AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON JANUARY 22, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended...
OR
[ ] 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 ________________________________________
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)
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)
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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)
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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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(Title of Class)
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: 8,857,001 as of December 31, 1998
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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 No X
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Indicate by check mark which financial statement item the
registrant has elected to follow.
Item 17 X Item 18
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Except as otherwise noted, all dollar amounts are presented in
Canadian dollars.
Exchange Rates: As at December 31, 1998, the median bidding
exchange rate of Canadian dollars into United States dollars was
$1.5375 Canadian to $1.00 United States.
<PAGE>
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TABLE OF CONTENTS
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Part I Page No
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Item 1. Description of Business................ 1 - 13
Introduction........................... 1
General Development of Business........ 1
Employees.............................. 1 - 2
1998-99 Fiscal Period Operational Plan. 2
Principal Products and Services........ 3 - 4
Principal Markets and Methods of
Distribution........................... 4 - 5
Competition and Competitive Strategy... 5
Intellectual Property Rights........... 5 - 6
Trading and Testing Activities......... 6
Breakdown of Total Sales and Costs To
Date................................... 7
Status of New Products or Services..... 7 - 8
Research and Development Policy........ 8
Distinctive and Special Characteristics
of Operation........................... 8 - 13
Item 2. Description of Property................ 13
Item 3. Legal Proceedings...................... 13
Item 4. Control of Registrant.................. 13 - 14
Item 5. Nature of Trading Market............... 14
Item 6. Exchange Controls and Other Limitations
Affecting Securities Holders........... 15
Item 7. Taxation............................... 16 - 17
Dividends.............................. 16
Capital Gains.......................... 17
Deemed Distributions on Death.......... 17
Item 8. Selected Financial Data................ 17 - 19
Summary of Financial Data.............. 18
Exchange Rates......................... 18 - 19
Item 9. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 19 - 26
Overview............................... 19 - 20
Results of Operations.................. 20 - 25
Liquidity and Capital Resources........ 25 - 26
Item 10. Directors and Officers of Registrant... 26 - 28
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TABLE OF CONTENTS
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Page No.
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Item 11. Compensation of Directors and Officers. 28
Item 12. Options to Purchase Securities from
Registrant or Subsidiaries............. 29
Item 13. Interest of Management in Certain
Transactions........................... 29 - 31
Material Transactions.................. 29 - 31
Indebtedness of Directors and Officers. 31
Part II
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Item 14. Description of Securities to be
Registered............................. 31 - 32
Part III
Item 15. Defaults Upon Senior Securities........ 33
Item 16. Changes in Securities and Changes in
Security for Registered Securities..... 33
Part IV
Item 17. Financial Statements................... 33
Item 18. Financial Statements................... 33
Item 19. Financial Statements and Exhibits...... 33 - 34
(a) Financial Statements..........
(b) Exhibits......................
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1
PART I
Item 1. Description of Business
INTRODUCTION
Titan Trading Analytics Inc. ("Registrant") is a financial trading
and software development company that commenced operations in May
1994 and is nearing the final stages of a multi-year software
research and development program. Registrant uses the software it
develops in its own trading activities and for providing training
services and seminars, in addition to offering them for sale or
license to customers. In this regard, the Registrant has developed
a series of software programs, including: (1) a financial trading
simulator called VirtualTrader ("VT"); (2)a series of real-time
proprietary pattern recognition trading indicators and stock index
trading systems for trading the S&P 500 Stock Index, the OEX 100
Stock Index, the Dow Jones Industrial Index and the NYSE Composite
Index called the TITAN Stock Index Trader series ("SIT"); and (3)a
portfolio of currency trading software programs for trading the
Japanese Yen, the Swiss Franc, the British Pound and the German
Mark called the TITAN World Currency Trader series ("WCT").
GENERAL DEVELOPMENT OF BUSINESS
Registrant 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." Registrant changed its name to "Titan Trading Analytics
Inc.," by filing of an amendment to its Articles on November 14,
1994. Registrant's principal business office is at 201 Selby
Street, Nanaimo, British Columbia, and its registered and records
office is located at 30 Front Street, Nanaimo, British Columbia.
Up to the period ended October 31, 1998, Registrant raised a total
of $2,808,962 in share capital through the sale of its Common
Shares, and has invested approximately $1,347,469 in the
development of its business.
On November 23, 1994, Registrant incorporated Titan Trading Corp.
("TTC") under the Company Act of the Province of British Columbia,
Canada, as its wholly owned subsidiary. TTC has no income,
expenses, assets or liabilities. It was set-up with a capital
contribution of $100, specifically and exclusively for the purpose
of acting as agent for Registrant in executing Registrant's in-
house stock and other trading activities.
EMPLOYEES
The following is a brief description of the Registrant's employees:
John Austin, was Titan's Manager of Marketing and Sales from
November 1995 to November 17, 1998, but was recently appointed to
the position of Manager of Trading Operations. Since graduating in
Business Administration from Utah State
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2
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 also involved in the
research and development of trading systems.
Between 1992 and 1994 he was engaged in the establishment,
development and sale of several private businesses. Mr. Austin is a
full-time employee of Registrant.
Greg Kennedy joined Registrant as a full-time Manager of Marketing
and Sales on November 17, 1998. Mr. Kennedy graduated from the
University of Alberta in 1989 with a business degree in Marketing
and Statistics. He gained stock trading experience during 8 years
in the investment business as a registered securities
representative for McDermid St.Lawrence Securities Ltd. Mr.
Kennedy is a full-time employee of Registrant.
Joe Shatzko joined Registrant as a full time stock trader effective
January 4, 1999. Mr Shatzko graduated with a Bachelor of Arts
degree from the University of British Columbia in 1989, and
obtained his Juris Doctor from California Western University Law
School in San Diego in 1994. He was called to the California Bar in
November 1994 and practiced law for one year in California before
entering the securities business as a securities broker in 1997
with McDermid St. Lawrence Securities Ltd. in British Columbia,
Canada. Joe Shatzko is director Paul Shatzko's son and brother of
director Robert Shatzko. Mr. Shatzko is a full-time employee of
Registrant.
For information regarding Registrant's officers and directors see
Item 10.
1998-99 FISCAL PERIOD OPERATIONAL PLAN
Registrant believes that the expanded discount brokerage business
in North America and the recent high growth of online internet
trading provides a growing marketplace in which to market and
commercialize its VT software and related training seminars.
In general, Registrant plans to demonstrate the performance of its
products and services by using them in actual trading for its own
account. This will not only generate income directly from trading,
it will help promote software and seminar sales. In November of
1998, Registrant signed a letter of intent for a planned joint
venture with an established brokerage operation on the West Coast
of Canada, Wolverton Securities Ltd.("Wolverton"), one of the
oldest securities firms in Canada having established its operation
in 1910.
Over the next year and a half, Registrant expects to spend
approximately $200,000 of its capital on continuing research and
development of its software products to enhance trading activities
and stay current in the market. In this on-going process,
Registrant further expects to spend an additional $25,000 on
computer equipment and systems. Moreover, Registrant expects to
hire 4 - 8 additional traders for its own activities and as part of
its planned joint venture with Wolverton.
Registrant does not at this time anticipate any other material
changes to employees, plant and equipment or other business items
over the next 18 months of operation.
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3
PRINCIPAL PRODUCTS AND SERVICES
Originally, Registrant planned to develop and offer a North
American pager based financial trading subscription service. This
plan was abandoned in late 1997 based on an assessment of new
competition from internet based financial subscription services.
During 1997 and 1998, Registrant developed and tested its
VirtualTrader software - an advanced training simulator for traders
that allows users to replay market data on a computer, bar by bar,
in any time frame, simulating a real time computer based financial
market data feed. This makes it possible for stock bond, currency
and commodity traders to easily test simple and complex trading
methods and money management strategies, without requiring any
software programming of mechanical trading rules, technical methods
or systems, and without risking any trading capital.
The VT program lets traders enter simulated trades on price charts,
enter market orders, stop loss orders, trade exit orders and track
trading performance, in a manner very similar to actual trading.
Registrant's management likens its VT trading software to a flight
training simulator for pilots, except VT is a training simulator
for traders. Traders can conveniently test trading strategies,
technical trading methods and different trading indicators, at a
lower cost, with more convenience, and with greater ease than
conventional methods of computerized back-testing.
In addition, Registrant uses VT software in the development of its
own trading systems and for in-house and joint venture training.
Applications of the VT software have been completed for various
futures trading applications, including currencies and stock
futures. More recently, the Registrant has used the VT software to
develop a technical analysis based approach to day-trading high
volume NASDAQ, AMEX and NYSE stocks. The Registrant's own in-house
application of the VT software along with a previously developed
stock index trading methodology known as the "neural tape reader",
have been combined to form an integrated method of day-trading
stocks that is now being used by the Registrant in its own trading
operations. This combination also forms the basis for Registrant's
plans to develop joint venture trading operations and offer
training seminars to stock day-traders in North America.
The trading methods, indicators and software developed by
Registrant in this manner, allow it (or its licensees) to
efficiently trade certain Stock Indexes and Currencies online,
real-time, intra-day and end-of-day. These developments center
around the application of Artificial Intelligence ("AI") to stock
index and currency trading, using neural networks and expert
systems. Neural networks are an AI based mathematical pattern
recognition technique that allows software to mimic the information
processing functions of humans by being able to "learn" to
recognize complex patterns through trial and error without being
programmed with specific, preconceived rules. AI based software
trading systems 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.
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4
All Registrant's software products, including those under
development, are designed to plug into and run under TradeStation
or SuperCharts, two of the industry's leading Windows-based
technical analysis and charting programs, developed and marketed
worldwide since late 1991 by Omega Research Inc. of Miami, Florida,
USA ("Omega"). TradeStation was the world's first real-time
Windows based charting program for analyzing stocks, stock index
futures, bonds, mutual funds, commodities and other securities.
SuperCharts is a related program for off-line technical market
analysis.
Both TradeStation and SuperCharts are widely used software programs
that allow users to develop, test and automate technical analysis
of the financial markets, and to run developed trading systems and
various standard and custom financial trading indicators in real-
time. The Registrant's software products have been designed to be
loaded into and to operate within the TradeStation and SuperCharts
software platforms and to take advantage of the automation and
charting features built into those products and their user-friendly
Windows operating system environment. This allows the Registrant to
implement and market its VT simulator software and related
indicators and trading systems within the established Omega
Research software programs.
Specifically, VT allows TradeStation software users to test methods
without having to acquire any programming knowledge of Omega's Easy
Language software language. The VT software also allows traders to
gain technical trading knowledge and experience, be formally
trained, and provides the use of conventional and custom technical
analysis techniques in a fully simulated real-time trading
environment.
PRINCIPAL MARKETS AND METHODS OF DISTRIBUTION
The Registrant's initial target market for its VirtualTrader
software and related training services is comprised of an estimated
40,000 to 50,000 existing PC users of the Windows-based SuperCharts
and TradeStation technical charting and financial analysis software
operating platforms. The Microsoft Windows operating system now
dominates the PC based software market worldwide. Although there
is a large number of financial software programs now available to
computerized investors and traders, users are increasingly
standardizing on Windows and a few proven Windows based technical
analysis and financial charting program platforms, such as
SuperCharts, TradeStation, and MetaStock for Windows(tm).
A broader market for VT training services is the existing and
growing market for online internet stock traders. Those online
stock traders who are not currently users of Omega charting program
platforms would have to invest US$395 (for SuperCharts) or US$2,395
(for TradeStation) to acquire them.
Omega, the manufacturer of SuperCharts and TradeStation software
offers marketing and other support for third-party product
development through the Omega Solution Provider Program (the
"Program"). There are approximately 150 software development and
service firms registered and active under this Program of which
Registrant is one. Products and services under this Program are
typically marketed by a combination of direct mail programs and
advertising in leading financial magazines. Omega presently
delivers the Program's Solution
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5
Provider advertisements by direct mail to its database of customers
on a quarterly basis in the form of the Omega Research magazine.
This provides a central advertising medium for TradeStation and
SuperCharts solution providers, and also allows users of the
software to become familiar with various new products and services
offered by Omega and Solution Providers.
More generally, Registrant plans to market to the online trader
market through: (1) an established internet web site presence, (2)
Omega's Solution Provider Program, (3) direct advertising in trade
periodicals, (4) direct seminars and mail campaigns, and (5) in-
house direct sales. In addition, Registrant plans to establish
wider channels of distribution with the support of distributors and
agents, and through a combination of its own internet web site and
third-party internet banner advertising.
The Registrant has installed a computerized sales lead tracking and
database management system capable of supporting telephone sales
and service support functions which it intends to utilize to manage
customer service direct mail campaigns, and marketing and investor
relations administration.
COMPETITION AND COMPETITIVE STRATEGY
The worldwide financial software and information services
marketplace is both crowded and intensely competitive, with strong
growth being reported in the online internet trading segment of the
marketplace. The emergence of huge volume discount brokerage
services and online internet trading with firms such as E-Trade and
Datek internet has changed the business model for stock traders
dramatically.
Registrant plans to compete based on the growing demand for online
trading by offering training services to private, institutional and
professional traders in the niche application offered by the
VirtualTrader software. These training services were first offered
in October 1998 following Registrant's own actual stock day-trading
test program in September 1998.
The marketplace for stock index trading software, day trading
software and related training services is also crowded and
intensely competitive. There is a wide variety of products
providing direct competition to the Registrant's software, and a
constant threat of new entrants into the market in all areas of the
financial software marketplace.
INTELLECTUAL PROPERTY RIGHTS
The Registrant's ability to compete effectively depends in part on
its ability to protect its core software technology. The
Registrant relies for such protection 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 the Registrant's products or
obtain and use its core
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6
software. The Registrant 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
such registration will be granted if applied for. Moreover,
certain aspects of the Registrant's software products are not
subject to intellectual property protection in law, and to the
extent such protection is available, its extent may differ from one
jurisdiction to another.
An application is in process in the United States for registration
of a VirtualTrader trademark. It should be noted, however, that the
initial response by the examiner of the application was to reject
the trademark as being merely descriptive. Nevertheless, Registrant
is currently proceeding with its application for registration, but
there can be no assurance the VirtualTrader trademark will be
allowed for registration in the US.
TRADING AND TESTING ACTIVITIES
Trading systems for stock indexes and currencies were installed in
April 1998, and a trading program has been carried out since that
time to prove the efficiency of Registrant's software technologies
under development.
In September 1998 the Registrant commenced testing online stock
day-trading activities over the internet as part of its planned
VirtualTrader training and trader development services program.
This trading has 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
VT trading simulator. Such trading 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. Trading risks are reduced in day-trading
by not holding open trading positions overnight and by using
standard stop loss management systems that limit losses on a trade
by trade basis to predetermined amounts. Trades typically last for
between one and four hours, with an exit from the process before or
at the end of the day.
A balance of $500,000 has been allocated out of existing working
capital as a reserve for the purposes of the Registrant's various
demonstration trading activities. Typically, 30% of the allocated
working capital is actually allocated to trading margin, the
balance is generally held as a reserve for ordinary course trading
draw-downs.
There is an ongoing risk of material losses from the demonstration
trading activities described above. While Registrant is
conservative in its trading practices and has established internal
risk management criteria to minimize trading losses, due to the
volatility associated with stock index, currency and stock day
trading activities, and the large draw-downs possible from such
trading, trading losses can and will occur in the ordinary course
of Registrant's trading activities.
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7
BREAKDOWN OF TOTAL SALES AND COSTS TO DATE
The development costs for Registrant's Software and Systems through
October 31, 1998, consist of the following:
Capital Assets: $ 192,122
Product and Development Costs: $ 604,722
Operating Costs*: $ 901,180
Total: $1,689,024
*Deficit less total amortization as of October 31, 1998.
Registrant's total revenue from sales and operations during the
past three fiscal years by category of activity was as follows:
FYE 10/98
Software Sales & Licensing $ 52,613
Trading Activities* $ 600
Interest and other Income $ 77,058
Total $130,271
FYE 10/97
Software Sales & Licensing $ 36,040
Trading Activities* $ 56,761
Interest and Other Income $ 58,581
Total $151,382
FYE 10/96
Software Sales & Licensing $ 21,213
Trading Activities* <$ 57,934>
Interest and other Income $ 35,290
Total <$ 1,431>
*including Demonstration and Testing
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.
STATUS OF NEW PRODUCTS OR SERVICES
Registrant is constantly refining and developing its software and
trading systems to maintain their integrity and marketability. As
a result there is and
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8
will be an on-going research and development effort with associated
costs to the company. Registrant anticipates spending
approximately $200,000 over the next 18 months on such research and
development efforts. Moreover, new products are constantly being
investigated and sought within the general area of the current
products developed by Registrant. No new products, however, other
than those described herein have been formally announced to the
public.
RESEARCH AND DEVELOPMENT POLICY
Registrant'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. Registrant 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.
As noted above, Registrant'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 are the
Registrant's best estimate of the total amounts spent by it on both
Systems and Software Development and Research and Development
during each of the past three fiscal years:
FYE 10/98 $202,200
FYE 10/97 $279,552
FYE 10/96 $137,371
DISTINCTIVE AND SPECIAL CHARACTERISTICS OF OPERATION
In the North American financial software industry it is a
regulatory requirement and practice, to which the Registrant
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.
Registrant's sales procedures provide for the inclusion in product
license agreements, manuals and promotional literature of a
Disclosure Statement in the form prescribed by the United States
Commodities and Futures Trading Commission ("CFTC"). In addition,
Registrant'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 Registrant's software products or related user
manuals, represents, or is intended to represent, the furnishing of
financial advice by the Registrant, its officers, agents or
employees. Users are warned that the pattern recognition software
and services merely provide educational, technical trading
information, neural
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9
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.
The factors set-forth below, while not exhaustive, are believed to
be important in that they may have a material impact upon the
Registrant'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 Registrant. Note
that unpredictable or unknown factors, not discussed herein, could
also have a material adverse effects on Registrant's actual
financial and other results.
1. Short operating history and likelihood of continuing operating
losses. Registrant 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.
Registrant's initial products and planned services are just
beginning to become available for market release and sale.
Registrant 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. Registrant'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
such additional financing will be available on acceptable terms, or
at all.
2. Early stage of development and no assurance of market acceptance
of the Registrant's new software products or services. Registrant's
existing and planned software products and the planned
VirtualTrader based training service are in an early stage of
development. Although a small level of sales have been effected
and there is an established market for such products and planned
services, there can be no assurance of market acceptance of
Registrant's products and services.
3. Dependence on the timely development and release of new software
products and services. Achievement of Registrant's objectives, and
its future operating results, are dependent upon completion of its
software marketing and new training service plans, and on the
success of such planned new software products and services. Timing
in this regard is crucial, as other similar products or services
that reach the market prior to Registrant's product may be able to
obtain and maintain business that would have otherwise gone to
Registrant. There can be no assurance that Registrant's timing and
business plan will be sufficiently successful to achieve sustained
profitability in its operations.
4. Dependence on key personnel. Registrant depends on its key
officers, including its founder and President, Michael Buchnanan
Paauwe, and its Vice President and Manager of Software Development,
Michael Gossland, and chief stock trader and trainer John Austin.
Although Registrant has key man life policies in place for Paauwe
and Gossland, loss of their ongoing services, would have a
materially adverse effect on future operating profits and
prospects.
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10
5. Dependence on in-house direct sales and the lack of any existing
established indirect sales and distribution channels. The
Registrant plans to market its software and services through direct
sales efforts. The Registrant has recently appointed new marketing
and sales staff but does not presently have in-house staffing of
experienced sales and marketing personnel. There can be no
assurance that the Registrant will be able to attract and retain
the necessary personnel as and when required. The Registrant 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 such channels cost
effectively.
6. Extensive competition and rapid technological change. The PC
based financial analysis and trading software and training markets
are intensely competitive and characterized by the frequent entry
of new competitors and introductions of new software programs,
features and technical innovations. Although Registrant's software
products are technically advanced and run under industry leading
Windows based technical charting and analysis programs, numerous
competitors are already established in this marketplace. The
Registrant will seek to establish its market position through the
sale of fully tested and high quality trading software, and by
making its trading solutions software and training services
available at reasonable cost to customers through its direct and
indirect marketing channels. However, there can be no assurance
that the Registrant will be successful in this effort, or, if
successful, that Registrant will have the resources to sustain any
early growth or market penetration it may achieve.
There is a large number of established financial trading and
trading software companies. Many are larger than Registrant, 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 Registrant achieves significant success in penetrating
the financial trading software and training business, financially
stronger companies may seek to enter this market and compete for
market share.
The market for online trading of stocks and commodities, the
provision of financial market data, various financial software
products 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, is 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 business plan, Registrant's
software will be used by Registrant to trade stocks, stock indexes,
futures contracts and international currencies. Due to the high
degree of market volatility for these trading items, as well as the
use of margin and leverage associated with such trading, there
exists the possibility of significant trading losses that could
have a materially adverse effect on Registrant's operating results
and financial condition.
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11
8. Past software product performance is no assurance of future
performance. Any trading operation involving the use of leverage is
considered highly risky even when conducted by experienced
practitioners. The historic results of Registrant's simulated
trading performance are not as accurate and dependable a measure of
profitability as actual trading results, and past performance
cannot be guaranteed or necessarily assumed to continue in the
future. Potential investors must expect trading losses in actual
trading operations and potentially wide fluctuations in future
quarter to quarter financial performance.
9. Limited intellectual property protection and physical security.
Registrant depends on its ability to protect its core proprietary
software technology. In this regard, Registrant relies on such
protection 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 Registrant's products or obtain and use its
proprietary technology. To date, Registrant has not sought 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 such registration will be granted if applied for.
Also, certain aspects of the Registrant'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 Registrant's proprietary technology and its
ability to effectively compete.
10. Possible high degree of volatility in the future price of
Registrant's stock. Factors such as news announcements on technical
developments, innovations by the Registrant, 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
Registrant's shares. Certain potentially large changes in the
trading price of its shares may be unrelated to the performance of
Registrant or its future prospects. In addition, investors in
Registrant's shares may lose their entire investment if Registrant
fails in its business.
12. Control by existing officers and directors. Registrant's
executive officers and directors currently own or control an
aggregate of 3,066,401 of the issued and outstanding shares of the
company which represents approximately 34.6% of the outstanding
shares as at December 31, 1998. As a result, these shareholders
will continue to be able to control the composition of Registrant'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
Registrant. Under certain circumstances such a limitation may be
considered adverse to the interests of other shareholders.
<PAGE>
12
13. Dependence on financial industry. Registrant is affected by
general economic and regulatory conditions affecting national and
international financial markets. A worldwide economic downturn may
have an adverse effect on Registrant's business, operating results
and/or financial condition.
14. Possible changes in derivatives market and the regulatory
environment. The Registrant's software provides pattern
recognition and market timing information related to stock indexes,
currencies and derivatives, including both futures and options.
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 software
or related services may have the effect of imposing new and
unexpected costs on Registrant and this may affect future expenses
and operating results. There remains an ongoing risk of an adverse
impact of possible new governmental regulations on Registrant's
business.
15. Technological change. The financial trading software
marketplace is characterized by constant and rapid technological
change. There is no assurance that the Registrant 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 Registrant cannot continue to compete on a technical
basis, this will likely have a materially adverse effect on its
operating results and financial condition.
16. Potential product liability claims. The Registrant does not
maintain product liability insurance against bugs or defects in the
general performance of its software products. In accordance with
standard industry practice, established by Omega Research Inc., the
software license agreements entered into on the sale or license of
its products provides that all these risks are borne solely and
entirely by the customer. There can be no assurance that such
provisions will protect the Registrant from all potential product
liability claims in all markets in which it may sell its products
or offer its services.
17. Strategic marketing dependence on expected future growth in key
industry suppliers. Registrant's software products, and its
strategic marketing and product development plans, depend to a
large extent on the continued existence of a serviceable installed
customer base of TradeStation and SuperCharts software products and
customers. If the market leadership now enjoyed by these products,
or their production and development were to change materially, or
technical support for them were to be discontinued or withdrawn,
that would have a material and adverse effect on Registrant's
operating results and financial condition.
18. Year 2000 potential negative business impact and risks. The
Year 2000 computer problem may have an adverse and unpredictable
affect on Registrant's operations due to its dependence on Omega
Research Inc.'s TradeStation product as the platform upon which its
main software products operate. While Omega
<PAGE>
13
Research Inc. has disclosed plans and intentions to make its
TradeStation software fully Year 2000 compliant, and appears
technically and financially able to do so, to date compliance has
not been achieved in its main software product, TradeStation. If
Omega were to fail to make its main products Year 2000 compliant,
there would be a materially adverse impact on Registrants sales and
business operations that would likely result in increased losses.
In addition, Registrant depends on third-party financial data
vendors of various market exchanges to supply real-time data in
order to carry out its trading operations. To the extent that many
such data suppliers may be adversely affected by the Year 2000
compliance issue, this will also have the effect of limiting
Registrant's actual trading operations, and may adversely affect
its financial results.
ITEM 2. Description of Property
Registrant owns no real property or real property rights.
Registrant's principal business office is a rented facility located
at 201 Selby Street, Nanaimo, British Columbia, Canada V9R 2R2.
Due to the set-up of Registrant's operations many business
functions are undertaken from other confidential, remote locations
not owned by the company.
Registrant's proprietary financial trading software products and
technologies generally fall into five categories:
1. TradeStation based proprietary stock index trading systems and
software.
2. TradeStation based proprietary world currency trading systems
and software.
3. VirtualTrader product software written in Microsoft Visual Basic
4.0 and Omega's Easy Language software.
4. Proprietary software testing and trading system development
tools.
5. Internet web-site software for the Company's web-site.
ITEM 3. Legal Proceedings
Registrant is not currently a party to any material legal
proceedings; nor, to Registrant knowledge, are there any legal
proceeding pending or threatened of which Registrant would be a
party, or any of its property or assets are likely to be subject.
ITEM 4. Control of Registrant
As far as known to Registrant, and except as disclosed herein,
Registrant is not directly or indirectly owned or controlled by any
other corporation or by any foreign government.
The following table sets forth as of December 31, 1998 information
with respect to record ownership of (a) any person or company who
is known to Registrant to be the owner of more than 10% of any
class of the Registrant's voting securities, and (b) the total
amount of any class of the Registrant's voting securities owned by
the officers and directors as a group.
<PAGE>
14
- -------------------------------------------------------------------
(1) (2) (3) (4)
Title or Identity of Person Amount Owned Percent
Class or Group
- -------------------------------------------------------------------
Common Shares TTN Escrow Capital Corp. 3,000,000 34%
without par value
Common Shares New Equities, Inc. 1,435,600 16.2%
without par value
Common Shares Directors and Officers 3,066,401 34.6%
without par value as a Group
As of the date hereof, there are no arrangements known to
Registrant, the operation of which may at a subsequent date result
in a change in control of the Registrant.
ITEM 5. Nature of Trading Market
Registrant's shares are listed and traded on the Vancouver Stock
Exchange in British Columbia, Canada. Registrant's shares are not
currently trading on any United States stock exchange nor on the
over-the-counter market, and, accordingly, there is currently no
public market for Registrant's common stock in the United States.
There can be no assurance that any such market will develop after
the effective date of this Registration Statement.
Trading in Registrant's shares commenced in Canada on July 24,
1996. The following table sets-forth the high and low sales prices
for Registrant's shares for the quarterly periods shown, expressed
in Canadian Dollars.
- -------------------------------------------------------------------
(1) (2) (3)
Year and Month High Low
- -------------------------------------------------------------------
August 1, 1998 - October 31, 1998 1.48 1.20
May 1, 1998 - July 31, 1998 1.55 1.41
February 1, 1998 - April 30, 1998 1.49 1.30
November 1, 1997 - January 31, 1998 1.44 1.25
August 1, 1997 - October 31, 1997 1.60 1.20
May 1, 1997 - July 31, 1997 1.35 1.05
February 1, 1997 - April 30, 1997 1.60 1.30
November 1, 1996 - January 31, 1997 1.85 1.43
As at December 31, 1998 there are 45,000 common shares representing
.5 % of Registrant's outstanding shares held of record by one
person residing in the United States. Registrant estimates that
there may be a total of four or five beneficial holders of its
common shares holding approximately 150,000 shares of its stock in
the United States, held in both registered and unregistered form.
<PAGE>
15
ITEM 6. Exchange Controls and Other Limitations Affecting Security
Holders
Except as discussed in Item 7 as to taxes and withholding, the
Registrant 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 Registrant's shares.
Registrant 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 Registrant.
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, such
investor is required to obtain approval if the asset value of the
corporation is greater than $178 million Cdn. If the asset value of
the corporation at the time of the proposed acquisition is less
than $178 million Cdn., 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 Registrant is deemed to be held by United States
investors, and if Registrant then wished to make investments of
greater than $178 million Cdn. in Canada, it would need
governmental approval.
Certain transactions involving Registrant'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 the Company, 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
Registrant consult professional advisors as to whether and how the
Investment Canada Act might apply.
<PAGE>
16
ITEM 7. Taxation
The following paragraphs set forth certain Canadian income tax
considerations in connection with the ownership of Registrant's
shares. 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
by US stockholders. There may also be relevant state, or local tax
considerations which are not discussed here.
Registrant's management believes that the following general summary
fairly describes the principal federal income tax consequences
applicable to a holder of Registrant'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 thereunder (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 herein.
DIVIDENDS
Dividends paid or credited on Registrant'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 Registrant) 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.
<PAGE>
17
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 Registrant 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 Registrant.
Where a resident of the United States meets the 25% ownership tests
described above, the person's capital gains realized on the
disposition of Registrant's shares will be subject to Canadian
income tax if the value of Registrant'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 Registrant fails the value of assets test, that person's
capital gains realized on the disposition of Registrant'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 Registrant (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 years ended October 31, 1995 to the nine months ended July 31,
1998 inclusive and related notes included therein, and should be
read in conjunction with such financial statements and with the
information appearing under the heading "Item 9 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
<PAGE>
18
Reference is made to Note 9 of Registrant's October 31, 1997
financial statement included herewith for a discussion of the
material differences between Canadian GAAP and US GAAP, and their
effects on Registrant's financial statements. To date, Registrant
has not generated sufficient cash flow from operations to fund
ongoing operational requirements and cash commitments. The Company
has financed its operations principally through the sale of its
equity securities and its ability to continue operations is
dependent on the ability of Registrant 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
- -------------------------------------------------------------------
9 Months ended Fiscal Years ended October 31
July 31, 1998 1997 1996 1995
- -------------------------------------------------------------------
Revenue $ 97,739 $151,382 $56,503 $20,655
Expenses $344,415 $293,615 $291,805 $336,058
Net Loss $246,676 $142,233 $235,302 $315,403
Net Loss Per Share(1)
Canadian GAAP $(.03) $(.02) $(.03) $(.78)
US GAAP $(.04) $(.03) $(.05) $(.78)
Net Working $1,455,493 $1,672,725 $1,579,827 $902,720
Capital
Total Assets $1,846,256 $1,924,638 $1,776,793 $977,238
Long Term $NIL $NIL $NIL $NIL
Obligations
__________________________________________________________________
(1) Calculated based on the average weighted number of shares
outstanding on a non-diluted basis.
To date, Registrant has paid no dividends on its shares, and does
not anticipate doing so in the foreseeable future. The declaration
of dividends on Registrant's Common Shares is within the discretion
of Registrant's board of directors and will depend upon, among
other factors, earnings, capital requirements, and the operating
and financial condition of Registrant.
EXCHANGE RATES
As at December 31, 1998, the median bidding exchange rate of
Canadian dollars into United States dollars was $1.5375 Canadian to
$1.00 United States.
The following table sets forth, for the periods and dates
indicated, certain
information concerning exchange rates of United States and Canadian
dollars. All
the figures shown represent noon buying rates for cable transfers
in New York
City, certified for customs purposes by the Federal Reserve Bank of
New York. The average rate means the average of the exchange rates
on the last day of each month during a year. The source of this
data is the Federal Reserve Bulletin and Digest.
<PAGE>
19
Period Period End Average High Low
- ------- ---------- ------- ------- -------
(CDN$/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
ITEM 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis should be read in conjunction
with Registrant's consolidated financial statements and notes
thereto appearing under Item 17 - "Financial Statements".
Registrant'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,
1997 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.
Note 9 to the October 31, 1997 financial statements of Registrant
included herein discusses some of the material differences between
Canadian GAAP and US GAAP, and their effect on Registrant'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 excludes shares which are
subject to escrow restrictions, unless the conditions for issuance
are currently met or will be met by the mere passage of time.
Registrant has 3,000,000 escrow 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
resulting differences in the loss per share calculations are as set
forth 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. In the case of Registrant,
US GAAP results in an increase to compensation totaling $6,350, as
described more fully in Note 9 to the October 31, 1997 financial
statements of Registrant. 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 ".
OVERVIEW
Registrant is a financial software development and trading company
engaged in the development of proprietary software based financial
trading systems and technologies with the aim of developing such
proprietary software technologies to a stage where they can be
exploited at a profit. Existing software products
<PAGE>
20
have been test marketed up to the present stage of development and
are also being used internally in Registrant's own operations with
the objective of eventually establishing consistent revenues from
profitable trading operations, software sales and related training
service revenues. The recent 1998 application of Registrant's
VirtualTrader software to stock day-trading and the potential to
apply this technology in a growing internet based electronic
trading environment is the main focus of Registrant's current
development efforts and marketing plans. Management believes that
its existing trading systems and software technologies can be
profitably exploited with a sustained marketing and sales effort
and by the formation of appropriate strategic business alliances
and software license agreements with established firms.
Prior to the current fiscal year and during 1998, Registrant's
operations have been primarily directed at developing trading
systems software with the VT software product, related market
testing and introductory sales, in addition to establishing
Registrant's online trading systems in late April 1998.
A new full-time Manager of Marketing and Sales was hired in
December 1998 following Titan's November 1998 public announcement
of the signing of a letter of intent to form a trading group for
stock day-trading with a registered Vancouver based brokerage,
Wolverton Securities Ltd.
RESULTS OF OPERATIONS
Stock index and currencies trading revenues have started to be more
consistent since formally establishing the online trading systems
in late April 1998, although they remain small, based on limited
trading activity, with only a few contracts being traded per
signal. Trading income by its nature remains subject to periodic
draw-down on a quarter by quarter basis in the ordinary course of
Registrant's trading business. However, the overall net trading
results since May 1, 1998 are positive and are expected to reduce
overall losses in operations in the current fiscal period and
contribute to profitability in future.
As Registrant's marketing strategy of using VT software to train
stock day-traders and establish revenues from training to
supplement license fees, only started with the first clients in
October 1998, there are no reportable results of these efforts.
However, management believes these activities will enhance VT
software sales and increase overall company revenues.
In the period August 1, 1998 to October 31, 1998, Registrant
completed development and software testing of its application of
the VT software to day-trading quality high volume US big board
stocks. The testing consisted of completing hundreds of simulated
day-trades inside Registrant's VT software, as well as executing
approximately 150 test day-trades over the internet with a US
discount brokerage firm. During this same period, Registrant
trained two traders with Wolverton Securities Ltd. using the VT
software and technical trading methods developed by Registrant.
Initial trading results on the first actual trades executed by
Wolverton following the training have exceeded expectations,
indicating a potential for profitability in a scaled-up trading
operation. Plans are now underway to expand the training program
to additional traders and to finalize business terms of the joint
venture stock day-trading
<PAGE>
21
operation between Registrant and Wolverton. The expected formal
start date of this joint venture trading operation is sometime in
the first calendar quarter of 1999.
A positive independent product review of the VT software was
published in the September 1998 issue of Technical Analysis of
Stocks and Commodities magazine. This increased exposure for the
product in the US market and internationally has initially produced
a more effective response rate than direct mail campaigns to date.
This indicates that greater coverage in the form of third-party
publicity will be needed to improve VT software sales in future.
As a result of Registrant's limited sales and trading activity,
only recently begun, inflation and changing prices have not had a
material effect on the Registrant's net sales, revenues and income
from continuing operations.
Nine months Ended July 31, 1998 compared to FYE October 31, 1997
At the end of this last nine month reporting period Registrant had
cash balances of $1,504,057 and net working capital of $1,455,493,
compared to cash balances of $1,667,530 and net working capital of
$1,672,725 at October 31, 1997. Total assets dropped to $1,846,256
from $1,924,638 at October 31, 1997. This reflects a net loss in
operations for the nine period ended July 31, 1998 of $246,676
compared to a net loss of $142,233 in the year ended October 31,
1997. The increased loss over the same period last year is the
result of increased expenditures in a number of expense categories,
including increased outlays for salaries, directors' fees,
management fees, marketing and promotion expenses, and investor
relations expenses.
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"). First time
management bonuses of $20,000 were paid to each of Gossland and
Paauwe and directors fees of $5000 were paid to outside directors.
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$8000 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 WCT
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
Registrant, promotion to offshore investment groups of the WCT
systems, presentations of Registrant'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 VT development, and ongoing monthly
market research and reporting.
During this period Registrant licensed its WCT trading software for
a period of twelve months to an international money manager based
in London. This resulted
<PAGE>
22
in the securing of an independent testimonial as to the
profitability of the WCT software when applied to currency hedging
in international stock portfolio management following use by this
client. This testimonial will form the basis for future European
software marketing efforts in the current and future fiscal
periods.
The cash loss in operations for the period was $189,939 compared to
$57,936 in the fiscal year ended October 31, 1997. Expenditures on
software and systems development during the period were $158,543.
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 simulations capability of the VT software and the costs of
solving related market data conversion problems necessary to
facilitate that application.
The main development project on the VT stock day-trading software
application neared completion during this period. Trading income
improved over prior period testing results because the position
trading systems went formally online in April of 1998. Trading
gains in this quarter of $45,872 offset prior quarter demonstration
and testing expenses. Actual trading operations have started to
contribute to operations and are expected to be scaled-up further
in future periods. In sum, the better contribution to operations
from trading during this period is the result of having
substantially completed trading system development of the stock
index trading systems effective in April 1998.
Cash balances were substantially maintained as the result of the
exercise of $131,250 in broker warrants during the quarter ending
April 1998. This contributed funds to increase expenditures on
travel, promotion and investor relations. Travel, marketing and
promotion expenditures increased as the result of efforts to
promote Registrant's software and systems technology to new
potential US Canadian and European institutional clients.
A first stage direct mail campaign on the VT software product was
initiated during the second quarter with limited results.
Management believes it will take at least another two quarters of
marketing activities before it can properly assess the
effectiveness of advertising and marketing programs on sales of the
VirtualTrader software.
The focus of further applications and software development work on
the VirtualTrader recently 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.
Applications work neared completion during the final quarter ending
October 1998, and as noted above, actual online system testing
started in September 1998. Management believes that if
profitability in this internet based electronic stock trading
application of VT can be established in actual stock day trading
operations, the market for the VT product will rise materially in
the future.
<PAGE>
23
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. Registrant 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 compared to a net loss of
$235,302 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. 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. Registrant remained
in an early stage of product and system development and market
testing during this period. The development stage continued as the
focus of our resources shifted to exploitation of the VT technology
for in-house trading operations work.
The loss for the fiscal period ended October 31, 1997 was $142,233
or $.02 per share. This compares to a loss of $235,302 or $.03 per
share in the year ended October 31, 1996. See Note 9 in the notes
to the financial statements for a reconciliation of Canadian GAAP
to US GAAP.
Fifty Nine percent (59%) of the operating loss for FYE 1997 was
from amortization expense, which is 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. Registrant 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. 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
<PAGE>
24
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, Registrant'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 ("SIT") development, and produced the first demo software
versions of this product.
A number of fees connected with the filing of Registrant'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,
Registrant 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, regulatory rules in the United States were changed
by the Commodities Futures Trading Commission ("CFTC") relating to
the sale of commodities, futures and options trading systems. New
regulatory enforcement measures were undertaken by the CFTC at that
time. Legal proceedings were commenced in the US against certain
unregistered and allegedly unscrupulous vendors of such trading
systems. As a result of these actions and the related adverse
publicity, customer demand dropped immediately, and the market
environment quickly became uncertain. Demand from prospective
purchasers dropped and as the result of the negative impact on the
software market for any kind of trading systems, Registrant
cancelled plans to market its SIT series software, incorporating it
instead as a component of the VT software development. This action
had the effect of reducing expected software sales revenues in the
short run until the development of the new VT simulator training
software could be completed.
FYE ended October 31, 1995 Compared to FYE October 31, 1994
Total assets as of October 31, 1995 amounted to $977,238, with cash
and cash equivalents of $873,552 and net working capital of
$902,720.
During the fiscal year ended October 31, 1995, Registrant engaged
in a full-time program of software research and development
activities, making expenditures of $39,786 on equipment and
intellectual property rights and $161,442 on software research and
development. General and administrative costs for the year ended
October 31, 1995 totaled $129,364; $34,160 was spent on management
fees and $30,000 on marketing consulting fees. The marketing
consulting fees were paid
<PAGE>
25
to an associate of a director over a 10 month period ended October
31, 1995, to complete a preliminary assessment of the institutional
and private trader market segments, as well as analyze information
technology developments and trends in the financial industry. A
total of $96,600 was paid to Michael Paauwe and Michael Gossland
during this period pursuant to service contracts, including
management fees of $32,600, research and development expenses of
$57,500, rental expenses of $4,200 and office costs of $2,300.
Registrant completed initial development of a portfolio of
international currency trading models - the WCT series software,
and also developed proprietary standalone software to install AI
based neural network financial pattern recognition indicators and
systems into TradeStation and SuperCharts. Development work
continued on AI based financial pattern recognition applications on
stock indexes, including development of a new and more accurate
neural network for end-of-day trend indication on the S&P 500 stock
index, as part of the SIT series software under development.
Share capital issuance of common shares during the period resulted
in net proceeds of $1,168,900. Commencing in August 1995, after
Registrant had completed development of its initial test
advertising and marketing concept and the development of a
trademark and logo design, it began a three month test marketing
program of its first software product, an international currency
trading program, at a cost of $29,000. Six hundred sales leads were
generated from several countries in response to the test marketing
program, indicating far more interest in Europe than in North
America for the WCT system.
Initial market test versions of the product were shipped in
September. A full time marketing and sales manager commenced
employment in November to start the process of implementing
Registrant's marketing and sales programs.
Five Month Initial Operating Period ended October 31, 1994
Registrant's founder, Michael Paauwe, commenced operations on
behalf of Registrant in May 1994. In the period from May 1994 to
October 31, 1994, Registrant was engaged in the initial formulation
of its capital structure, technical and product development plans
and initial business strategy. It acquired computer and office
equipment for $27,103 and incurred $43,376 in software and systems
research and development expenditures. Total expenses during this
period amounted to $75,058. This included $40,000 in fees paid to
Michael Paauwe and Michael Gossland as independent contractors for
management and research and development services.
LIQUIDITY AND CAPITAL RESOURCES
At the end of this last nine month reporting period Registrant had
cash balances of $1,504,057 and net working capital of $1,455,493,
compared to cash balances of $1,667,530 and net working capital of
$1,672,725 as of October 31, 1997. Total assets dropped to
$1,846,256 from $1,924,638 at October 31, 1997. By reference to the
working capital resources and liquidity risks outlined above,
management believes Registrant has sufficient current liquidity
working capital resources to sustain the operations in accordance
with its present business plans for several additional quarters
without requiring additional financing.
<PAGE>
26
As Registrant does not as yet have general earnings from its
operations and does not currently have an existing credit facility,
Registrant's liquidity in the future depends on its ability to
either generate such earnings in the future, access the capital
markets or enter into joint venture agreements. The ability of
Registrant 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 and trading operations. No
specific arrangements or agreements have been made for any such
financing at this time.
Registrant does not know of any other trends, demands, commitments,
events or uncertainties that will result in, or that are reasonably
likely to result in, Registrant's liquidity either materially
increasing or decreasing at present or in the foreseeable future.
Registrant has not entered into any 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, and does
not anticipate any significant capital purchases other than
discussed above.
Registrant is not aware of any material trends, favorable or
unfavorable, in its capital resources other than as discussed
herein, and does not anticipate any material changes in the mix of
the relative costs of such resources.
ITEM 10 Directors and Officers of Registrant
The following table sets forth, as of December 31, 1998, the names
of the directors and executive officers of the Company, 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. There are no
other family relationships between any director or executive
officer and any other director or executive officer.
- -------------------------------------------------------------------
Name and municipality Position with Registrant Commencement of
of residence Service
- -------------------------------------------------------------------
Michael B. Paauwe President & Director May 1, 1994
Nanaimo, British
Columbia
Michael Gossland Vice President, Secretary, September 1, 1994
Nanaimo, British Manager of Software Dev.
Columbia & Director
Paul Shatzko Director December 1, 1994
West Vancouver,
British Columbia
<PAGE>
27
Robert Shatzko Director April 15, 1996
San Mateo, CA
Jennifer Gee Chief Financial Officer December 1, 1994
Nanaimo, British
Columbia
Michael B. Paauwe, the founder, President and a director of
Registrant, 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
Registrant under a contract services agreement. Mr. Paauwe devotes
the majority of his time to the business and affairs of the
Registrant.
Michael Gossland, M. Sc., P. Eng., is the Vice President,
Secretary, a Director, and the Manager of Software Development of
Registrant. 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 Registrant.
Paul Shatzko, M.D. a radiologist who formerly practiced in North
and West Vancouver, British Columbia, is a director of the
Registrant. 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. 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 publicly traded companies, and devotes such
time to the affairs of the Registrant as is necessary to perform
his functions as a director.
<PAGE>
28
Robert Shatzko, a member of the California State Bar and a trial
lawyer, is a director of the Registrant. 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 such time to the affairs of the Registrant as is necessary
to perform his functions as a director.
Jennifer Gee, Titan's Chief Financial Officer, is an independent
business and marketing consultant in Nanaimo, British Columbia.
From 1984 until May 1994, Ms. Gee was the financial controller for
TNT. She has worked for Titan in a similar capacity on a part time
basis since June 1994, and will continue to do so until such time
as the Registrant's requirements necessitate the appointment of a
full-time Chief Financial Officer.
ITEM 11. Compensation of Directors and Officers
During the nine months ended July 31, 1998 and the fiscal year
ended October 31, 1997, the following executive officers received
compensation from Registrant 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 9 Months ending July 1998 FYE
October 1997
- -------------------------------------------------------------------
Michael B. Paauwe, $85,667 $72,000
President
Michael Gossland,
vice president, secretary, $82,750 $72,000
manager of software
development
Jennifer Gee $6,526 $7,387
chief financial officer
Total Compensation $174,943 $151,387
to all Directors &
Officers
Registrant 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 two fiscal
years.
Registrant does not compensate directors who are also officers of
the company for acting as directors, and Registrant has not set-up
or paid out on any pension, retirement or similar plans for
directors or officers.
<PAGE>
29
ITEM 12. Options to Purchase Securities from Registrant and
Subsidiaries
OPTIONS
Certain of the directors and officers, as well as employees who are
not directors or officers of Registrant, have been granted
incentive stock options to purchase Common Shares of Registrant at
various prices. As of December 1, 1998 the following total number
of Company stock options are outstanding:
- -------------------------------------------------------------------
Holders Number of Shares Exercise Price Expiration Date
- -------------------------------------------------------------------
Directors and 785,000 $0.90 July 2001
officers as a group Common Shares
Employees who are 75,000 $0.90 July 2001
not directors or Common Shares
officers
WARRANTS
There are no outstanding warrants to purchase Registrant's common
shares as of October 28, 1998; nor were any outstanding at the end
of the last reporting period on July 31, 1998.
ITEM 13. Interest of Management in Certain Transactions
MATERIAL TRANSACTIONS
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
systems research and product development contract services to
Registrant 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.
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
Registrant 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.
Except for the description of the services to be performed
thereunder, the written agreements between Registrant and Paauwe
and the Registrant 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
<PAGE>
30
monthly fee to be agreed from time to time (the "Fee"), but not
less than $6,000, plus reimbursement of expenses. Each of the
Agreements also provides for the payment of an annual bonus (the
"Bonus") of $4,500. Registrant may terminate these Services
Agreements at any time on 30 days written notice. If it terminates
otherwise than for a material and substantial failure to perform
the agreed services by Paauwe or Gossland, as the case may be, the
Services Agreements provide for payment of a lump sum equal to 12
times the Fee then in effect plus any unpaid Bonus (the "Lump Sum")
if terminated during the initial term, and an amount to be
negotiated, but not less than the Lump Sum, if terminated
thereafter. The latter provision applies as well to a failure by
Registrant to renew the Services Agreement. If terminated for a
material and substantial breach of their obligations, Paauwe and
Gossland, as the case may be, have a 30 day period in which to cure
the breach. The Services Agreements may be terminated by Paauwe
and Gossland, as the case may be, on 120 days written notice to the
Registrant. The Services Agreements also contain confidentiality
provisions, and provisions for the arbitration of disputes.
Pursuant to an agreement dated September 15, 1995 (the "Gossland
Agreement"), Michael Gossland (officer and director) assigned to
Registrant all of his right, title and interest in all software
copyrights, product trademarks and related assets in respect of
NeuralEdge and Neural$. 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 Registrant 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
Registrant pursuant to the Gossland Agreement.
In June 1994, Registrant 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.
Registrant 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.
In addition, during the fiscal year ended October 31, 1995,
Registrant 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 Registrant's business
plan.
In 1998 the, Services Agreements for Michael Gossland and Michael
Paauwe were both re-negotiated with the board of directors of
Registrant and amended
<PAGE>
31
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 $6000 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.
During the nine months ended July 31, 1998 Registrant paid
US$70,000 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 the WCT systems 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 VT
development; and (9) ongoing monthly 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 three years, there has been no recorded
indebtedness of any of the directors or officers, or any associates
of the directors or officers, to the Registrant.
PART II
ITEM 14. Description of Securities to be Registered
The class of capital stock of Registrant being registered hereby is
the Registrant's common shares.
The issued and outstanding share capital of the Registrant is
summarized as follows:
The authorized capital of Registrant consists of 100,000,000 common
shares without par value. As of October 28, 1998, 8,857,001 common
shares were issued and outstanding. If all outstanding options to
purchase common shares were exercised, the issued common share
capital of Registrant would be 9,687,001 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,
<PAGE>
32
and to participate ratably in any distribution of property or
assets on the liquidation, winding up or other dissolution of
Registrant. The common shares have no pre-emptive or conversion
rights. Registrant 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 such resolution. No
such purchase shall be made if Registrant is insolvent at the time
of the proposed purchase or if the proposed purchase would render
Registrant insolvent. Unless otherwise permitted under The Company
Act, Registrant 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 Registrant.
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 Registrant, 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.
The Escrow Shares are subject to the direction or determination of
the Vancouver Stock Exchange. The Escrow Agreement provides that
the Escrow Shares may not be traded in, dealt with or released
without the consent of the Vancouver Stock Exchange. Any Escrow
Shares not released from escrow by June 21, 2006 will be cancelled
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 Registrant's
cumulative cash flow from operations as disclosed in its audited
financial statements from time to time. In short, Policy 3-07
requires that Registrant 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 Vancouver Stock
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 Registrant on a winding
up or dissolution.
<PAGE>
33
PART III
ITEM 15. Defaults upon Senior Securities
Registrant 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
Registrant's securities.
PART IV
ITEM 17. Financial statements
The financial statements of Registrant 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, 1997.
See "Item 19. Financial Statements and Exhibits" for a list of
Registrant's Financial Statements that follow.
ITEM 18. Financial Statements
Inapplicable
Item 19. Financial Statements and Exhibits
INDEX
1. FINANCIAL STATEMENTS
(a) Interim un-audited management prepared financial
statements for the nine months ending July 31,1998, including:
- Consolidated Interim Balance Sheet
- Consolidated Interim Statement of Operations and Deficit
- Consolidated Interim Statement of Changes in Financial
Position
- Supplemental Information
(b) Audited Financial Statements of the Registrant as of
October 31, 1997, including:
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Changes in Financial Position
- Notes to Consolidated Financial Statements
<PAGE>
34
(c) Audited Financial Statements of the Registrant as of
October 31,1996, including:
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Changes in Financial Position
- Notes to Consolidated Financial Statements
(d) Audited Financial Statements of the Registrant as of
October 31,1995, including:
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Changes in Financial Position
- Notes to Consolidated Financial Statements
(e) Consent letter from Collins Barrow in regard to the
inclusion of Independent Auditors' Reports in the Registration
Statement.
2. EXHIBITS
(a) Certificate of Incorporation of KBK No. 24 Ventures Ltd.
(b) Certificate of Change of Name of KBK No. 24 Ventures Ltd.
to Titan Trading Analytics Inc.
(c) Articles of Registrant
(d) Current Contract Services Agreement between Registrant
and Michael B. Paauwe and Associates dated January 1, 1998
(e) Current Contract Services Agreement between Registrant
and Michael Gossland and Associates dated January 1, 1998
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant 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)
"MICHAEL B. PAAUWE"
MICHAEL B. PAAUWE
PRESIDENT AND DIRECTOR
(Authorized Signatory)
DATE: January 22, 1999
TITAN TRADING ANALYTICS INC.
SCHEDULE A
FINANCIAL INFORMATION
PERIOD ENDED JULY 31,1998
PREPARED BY MANAGEMENT WITHOUT AUDIT
<PAGE>
TITAN TRADING ANALYTICS INC.
(Incorporated under the laws of British Columbia)
CONSOLIDATED INTERIM BALANCE SHEET
JULY 31, 1998
ASSETS
Current Assets 1998 1997
Cash and short-term investments $ 1,504,057 $ 1,635,565
Accounts receivable 7,910 0
Prepaid expenses 1,492 12,888
----------- -----------
1,513,459 1,648,453
Software and systems development
(net) 294,267 199,332
Capital assets (net) 38,530 47,510
----------- -----------
$ 1,846,256 $ 1,895,295
----------- -----------
LIABILITIES
Current Liabilities
Accounts payable and
accrued liabilities $ 57,966 $ 6,477
----------- -----------
SHAREHOLDERS' EQUITY
Share capital $ 2,802,962 $ 2,671,712
Deficit (1,014,672) (782,894)
----------- -----------
$ 1,846,256 $ 1,895,295
----------- -----------
Approved by the Directors
/S/ Michael Paauwe Director
/S/ Michael Gossland Director
PREPARED BY MANAGEMENT WITHOUT AUDIT
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS AND
DEFICIT
FOR THE PERIOD FROM NOVEMBER 1, 1997 TO JULY 31,1998
Revenue
1998 1997
Software Sales $ 41,106 $ 19,788
Interest and Other Income 56,633 41,351
-------- --------
$ 97,739 $ 61,139
-------- --------
Expenses
Advertising, marketing
and promotion 70,198 16,441
Amortization 56,737 35,782
Bank charges 1,853 1,160
Capital tax 6,157 4,850
Directors' fees 5,000 0
Demonstration and testing 1,440 43,069
Investor relations 48,344 0
Management fees 48,960 34,591
Office 8,023 9,496
Professional fees 13,599 8,751
Research & development 3,516 0
Regulatory fees 7,066 8,762
Rent 3,588 4,513
Salaries and benefits 48,033 35,197
Telephone 2,855 3,562
Travel 19,046 12,095
-------- -------
344,415 218,269
-------- -------
Net loss for the period $ (246,676) $ (157,130)
Deficit beginning of period (767,996) (625,764)
-------- -------
Deficit end of period $(1,014,672) $ (782,894)
-------- -------
PREPARED BY MANAGEMENT WITHOUT AUDIT
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN FINANCIAL
POSITION FOR THE PERIOD FROM NOVEMBER 1, 1997 TO JULY 31,1998
1998 1997
Cash from operating activities
Net loss for the period $ (246,676) $ (157,130)
Item not involving cash
Amortization 56,737 35,782
---------- ----------
(189,939) (121,348)
Net change in non-cash working
capital balances 53,759 (17,174)
---------- ----------
(136,180) (138,522)
---------- ----------
Cash used in investing activities (158,543) (118,902)
---------- ----------
Cash from financing activities
Share subscriptions received and
issuance of Common Shares 131,250 302,400
---------- ----------
Increase (decrease) in cash
during the period (163,473) 44,976
Cash and short-term investments,
beginning of the period 1,667,530 1,590,589
---------- ----------
Cash and short-term investments,
end of period $1,504,057 1,635,565
---------- ----------
PREPARED BY MANAGEMENT WITHOUT AUDIT
<PAGE>
TITAN TRADING ANALYTICS INC.
SCHEDULE B
SUPPLEMENTARY INFORMATION
PERIOD ENDED JULY 31,1998
<PAGE>
TITAN TRADING ANALYTICS INC.
Form 61 - Schedule B - Supplementary Information
For the Third Quarter ended July 31, 1998
1. For the current year to date:
Expenditures to parties not dealing at arm's length:
Management Fees of $208,418 as follows:
Management contracts:
1. Michael B. Paauwe & Associates - $105,668
2. Michael Gossland & Associates - S102,750
These amounts, which include management bonuses, are included
in management fees, as well as in capitalized amounts of software
and systems during the period, reflected under capital expenditures
and subject to amortization.
Outside Directors' Fees: 1. Paul Shatzko - $2,500
2. Robert Shatzko - $2,500
2. Securities issued for the quarter under review: NONE
3. As at end of quarter:
a) Authorized share capital 100,000,000 common shares
Issued share capital 8,857,001 common shares
Reserved for future issuance 830,000 common shares
Fully diluted 9,687,001 common shares
b) Summary of options and warrants
1) Options granted February 1, 1997
Name No. of Shares Per Shares Expiry Date
---- ------------- ---------- -----------
Michael B. Paauwe 195,000 $.90 July 2001
Michael Gossland 195,000 $.90 July 2001
Paul Shatzko 240,000 $.90 July 2001
Robert Shatzko 100,000 $.90 July 2001
John Austin 75,000 $.90 July 2001
Jennifer Gee 25,000 $.90 July 2001
-------
830,000
c) Escrow shares -
TTN Escrow Capital Corp. 3,000,000 common shares
d) Directors: Michael Paauwe
Michael Gossland
Paul Shatzko
Robert Shatzko
TITAN TRADING ANALYTICS INC.
CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 1997
<PAGE>
Collins
Barrow
Chartered Accountants
Suite 800
1030 West Georgia Street
Vancouver, Canada
V6E 3B9
AUDITORS' REPORT
To the Directors of
Titan Trading Analytics Inc.
We have audited the consolidated balance sheets of Titan Trading
Analytics Inc. as at October 31, 1997 and 1996 and the consolidated
statements of operations and deficit and changes in financial
position for each of the years in the three year period ended
October 31, 1997. 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, 1997 and 1996 and the results of its
operations and changes in financial position for each of the years
in the three year period ended October 31, 1997 in accordance with
generally accepted accounting principles in Canada. As required by
the Company Act (B.C.), we report that, in our opinion, these
principles have been applied on a consistent basis.
/S/ Collins
Barrow
CHARTERED
ACCOUNTANTS
Vancouver, Canada
January 15, 1998
A member of
Moores
Rowland
Collins Barrow
An association of independent is a Partnership of
accounting firms throughout the world. Incorporated Professionals
<PAGE>
TITAN TRADING ANALYTICS INC.
(Incorporated under the laws of British Columbia)
CONSOLIDATED BALANCE SHEET
OCTOBER 31,1997
ASSETS 1997 1996
------ ---- ----
Current assets
Cash and short-term investments $ 1,667,530 $ 1,590,589
Accounts receivable 22,634 9,244
Prepaid expenses 3,483 13,238
----------- -----------
1,693,647 1,613,071
Software and systems development
(note 3) 185,571 107,105
Capital assets (note 4) 45,420 56,617
----------- -----------
LIABILITIES
Current liabilities
Accounts payable and accrued
Liabilities $ 20,922 $ 33,244
----------- -----------
SHAREHOLDERS' EQUITY
Share subscriptions received --- 140,000
Share capital (note 5) 2,671,712 2,229,312
Deficit (767,996) (625,763)
----------- -----------
1,903,716 1,743,549
----------- -----------
$ 1,924,638 $ 1,776,793
----------- -----------
Approved by the Directors
/S/ Michael Paauwe, Director
/S/ Michael Gossland, Director
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED OCTOBER 31,1997
1997 1996 1995
---- ---- ----
Revenue
Software sales $ 36,040 $ 21,213 $ 11,165
Demonstration and testing 56,761 -- --
Interest and other income 58,581 35,290 9,490
-------- -------- --------
151,382 56,503 20,655
-------- -------- --------
Expenses
Advertising, marketing
and promotion 48,157 65,159 45,252
Amortization 84,297 37,228 11,104
Bank charges 1,452 1,811 768
Capital taxes 4,850 -- --
Consulting fees -- -- 30,000
Demonstration and testing -- 57,934 6,633
Management fees 44,887 34,364 34,160
Office 15,005 10,118 12,735
Professional fees 13,424 8,669 12,587
Rent 5,900 6,330 5,715
Research and development
(note 6) 3,483 7,436 154,809
Salaries and benefits 47,282 43,750 9,977
Telephone 4,533 5,060 3,434
Travel 20,345 13,946 8,884
-------- -------- --------
293,615 291,805 336,058
-------- -------- --------
Net loss for the year (142,233) (235,302) (315,403)
Deficit, beginning of the year (625,763) (390,461) (75,058)
-------- -------- --------
Deficit, end of the year $ (767,996) $(625,763) $ (390,461)
-------- -------- --------
Net loss per share for the year
(note 8(c)) $(.02) $(.03) $(.78)
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED OCTOBER 31,1997
1997 1996 1995
-------- -------- --------
Cash from (used in) operating activities
Net loss for the year $(142,233) $(235,302) $(315,403)
Item not involving cash
Amortization 84,297 37,228 11,104
-------- -------- --------
(57,936) (198,074) (304,299)
Net change in non-cash
working capital (15,957) 39,930 (32,020)
-------- -------- --------
(73,893) (158,144) (336,319)
-------- -------- --------
Cash used in investing activities
Acquisition of capital assets (5,432) (19,295) (39,786)
Software and system development(146,134) (129,935) --
-------- -------- --------
(151,566) (149,230) (39,786)
-------- -------- --------
Cash from (used in) financing activities
Share subscriptions received and
issuance of common shares 302,400 1,165,500 1,168,900
Share issue costs -- (141,089) --
-------- -------- --------
302,400 1,024,411 1,168,900
-------- -------- --------
Increase in cash during the year 76,941 717,037 792,795
Cash and short-term investments,
beginning of the year 1,590,589 873,552 80,757
-------- -------- --------
Cash and short-term investments,
end of the year $ 1,667,530 $ 1,590,589 $ 873,552
-------- -------- --------
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. General information
The company develops and markets financial software systems.
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) Research and development - Research costs are expensed when
incurred. Development costs are expensed when incurred unless a
commercial product is developed for which adequate resources exist
to market the product in which case they are capitalized as
software and systems development.
c) Software and systems development - Software and systems
development costs are amortized on a straight line basis over a
three year period from the commencement of production.
d) Capital assets - Capital assets are recorded at cost and
amortized at the following annual rates:
Computer equipment - 30% declining balance
Copyrights and trademarks - 20% straight line
Furniture and equipment - 20% declining balance
e) 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.
3. Software and systems development 1997 1996
---- ----
Cost $ 276,069 $ 129,935
Accumulated amortization (90,498)
(22,830)
--------- ---------
$ 185,571 $ 107,105
--------- ---------
Software and system development cost is comprised of:
1997 1996
---- ----
Computer services $ 18,495 $ 5,800
Contract services 200,750 94,250
Other 34,909 15,585
Rent 7,200 4,200
Salaries 14,715 10,100
--------- ---------
$ 276,069 $ 129,935
--------- ---------
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
4. Capital assets
1997
-------------------------------------
Accumulated
Cost Amortization Net
-------- -------------- --------
Computer equipment $ 71,675 $ 38,378 $ 33,297
Copyrights and trademarks 11,836 4,184 7,652
Furniture and equipment 7,012 2,541 4,471
-------- -------------- --------
$ 90,523 $ 45,103 $ 45,420
-------- -------------- --------
1996
-------------------------------------
Accumulated
Cost Amortization Net
-------- -------------- --------
Computer equipment $ 68,376 $ 25,829 $ 42,547
Copyrights and trademarks 10,000 2,000 8,000
Furniture and equipment 7,808 1,738 6,070
-------- -------------- --------
$ 86,184 $ 29,567 $ 56,617
-------- -------------- --------
5. Share capital
1997 1996
---- ----
Authorized
100,000,000 common shares,
without par value
Issued 8,732,001 (1996 - 8,416,001)
common shares $ 2,671,712 $ 2,229,312
----------- -----------
During the year the company issued 316,000 common shares for
$442,400 pursuant to share subscriptions received in 1996.
During 1996 the company issued 4,302,000 common shares for
$1,055,500.
The following options and warrants remain outstanding:
Directors, officers and employee stock options for 830,000
common shares exercisable at $.90 per share to July 2001.
Warrants for 125,000 common shares exercisable at $1.05 per
share to June 1998.
Warrants for 158,000 common shares exercisable at $1.75 per
share to June 1998.
3,000,000 of the common shares issued during 1996 are held in
escrow with their release being subject to regulatory approval.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
6. Research and development
1997 1996 1995
---- ---- ----
Computer services and software $ -- $ -- $ 10,709
Contract services -- 6,250 115,000
Other 3,483 1,186 19,500
Product research -- -- 6,100
Rent -- -- 3,500
-------- ------- ---------
$ 3,483 $ 7,436 $ 154,809
7. Income taxes
The financial statements do not reflect the potential tax
reductions which may be available through the application of losses
of $806,000 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
----------
1,010,000
Losses attributable to timing differences
(204,000)
----------
$ 806,000
----------
8. Other information
a) Related party transactions
Included in the statement of operations and deficit are the
following transactions with officers and directors and related
individuals:
1997 1996 1995
---- ---- ----
Expenses
Consulting fees $ -- $ -- $ 3,000
Management fees $ 44,887 $ 34,032 $ 32,600
Office $ -- $ -- $ 2,300
Rent $ 4,200 $ 4,200 $ 4,200
Research and development $ -- $ 6,250 $ 57,500
Software and systems development costs incurred during the year
includes $109,500 (1996 - $98,450) of amounts paid to officers and
directors.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31,1997
8. Other information - continued
a) Related party transactions - continued
At October 31, 1997 $6,093 (1996 - $3,515) 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.
The company has contract services agreements with officers,
requiring the company to pay monthly fees of $14,917 to November
1998 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.
b) Financial instruments
The company's financial instruments consist of cash and short-term
investments, accounts receivable, and accounts payable. Unless
otherwise noted, it is management's opinion that the company is not
exposed to significant interest, currency or credit risks arising
from these financial instruments. A significant portion of the
company's cash and short-term investments are denominated in United
States dollars. Therefore, the realization of these amounts into
Canadian dollars can fluctuate based on foreign exchange rates. The
fair values of these financial instruments approximate their
carrying values, unless otherwise noted.
c) Loss per share
The loss per share is calculated on the basis of the weighted
average number of shares outstanding during the year.
9. United States accounting principles
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 subject to escrow restrictions unless the conditions for
issuance are currently met or will be met by the mere passage time.
1997 1996 1995
Net loss per share under United States
generally accepted accounting principles $(.03) $(.05) $(.78)
------ ------ ------
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31,1997
9. United States accounting principles - continued
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 equaled
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 $Nil
in 1997, $6,350 in 1996 and $Nil in 1995.
The weighted average grant date fair market value of options
granted was determined using the Black-Scholes option pricing model
assuming a risk-free interest rate of 6.25%; an option life of 5
years; an expected volatility of 13% and that no dividends would be
paid until after the expiry date of the options.
1997 1996 1995
---- ---- ----
Net loss under United States
generally accepted accounting
policy $ (142,233) $ (235,302) $ (315,403)
Increase in directors',
officers' and employees'
compensation -- 6,350 --
----------- ----------- -----------
$ (142,233) $ (241,652) $ (315,403)
----------- ----------- -----------
Net loss per share if SFAS
123 adopted $(.03) $(.05) $(.78)
------ ------ ------
TITAN TRADING ANALYTICS INC.
CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31,1996
<PAGE>
Collins
Barrow
Chartered Accountants
Suite 800
1030 West Georgia Street
Vancouver, Canada
V6E 3B9
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, 1996 and 1995 and the consolidated
statements of operations and deficit and changes in financial
position for the years then ended. 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, 1996 and 1995 and the results of its
operations and changes in financial position for the years then
ended in accordance with generally accepted accounting principles.
As required by the Company Act (B.C.), we report that, in our
opinion, these principles have been applied on a consistent basis.
/S/ Collins Barrow
CHARTERED ACCOUNTANTS
Vancouver, Canada
January 23, 1997
A member of
Moores
Rowland Collins Barrow
An association of independent is a Partnership of
accounting firms throughout the world Incorporated Professionals
<PAGE>
TITAN TRADING ANALYTICS INC.
(Incorporated under the laws of British Columbia)
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1996
ASSETS 1996 1995
------ ---- ----
Current assets
Cash and short-term investments $ 1,590,589 $ 873,552
Accounts receivable 9,244 12,681
Prepaid expenses 13,238 39,285
----------- ---------
1,613,071 925,518
----------- ---------
Software and systems development (note 3) 107,105 --
Capital assets (note 4) 56,617 51,720
----------- ---------
$ 1,776,793 $ 997,238
----------- ---------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 33,244 $ 22,798
----------- ---------
SHAREHOLDERS' EQUITY
Share subscriptions received (note 5) 140,000 30,000
Share capital (note 5) 2,229,312 1,314,901
Deficit (625,763) (390,461)
----------- ---------
1,743,549 954,440
----------- ---------
$ 1,776,793 $ 977,238
----------- ---------
Approved by the Directors
/S/ Michael Gossland, Director
/S/ Michael Paauwe, Director
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED OCTOBER 31,1996
1996 1995
---- ----
Revenue
Software sales $ 21,213 $ 11,165
Interest and other income 35,290 9,490
-------- --------
56,503 20,655
-------- --------
Expenses
Advertising, marketing and promotion 65,159 45,252
Amortization 37,228 11,104
Bank charges 1,811 768
Consulting fees -- 30,000
Demonstration and testing 57,934 6,633
Management fees 34,364 34,160
Office 10,118 12,735
Professional fees 8,669 12,587
Rent 6,330 5,715
Research and development (note 6) 7,436 154,809
Salaries and benefits 43,750 9,977
Telephone 5,060 3,434
Travel 13,946 8,884
--------- ---------
291,805 336,058
--------- ---------
Net loss for the year (235,302) (315,403)
Deficit, beginning of the year (390,461) (75,058)
--------- ---------
Deficit, end of the year $ (625,763) $ (390,461)
--------- ---------
Net loss per share for the year (note 8) $(.03) $(.78)
------ ------
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED OCTOBER 31,1996
1996 1995
---- ----
Cash from operating activities
Net loss for the year $ (235,302) $ (315,403)
Item not involving cash
Amortization 37,228 11,104
--------- ---------
(198,074) (304,299)
Net change in non-cash working
capital balances 39,930 (32,020)
--------- ---------
(158,144) (336,319)
--------- ---------
Cash used in investing activities
Acquisition of capital assets (19,295) (39,786)
Software and system development (129,935) --
--------- ---------
(149,230) (39,786)
--------- ---------
Cash from financing activities
Share subscriptions received and
issuance of common shares 1,165,500 1,168,900
Share issue costs (141,089) --
--------- ---------
1,024,411 1,168,900
--------- ---------
Increase in cash during the year 717,037 792,795
Cash and short-term investments,
beginning of the year 873,552 80,757
--------- ---------
Cash and short-term investments,
end of the year $ 1,590,589 $ 873,552
--------- ---------
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
1. General information
The company develops and markets financial software systems.
2. Significant accounting policies
a) Consolidation - The financial statements include the
accounts of the company and of its wholly-owned subsidiary, Titan
Trading Corp.
b) Research and development - Research costs are expensed when
incurred. Development costs are expensed when incurred unless a
commercial product is developed for which adequate resources exist
to market the product in which case they are capitalized as
software and systems development.
c) Software and systems development - Software and systems
development costs are amortized on a straight line basis over a
three year period from the commencement of production.
d) 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
Copyrights and trademarks - 20% straight line
e) 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.
3. Software and systems development
1996 1995
---- ----
Cost $ 129,935 $ --
Accumulated amortization (22,830) --
--------- ----------
$ 107,105 $ --
--------- ----------
Software and system development cost is comprised of:
Computer services $ 5,800
Contract services 94,250
Other 15,585
Rent 4,200
Salaries 10,100
---------
$ 129,935
---------
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31,1996
4. Capital assets
1996
--------------------------------------
Accumulated
Cost Amortization Net
-------- ------------ ---------
Computer equipment $ 68,376 $ 25,829 $ 42,547
Copyrights and trademarks 10,000 2,000 8,000
Furniture and equipment 7,808 1,738 6,070
-------- -------- ---------
$ 86,184 $ 29,567 $ 56,617
-------- -------- ---------
1995
--------------------------------------
Accumulated
Cost Amortization Net
-------- ------------ ---------
Computer equipment $ 52,643 $ 14,345 $ 38,298
Copyrights and trademarks 10,000 -- 10,000
Furniture and equipment 4,246 824 3,422
-------- ------------ ---------
$ 66,889 $ 15,169 $ 51,720
-------- ------------ ---------
5. Share capital
1996 1995
Authorized ---- ----
100,000,000 common shares,
without par value
Issued
8,416,001 (1995 - 4,114,001)
common shares $ 2,229,312 $ 1,314,901
----------- -----------
During the year the company issued 1,302,000 common shares for
$1,025,500 and issued 3,000,000 common shares for $30,000 pursuant
to share subscriptions received in 1995.
During 1995 the company issued 4,114,000 common shares for
$1,314,900.
The following options and warrants remain outstanding:
Directors, officers and employee stock options for 830,000
common shares exercisable at $.90 per share to July 2001.
Warrants for 125,000 common shares exercisable at $.90 per
share to July 1997 and $1.05 per share to July 1998.
The 3,000,000 common shares issued during the year are held in
escrow with their release being subject to regulatory approval.
<PAGE>
TITAN TRADING ANALYTTCS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
5. Share capital - continued
Subsequent to October 31, 1996 the company issued 316,000 common
shares and 158,000 share purchase warrants for $442,400. The share
purchase warrants are exercisable at a price of $1.50 per share to
December 1997 and at $1.75 per share to June 1998.
$140,000 of the share subscriptions was received prior to October
31, 1996.
6. Research and development
1996 1995
---- -----
Computer services and software $ -- $ 10,709
Contract services 6,250 115,000
Other 1,186 19,500
Product research -- 6,100
Rent -- 3,500
------- ---------
$ 7,436 $ 154,809
------- ---------
7. Income taxes
The financial statements do not reflect the potential tax
reductions which may be available through the application of losses
of $597,000 carried forward against future years' earnings
otherwise subject to income taxes.
The losses expire as follows:
2001 $ 65,000
2002 314,000
2003 218,000
--------
$597,000
--------
8. Loss per share
The loss per share is calculated on the basis of the weighted
average number of shares outstanding during the year.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
9. Related party transactions
Included in the statement of operations and deficit are the
following transactions with officers and directors and related
individuals:
1996 1995
---- ----
Expenses
Consulting fees $ -- $ 30,000
Management fees $ 34,032 $ 32,600
Office $ -- $ 2,300
Rent $ 4,200 $ 4,200
Research and development $ 6,250 $ 57,500
Software and systems development includes $98,450 of amounts paid
to officers and directors.
Share issue costs include $18,000 paid to an officer and director.
During 1995 the company purchased copyrights, trademarks, and other
rights under an agreement for $20,000 from a director.
At October 31, 1996 $3,515 (1995 - $6,427) due to officers and
directors is included in accounts payable and accrued liabilities.
The company has entered into written contract services agreements
with officers requiring the company to pay aggregate monthly fees
of not less than $12,000 to November 1998 and additional amounts if
not renewed at that time.
10. Comparative figures
The comparative figures have been restated where applicable to
conform with the current year's presentation.
TITAN TRADING ANALYTICS INC.
CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31,1995
<PAGE>
Collins
Barrow
Chartered Accountants
Suite 800
1030 West Georgia Street
Vancouver, Canada
V6E 3B9
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, 1995 and 1994 and the consolidated
statements of operations and deficit and changes in financial
position for the years then ended. 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, 1995 and 1994 and the results of its
operations and changes in financial position for the years then
ended in accordance with generally accepted accounting principles,
As required by the Company Act (B.C.), we- report that, in our
opinion, these principles have been applied on a consistent basis.
/S/ Collins Barrow
CHARTERED ACCOUNTANTS
Vancouver, Canada
December 15, 1995
Founding Member of
Moores
Rowland
International
Represented in 60 Countries
<PAGE>
TITAN TRADING ANALYTICS INC.
(Incorporated under the laws of British Columbia)
CONSOLIDATED BALANCE SHEET
OCTOBER 31,1995
ASSETS 1995 1994
Current assets
Cash and short-term investments $ 873,552 $ 80,757
Accounts receivable 12,681 2,641
Prepaid expenses (note 3) 39,285 --
--------- --------
925,518 83,398
Capital assets (note 4) 51,720 23,038
--------- --------
$ 977,238 $106,436
--------- --------
LIABILITIES
Current liabilities
Accounts payable and
accrued liabilities $ 22,798 $ 5,493
--------- --------
SHAREHOLDERS' EQUITY
Share subscriptions received
(note 5) $ 30,000 176,000
Share capital (note 5) 1,314,901 1
Deficit (390,461) (75,058)
--------- --------
954,440 100,943
$ 977,238 $ 106,436
--------- --------
Approved by the Directors
/S/ Michael Paauwe, Director
/S/ Michael Gossland, Director
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED OCTOBER 31, 1995
1994
1995 (note 1)
Revenue
Software sales $ 11,165 $ --
Interest and other income 9,490 --
--------- ---------
20,655 --
--------- ---------
Expenses
Advertising 32,288 --
Amortization 11,104 4,065
Bank charges 768 --
Consulting fees 30,000 --
Management fees 34,160 11,778
Marketing and promotion 12,964 --
Office 12,735 3,359
Professional fees 12,587 5,564
Rent 5,715 3,550
Research and development (note 6) 161,442 43,376
Salaries and benefits 9,977 --
Telephone 8,434 1,151
Travel 8,884 2,215
--------- ---------
336,058 75,058
--------- ---------
Net loss for the period (315,403) (75,058)
Deficit, beginning of the period (75,058) --
--------- ---------
Deficit, end of the period $ (390,461) $(75,058)
--------- ---------
Net loss per share for the period $ (.78) $(75,058)
(note 8) --------- ---------
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED OCTOBER 31,1995
1994
1995 (note 1)
Cash from operating activities
Net loss for the period $ (315,403) $ (75,058)
Item not involving cash
Amortization 11,104 4,065
--------- ---------
(304,299) (70,993)
Net change in non-cash working
capital balances (32,020) 2,852
--------- ---------
(336,319) (68,141)
--------- ---------
Cash used in investing activities
Acquisition of capital assets (39,786) (27,103)
--------- ---------
Cash from financing activities
Share subscriptions received and
issuance of Common shares 1,168,900 176,001
--------- ---------
Increase in cash during the period 792,795 80,757
Cash and short-term investments,
beginning of the period 80,757 --
Cash and short-term investments,
end of the period $ 873,552 $ 80,757
--------- ---------
See accompanying notes to the consolidated financial
statements.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31,1995
1. General information
The company was incorporated on November 30, 1993 as KBK No. 24
Ventures Ltd. and changed its name to Titan Trading Analytics Inc.
on November 14, 1994. The company commenced operations in May 1994
and accordingly the comparative figures are for the period from May
1994 to October 31, 1994.
The company develops and markets financial software systems.
2. Significant accounting policies
a) Consolidation - The financial statements include the
accounts of the company and of its wholly-owned inactive
subsidiary, Titan Trading Corp.
b) Capital assets - Capital assets are recorded at coot and
amortized at the following annual rates:
Computer equipment - 30% declining balance
Furniture and equipment - 20% declining balance
Copyrights and trademarks - 20% Straight line
c) Research and development - Research costs are expensed when
incurred. Development costs are expensed when incurred unless a
commercial product is developed for which adequate resources exist
to market the product.
d) 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.
3. Prepaid expenses
Prepaid expenses includes prepaid royalties of $10,000 paid
pursuant to an agreement entered into by the company during the
year.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31,1995
4. Capital assets
1995
---------------------------------------
Accumulated
Cost Amortization Net
---------- ------------ ----------
Computer equipment $ 52,643 $ 14,345 $ 38,298
Furniture and equipment 4,246 824 3,422
Copyrights and trademarks 10,000 -- 10,000
---------- ------------ ----------
$ 66,889 $ 15,169 $ 51,720
---------- ------------ ----------
1994
---------------------------------------
Accumulated
Cost Amortization Net
---------- ------------ ----------
Computer equipment $ 25,289 $ 3,793 $ 21,496
Furniture and equipment 1,814 272 1,542
---------- ------------ ----------
$ 27,103 $ 4,065 $ 23,038
---------- ------------ ----------
5. Share capital
1995 1994
---- ----
Authorized
100,000,000 Common shares,
without par value Issued
4,114,001 (1994 - 1) Common shares $ 1,314,901 $ 1
----------- -------
During the year the company changed its authorized share capital
from 10,000 Common shares without par value.
During the year the company issued the following Common shame for
cash.
Number of Common Shares Consideration
----------------------- -------------
2,600,000 $ 650,000
614,000 214,900
900,000 450,000
--------- -----------
4,114,000 $ 1,314,900
--------- -----------
During the year the company received share subscriptions for, and
allotted, 3,000,000 Common shares at $.01 per share which, when
issued, will be held in escrow with their release being subject to
regulatory approval, At October 31, 1995 the shares had not been
issued.
Subsequent to October 31, 1995 the company issued 52,000 Common
shares for $13,000 pursuant to a share subscription received during
the year.
In 1994 the company received share subscriptions for 704,000 Common
shares at $.25 per share and during 1995 the shares were issued.
See note 10.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
6. Research and development
1995 1994
---- ----
Computer services and software $ 10,709 $ 6,268
Contract services 115,000 32,500
Other 26,133 4,608
Product research 6,100 --
Rent 3,500 --
--------- --------
$ 161,442 $ 43,376
--------- --------
7. Income taxes
The financial statements do not reflect the potential tax
reductions which may be available through the application of losses
of $379,000 carried forward against future years' earnings
otherwise subject to income taxes.
The losses expire as follows:
2001 $ 65,000
2002 314,000
---------
$ 379,000
---------
8. Loss per share
The loss per share is calculated on the basis of the weighted
average number of shares outstanding during the year of 405,764
(1994 - 1). At October 31, 1995 there were 4,114,001 shares
outstanding (1994 - 1). See note 5.
9. Related party transactions
Included in the statement of operations and deficit am the
following transactions with related individuals.
1995 1994
---- ----
Expenses
Consulting fees $ 30,000 $ --
Management fees $ 32,600 $ 7,500
Office $ 2,300 $ --
Rent $ 4,200 $ 1,750
Research and development $ 57,500 $22,500
At October 31, 1995 $6,427 (1994 - $1,750) due to related
individuals is included in accounts payable and accrued
liabilities.
During the year the company purchased copyrights, trademarks, and
other rights under an agreement for $20,000 from a related
individual.
During 1994 the company purchased a capitol asset for $2,400 from a
related individual.
<PAGE>
TITAN TRADING ANALYTICS INC.
NOTES TO THE CONSOLIDATED FINANCIAL SIATEMENTS
OCTOBER 31, 1995
10. Subsequent events
Subsequent to October 31, 1995 the company continued to take steps
in connection with its plan to file a preliminary prospectus in
British Columbia and Alberta for the purpose of completing an
initial public offering of the company's Common shares.
See note 5.
Collins
Barrow
Chartered Accountants
Suite 800
1030 West Georgia Street
Vancouver, Canada
V6E 3B9
Telephone (604) 685-0561
Facsimile (6O4) 685-2050
Internet [email protected]
5-1591I
January 6, 1999
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 Registration Statement pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended.
As requested, we hereby consent to the filing of the audited
consolidated balance sheets of the company as at October 31, 1997
and 1996 and the consolidated statements of operations and deficit
and changes in financial position for each of the years in the
three year period ended October 31, 1997 including our auditors'
report dated January 16, 1998 thereon as part of the registration
statement.
If you have any further requirements please contact us.
Yours truly,
COLLINS BARROW
Chartered Accountants
Per:
/S/ James R. Church
James R. Church
JRC:cd
cc: Mr. Mike Paauwe
cc: Mr. Michael Cane
A member of
Moores
Rowland
International Collins Barrow
An association of independent is a Partnership of
accounting firms throughout the world. Incorporated
Professionals
Number 459156
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
CERTIFICATE OF INCORPORATION
I Hereby Certify that
KBK NO. 24 VENTURES LTD.
has this day been incorporated under the Company Act
Issued under my hand at Victoria,
British Columbia
on November 30, 1993
/S/J S Powell
JOHN S. POWELL
Registrar of Companies
<PAGE>
Province of Ministry of Corporate, Central and Mobile
British Columbia Finance and Home Registry
Corporate Relations 940 Blanshard Street
Victoria
British Columbia
V8W 3E6
File Number: 459156
KBK NO. 24 VENTURES LTD.
I hereby certify that the documents attached hereto are copies of
documents filed with the Registrar of Companies on November 30,
1993
/S/ J S Powell
JOHN S. POWELL
Registrar of Companies
Number: 459156
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I Hereby Certify that
KBK NO. 24 VENTURES LTD.
has this day changed its name to
TITAN TRADING ANALYTICS INC.
Issued under my hand at Victoria,
British Columbia
on November 14, 1994
/S/ John S Powell
JOHN S. POWELL
Registrar of Companies
ARTICLES
OF
TITAN TRADING ANALYTICS INC.
TABLE OF CONTENTS
PART ARTICLE SUBJECT
1 INTERPRETATION
1.1 Definition
Construction of Words
1.2 Company Act and Interpretation Act
1.3 Interpretation Act Rules of
Construction Apply
2 SHARES
2.1 Member entitled to Certificate
2.2 Replacement of Certificates
2.3 Limit of Joint Holders
2.4 Execution of Certificates
2.5 No Recognition of Trusts
3 ISSUE OF SHARES
3.1 Directors' Authority
3.2 Share Warrants
3.3 Commissions and Brokerage
3.4 No Issue Until Fully Paid
3.5 Pro Rata Allotment
4 SHARE REGISTERS
4.1 Registers to be Kept
4.2 Branch Registers of Members
4.3 No Closing of Register of Members
5 TRANSFER AND TRANSMISSION OF SHARES
5.1 Transfer of Shares
5.2 Execution of Instrument of Transfer
5.3 Enquiry as to Title not Required
5.4 Instruments of Transfer
5.5 Transfer Fee
5.6 Death of a Member
5.7 Rights of Representative
<PAGE>
PART ARTICLE SUBJECT
5.8 Registration or Transfer by
Representative
6 ALTERATION OF CAPITAL
6.1 Increase of Authorized Capital
6.2 Other Capital Alterations
6.3 Special Rights and Restrictions of
Shares
6.4 Consent of Class or Series
6.5 Class or Series Meetings of Members
6.6 Reduction of Authorized Capital
6.7 Shares Ranking Pari Passu
7 PURCHASE AND REDEMPTION OF SHARES
7.1 Company May Purchase or Redeem
7.2 Selection for Redemption
7.3 Shares Held by Company
8 BORROWING POWERS
8.1 Powers of Directors
8.2 Special Rights in Debt Obligations
8.3 Register of Debentures
8.4 Execution of Debt Obligations
8.5 Register of Indebtedness
9 GENERAL MEETINGS
9.1 Annual General Meetings
9.2 Consent in Writing
9.3 Classification of Meetings
9.4 Calling of Meetings
9.5 Advance Notice
9.6 Particulars of Notice
9.7 Waiver of Notice
9.8 Notice of Documents
10 PROCEEDINGS AT GENERAL MEETINGS
10.1 Special Business
10.2 Need for Quorum
10.3 Quorum
10.4 Lack of Quorum
10.5 Chairman
PART ARTICLE SUBJECT
10.6 Alternate Chairman
10.7 Adjournments
10.8 Moving and Seconding
10.9 Show of Hands or Poll
10.10 Casting Vote Provision
10.11 Taking a Poll
10.12 Retention of Ballots
10.13 Casting of Votes on a Poll
10.14 Ordinary Resolution Sufficient
11 VOTING OF MEMBERS
11.1 Number of Votes
11.2 Persons in Representative Capacity
11.3 Corporate Member
11.4 Joint Holders
11.5 Committee for a Member
11.6 Appointment of Proxyholders
11.7 Execution of Form of Proxy
11.8 Deposit of Proxy
11.9 Form of Proxy
11.10 Validity of Proxy Vote
11.11 Revocation of Proxy
12 DIRECTORS
12.1 Number of Directors
12.2 Remuneration and Expenses
12.3 Qualification
13 ELECTION AND REMOVAL OF DIRECTORS
13.1 Election at Annual General Meetings
13.2 Eligibility of Retiring Director
13.3 Continuance of Directors
13.4 Election of Fewer than Required
Number of Directors
13.5 Filling a Casual-Vacancy
13.6 Additional Directors
13.7 Alternate Directors
13.8 Termination of Directorship
13.9 Removal of Directors
14 POWERS AND DUTIES OF DIRECTORS
14.1 Management of Business
14.2 Appointment of Attorney
<PAGE>
PART ARTICLE SUBJECT
15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1 Disclosure of Conflicting Interest
15.2 Director May Hold Other Office
15.3 Director Acting in Professional
Capacity
15.4 Director Receiving Remuneration From
Others
16 PROCEEDINGS OF DIRECTORS
16.1 Chairman of Meetings
16.2 Procedure at Meetings
16.3 Meetings by Conference Telephone
16.4 Notice of Meeting
16.5 Waiver of Notice of Meetings
16.6 Quorum
16.7 Continuing Directors may Act
16.8 Validity of Acts of Directors
16.9 Resolution in Writing Effective
17 EXECUTIVE AND OTHER COMMITTEES
17.1 Appointment of Executive Committee
17.2 Appointment of Committees Generally
17.3 Audit Committee
17.4 Procedure at Meetings
18 OFFICERS
18.1 President and Secretary Required
18.2 Holding More Than One Office
18.3 Remuneration
18.4 Functions
18.5 Disclosure of Conflicting Interest
19 INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Indemnification of Directors
19.2 Indemnification of Officers,
Employees, Agents
19.3 Indemnification not Invalidated by
Non-compliance
19.4 Company may Purchase Insurance
19.5 Duty to Act Honestly, etc.
<PAGE>
PART ARTICLE SUBJECT
20 DIVIDENDS AND RESERVES
20.1 Declaration of Dividends
20.2 Date Dividend Payable
20.3 Proportionate to Number of Shares
20.4 Reserves
20.5 Receipts from Joint Holders
20.6 No Interest on Dividends
20.7 Payment of Dividends
20.8 Capitalization of Retained Earnings
or Surplus
21 DOCUMENTS, RECORDS AND REPORTS
21.1 Documents to be Kept
21.2 Accounts to be Kept
21.3 Inspection of Accounts
21.4 Financial Statements and Reports
21.5 Copies to Members
22 NOTICES
22.1 Method of giving Notice
22.2 Notice to Joint Holder
22.3 Notice to Personal Representative
22.4 Persons to Receive Notice
23 RECORD DATES
23.1 Directors May Fix Record Dates
23.2 When Record Date Not Fixed
24 SEAL
24.1 Authority to Affix Seal
24.2 Facsimile Signatures
24.3 Reproduction of Seal
24.4 Official Seal for Other
Jurisdictions
25 PROHIBITIONS IF NOT A REPORTING COMPANY
25.1 Prohibitions
<PAGE>
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
OF
TITAN TRADING ANALYTICS INC.
PART 1
INTERPRETATION
1.1. In these Articles, unless there is something in the
subject or context inconsistent therewith:
"Board" and "the Directors" or "the directors" or "the
Board of Directors" mean the Directors or sole Director
of the Company for the time being;
"Company Act" means the Company Act of the Province of
British Columbia as from time to time in force and all
amendments thereto and includes the regulations made
pursuant thereto;
"Interpretation Act" means the Interpretation Act of the
Province of British Columbia as and from time to time in
force and all amendments thereto and includes the
regulations made pursuant thereto;
"proxyholder" means a person duly appointed
registered holder to represent him at a meeting;
"registered address" of a member or registered holder
means his address as recorded in the register of members;
"registered owner" or "registered holder" when used with
respect to a share in the authorized capital of the
Company means the person registered in the register of
members in respect of such share;
"seal" means the common seal of the Company.
Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography and
other modes of representing or reproducing words in a visible form.
<PAGE>
- 2 -
Words importing the singular include the plural and vice versa; and
words importing male persons include female persons and words
importing individuals shall include corporations and vice versa.
1.2. The meaning of any words or phrases defined in the
Company Act and the Interpretation Act shall, if not inconsistent
with definitions herein or with the subject or context, bear the
same meaning in these Articles provided that in the event of any
conflict or inconsistency between the Company Act and the
Interpretation Act, the former shall govern.
1.3. Except as may be otherwise provided expressly or by
necessary implication in the Company Act, the rules of construction
contained in the Interpretation Act shall apply, with the necessary
changes and so far as applicable, to the interpretation of these
Articles.
PART 2
SHARES AND SHARE CERTIFICATE
2.1. Every member is entitled without charge, to one
certificate representing the shares of each class or series held by
him. If a member requests the Company to issue to him more than
one share certificate for any shares of the same class or series
registered in his name, the Directors may prescribe the fee to be
paid for each additional certificate. In respect of a share or
shares held jointly by several persons, the Company shall not be
bound to issue more than one certificate, and delivery of a
certificate for a share to one of several joint registered holders
or to his duly authorized agent shall be sufficient delivery to
all; and provided further that the Company shall not be bound to
issue certificates representing redeemable shares, if such shares
are to be redeemed within one month of the date on which they were
allotted. Any share certificate may be sent through the mail by
registered prepaid mail to the member entitled thereto at his
registered address, and neither the Company nor any transfer agent
shall be liable for any loss occasioned to the member owing to any
such share certificate so sent being lost in the mail, stolen or
destroyed
2.2. If a share certificate:
(i) is worn out or defaced, the Company shall, upon
production to it of the said certificate and
upon such other terms, if any, as the Directors
prescribe, order the said certificate to be
cancelled and shall issue a new certificate in
replacement thereof; or
<PAGE>
- 3 -
(ii) is lost, stolen or destroyed, then, upon proof
thereof to the satisfaction of the Directors
and upon such indemnity, if any, as the
Directors deem adequate being given, a new
share certificate in lieu thereof shall be
issued to the person entitled to such lost,
stolen or destroyed certificate.
Such sum, not exceeding the amount permitted by the Company Act, as
the Directors may from time to time fix, shall be paid to the
Company for each certificate to be issued under this Article.
2.3. Save in the case of the personal representatives of a
deceased member, the Directors may refuse to register more than
three persons as the joint holders of a share.
2.4. Every share certificate shall be signed manually by at
least one officer or Director of the Company, or by or on behalf of
a registrar, branch registrar, transfer agent or branch transfer
agent of the Company and any additional signatures may be printed
or otherwise mechanically reproduced and, in such event, a
certificate so signed is as valid as if signed manually,
notwithstanding that any person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that
he is stated on such certificate to hold at the date of the issue
of a share certificate.
2.5. Except as required by law or these Articles, no person
shall be recognized by the Company as holding any share upon any
trust, and the Company shall not be bound by or compelled in any
way to recognize (even when having notice thereof) any equitable,
contingent, future or partial interest in any share or in any
fractional part of a share or (except only as by law or these
Articles provided or as ordered by a court of competent
jurisdiction) any other rights in respect of any share except an
absolute right to the entirety thereof in its registered holder.
PART 3
ISSUE OF SHARES
3.1. Subject to the Company Act, the Memorandum and these
Articles and to the rights of holders of issued shares arising
under the Company Act or otherwise, the shares shall be under the
control of the Directors who may issue, allot, sell or otherwise
dispose of, and/or grant options on or otherwise deal in, shares
authorized but not outstanding, and outstanding shares (including
shares purchased or redeemed by the Company but not cancelled) held
by the Company, at such times, to such persons (including
<PAGE>
- 4 -
Directors), in such manner, upon such terms and conditions, and at
such price or for such consideration, as they may determine.
3.2. The Directors may authorize the issue of share purchase
or subscription warrants to the purchasers or holders of any debt
obligations or other evidences of indebtedness or other obligations
or shares of the Company, upon such terms and subject to such
restrictions as they may determine.
3.3. Subject to the provisions of the Company Act, the
Company, or the Directors on behalf of the Company, may pay a
commission or allow a discount to any person in consideration of
his subscribing or agreeing to subscribe, whether absolutely or
conditionally, for any shares in, or securities of, the Company, or
procuring or agreeing to procure subscriptions, whether absolutely
or conditionally, for any such shares or securities, provided that,
if the Company is not a specially limited company, the rate of the
commission and discount shall not in the aggregate exceed 25 per
centum of the amount of the subscription price of such shares. The
Directors may also on any issue or sale of shares or other
securities cause the Company to pay such brokerage as may be
lawful.
3.4. Subject to the exceptions permitted by the Company Act,
no share may be issued until it is fully paid and the Company shall
have received the full consideration therefor in cash, property or
past services actually performed for the Company. The value of
property or services for the purpose of this Article shall be the
amount determined by the Directors by resolution to be, in all
circumstances of the transaction, no greater than the fair market
value thereof.
3.5. If the Company is, or becomes, a company which is not a
reporting company and the Directors are required by the Company Act
before allotting any shares to offer them pro rata to the members,
the Directors shall, before allotting any shares, comply with the
applicable provisions of the Company Act.
PART 4
SHARE REGISTERS
4.1. The Company shall keep or cause to be kept a register of
members, a register of transfers and a register of allotments
within British Columbia, all as required by the Company Act, and
may combine one or more of such registers. If the Company's
capital shall consist of more than one class or series of shares
a separate register of members, register of transfers and register
of allotments may be kept in respect of each class or series of
shares. The Directors may appoint a trust company to keep the
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register of members, register of transfers and register of
allotments or, if there is more than one class or series of shares,
the Directors may appoint a trust company, which need not be the
same trust company, to keep the register of members, the register
of transfers and the register of allotments for each class or
series of shares. The Directors may also appoint one or more trust
companies, including the trust company which keeps the said
registers of its shares or of a class or series thereof, as
transfer agent or branch transfer agent for its shares or a class
or series thereof, as the case may be, and the same or another
trust company or companies as registrar for its shares or a class
or series thereof, as the case may be. The Directors may terminate
the appointment of any trust company referred to in this Article or
in Article 4.2 at any time and may appoint another trust company in
its place.
4.2. Subject to the Company Act, the Company may keep or
cause to be kept branch registers of members at such places as the
Directors may determine, provided that any such branch register
kept within British Columbia shall be kept by a trust company.
4.3. The Company shall not at any time close its register of
members.
PART 5
TRANSFER AND TRANSMISSION OF SHARES
5.1. Subject to the Memorandum and these Articles, any member
may transfer any of his shares by instrument in writing executed by
or on behalf of such member. The instrument of transfer of any
share of the Company shall be in the form, if any, on the back of
the Company's share certificates or in any usual or common form or
in such other form as the Directors may from time to time approve.
Except to the extent that the Company Act may otherwise provide,
the transferor shall be deemed to remain the holder of the shares
until the name of the transferee is entered in the register of
members or a branch register of members in respect thereof.
5.2. The signature of the registered owner-of any shares, or
of his duly authorized attorney, upon an authorized instrument of
transfer delivered to the Company shall constitute a complete and
sufficient authority to the Company, its Directors, officers and
agents to register, in the name of the transferee as named in the
instrument of transfer, the number of shares specified therein or,
if no number is specified, all the shares of the registered owner
represented by share certificates deposited with the instrument of
transfer. If no transferee is named in the instrument of transfer,
the instrument of transfer shall constitute a complete and
sufficient authority to the Company, its directors, officers and
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agents to register, in the name of the person on whose behalf any
certificate for the shares to be transferred is deposited with the
Company for the purpose of having the transfer registered, the
number of shares specified in the instrument of transfer or, if no
number is specified, all the shares represented by all share
certificates deposited with the instrument of transfer.
5.3. Neither the Company nor any Director, officer or agent
thereof shall be bound to inquire into the title of the person
named in the form of transfer as transferee, or, if no person is
named therein as transferee, of the person on whose behalf the
certificate is deposited with the Company for the purpose of having
the transfer registered or be liable to any claim by such
registered owner or by any intermediate owner or holder of the
certificate or of any of the shares represented thereby or any
interest therein for registering the transfer, and the transfer,
when registered, shall confer upon the person in whose name the
shares have been registered a valid title to such shares.
5.4. Every instrument of transfer shall be executed by the
transferor and left at the registered office of the Company or at
the office of its transfer agent or branch transfer agent or
registrar or branch registrar for the shares to be transferred for
registration together with the share certificate for the shares to
be transferred and such other evidence, if any, as the Directors or
the transfer agent or branch transfer agent or registrar or branch
registrar may require to prove the title of the transferor or his
right to transfer the shares and the right of the transferee to
have the transfer registered. All instruments of transfer or a
photographic reproduction thereof, if the transfer is registered,
shall be retained by the Company or its transfer agent or branch
transfer agent or registrar or branch registrar and any instrument
of transfer, if the transfer is not registered, shall be returned
to the person depositing the same together with the share
certificate which accompanied the same when tendered for
registration.
5.5. There shall be paid to the Company in respect of the
registration of any transfer such sum, if any, as the Directors may
from time to time determine.
5.6. In the case of the death of a member, the survivors
where the deceased was a joint registered holder, and the personal
representatives of the deceased where he was the sole registered
holder, shall be the only persons recognized by the Company as
having any title to the deceased's interest in the shares
registered in his name. Before recognizing any personal
representative the Directors may require him to deliver to the
Company the documents required by the Company Act and such other
evidence as the Directors may require of the personal
representative's appointment, including a grant of probate, letters
of administration or other similar documentation from the
jurisdiction in which the shares are to be transferred, and of the
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payment or satisfaction of all taxes, duties, fees and other
similar assessments payable to any governmental authority of any
applicable jurisdiction with respect to the shares arising out of
the member's death.
5.7. A guardian, committee, trustee, curator, tutor, personal
representative or trustee in bankruptcy of a member, although not
a member himself, shall have the same rights, privileges and
obligations that attach to the shares held by the member if the
documents and evidence referred in Article 5.6 are delivered to the
Company. This Article does not apply on the death of a member with
respect to shares registered in his name and the name of another
person in joint tenancy.
5.8. Any person referred to in Article 5.7 who becomes
entitled to shares of a member, upon the documents and evidence
referred to in Article 5.6 being delivered to the Company, has the
right either to be registered as a member in his representative
capacity in respect of such shares, or, if he is a personal
representative, instead of being registered himself, to make such
transfer of the shares as the member could have made; but the
Directors shall, as regards a transfer by any such person, have the
same right, if any, to decline registration of a transferee as they
would have in the case of a transfer of the shares by the member.
PART 6
ALTERATION OF CAPITAL
6.1. The Company may by ordinary resolution amend its
Memorandum to increase the authorized capital of the Company by:
(i) creating shares with par value or shares
without par value, or both;
(ii) increasing the number of shares with par value
or shares without par value, or both; or
(iii) increasing the par value of a class of shares
with par value, if no shares of that class are
issued.
6.2 The Company may be special resolution alter its
Memorandum to subdivide, consolidate, change from shares with par
value to shares without par value, or from shares without par value
to shares with par value, or change the designation of, all or any
of its shares but only to such extent, in such manner and with such
consents of members holding a class or series of shares which is
the subject of or affected by such alteration, as the Company Act
provides.
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6.3. The Company may alter its Memorandum or these Articles
by such resolution as is permitted by the Company Act and by
otherwise complying with any applicable provisions of the
Memorandum or these Articles, to create, define and attach special
rights or restrictions to any shares and to vary or abrogate any
special rights and restrictions attached to any shares.
6.4. No right or special right attached to the issued shares
of any class or series shall be prejudiced or interfered with
unless the consents of the holders of the shares of each such class
or series required by the Company Act are obtained.
Notwithstanding such consent, no right or special right attached to
any issued shares shall be prejudiced or interfered with as to any
part of issued shares of any class or series unless the holders of
the rest of the issued shares of such class or series either all
consent thereto in writing or consent thereto by a resolution
passed by the votes of members holding three-fourths of the rest of
such class or series.
6.5. Subject to the Company Act, and unless these Articles or
the Memorandum otherwise provide, the provisions of these Articles
relating to general meetings shall apply, with the necessary
changes and so far as they are applicable, to a class or series
meeting of members holding a particular class or series of shares
but the quorum at a class or series meeting shall be one person
holding in person or by proxy not less than one-third of the issued
shares of that class or series, as the case may be.
6.6. The Company may, by resolution of the Directors, alter
the Memorandum by canceling shares which are not allotted or
issued, or which are surrendered to the Company either by way of
gift or otherwise in accordance with the Company Act, and diminish
its authorized capital accordingly.
6.7. The rights, or special rights or restrictions attached
to the shares of any class or series shall, unless otherwise
expressly provided by the terms, if any, of such rights, or special
rights or restrictions be deemed not to be modified, abrogated,
varied or dealt with by the creation or issue of further shares
ranking pari passu therewith.
PART 7
PURCHASE AND REDEMPTION OF SHARES
7.1. Subject to the special rights and restrictions attached
to any shares, the Company may, by 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 such resolution, or
redeem any of its shares which have a right of redemption attached
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to them. No such purchase or redemption shall be made if the
Company is insolvent at the time of the proposed purchase or
redemption or if the proposed purchase or redemption would render
the Company insolvent. Unless the shares are to be purchased
through a stock exchange or the Company is purchasing the shares
from dissenting members pursuant to the requirements of the Company
Act, or from a bona fide employee or former employee of the Company
or an affiliate of the Company or his personal representative in
respect of shares beneficially owned by such employee or former
employee, the Company shall, if required by the Company Act, make
its offer to purchase pro rata to every member who holds shares of
the class or series, as the case may be, to be purchased.
7.2. If the Company proposes at its option to redeem some but
not all of the shares of any class or series, the Directors may,
subject to the special rights and restrictions attached to the
shares of such class or series, decide the manner in which the
shares to be redeemed shall be selected, and, subject as aforesaid,
need not redeem pro rata.
7.3. Subject to the Company Act and the Memorandum, any
shares purchased or redeemed by the Company, if not cancelled, may
be sold or, if cancelled (but still in the Company's authorized
capital), may be reissued, but, while such shares which have not
been cancelled are held by the Company, it shall not exercise any
vote in respect of such shares and no dividend or other
distribution shall be paid or made thereon.
PART 8
BORROWING POWERS
8.1. Subject to the Company Act, the Directors may authorize
and cause the Company to:
(i) borrow money in such manner and amounts, on
such security, or without security, from such
sources and upon such terms and conditions as
they think fit;
(ii) guarantee the repayment of money by any other
person or the performance of any obligation of
any other person;
(iii) issue debt obligations, or other evidences of
obligations or indebtedness, either outright or
as security for any liability or obligation of
the Company or any other person;
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(iv) mortgage, charge, whether by way of specific or
floating charge, or both, or give other
security on the undertaking, or on the whole or
any part of the property and assets, of the
Company (both present and future); and
(v) for the purposes of the Special Corporate
Powers Act of the Province of Quebec and
without in any way limiting the powers
conferred upon the Company and the Directors by
the foregoing or by any other provisions of
these Articles, or by the Memorandum, or by the
Company Act, for the purpose of securing any
notes, bonds, debentures or debenture stock
which it is by law entitled to, issue,
hypothecate, mortgage or pledge, and cede and
transfer, any property, moveable or immovable,
present or future, which it may own in the
Province of Quebec.
8.2. Any debt obligations of the Company may be issued at a
discount, premium or otherwise, and with any special privileges as
to redemption, surrender, drawings, allotment of or conversion into
or exchange for shares or other securities, attending and voting at
general meetings of the Company, appointment or election of
Directors, or otherwise, and may by their terms be assignable free
from any equities between the Company and the person to whom they
are issued or any other person who subsequently acquires the same,
all as the Directors may determine.
8.3. The Company shall keep or cause to be kept within the
Province of British Columbia in accordance with the Company Act a
register of its debentures and a register of debentureholders,
which registers may be combined, and if there is more than one
series of debentures a separate register of debentures and
debentureholders may be kept in respect of each series. The
Directors may appoint a trust company to keep the register of
debentureholders. Subject to the Company Act, the Company may keep
or cause to be kept branch registers of its debentureholders at
such places as the Directors may determine, provided that any such
branch register kept within British Columbia shall be kept by a
trust company. The Directors may also appoint a trust company as
transfer agent or branch transfer agent for its debentures or a
series thereof. The Directors may terminate the appointment of any
such trust company at any time and may appoint another trust
company in its place.
8.4. Every debt obligation of the Company shall be signed
manually be at least one Director or officer of the Company or by
or on behalf of a trustee, registrar, branch registrar, transfer
agent or branch transfer agent for the debt obligation appointed by
the Company or under any instrument under which the debt obligation
is issued, or by or on behalf of a trustee who certifies it in
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accordance with a trust indenture, and any additional signatures
may be printed or otherwise mechanically reproduced thereon and, in
such event, a debt obligation so signed is as valid as if signed
manually notwithstanding that any person whose signature is so
printed or mechanically reproduced shall have ceased to hold the
office that he is stated on such debt obligation to hold at the
date of the issue thereof.
8.5. If the Company is or becomes a reporting company, the
Company shall keep or cause to be kept a register of its
indebtedness to every Director or officer of the Company or an
associate of any of them in accordance with the provisions of the
Company Act.
PART 9
GENERAL MEETINGS
9.1. Annual general meetings of the Company shall be held as
required by the Company Act at such time and place as is determined
by the Directors.
9.2. If the Company is, or becomes, a company which is not a
reporting company, and all the members entitled to attend and vote
at an annual general meeting consent in writing to all the business
which is required or desired to be transacted at the meeting, the
meeting need not be held, and shall be deemed to have been held on
the date specified in such written consent, or, failing such a date
being specified, on the date all such members consent thereto. A
written consent for the purposes of this Article 9.2 may be given
by any method or means authorized by Article 16.9 for consenting in
writing to a resolution.
9.3. All general meetings other than annual general meetings
are herein referred to as and may be called extraordinary general
meetings or special general meetings.
9.4. The Directors may, whenever they think fit, convene a
special general meeting. A special general meeting, if
requisitioned in accordance with the Company Act, shall be convened
by the Directors or, if not convened by the Directors, may be
convened by the requisitionists as provided in the Company Act.
9.5. If the Company is or becomes a reporting company,
advance notice of any general meeting at which Directors are to be
elected shall be published in the manner required by the Company
Act.
9.6. A notice convening a general meeting specifying the
place, the day, and the hour of the meeting, and, in case of
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special business, the general nature of that business, shall be
given as provided in the Company Act and in the manner hereinafter
in these Articles mentioned, or in such other manner (if any) as
may be prescribed by ordinary resolution, whether previous notice
thereof has been given or not, to such persons as are entitled by
law or under these Articles to receive such notice from the
Company. Accidental omission to give notice of a meeting to, or
the non-receipt of notice of a meeting, by any member shall not
invalidate the proceedings at that meeting.
9.7. All the members of the Company entitled to attend and
vote at a general meeting may, by unanimous consent in writing
given before, during or after the meeting, or if they are present
at the meeting by a unanimous vote, waive or reduce the period of
notice of such meeting and an entry in the minute book of such
waiver or reduction shall be sufficient evidence of the due
convening of the meeting. A consent in writing for the purposes of
this Article 9.7 may be given by any method or means authorized by
Article 16.9 for consenting in writing to a resolution.
9.8. Except as otherwise provided by the Company Act, where
any special business at a general meeting includes considering,
approving, ratifying, adopting or authorizing any document or the
execution thereof or the giving of effect thereto, the notice
convening the meeting shall, with respect to such document, be
sufficient if it states that a copy of the document is or will be
available for inspection by members at the registered office or
records office of the Company or at some other place in British
Columbia designated in the notice during usual business hours on
specified dates prior to the date of such meeting.
PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1. All business shall be deemed special business which is
transacted at:
(i) a special general meeting other than the
conduct of and voting at, such meeting; and
(ii) an annual general meeting, with the exception
of the conduct of, and voting at, such meeting,
the consideration of the financial statement
and of the respective reports of the Directors
and Auditor, fixing or changing the number of
Directors, electing Directors, appointing the
Auditor, fixing the remuneration of the Auditor
and the Directors if applicable, and such
business as by these Articles or the Company
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Act may be transacted at a general meeting
without prior notice thereof being given to the
members and any business which is brought under
consideration by the report of the Directors.
10.2. No business, other than election of the chairman or the
adjournment of the meeting, shall be transacted at any general
meeting unless a quorum of members, entitled to attend and vote, is
present at the commencement of the meeting, but the quorum need not
be present throughout the meeting.
10.3. Save as herein otherwise provided, a quorum for a
meeting shall be two persons present and being, or representing by
proxy, members holding not less than one-twentieth of the issued
shares entitled to be voted at the meeting. If there is only one
member the quorum is one person present and being, or representing
by proxy, such member. The Directors, the Secretary, an Assistant
Secretary and a solicitor of the Company shall be entitled to
attend at any general meeting but no such person shall be counted
in the quorum or vote at any meeting unless he shall be a member or
proxyholder entitled to vote thereat.
10.4. If within half an hour from the time appointed for a
general meeting a quorum is not present, the meeting, if convened
upon the requisition of members, shall be dissolved. In any other
case it shall stand adjourned to the same day in the next week, at
the same time and place, and, if at the adjourned meeting a quorum
is not present within half an hour from the time appointed for the
meeting, the person or persons present and being, or representing
by proxy, a member or members entitled to attend and vote at the
meeting shall be a quorum.
10.5. The Chairman of the Board, if any, or in his absence
the
President of the Company or in his absence a Vice-President of the
Company, if any, shall be entitled to preside as chairman at every
general meeting of the Company.
10.6. If at any general meeting neither the Chairman of the
Board nor President nor a Vice-President is present within fifteen
minutes after the time appointed for holding the meeting or is
willing to act as chairman, the Directors present shall choose some
one of their number to be chairman, or if all the persons occupying
the said offices shall have advised the Secretary or an Assistant
Secretary that they will not be present at a meeting, the Directors
present shall choose one of their number to be chairman or if no
Director is present, the members and proxyholders present may
choose one of their number to be a chairman. If a person willing
to act is not chosen as chairman in accordance with these
provisions within 45 minutes after the time appointed for holding
the meeting, the meeting shall be dissolved.
10.7. The chairman may and shall, if so directed by the
meeting, adjourn a meeting from time to time and from place to
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place, but no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting from which
the adjournment took place. When a meeting is adjourned for thirty
days or more, notice, but not, "advance notice" referred to in
Article 9.5, of the adjourned meeting shall be given as in the case
of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjourned meeting or of the
business to be transacted at an adjourned meeting.
10.8. No motion proposed at a general meeting need be
seconded, and the chairman, a director, a member or a proxyholder
may propose or second a motion.
10.9. Subject to the provisions of the Company Act, at any
general meeting a resolution put to the vote of the meeting shall
be decided on a show of hands, unless (before or on the declaration
of the result of the show of hands) a poll is directed by the
chairman or demanded by at least one member or proxyholder entitled
to vote who is present. The chairman shall declare to the meeting
the decision on every question in accordance with the result of the
show of hands or the poll, and such decision shall be entered in
the book of proceedings of the Company. A declaration by the
chairman that a resolution has been carried, or carried
unanimously, or by a particular majority, or lost or not carried by
a particular majority and an entry to that effect in the book of
the proceedings of the Company shall be conclusive evidence of the
fact, without proof of the number or proportion of the votes
recorded in favour of, or against, that resolution.
10.10. In the case of an equality of votes, whether on a show
of hands or on a poll, the chairman of the meeting at which the
show of hands takes place or at which the poll is demanded shall
not be entitled to a second or casting vote.
10.11. No poll may be demanded on the election of a chairman.
A poll demanded on a question of adjournment shall be taken
forthwith. A poll demanded on any other question shall be taken as
soon as, in the opinion of the chairman, is reasonably convenient,
but in no event later than seven days after the meeting and at such
time and place and in such manner as the chairman of the meeting
directs. The result of the poll shall be deemed to be the
resolution of and passed at the meeting at which the poll was
demanded. Any business other than that upon which the poll has
been demanded may be proceeded with pending the taking of the poll.
A demand for a poll may be withdrawn. In any dispute as to the
admission or rejection of a vote the decision of the chairman made
in good faith shall be final and conclusive. In the event of a
poll by mail, the seven days limit hereinbefore prescribed shall be
deemed to be satisfied if the ballot is mailed within seven days
and specifies a date by which completed ballots must be received to
be counted in the poll that date being such date as the chairman in
the reasonable exercise of his discretion thinks is appropriate,
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but being in no event later than twenty-one days after the mailing
of the ballot form.
10.12. Every ballot cast upon a poll and every proxy appointing
a proxyholder who casts a ballot upon a poll shall be retained by
the Secretary for such period and be subject to such inspection as
the Company Act may provide.
10.13. On a poll a person entitled to cast more than one vote
need not, if he votes, use all his votes or cast all the votes he
uses in the same way.
10.14. Unless the Company Act, the Memorandum or these Articles
otherwise provide, any action to be taken by a resolution of the
members may be taken by an ordinary resolution.
PART 11
VOTES OF MEMBERS
11.1. Subject to any special voting rights or restrictions
attached to any shares and the restrictions on joint registered
holders of shares, on a show of hands every member who is present
in person at a meeting and entitled to vote thereat shall have one
vote and on a poll every member shall have one vote for each share
entitled to be voted at the meeting of which he is the registered
holder and may exercise such vote either in person or by
proxyholder. A proxyholder shall not have the right to vote on a
show of hands unless he is a member entitled to vote at the meeting
on a show of hands.
11.2. Any person who is not registered as a member but is
entitled to vote at any meeting in respect of a share, may vote the
share in the same manner as if he were a member; but, unless the
Directors have previously admitted his right to vote at that
meeting in respect of the share, he shall satisfy the Directors or
the Secretary of his right to vote the share before the time for
holding the meeting, or adjourned meeting, as the case may be, at
which he proposes to vote, and unless he shall so satisfy the
Directors or the Secretary he shall not be entitled to vote that
share.
11.3. Any corporation not being a subsidiary which is a member
of the Company may authorize such person as it thinks fit to act as
its representative at any meeting. The person so authorized shall
be entitled to exercise in respect of and at such meeting the same
powers on behalf of the corporation which he represents as that
corporation could exercise if it were an individual member of the
Company personally present, including, without limitation, the
right to appoint a proxyholder to represent such corporation, and
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shall, if present at the meeting, be counted for the purpose of
forming a quorum and be deemed to be a member present at the
meeting. Evidence of the appointment of any such representative
may be sent to the Company by written instrument, telegram, telex
or any method of transmitting legibly recorded messages.
Notwithstanding the foregoing, a corporation being a member and
entitled to vote may appoint a proxyholder.
11.4. In the case of joint registered holders of a share the
vote of the senior who exercises a vote, whether in person or by
proxyholder, shall be accepted to the exclusion of the votes of the
other joint registered holders; and for this purpose seniority
shall be determined by the order in which the names stand in the
register of members, the person whose name stands first being
senior to the person whose name stands second, and so on. Several
legal personal representatives of a deceased member whose shares
are registered in his sole name shall for the purpose of this
Article be deemed joint registered holders.
11.5. A member of unsound mind entitled to attend and vote, in
respect of whom an order has been made by any court having
jurisdiction, may vote, whether on a show of hands or on a poll, by
his committee, curator bonis, or other person in the nature of a
committee or curator bonis appointed by that court, and any such
committee, curator bonis, or other person may appoint a
proxyholder.
11.6. A member holding more than one share in respect of which
he is entitled to vote shall be entitled to appoint one or more,
but not more than three, proxyholders to attend, act and vote for
him on the same occasion. If such a member should appoint more
than one proxyholder for the same occasion he shall specify the
number of shares each proxyholder shall be entitled to vote. A
member may also appoint one or more alternate proxyholders to act
in the place and stead of an absent proxyholder.
11.7. A proxy shall be in writing under the hand of the
appointor or of his attorney duly authorized in writing, or, if the
appointor is a corporation, either under the seal of the
corporation or under the hand of a duly authorized officer or
attorney. A proxyholder need not be a member of the Company.
11.8. Unless otherwise permitted by the Directors, a proxy and
the power of attorney or other authority, if any, under which it is
signed or a notarially certified copy thereof shall be deposited at
the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting, not
less than 48 hours (excluding Saturdays and holidays) before the
time for holding the meeting in respect of which the person named
in the instrument is appointed. In addition to any other method of
depositing proxies provided for in these Articles, the Directors
may, subject to the Company Act, make regulations relating to the
depositing of proxies at any place or places and fixing the time or
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times for depositing the proxies prior to the meeting or adjourned
meeting at which they are to be used and providing for particulars
of such proxies to be sent to the Company or any agent of the
Company in writing or by letter, telegram, telex or any method of
transmitting legibly recorded messages so as to arrive before the
commencement of the meeting or adjourned meeting at the office of
the Company or of any agent of the Company appointed for the
purpose of receiving such particulars and providing that proxies so
deposited may be acted upon as though the proxies themselves were
deposited as required by this Part and votes given in accordance
with such regulations shall be valid and shall be counted.
11.9. Unless the Company Act or any other statute or law which
is applicable to the Company or to any class of its shares requires
any other form of proxy, a proxy, whether for a specified meeting
or otherwise, shall be in the form following, but may also be in
any other form that the Directors or the chairman of the meeting
shall approve:
PROXY
The undersigned, being a member
of ________________________________,
hereby appoints ___________________,
or failing him, _________________, as
proxyholder for the undersigned to attend,
act and vote for and on behalf of the
undersigned at the annual or extraordinary
(as the case may be) general meeting of the
Company to be held on the ________ day of
______________, 19___ and at any adjournment
thereof.
Signed this ________________ day of
______________, 19___.
_____________________________________
(Signature of member)
11.10. A vote given in accordance with the terms of a proxy is
valid notwithstanding the previous death or incapacity of the
member giving the proxy or the revocation of the proxy or of the
authority under which the form of proxy was executed or the
transfer of the share in respect of which the proxy is given,
provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received by the chairman of
the meeting or adjourned meeting for which the proxy was given
before the vote is taken.
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11.11 Every proxy may be revoked by an instrument in writing:
(i) executed by the member giving the same or by
his attorney authorized in writing or, where
the member is a corporation, by a duly
authorized officer or attorney of the
corporation; and
(ii) delivered either at the registered office of
the Company at any time up to and including the
last business day preceding the day of the
meeting, or any adjournment thereof at which
the proxy is to be used, or to the chairman of
the meeting on the day of the meeting or any
adjournment thereof before any vote in respect
of which the proxy is to be used shall have
been taken,
or in any other manner provided by law.
PART 12
DIRECTORS
12.1. If the Company is an amalgamated Company, the first
Directors shall be the persons so specified in the amalgamation
agreement. The Directors to succeed the first Directors, after
incorporation of the Company, may be appointed in writing by a
majority of the subscribers to the Memorandum or at a meeting of
the subscribers, or if not so appointed, they shall be elected by
the members entitled to vote on the election of Directors and the
number of Directors shall be the same as the number of Directors so
appointed or elected. The number of Directors, excluding
additional Directors, may be fixed or changed from time to time by
ordinary resolution, whether previous notice thereof has been given
or not, but notwithstanding anything contained in these Articles
the number of Directors shall never be less than one or, if the
Company is or becomes a reporting company, less than three.
12.2. The remuneration of the Directors as such may from time
to time be determined by the Directors or, if the Directors shall
so decide, by the members. Such remuneration may be in addition to
any salary or other remuneration paid to any officer or employee of
the Company as such who is also a Director. The Directors shall be
repaid such reasonable travelling, hotel and other expenses as they
incur in and about the business of the Company (including, if
authorized by resolution of the Directors in respect of the
Directors generally, those incurred in attending meetings of the
Directors or of any committees of the Directors) and if any
Director shall perform any professional or other services for the
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Company that in the opinion of the Directors are outside the
ordinary duties of a Director or shall otherwise be specially
occupied in or about the Company's business, he may be paid a
remuneration to be fixed by the Board, or, at the option of such
Director, by the Company in general meeting, and such remuneration
may be either in addition to, or in substitution for any other
remuneration that he may be entitled to receive. The Directors on
behalf of the Company, unless otherwise determined by ordinary
resolution, may pay a gratuity or pension or allowance on
retirement to any Director who has held any salaried office or
place of profit with the Company or to his spouse or dependents and
may make contributions to any fund and pay premiums for the
purchase or provision of any such gratuity, pension or allowance.
12.3. A Director shall not be required to hold a share in the
capital of the Company as qualification for his office but shall be
qualified as required by the Company Act, to become or act as a
Director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1. At each annual general meeting of the Company all the
Directors shall retire and the members entitled to vote thereat
shall elect a Board of Directors consisting of the number of
Directors for the time being fixed pursuant to these Articles. If
the Company is, or becomes, a company that is not a reporting
company and the business to be transacted at any annual general
meeting is consented to in writing by all the members who are
entitled to attend and vote thereat such annual general meeting
shall be deemed for the purpose of this Part to have been held on
such written consent becoming effective.
13.2. A retiring Director shall be eligible for re-election.
13.3. Where the Company fails to hold an annual general
meeting in accordance with the Company Act, the Directors then in
office shall be deemed to have been elected or appointed as
Directors on the last day on which the annual general meeting could
have been held pursuant to these Articles and they may hold office
until other Directors are appointed or elected or until the day on
which the next annual general meeting is held.
13.4. If at any general meeting at which there should be an
election of Directors, the places of any of the retiring Directors
are not filled by such election, such of the retiring Directors who
are not re-elected as may be requested by the newly-elected
Directors shall, if willing to do so, continue in office to
complete the number of Directors for the time being fixed pursuant
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to these Articles until further new Directors are elected. If any
such election or continuance of Directors does not result in the
election or continuance of the number of Directors for the time
being fixed pursuant to these Articles such number shall be fixed
at the number of Directors actually elected or continued in office.
If no Directors are elected at such meeting the retiring Directors
shall be deemed to have been re-elected, but nothing herein shall
prohibit or restrict the right of a Director to resign.
13.5. Subject to Article 16.7, any casual vacancy occurring in
the Board of Directors may be filled by the remaining Directors or
Director.
13.6. Between successive annual general meetings the Board of
Directors shall itself have power to appoint one or more additional
Directors of the Company but the number of Directors so appointed
shall not at any time exceed one-third of the number of Directors
elected at the last general meeting at which Directors were
elected. Any Director so appointed shall hold office only until
the next following annual general meeting of the Company, but shall
be eligible for election at such meeting and so long as he is an
additional Director the number of Directors shall be increased
accordingly.
13.7. Any Director may by instrument in writing delivered to
the Company appoint any person to he his alternate to act in his
place at meetings of the Directors at which he is not present
unless the Directors shall have reasonably disapproved the
appointment of such person as an alternate Director and shall have
given notice to that effect to the Director appointing the
alternate Director within a reasonable time after delivery of such
instrument to the Company. Every such alternate shall be entitled
to notice of meetings of the Directors and to attend, be counted in
the quorum and vote as a Director at a meeting at which the person
appointing him is not personally present, and, if the alternate is
a Director in his own right, to be separately counted in the
determination of a quorum on behalf of the Director or Directors he
is representing and to have a separate vote on behalf of the
Director or Directors he is representing. Every such alternate, to
the extent not restricted by the instrument appointing him, may
sign on behalf of the Director or Directors who appointed him,
resolutions submitted to the Directors to be consented to in
writing, as referred to in Article 16.9, and shall be deemed to be
a Director for the purposes of so signing such resolutions. Save
as aforesaid or as expressly otherwise provided in these Articles,
an alternate Director shall not generally have the power to act as
a Director. A Director may at any time by instrument in writing
revoke the appointment of an alternate appointed by him. The
remuneration if any payable to such an alternate Director shall be
payable out of the remuneration of the Director appointing him.
The appointment or revocation of the appointment of an alternate
Director may be by telegram, telex or any method of transmitting
legibly recorded messages delivered to the Company.
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13.8. In addition to the provisions of Article 13.1 and
Article 13.9, a Director shall cease to hold office if he:
(i) resigns his office by notice in writing
delivered to the registered office of the
Company; or
(ii) is convicted of an indictable offence and the
other Directors shall have resolved to remove
him; or
(iii) ceases to be qualified to act as a Director
pursuant to the Company Act.
The appointment of an alternate Director shall terminate if:
(i) the Director who appointed him at any time or
by notice to the Company revokes his
appointment; or
(ii) he resigns by notice to the Company; or
(iii) the Director who appointed him ceases for any
reason to be a Director; or
(iv) he is convicted of an indictable offence and
the other Directors shall have resolved to
remove him; or
(v) he ceases to hold the qualifications necessary
for a Director pursuant to the Company Act; or
(vi) the term of his appointment, if any, expires.
13.9. The Company may by special resolution remove any
Director before the expiration of his period of office, and may by
an ordinary resolution appoint another person in his stead.
PART 14
POWERS AND DUTIES OF DIRECTORS
14.1. The Directors shall manage, or supervise the management
of, the affairs and business of the Company and shall have the
authority to exercise all such powers of the Company as are not, by
the Company Act or by the Memorandum or these Articles, required to
be exercised by the Company in general meeting.
14.2. The Directors may from time to time by power of attorney
or other instrument under the seal, appoint any person to be the
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attorney of the Company for such purposes, and with such powers,
authorities and discretions (not exceeding those vested in or
exercisable by the Directors under these Articles and excepting the
powers of the Directors relating to the constitution of the Board
and of any of its committees and the appointment or removal of
officers and the power to declare dividends) and for such period,
with such remuneration and subject to such conditions as the
Directors may think fit, and any such power of attorney or other
instrument may contain such provisions for the protection or
convenience of persons dealing with such attorney as the Directors
think fit. Any such attorney may be authorized by the Directors to
subdelegate all or any of the powers, authorities and discretions
for the time being vested in him.
PART 15
DISCLOSURE OF INTEREST OF DIRECTORS
15.1. A Director who:
(i) is, in any way, directly or indirectly
interested in an existing or proposed contract
or transaction with the Company; or
(ii) holds any office or possesses any property
whereby, directly or indirectly, a duty or
interest may be created to conflict with his
duty or interest as a Director,
shall declare the nature and extent of his interest in such
contract or transaction or of the conflict or potential conflict
with his duty and interest as a Director, as the case may be, in
accordance with the Company Act. A Director interested in a
contract or transaction as aforesaid shall be counted in the quorum
at a meeting of the Directors at which the proposed contract or
transaction is approved, if present at the meeting, and such
Director may vote in respect of the approval of the contract or
transaction. If he votes he may be liable to account for any
profit in accordance with the provisions of the Company Act.
15.2. A Director may hold any office or place of profit with
the Company (other than the office of auditor of the Company) in
addition to his office of Director for such period and on such
terms (as to remuneration or otherwise) as the Directors may
determine and no Director or intended Director shall be
disqualified by his office from contracting with the Company either
with regard to his tenure of any such other office or place of
profit or as vendor, purchaser or otherwise, and, subject to
compliance with the provisions of the Company Act, no contract or
transaction entered into by or on behalf of the Company in which a
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Director is in any way interested shall be liable to be voided by
reason thereof.
15.3. Subject to the Company Act, a Director or his firm may
act in a professional capacity for the Company (except as auditor
of the Company) and he or his firm shall be entitled to
remuneration for professional services as if he were not a
Director.
15.4. A Director may be or become a director or other officer
or employee of, or otherwise interested in, any corporation or firm
in which the Company may be interested as a shareholder or
otherwise, and, subject to compliance with the provisions of the
Company Act, such Director shall not be accountable to the Company
for any remuneration or other benefits received by him as director,
officer or employee of, or from his interest in, such other
corporation or firm.
PART 16
PROCEEDINGS OF DIRECTORS
16.1. The Chairman of the Board, if any, or in his absence,
the President shall preside as chairman at every meeting of the
Directors, or if there is no Chairman of the Board or neither the
Chairman of the Board nor the President is present within fifteen
minutes of the time appointed for holding the meeting or is willing
to act as chairman, or, if the Chairman of the Board, if any, and
the President have advised the Secretary that they will not be
present at the meeting, the Directors present shall choose one of
their number to be chairman of the meeting.
16.2. Subject to these Articles, the Directors may meet
together for the dispatch of business, adjourn and otherwise
regulate their meetings, as they think fit. Questions arising at
any meeting shall be decided by a majority of votes. In case of an
equality of votes the chairman shall not have a second or casting
vote. Meetings of the Board held at regular intervals may be held
at such place, at such time and upon such notice (if any) as the
Board may by resolution from time to time determine.
16.3. A Director may participate in a meeting of the Board or
of any committee of the Directors by means of conference telephones
or other communications facilities by means of which all Directors
participating in the meeting can hear each other and provided that
all such Directors agree to such participation. A Director
participating in a meeting in accordance with this Article shall be
deemed to be present at the meeting and to have so agreed and shall
be counted in the quorum therefor and be entitled to speak and vote
thereat.
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16.4. A Director may, and the Secretary or an Assistant
Secretary upon request of a Director shall, call a meeting of the
Board at any time. Reasonable notice of such meeting specifying
the place, day and hour of such meeting shall be given by mail,
postage prepaid, addressed to each of the Directors and alternate
Directors at his address as it appears on the books of the Company
or by leaving it at his usual business or residential address or by
telephone, telegram, telex, or any method of transmitting legibly
recorded messages. It shall not be necessary to give notice of a
meeting of Directors to any Director if such meeting is to be held
immediately following a general meeting at which such Director
shall have been elected or is the meeting of Directors at which
such Director is appointed.
16.5. Any Director or alternate Director may file with the
Secretary a document executed by him waiving notice of any past,
present or future meeting or meetings of the Directors being, or
required to have been, sent to him and may at any time withdraw
such waiver with respect to meetings held after such withdrawal.
After filing such waiver with respect to future meetings and until
such waiver is withdrawn no notice need be given to such Director
and, unless the Director otherwise requires in writing to the
Secretary, to his alternate Director of any meeting of Directors
and all meetings of the Directors so held shall be deemed not to be
improperly called or constituted by reason of notice not having
been given to such Director or alternate Director. A waiver as
aforesaid may be given by telegram, telex or other method of
transmitting legibly recorded messages.
16.6. The quorum necessary for the transaction of the business
of the Directors may be fixed by the Directors and if not so fixed
shall be that number of Directors that is a majority of the number
of Directors positions then fixed for the Company, whether or not
each position is filled.
16.7. The continuing Directors may act notwithstanding any
vacancy in their body, but, if and so long as their number is
reduced below the number that, pursuant to these Articles, is the
necessary quorum for meetings of the Directors, the continuing
Directors may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of the
Company, but for no other purpose.
16.8. Subject to the Company Act, all acts done by any meeting
of the Directors or of a committee of Directors, or by any person
acting as a Director, shall, notwithstanding that it be afterwards
discovered that there was some defect in the qualification,
election or appointment of any Director or person acting as
aforesaid, be as valid as if every such person had been duly
elected or appointed and was qualified to be a Director.
16.9. A resolution consented to in writing (which resolution
may be in counterparts which together shall be deemed to constitute
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one resolution in writing) whether by document, telegram, telex or
any method of transmitting legibly recorded messages or other
means, by all of the Directors shall be as valid and effectual as
if it had been passed at a meeting of the Directors duly called and
held on the date, expressly or by necessary implication stated
thereon to be the effective date of the passage or adoption of the
resolution. In the event of counterparts bearing expressly or by
implication different effective dates, then in the absence of a
further resolution of the Directors in that regard, the date the
resolution is passed or adopted shall be deemed to be the latest
effective date stated on any counterpart.
PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1. The Directors may appoint an Executive Committee to
consist of such member or members of their body as they think fit,
which Committee shall have, and may exercise during the intervals
between the meetings of the Directors, all the powers vested in the
Directors except the power to fill vacancies in the Board of
Directors, the power to change the membership of, or fill vacancies
in, said Committee and such other powers, if any, as may be
specified by the Directors.
17.2. The Directors may appoint committees consisting of such
members of their body as they think fit and may delegate to any
such committee any power of the Directors (except the power to fill
vacancies in the Board of Directors, the power to change the
membership of, or fill vacancies in, any committee of the Directors
and the power to appoint or remove officers appointed by the
Directors), subject to such conditions as may be prescribed by the
Directors.
17.3. If the Company is or becomes a reporting company, the
Directors shall appoint an audit committee at such time and
consisting of such members of their body as they think fit subject
to the Company Act. The audit committee shall exercise the powers
and perform the functions of an audit committee as described in the
Company Act. In addition, the Directors may delegate to the audit
committee any power of the Directors (except the power to fill
vacancies in the Board of Directors, the power to change the
membership of, or fill vacancies in, any committee of the Directors
and the power to appoint or remove officers appointed by the
Directors), subject to such conditions as may be prescribed by the
Directors.
17.4. All committees of Directors shall keep regular minutes
of their proceedings and meetings and shall cause them to be
recorded in books kept for that purpose, and shall report the same
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to the Directors at such times as the Directors may from time to
time require. Committees may make rules for the conduct of their
business and may appoint such assistants as they may deem
necessary. A majority of the members of a committee shall
constitute a quorum thereof . Save as set out in this Part 17 or in
the rules made by a committee as aforesaid, the meetings and
proceedings of a committee consisting of more than one member shall
be governed by the provisions of these Articles regulating the
proceedings and meetings of the Directors, including, without
limitation, the provisions with respect to the appointment of
alternates to the intent that a Director who is a member of a
committee may appoint an alternate to represent him at a meeting of
the committee unless the Board of Directors shall prohibit the
appointment of alternates by the members of such committee, and
including the provisions with respect to resolutions consented to
in writing. The Directors shall have power at any time to revoke
or override any authority given to or acts to be done by any such
committees, except with respect to acts done before such revocation
or overriding, and to terminate the appointment or change the
membership of a committee and to fill vacancies in it.
PART 18
OFFICERS
18.1. The Directors shall appoint a President and a Secretary
and such other officers, if any, as the Directors shall determine
from time to time and the Directors may, at any time, terminate any
such appointment. No officer shall be appointed unless he is
qualified in accordance with the provisions of the Company Act.
18.2. One person may hold more than one of such offices except
that the offices of President and Secretary must be held by
different persons unless the Company has only one member. Any
person appointed as the Chairman of the Board, the President or the
Managing Director shall be a Director. The other officers need not
be Directors.
18.3. The remuneration of the officers of the Company as such
and the terms and conditions of their tenure of office or
employment shall from time to time be determined by the Directors;
such remuneration may be by way of salary, fees, wages, commission
or participation in profits or any other means or all of these
modes and an officer may in addition to such remuneration be
entitled to receive after he ceases to hold such office or leaves
the employment of the Company a pension or gratuity.
18.4. The Directors may decide what functions and duties each
officer shall perform and may entrust to and confer upon him any of
the powers exercisable by them upon such terms and conditions and
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with such restrictions as they think fit and may from time to time
revoke, withdraw., alter or vary all or any of such functions.
duties and powers. The Secretary shall, inter alia, perform the
functions of the Secretary specified in the Company Act.
18.5. Every officer of the Company who holds any office or
possesses any property whereby, whether directly or indirectly,
duties or interests might be created in conflict with his duties or
interests as an officer of the Company shall, in writing, disclose
to the President the fact and the nature and extent of the
conflict.
PART 19
INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1. Subject to the Company Act and these Articles, the
Directors shall cause the Company to indemnify a Director or former
Director of the Company and a Director or former Director of a
corporation which is or was a subsidiary of the Company or (if he
acted as such at the request of the Company) of any other
corporation of which the Company is or was a shareholder and the
heirs and personal representatives of any such person against all
costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by
him or them including an amount paid to settle an action or satisfy
a judgment in a civil, criminal or administrative action or
proceeding to which he is or they are made a party by reason of his
being or having been a Director of the Company or a director of
such corporation, including any action brought by the Company or
any such corporation. The Company shall apply to the Court for all
approvals of the Court which may be required to make any indemnity
referred to in this Article effective and enforceable. The Company
shall be deemed to have contracted, on the terms of the foregoing
indemnity, with each Director of the Company and each such Director
of such corporation on his being elected or appointed.
19.2. Subject to the Company Act and these Articles, the
Directors shall cause the Company to indemnify:
(i) any officer or former officer (but in the case
of an officer of a corporation other than a
subsidiary of the Company only if he acted as
such at the request of the Company); and
(ii) any employee, former employee or agent or
former agent designated by the Directors,
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of the Company or of a corporation which is or was a subsidiary of
the Company or of any other corporation of which the Company is or
was a shareholder (notwithstanding that he is also a Director) and
his heirs and personal representatives against all costs, charges
and expenses whatsoever (including, without limiting the generality
of the foregoing, those specifically referred to in Article 19.1
above) incurred by him or them and resulting from his acting as an
officer, employee or agent of the Company or of such corporation.
The Company shall be deemed to have contracted, on the terms of the
foregoing indemnity, with each such officer or former officer on
his being appointed.
19.3. The failure of a person to comply with the Company Act
or of the Memorandum or these Articles shall not, of itself,
invalidate any indemnity to which such person is entitled under
this Part.
19.4. The Directors may cause the Company to purchase and
maintain insurance for the benefit of:
(i) any person who is or was serving as a Director
or officer of the Company or as a director or
officer of a corporation which is or was a
subsidiary of the Company or (if he acted as
such at the request of the Company) of any
other corporation of which the Company is or
was a shareholder; and
(ii) any person designated by the Directors who is
or was serving as an employee or agent of the
Company or of such corporation; and
(iii) any person in respect of whom the Company is or
may be obligated to indemnify pursuant to this
Part 19,
and his heirs and personal representatives against any liability
incurred by him as such Director, director, officer, employee or
agent.
19.5. If any of the provisions of this Part shall be void,
illegal or invalid, the remaining provisions of this Part shall be
construed and take effect as if the void, illegal or invalid
provision had never been contained herein. The Company shall not
be required to indemnify a person pursuant to Articles 19.1 or 19.2
if such person did not, with respect to the act or matter giving
rise to the proposed indemnification, act honestly and in good
faith and with a view to the best interests of the Company or the
corporation referred to therein, as the case may be, or in the case
of a criminal or administrative actor proceeding, if he did not
have reasonable grounds for believing his conduct was lawful or
duly authorized. The provisions of this Part 19 relating to
Directors and former Directors of the Company and to directors and
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former directors of a corporation which is or was a subsidiary of
the Company or of a corporation in which the Company is or was a
shareholder also apply, with the necessary changes and so far as
applicable, to alternate Directors of the Company and alternate
directors of such corporations.
PART 20
DIVIDENDS AND RESERVES
20.1. Subject to the Company Act and to the special rights and
restrictions as to dividends attached to any shares, the Directors
may from time to time declare and authorize payment of such
dividends, if any, as they may deem advisable and need not give
notice of such declaration to any member. No dividend shall be
paid otherwise than out of funds and/or assets properly available
for the payment of dividends and a declaration by the Directors as
to the amount of such funds and/or assets available for dividends
shall be conclusive. The Company may pay any such dividend wholly
or in part by the distribution of specific assets and in particular
by paid up shares, bonds, debentures or other securities of the
Company or any other corporation or in any one or more such ways as
may be authorized by the Company or the Directors and where any
difficulty arises with regard to such a distribution the Directors
may settle the same as they think expedient, and in particular may
fix the value for distribution of such specific assets or any part
thereof, and may determine that cash payments in substitution for
all or any part of the specific assets to which any members are
entitled shall be made to any members on the basis of the value so
fixed in order to adjust the rights of all parties and may vest any
such specific assets in trustees for the persons entitled to the
dividend as may seem expedient to the Directors.
20.2. Any dividend declared on shares of any class or series
by the Directors may be made payable on such date as is fixed by
the Directors.
20.3. Subject to the rights of members (if any) holding shares
with special rights as to dividends, all dividends on shares of any
class or series shall be declared and paid according to the number
of such shares held.
20.4. The Directors may, before declaring any dividend, set
aside out of the funds properly available for the payment of
dividends such sums as they think proper as a reserve or reserves,
which shall, at the discretion of the Directors, be applicable for
meeting contingencies, or for equalizing dividends, or for any
other purpose to which such funds of the Company may be properly
applied, and pending such application may, at the like discretion,
either be employed in the business of the Company or be invested in
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such investments as the Directors may from time to time think fit.
The Directors may also, without placing the same in reserve, carry
forward such funds, which they think prudent not to divide.
20.5. If several persons are registered as joint holders of
any share, any one of them may give an effective receipt for any
dividend, bonuses or other moneys payable in respect of the share.
20.6. No dividend shall bear interest against the Company.
Where the dividend to which a member is entitled includes a
fraction of a cent, such fraction shall be disregarded in making
payment thereof and such payment shall be deemed to be payment in
full.
20.7. Any dividend, bonus or other moneys payable in cash in
respect of shares may be paid by cheque or warrant sent through the
post directed to the registered address of the holder, or in the
case of joint holders, to the registered address of that one of the
joint holders who is first named on the register, or to such person
and to such address as the holder or joint holders may direct in
writing. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. The mailing of such cheque
or warrant shall, to the extent of the sum represented thereby
(plus the amount of any tax required by law to be deducted)
discharge all liability for the dividend, unless such cheque or
warrant shall not be paid on presentation or the amount of tax so
deducted shall not be paid to the appropriate taxing authority.
20.8. Notwithstanding anything contained in these Articles the
Directors may from time to time capitalize any retained earnings or
surplus of the Company and may issue as fully paid and non-
assessable any unissued shares or any debt obligations of the
Company as a dividend representing such retained earnings or
surplus or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1. The Company shall keep at its records office or at such
other place as the Company Act may permit, the documents, copies,
registers, minutes, and records which the Company is required by
the Company Act to keep at its records office or such other place,
as the case may be.
21.2. The Company shall cause to be kept proper books of
account and accounting records in respect of all financial and
other transactions of the Company in order properly to record the
financial affairs and condition of the Company and to comply with
the Company Act.
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21.3. Unless the Directors determine otherwise, or unless
otherwise determined by an ordinary resolution, no member of the
Company shall be entitled to inspect the accounting records of the
Company.
21.4. The Directors shall from time to time at the expense of
the Company cause to be prepared and laid before the Company in
general meeting such financial statements and reports as are
required by the Company Act.
21.5. Every member shall be entitled to be furnished once
gratis on demand with a copy of the latest annual financial
statement of the Company and, if so required by the Company Act, a
copy of each such annual financial statement and interim financial
statement shall be mailed to each member.
PART 22
NOTICES
22.1. A notice, statement or report may be given or delivered
by the Company to any member either by delivery to him personally
or by sending it by mail to him to his address as recorded in the
register of members. Where a notice, statement or report is sent
by mail, service or delivery of the notice, statement or report
shall be deemed (i) to be effected by properly addressing,
prepaying and mailing the notice, statement or report, and (ii) to
have been given on the date, Saturdays and holidays excepted,
following the date of mailing. A certificate signed by the
Secretary or other officer of the Company or of any other person
acting in that behalf for the Company that the letter, envelope or
wrapper containing the notice, statement or report was so
addressed, prepaid and mailed shall be conclusive evidence thereof.
22.2. A notice, statement or report may be given or delivered
by the Company to the joint holders of a share by giving the notice
to the joint holder first named in the register of members in
respect of the share.
22.3. A notice, statement or report may be given or delivered
by the Company to the persons entitled to a share in consequence of
the death, bankruptcy or incapacity of a member by sending it
through the mail prepaid addressed to them by name or by his title
or by any like description, at the address (if any) supplied to the
Company for the purpose by the persons claiming to be so entitled,
or (until such address has been so supplied) by giving the notice
in a manner in which the same might have been given if the death,
bankruptcy or incapacity had not occurred.
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22.4. Notice of every general meeting or meeting of members
shall be given in a manner hereinbefore authorized to every member
holding at the record date for determining the members entitled to
such notice shares which confer the right to notice of and to
attend and vote at any such meeting. No other person except the
auditor of the Company and the Directors of the Company shall be
entitled to receive notices of any such meeting.
PART 23
RECORD DATES
23.1. Subject to the Company Act, the Directors may fix in
advance a date as the record date for the determination of the
members entitled to notice of any meeting of members or any
adjournment thereof, and/or a date as the record date f or the
determination of the members entitled to attend and vote at any
meeting of members or any adjournment thereof (which may but need
not be the same date as the record date for determining members
entitled to notice) and/or a date as a record date for the
determination of members entitled to receive payment of a dividend,
or for any other proper purpose and in such case, notwithstanding
anything elsewhere contained in these Articles, only members or
persons of record on the date so picked shall be deemed to be
members for the particular purpose or purposes aforesaid.
23.2. Where no record date is fixed for the determination of
members entitled to notice, or to vote, or of members entitled to
receive payment of a dividend or for any other proper purpose, the
date on which notice of the meeting is mailed or on which the
resolution of the Directors declaring the dividend is adopted
respectively is the record date for such determination.
PART 24
SEAL
24.1. The Directors may provide a seal for the Company and, if
they do so, shall provide for the safe custody of the seal which
shall not be affixed to any instrument except in the presence of
the following persons, namely;
(i) the President or the Secretary;
(ii) any two Directors of the Company;
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(iii) one of the Chairman of the Board, the
President, a Director or the Vice-President
together with any one of the Secretary, an
Assistant Secretary, the Treasurer, the
Secretary-Treasurer, an Assistant Treasurer and
an Assistant Secretary-Treasurer; or
(iv) such person or persons as the Directors may
from time to time by resolution appoint,
and the said Directors, officers, person or persons in whose
presence the seal is so affixed to an instrument shall sign such
instrument. For the purpose of certifying under the seal copies or
extracts from the Memorandum or Articles of the Company, minutes of
meetings or resolutions of the members or Directors or committees
of Directors, or any instrument executed or issued by the Company,
the seal may be affixed in the presence of any one of the persons
hereinbefore mentioned unless the Directors shall by resolution
determine otherwise.
24.2. The signatures of any one or more of the Chairman of the
Board, President, Vice-Presidents, Directors, Secretary, Treasurer,
Assistant-Secretaries, Assistant-Treasurers and any other officers
of the Company and any persons referred to in Article 24.1(iv) may,
if authorized by the Directors, be printed, lithographed, engraved
or otherwise mechanically reproduced upon all instruments executed
or issued by the Company; and any instrument on which the signature
of any such person is so reproduced by authorization of the
Directors shall be deemed to have been manually signed by such
person whose signature is so reproduced and shall be, subject to
the Company Act, as valid to all intents and purposes as if such
instrument had been signed manually, and notwithstanding that the
person whose signature is so reproduced may have ceased to hold
office (if applicable) at the date of the delivery or issue of such
instrument. The term "instrument" as used in Article 24.1 and this
Article 24.2 shall include deeds, mortgage, hypothecs, charges,
conveyances, transfers and assignments of property, real or
personal, agreements, releases, receipts and discharges for the
payment of money or other obligation, certificates of the Company's
shares, bonds, debentures and other securities and debt obligations
of the Company, and all paper-writings.
24.3. To enable the seal of the Company to be affixed to any
debt obligations, share certificates, or other securities of the
Company, whether in definitive or interim form, on which facsimiles
of any of the signatures of the Directors or officers of the
Company are, in accordance with the Company Act and/or these
Articles, printed or otherwise mechanically reproduced there may be
delivered to the firm or company employed to engrave, lithograph or
print such definitive or interim debt obligations, share
certificates or other securities one or more unmounted dies
reproducing the Company's seal and the Chairman of the Board, the
President, the Managing Director or a Vice-President and the
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Secretary, Treasurer, Secretary-Treasurer, an Assistant Secretary,
an Assistant Treasurer or an Assistant Secretary-Treasurer may by
a document authorize such firm or company to cause the Company's
seal to be affixed to such definitive or interim debt obligations,
share certificates or other securities by the use of such dies.
Debt obligations, share certificates or other securities to which
the Company's seal has been so affixed shall for all purposes be
deemed to be under and to bear the Company's seal lawfully affixed
thereto.
24.4. The Company may have for use in any other province,state,
territory or country an official seal which shall have on its face
the name of the province, state, territory or country where it is
to be used.
PART 25
PROHIBITIONS IF NOT A REPORTING COMPANY
25.1. If the Company is, or becomes, a company which is not a
reporting company under the Company Act:
(i) the number of members for the time being of the
Company, exclusive of persons who are for the
time being in the employment of the Company and
continue to be members after the termination of
such employment, shall not exceed 50;
(ii) no securities of the Company shall be offered for
sale or subscription to the public;
(iii) no shares shall be transferred without the
previous consent of the Directors expressed by a
resolution of the Board and the Directors shall
not be required to give any reason for refusing
to consent to any such proposed transfer.
FULL NAME, RESIDENT ADDRESS AND OCCUPATION OF SUBSCRIBER:
/S/ David A. G. Birnie
- --------------------------
DAVID A. G. BIRNIE
875 Aubeneau Crescent
West Vancouver, B.C.
V7T 1T4
Barrister and Solicitor
DATED the 23rd day of November, 1993.
THIS CONTRACT SERVICES AGREEMENT MADE AS OF: JANUARY 1, 1998
BETWEEN:
TITAN TRADING ANALYTICS INC., a company duly
incorporated under the laws of the Province of
British Columbia, and having an office at 201
Selby Street. Nanaimo, British Columbia, V9R 2R2
(hereinafter referred to as "Titan")
AND:
MICHAEL B. PAAUWE AND ASSOCIATES, management and
financial consultants having an office at 3473 Ellis
Place, Nanaimo, British Columbia, V9T 4Y6
(hereinafter referred to as "Paauwe")
WITNESSES THAT WHEREAS:
A. Titan is and has been engaged in the development of artificial
intelligence ("AI") technologies, research, development, marketing
and sale of financial software, the development of AI based
financial trading systems, and proposes to develop an AI based
wireless financial messaging service;
B. Paauwe has experience in the provision of corporate and
financial management, financial trading systems software
development, product marketing, corporate financing, financial
research and administration, and related advice and services (the
"Services"), and has since May 1994 been providing the Services to
Titan as an independent contractor under an oral arrangement
entered into in that connection; and
C. the parties consider that it would be in their mutual best
interests to reduce the terms of the oral arrangement to writing,
and to amend the Fee payable pursuant to clause 2.1 in the November
1, 1995 agreement, in accordance with a directors' resolution dated
December 23, 1997, the parties hereto, in consideration of the
premises and the mutual covenants and agreements contained herein
and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, agree as follows:
1. Engagement
Titan hereby confirms the engagement of Paauwe to perform, and
Paauwe agrees to continue to perform the Services on and subject to
the terms of this Agreement for not fewer than 160 nor more than
200 hours (or such greater or lesser number of hours as the parties
may from time to time agree in writing) in each calendar month.
<PAGE>
2
2. Payment for the Services and reimbursement of expenses
2.1 Titan hereby agrees:
2.1.1 to pay Paauwe monthly for the Services monthly at a
rate, being not less than $7,666.66, to be agreed upon between the
parties from time to time (the "Fee"); and
2.1.2 to pay Paauwe annually, upon his request, a bonus (the
"Bonus") of $4,500.
2.2 Titan agrees to reimburse Paauwe for vehicle mileage expenses
at a rate to be agreed from time to time, and also agrees to
reimburse Paauwe for all reasonable expenses incurred in travel,
administration, promotion and all other out of pocket expenses
actually and reasonably incurred by Paauwe in connection with the
business of Titan and in performing the Services.
3. Paauwe to be an independent contractor
Notwithstanding any other provision of this Agreement, it is
understood and agreed between the parties and it is a condition of
this Agreement, that Paauwe is an independent contractor and not
subject except as hereinafter provided, to the direction or control
of any other person in performing the Services, nor is he an
employee by virtue of any provision hereof, or his position as all
officer of Titan. In performing the Services. Paauwe shall at all
times, but subject to (a) the business plan of Titan, as from time
to time approved by its board of directors, (b) any resolutions of
the board of directors from time to time, and (c) any legal,
governmental or regulatory requirements or conditions, take such
steps as in his good faith business judgment shall be necessary or
appropriate.
4. Term and renewal
Subject to the termination provisions of paragraph 7 hereof, the
term of this Agreement shall be for a period of three years from
the date of this Agreement (the "Initial Term"), and unless
terminated, shall be renewed by the parties from time to time for
further periods (a "Renewal Term") of two years.
5. Right of Paauwe to enter into other contracts for services
Nothing in this Agreement shall restrict the right of Paauwe to
perform services for others, provided that such others are not
engaged in a business which is competitive or in conflict with the
business of Titan, and provided further that the performance of
such services does not, in the opinion of the board of directors of
Titan acting reasonably, interfere with the performance of the
Services.
6. Confidentiality and non-disclosure
Paauwe agrees that all proprietary information relating to Titan's
technology, business and affairs ("Proprietary Information") is and
shall be kept confidential, and will not be disclosed to any person
other than a person employed by or performing services for Titan
and who has a need to know such Proprietary Information, except
with the prior consent in writing of the President of Titan.
<PAGE>
3
7. Termination
7.1 Titan may at any time and for any reason terminate this
Agreement upon 30 days written notice to Paauwe, and such
termination shall be effective 30 days following the delivery of
such notice to Paauwe.
7.2 If Titan terminates this Agreement for any reason other than
the commission by Paauwe of a material and substantial breach of
his obligation to perform the Services as provided in this
Agreement, Titan shall forthwith pay Paauwe, in a lump sum:
7.2.1 an amount equal to 12 times the Fee, plus any Bonus to
which Paauwe is entitled pursuant to section 2.1.2 hereof, if
termination occurs during the Initial Term;
7.2.2 an amount to be negotiated between the parties, but not
less than the amount payable under section 7.2.1 hereof, if
termination occurs during any Renewal Term or if Titan fails to
renew this Agreement.
7.3 If Titan gives notice of termination of this Agreement to
Paauwe by reason of a material and substantial breach of his
obligation to perform the Services, the notice shall specify and
Paauwe shall have 30 days from delivery of the notice to him to
cure, the breach, and upon such breach being cured notwithstanding
section 7.1, the notice of termination shall thereupon cease to be
effective.
7.3 Paauwe may terminate this Agreement at any time upon 120 days
written notice to Titan.
8. Payment of GST
All amounts payable by Titan to Paauwe for the Services shall be
exclusive of any Goods and Services Tax (GST) or other governmental
taxes or levies payable in respect of the Fee and Titan shall, in
addition to the Fee, pay to Paauwe all amounts of GST or other
governmental taxes or levies imposed on Paauwe with respect to the
Fee, and agrees to indemnify him and save him harmless in respect
of any such imposition resulting from any failure by Paauwe to
collect, or by Titan to make payment of any amount properly
chargeable to it on account thereof.
9. Severability
If an provision of this Agreement is found to be void, invalid,
illegal or unenforceable by a court of competent jurisdiction, such
finding will not affect any other provision of this Agreement,
which will continue to be in full force and effect.
10. Assignment
This agreement may not be assigned by either party without the
prior written consent of the other, which consent may not be
unreasonably witheld.
<PAGE>
4
11. Arbitration of disputes
11.1 Except as provided in section 11.2, all differences or
disputes arising out of or in connection with this agreement,
including any difference or dispute with respect to the amount of
the Fee, or in respect of any defined legal relationship associated
herewith or derived herefrom shall be referred to and finally
resolved by arbitration under the rules for the conduct of domestic
commercial arbitrations under the British Columbia International
Commercial Arbitration Centre. The appointing authority shall be
the British Columbia International Commercial Arbitration Centre.
The case shall be administered by the British Columbia
International Commercial Arbitration Centre in accordance with its
Procedures for Cases under the BCICAC Rules". The place of
arbitration shall be Vancouver, British Columbia, Canada.
11.2 The provisions of section 11.1 do not apply to the obligations
of Titan under section 7.2 hereof.
13. Enurement
This Agreement shall enure to the benefit of and shall bind the
parties and their respective heirs, executors, administrators,
successors and permitted assigns.
14. Governing law
This Agreement shall be interpreted in accordance with the laws of
the Province of British Columbia
The parties, intending to be bound, have executed this Agreement as
of the date first above written.
TITAN TRADING ANALYTICS INC.
Per: /S/ Michael Gossland
--------------------------
Authorized signatory
MICHAEL B. PAAUWE AND ASSOCIATES
Per: /S/ Michael B. Paauwe
--------------------------
Authorized signatory
THIS CONTRACT SERVICES AGREEMENT MADE AS OF: JANUARY 1, 1998
BETWEEN:
TITAN TRADING ANALYTICS INC., a company duly
incorporated under the laws of the Province of
British Columbia, and having an office at 201
Selby Street. Nanaimo, British Columbia, V9R 2R2
(hereinafter referred to as "Titan")
AND:
MICHAEL GOSSLAND AND ASSOCIATES, professional
software developers, having an office at 5966 Broadway
Road, Nanaimo, British Columbia, V9V 1C9
(hereinafter referred to as "Gossland")
WITNESSES THAT WHEREAS:
A. Titan is and has been engaged in the development of artificial
intelligence ("AI") technologies, research, development, marketing
and sale of financial software, the development of AI based
financial trading systems, and proposes to develop an AI based
wireless financial messaging service;
B. Gossland has experience in software design and engineering,
financial trading software system research and development,
computer systems configuration and maintenance, technical trouble
shooting, software technology security, and matters related to the
foregoing (the "Services"), and has since September 1, 1994 been
providing the Services to Titan as an independent contractor under
an oral arrangement entered into in that connection; and
C. the parties consider that it would be in their mutual best
interests to reduce the terms of the oral arrangement to writing,
and to amend the Fee payable pursuant to clause 2.1 in the November
1, 1995 agreement, in accordance with a directors' resolution dated
December 23, 1997, the parties hereto, in consideration of the
premises and the mutual covenants and agreements contained herein
and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, agree as follows:
1. Engagement
Titan hereby confirms the engagement of Gossland to perform, and
Gossland agrees to continue to perform the Services on and subject
to the terms of this Agreement for not fewer than 160 nor more than
200 hours (or such greater or lesser number of hours as the parties
may from time to time agree in writing) in each calendar month.
<PAGE>
2
2. Payment for the Services and reimbursement of expenses
2.1 Titan hereby agrees:
2.1.1 to pay Gossland monthly for the Services monthly at a
rate, being not less than $7,250, to be agreed upon between the
parties from time to time (the "Fee"); and
2.1.2 to pay Gossland annually, upon his request, a bonus
(the "Bonus") of $4,500.
2.2 Titan agrees to reimburse Gossland for vehicle mileage
expenses at a rate to be agreed from time to time, and also agrees
to reimburse Gossland for all reasonable expenses incurred in
travel, administration, promotion and all other out of pocket
expenses actually and reasonably incurred by Gossland in connection
with the business of Titan and in performing the Services.
3. Gossland to be an independent contractor
Notwithstanding any other provision of this Agreement, it is
understood and agreed between the parties and it is a condition of
this Agreement, that Gossland is an independent contractor and not
subject except as hereinafter provided, to the direction or control
of any other person in performing the Services, nor is he an
employee by virtue of any provision hereof, or his position as all
officer of Titan. In performing the Services. Gossland shall at all
times, but subject to (a) the business plan of Titan, as from time
to time approved by its board of directors, (b) any resolutions of
the board of directors from time to time, and (c) any legal,
governmental or regulatory requirements or conditions, take such
steps as in his good faith business judgment shall be necessary or
appropriate.
4. Term and renewal
Subject to the termination provisions of paragraph 7 hereof, the
term of this Agreement shall be for a period of three years from
the date of this Agreement (the "Initial Term"), and unless
terminated, shall be renewed by the parties from time to time for
further periods (a "Renewal Term") of two years.
5. Right of Gossland to enter into other contracts for services
Nothing in this Agreement shall restrict the right of Gossland to
perform services for others, provided that such others are not
engaged in a business which is competitive or in conflict with the
business of Titan, and provided further that the performance of
such services does not, in the opinion of the board of directors of
Titan acting reasonably, interfere with the performance of the
Services.
6. Confidentiality and non-disclosure
Gossland agrees that all proprietary information relating to
Titan's technology, business and affairs ("Proprietary
Information") is and shall be kept confidential, and will not be
disclosed to any person other than a person employed by or
performing services for Titan and who has a need to know such
Proprietary Information, except with the prior consent in writing
of the President of Titan.
<PAGE>
3
7. Termination
7.1 Titan may at any time and for any reason terminate this
Agreement upon 30 days written notice to Gossland, and such
termination shall be effective 30 days following the delivery of
such notice to Gossland.
7.2 If Titan terminates this Agreement for any reason other than
the commission by Gossland of a material and substantial breach of
his obligation to perform the Services as provided in this
Agreement, Titan shall forthwith pay Gossland, in a lump sum:
7.2.1 an amount equal to 12 times the Fee, plus any Bonus to
which Gossland is entitled pursuant to section 2.1.2 hereof, if
termination occurs during the Initial Term;
7.2.2 an amount to be negotiated between the parties, but not
less than the amount payable under section 7.2.1 hereof, if
termination occurs during any Renewal Term or if Titan fails to
renew this Agreement.
7.3 If Titan gives notice of termination of this Agreement to
Gossland by reason of a material and substantial breach of his
obligation to perform the Services, the notice shall specify and
Gossland shall have 30 days from delivery of the notice to him to
cure, the breach, and upon such breach being cured notwithstanding
section 7.1, the notice of termination shall thereupon cease to be
effective.
7.3 Gossland may terminate this Agreement at any time upon 120
days written notice to Titan.
8. Payment of GST
All amounts payable by Titan to Gossland for the Services shall be
exclusive of any Goods and Services Tax (GST) or other governmental
taxes or levies payable in respect of the Fee and Titan shall, in
addition to the Fee, pay to Gossland all amounts of GST or other
governmental taxes or levies imposed on Gossland with respect to
the Fee, and agrees to indemnify him and save him harmless in
respect of any such imposition resulting from any failure by
Gossland to collect, or by Titan to make payment of any amount
properly chargeable to it on account thereof.
9. Severability
If an provision of this Agreement is found to be void, invalid,
illegal or unenforceable by a court of competent jurisdiction, such
finding will not affect any other provision of this Agreement,
which will continue to be in full force and effect.
10. Assignment
This agreement may not be assigned by either party without the
prior written consent of the other, which consent may not be
unreasonably witheld.
<PAGE>
4
11. Arbitration of disputes
11.1 Except as provided in section 11.2, all differences or
disputes arising out of or in connection with this agreement,
including any difference or dispute with respect to the amount of
the Fee, or in respect of any defined legal relationship associated
herewith or derived herefrom shall be referred to and finally
resolved by arbitration under the rules for the conduct of domestic
commercial arbitrations under the British Columbia International
Commercial Arbitration Centre. The appointing authority shall be
the British Columbia International Commercial Arbitration Centre.
The case shall be administered by the British Columbia
International Commercial Arbitration Centre in accordance with its
Procedures for Cases under the BCICAC Rules". The place of
arbitration shall be Vancouver, British Columbia, Canada.
11.2 The provisions of section 11.1 do not apply to the obligations
of Titan under section 7.2 hereof.
13. Enurement
This Agreement shall enure to the benefit of and shall bind the
parties and their respective heirs, executors, administrators,
successors and permitted assigns.
14. Governing law
This Agreement shall be interpreted in accordance with the laws of
the Province of British Columbia
The parties, intending to be bound, have executed this Agreement as
of the date first above written.
TITAN TRADING ANALYTICS INC.
Per: /S/ Michael B. Paauwe
--------------------------
Authorized signatory
MICHAEL GOSSLAND AND ASSOCIATES
Per: /S/ Michael Gossland
--------------------------
Authorized signatory
