FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
Commission File Number: 0-25024
TITAN TECHNOLOGIES, INC.
(Exact name of small business issuer as
specified in its charter)
NEW MEXICO 85-0388759
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3206 Candelaria Road NE. Albuquerque, NM 87107
(Address of principal executive offices)
(505) 884-0272
(Issuer's telephone number)
N/A
(Former name, former address and former three-months, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's common stock outstanding as of May 29,
1998 was:
No Par Value Common 22,065,411
Transitional Small Business Format: Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
April 30, 1998
UNAUDITED
ASSETS
Current Assets
Cash .................................................. $ 17,154
Accounts receivable - stockholder ..................... 609
-----------
Total Current Assets ........................... 17,763
Property and Equipment, at cost
Furniture and fixtures ............................. 5,407
Machinery .......................................... 7,706
-----------
13,113
Less accumulated depreciation ...................... (4,552)
-----------
Net property and equipment ..................... 8,561
$ 26,324
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ...................................... $ 7,562
Note payable stockholder .............................. 124,750
Other accrued liabilities ............................. 56,324
-----------
Total Current Liabilities ...................... 188,636
Stockholders' Equity
Common stock - no par value; authorized,
50,000,000 shares; issued and outstanding,
22,065,411 shares ..................................... 1,317,944
Accumulated deficit ................................... (1,480,256)
-----------
(162,312)
-----------
$ 26,324
===========
The Accompanying Notes Are An Integral Part of These Financial Statements
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months April 30
UNAUDITED
1998 1997
------------ ------------
REVENUES
Other income ............................ $ 4,541 $ 1,492
Gain (loss) on sale of assets ........... (174) --
------------ ------------
4,367 1,492
COSTS AND EXPENSES
General and administrative .............. 64,562 90,173
Outside services ........................ -- 11,807
Depreciation and amortization ........... (1,130) 345
Interest ................................ 3,360 3,360
------------ ------------
66,792 105,685
------------ ------------
Income (loss) before income taxes ....... (62,425) (104,193)
Provision for income taxes .............. -- --
------------ ------------
Net income (loss) ....................... $ (62,425) $ (104,193)
============ ============
Weighted average common shares
outstanding, basic and diluted (Note 2) 22,002,593 18,725,788
============ ============
Basic and diluted (loss) per common share .. $ 0.00 $ 0.00
============ ============
The Accompanying Notes Are An Integral Part of These Financial Statements
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended April 30
UNAUDITED
1998 1997
------------ ------------
REVENUES
Plant licensing ......................... $ 39,353 $ --
Gain (loss) on sale of assets ........... (174) 162,678
Other income ............................ 5,582 7,282
------------ ------------
44,761 169,960
COSTS AND EXPENSES
General and administrative .............. 206,061 281,575
Outside services ........................ 12,733 30,978
Depreciation and amortization ........... 1,491 2,042
Interest ................................ 10,080 8,583
------------ ------------
230,365 323,178
------------ ------------
Income (loss) before income taxes ....... (185,604) (153,218)
Provision for income taxes .............. -- --
------------ ------------
Net income (loss) ....................... $ (185,604) $ (153,218)
============ ============
Weighted average common shares
outstanding, basic and diluted (Note 2) 22,002,593 18,725,788
============ ============
Basic and diluted (loss) per common share .. $ (0.01) $ (0.00)
============ ============
The Accompanying Notes Are An Integral Part of These Financial Statements
Titan Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended April 30
UNAUDITED
1998 1997
--------- ---------
Cash flows from operating activities
Cash received from customers .................. $ 39,353 $ --
Interest received ............................. 1,159 7,282
Cash paid for suppliers and subcontractors .... (183,154) (304,178)
Interest paid ................................. (10,080) (8,583)
Miscellaneous Income .......................... 4,423 --
--------- ---------
Net cash provided by (used in)
operating activities .......................... (148,299) (305,479)
Cash flows from investing activities
Acquisition of property and equipment ......... (32,277) (2,322)
Proceeds from sale of assets .................. 24,606 --
--------- ---------
(7,671) (2,322)
Cash flows from financing activities
Proceeds from stockholder loan ................ 12,750 112,000
Proceeds from sale of common stock ............ 157,250 --
--------- ---------
170,000 112,000
Net increase (decrease) in cash ............... 14,030 (195,801)
--------- ---------
Cash at beginning of year ..................... 3,125 272,714
--------- ---------
Cash at end of period ......................... $ 17,155 $ 76,913
========= =========
Reconciliation of Net earnings (loss) to
Cash Provided by (used in)
Operating Activities
Net earnings (loss) ........................... $(185,604) $(153,218)
Adjustments
(Gain) loss on sale of assets ................. 174 (162,678)
Depreciation and amortization ................. 1,491 2,042
Changes in assets and liabilities
(Decrease) increase
in accounts payable ......................... 5,023 (749)
Increase in interest payable .................. 10,080 7,238
(Decrease) increase in accrued liabilities .... 20,537 1,886
--------- ---------
Net cash provided by (used in)
operating activities ........................ $(148,299) $(305,479)
========= =========
The Accompanying Notes Are An Integral Part of These Financial Statements
Noncash investing and financing activities: During the nine months ending April
30,1997 certain rights and patents with a net book value of approximately
$75,000 were transferred to the developer in exchange for notes payable,
accrued interest and other liabilities to the developer totaling
approximately $238,000.
Titan Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended April 30, 1998
1) NOTES TO FINANCIAL STATEMENTS
The balance sheet at April 30, 1998, and the statements of operations and cash
flow for the nine months ended April 30, 1998 and 1997 have been prepared
without audit. In the opinion of management, all adjustments, including normal
recurring adjustments necessary to present fairly the financial position,
results of operations and cash flows, have been made. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read in conjunction
with the Company's audited financial statements at July 31, 1997. The results of
operations for the nine months ended April 30, 1998 are not necessarily
indicative of operating results for the full year.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income (loss) per common share is calculated using the weighted average
number of share outstanding during each period.
3) ISSUANCE OF COMMON STOCK
In March 1997, the Company exchanged 3,000,000 shares of its common stock for a
28.5% interest in ESA Recycling GMBH ("ESA"), an Austrian company. No investment
was recorded because the estimated fair value of the net assets of ESA at the
time of the exchange were nominal. ESA has no current operations but plans to
develop a tire recycling plant in Europe.
In August 1997 the company sold 580,000 shares of common stock for which it
received $145,000. In February 1998 the company sold 49,000 shares of common
stock for which it received $12,500.
4) CERTAIN TRANSACTIONS
In order to raise working capital, on April 23, 1998, the Company sold a truck
to Jeff Wilder, an employee of Tire Recycling Technologies Corp., for $16,830
and the forgiveness of one month's salary due but unpaid to Jeff Wilder. Jeff
Wilder granted Tire Recycling Technologies Corp. The right to continue to use
the truck for its business purposes and the right to repurchase the truck by
assuming the amount of the loan and repaying all payments made by Jeff Wilder on
the bank note signed by him to finance his purchase of the truck. Jeff Wilder is
the son of Ronald L. Wilder, the President of Tire Recycling Technologies Corp.
On May 22, 1998, the Company granted an option to purchase 300,000 shares of its
common stock to Jeff Wilder and to Dana Finley, both of whom are full-time
Company employees. Each option grants the holder the right, for a period of five
years from the date of the option, to purchase all or any part of 300,000 shares
of the Company's common stock at an exercise price per share of $0.24, the
market price of the Company's stock on May 22, 1998. The options are subject to
ratification by the Company's Shareholders.
The Company granted an option to purchase 300,000 shares of the Company's common
stock to Dr. Ronald Allred, in recognition of the time and effort devoted by him
and by Adherent Technology to advancing the Company's technology. The option
grants the holder the right, for a period of five years from the date of the
option, to purchase 300,000 shares of the Company's common stock at an exercise
price per share of $0.24. The option may be exercised at any time, or from time
to time, for all or any part of the shares subject to the option. The option is
subject to ratification by the Company's Shareholders.
4) LOSS PER SHARE
Loss per common share is computed using the weighted average number of common
shares outstanding during the period. The company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share " during the quarter ended
January 31, 1998. Since the Company has only common stock outstanding, the
adoption of this standard had no significant effect on the company's financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
During the nine months ended April 30, 1998, the Company had $39,353 in
licensing revenue. During the year ended July 31, 1996 the Company granted tire
recycling license rights for Europe, Australia, New Zealand and South Africa to
a company. The agreement requires the payment of licensee fees of $1,500,000 to
$2,500,000 to the Company for each plant constructed and royalties of 3.5% of
the gross sales price of by-products from the plants. No plants are scheduled
for construction at April 30, 1998. As a result of these activities by
management general and administrative expenses decreased $25,611 to $64,562 and
outside services decreased $11,807 to $0 for the three months ended April 30,
1998 as compared to the three months ended April 30, 1997. General and
administrative decreased $75,514 to $206,061 and outside services decreased
$18,245 to $12,733 for the nine months ended April 30, 1998 as compared to the
six months ended April 30, 1997.
Financial Condition
- -------------------
The Company's liquidity increased in the nine months ended April 30, 1998 as
cash increased by $14,030 since July 31, 1997. Operations used $148,299 compared
to the same period of the prior year in which operations used $305,479. The
Company did not repay a note due September 24, 1997 and is in default of the
note. The Company is attempting to renegotiate the note. Pending renegotiation
of the note and based on the results of fiscal 1997 and its prospects for 1998,
management considers the Company's liquidity position adequate with funds
sufficient to meet its operating needs.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The only legal proceedings to which the Registrant is a party to or of which any
of its property is subject to, or is pending or known to be contemplated are the
following:
1. On February 12, 1998, the Registrants filed an action in the United States
District Court for New Mexico (Civil Action CV-98-182), against Josef
Strauss and Environmental Solutions Agency (a.k.a. ESA World Trade),
alleging fraud, breach of contract, conversion, and breach of oral
agreement in connection with contracts and agreements for the sale and/or
licensing of the Registrant's TRTC technology and certain geographic
marketing rights and raising capital funds for recycling plants in Europe.
The suit seeks compensatory and punitive damages in excess of $50,000 plus
attorney fees. Due to the early state of this litigation, management cannot
estimate when a trial on the merits may occur or the likelihood of success
or the amount of any verdict favorable to the Registrant. Josef Strauss has
filed an answer denying the allegations in the Company's complaint. The
parties are currently in settlement negotiations.
2. On May 15, 1998, in the United States District Court for New Mexico (Civil
Action CV-98-0580), Strauss Investor Services, Inc. ("SIS") and
Environmental Solutions Agency ("ESA") and ESA World Trade, Ltd. ("ESA
World"), filed an action naming the Company, its subsidiary Tire Recycling
Technologies Corporation ("TRTC") and Ronald L. Wilder, the Company's
President, defendants and alleging that on or about February 12, 1996, SIS,
d/b/a ESA entered into an agreement and Side Letter wherein ESA was granted
a license within the territory of Europe, Australia, and America. The
Complaint alleges that the defendants have marketed, directly or through
third parties, the same technology without notifying ESA of the potential
customers or licensees.
The Plaintiffs in this action are entities under the control of Josef
Strauss, a defendant in the legal action described above in section 1 and
one of the shareholders who demanded a special meeting of shareholders.
The Complaint alleges that the acts of the defendants are a breach of its
license agreement and the defendants acted in a malicious, reckless,
wanton, willful and oppressive manner. The plaintiffs seek compensatory and
punitive damages, interest, costs and attorneys fees.
The Complaint also seeks to collect a promissory note of $112,000 and
interest accrued at the rate of 12% from September 24, 1996, which note and
interest were guaranteed by Mr. Wilder.
This action was only recently filed and appears to address the same issues
that are the subject matter of the litigation discussed above in section 1
of this discussion of litigation. The Company and the other defendants will
seek to consolidate the two actions, and will deny the allegations of the
complaint. This case is currently abated by agreement on the parties and
its subject matter is also included in settlement negotiations referred in
paragraph 1.
3. On May 13, 1998, in the United States District Court for New Mexico (Civil
Action CV-98-0557), Diana D. Holt filed an action against Ronald L. Wilder,
Ronald L. Allred in which is alleged that the Company's Proxy materials
contain material misstatements and/or omissions of facts, and, in addition,
seeing to recover (a) $45,000 paid to finish development of portable
prototype unit and to ship the unit to Pittsburgh, Pennsylvania, (i.e., for
demonstration) and (b) the recovery of $100,000 for finishing and shipping
the portable unit to Pittsburgh, Pennsylvania, and further alleging a
conversion by the defendants of the money and a breach of good faith and
fair dealing in the execution and performance of the agreements between the
Plaintiff and the Company.
Diana D. Holt is one of the persons who demanded that the Company hold a
special meeting of shareholders.
Although this complaint was recently filed, the Company has attempted to
work with Ms. Holt's lawyers to correct any deficiency either party
believes exists in Management's Proxy material or in the Opposition Group's
proxy material.
The defendants have denied all of the allegations relating to a breach of
contract or conversion and will affirmatively state that the Company
completed the prototype as required by the Agreement, but were never
furnished certain information by the plaintiff that was necessary prior to
transportation of the equipment. The defendants will also prove that the
$100,000 was deposited into an account over which only Ms. Hold and Mr.
Bruce Clark had the power to issue checks and that Mr. Clark issued a check
from that account to the Company to purchase shares of the Company's common
stock for Ms. Hold. Shares that were referenced in Ms. Holt's demand that
the Company hold a special meeting of shareholders, although according to
Ms. Holt's attorneys, repayment of the $145,000 to her will terminate her
stock ownership of 580,000 shares.
The Company has not yet determined whether Mr. Clark, because of his
relationship to Ms. Holt, is an indispensable party to the litigation and
should be added as a defendant. The present feeling of the Company's
lawyers is that Mr. Clark should be named as a third party defendant.
The Company knows of no other legal proceedings pending or threatened or
judgement against any director or officer of the Registrant in their capacity as
such.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS IN SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required by Item 601 of Regulation S-K
(b) Reports on Form 8-K. State whether any reports on Form 8-K have been
filed during the quarter for which this report is filed, listing the items
reported, any financial statements filed, and the dates of any such reports.
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TITAN TECHNOLOGIES, INC. AND SUBSIDIARIES
July 6, 1998 Ronald L. Wilder
-----------------------------------------------------
Ronald L. Wilder, President, Chief Executive Officer,
Chief Financial Officer and Chief Accounting Officer.
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