events: Titan filed a Current Report on Form 8-K on May 23, 2005. See
Note 5 - Licensing Agreement, to the Financial Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed with this report:
31.1 Certification pursuant to Rule 13(a) or 15d-14(a) under the
Securities Exchange Act of 1934, as amended.
32 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
(b) Reports on Form 8-K. State whether any reports on Form 8-K have been
filed during the quarter for which this report is filed, listing the
items reported, any financial statements files, and the dates of any
such reports.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TITAN TECHNOLOGIES, INC.
Date June 15, 2005 /s/ Ronald L. Wilder
-----------------------------------------------------
Ronald L. Wilder, President, Chief Executive Officer,
Chief Financial Officer and Chief Accounting Officer.
11