UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended July 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 0-25024
TITAN TECHNOLOGIES, INC.
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(Exact name of Registrant as specified in its charter)
New Mexico 85-0388759
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(State or other jurisdiction of (I.R.S. Employer
incorporation or other organization) (Identification No.)
3206 Candelaria Road, N.E., Albuquerque, New Mexico 87107
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: 505-884-0272
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X ] No [__].
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $93,054.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 16, 1999: $5,354,722.
The number of shares outstanding of the Registrant's No Par Value common stock,
as of October 16, 1999, was: 28,950,411 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
Part II - Items 5(c), 6, 7, - Registrant's Annual Report for the fiscal
year ended July 31, 1999.
Part III - Items 9, 10, 11, and 12 - Registrant's Definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on
December 17, 1999.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
History
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Titan Technologies, Inc. (hereafter the "Registrant") was incorporated
under the laws of the State of New Mexico on July 14, 1954, as Titan Uranium
Corporation. Its name was change to Titan Technologies, Inc. in 1986 when it
begin to seek new business opportunities.
In 1991, the Registrant acquired all of the outstanding common stock of
Tire Recycling Technologies Corporation., a privately held North Carolina
corporation, that had developed the initial tire recycling technology advanced
by the Registrant to its initial state of development. The acquired corporation
was subsequently merged into the Registrant and all of the Registrant's business
is conducted directly by the Registrant and not through any subsidiary
corporation.
The TRTM Technology.
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The Registrant's business is offering for sale to interested operators on a
turnkey basis a completed, licensed and operational recycling plant utilizing
the Registrant's TRTM plants and its recycling processes that are discussed
below.
The TRTM technology and process was developed to recover the oil, steel,
and carbon black utilized in the manufacture of tires and has now been further
developed to recover the constituent parts of plastics and carbon based
material. The process is self contained, using scrap tires and plastics as the
feed-stock resource, which, with heat and a physical enabler reduces the tires
or plastics to their basic chemicals. Minor residue from combustion is vented
into the atmosphere, which is believed by Management to result in minimal
environmental impact.
The Registrant, with the assistance of Adherent Technologies and its
licensees is continually upgrading the performance of its technology and the
equipment employing the technology. During the past four years the Registrant
and Adherent Technologies have devoted substantial resources to this end. The
current evolution of the Registrant's technology uses a catalyst substantially
different from the one initially acquired from Tire Recycling Technologies, Inc.
The enabler developed by the Registrant and now being used has proven to be
superior in initiating the necessary catalytic reaction and in continuing the
process of breaking down the tires and plastics into their basic constituent
parts.
The TRTM Technology employs enhanced pyrolysis, which, unlike known
competing scrap tire recovery systems, is true tertiary recycling: the original
elements that went into making the tires, primarily oil, steel, and carbon
black, are reclaimed in near virgin form.
The entire recycling process is a closed system. The only emissions are the
exhaust gases from firing the retort burners. Because methane and other
components of the gas fraction are clean burning, release of pollutants to the
atmosphere is minimal. The only nonresalable materials from the process are the
small quantities of ash and dirt produced that are landfilled.
The TRTM technology was developed to meet the world-wide need for an
economically viable method for the permanent disposal of tires, plastics, carbon
based materials, and materials used in the manufacture of computers and other
electronic products. Total quantities of tires in stock piles and dumps in the
United States have been estimated at 3 billion tires. The Scrap Tire Management
Council estimates that there is about one scrap tire generated annually per
person in the United States, or approximately 240 million scrap tires annually.
The total of stockpiled plastics, carbon fiber based products and electronic
products is presently unknown to management, but is known to be a large and
continually growing world wide waste problem.
Stockpiled tires and the risks associated with them, from mosquito
production to fire hazard, have become a significant environmental problem.
Legislation has been introduced and passed in many states controlling tire
disposal, storage and transportation.
The Registrant's Management believes that the Registrant's process is
unique in the industry in that it operates on a continuous basis at the
unusually low temperature of 450 degrees Fahrenheit rather than competing
pyrolytic technologies, which typically function at temperatures of 1000 degrees
Fahrenheit or greater. The lower temperature at which the Registrant's process
operates translates into cost efficiencies by using less energy to operate and
reduced wear and tear on the equipment. The low temperatures result in
qualitative enhancement of the end products generated by the process.
The TRTM technology is proprietary. However, two patents have been issued,
both of which relate to advancements in the technology. While the feedstock used
in the process initially consisted of shredded tires, the Registrant has
developed some initial applications looking toward the eventual application of
the process to various plastics.
Governmental regulations regarding plant operations.
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Because the process uses natural gas to fire its retort burners, discharge
from a plant utilizing the TRTM process is minimal. However, because the plant
creates and stores recovered oil and carbon black, each plant must meet all
requirements established by federal and state environmental laws related to the
storage and transportation of such products. The storage and transportation
requirements are well established and present no significant problem in
obtaining all necessary licenses for operation of any facility.
Current Status of Marketing Efforts.
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As previously reported, in 1995, Dowon Company, Ltd. ("Dowon"), a Republic
of Korea corporation, completed construction of two plants in the Republic of
Korea that employ the TRTM process. One of the plants is located approximately
twenty miles from the city of Chong Ju, while the other is located approximately
two miles from Taegu City. Each of these plants is capable of processing
approximately 60 tons of scrap tires per day and are estimated to produce
approximately 150 barrels of oil, 6 tons of steel, and 17 tons of carbon black
per day. Dowan sold its interest in the plant located at Taegu City to Hannam
Co., Ltd., a Korean corporation, which subsequently filed bankruptcy and closed
the plant. The Registrant has been informed that Dowon expects to reacquire this
plant and reestablish its production. The other plant has operated through
fiscal 19998.
The Registrant retained no royalty on any products produced from the
initial plant, while the Registrant retained a royalty of 3.5% of all gross
receipts from the sale of products produced by the second plant, less the cost
of transportation to the point of sale of the products. To date, Dowon has not
reported any sale of any products from the plants and the Registrant has waived
its right to receive any additional payment from this plant.
During fiscal 1998, Dowon completed the first TRTM plant located outside of
Korea. That plant is in Taiwan and was undamaged by the earthquake that hit
Taiwan in September of 1999. The Taiwan plant incorporates various advances in
technology developed by both Dowan and by the Company and is operating at
capacity. This plant incorporates certain Japanese developed technology acquired
by Dowan that activates the carbon black produced by the plant, thereby
enhancing the commercial value of the carbon black. The Company has the right to
utilize the carbon black technology in future plants constructed by companies
other than Dowan, but to date has not memorialized that agreement.
The Registrant anticipates that the sales price for a completed plant will
range from $8,000,000 to $10,000,000. It also anticipates that future licenses
will retain a royalty of 7.5% of all after tax receipts for products produced
from each plant. Although these are Management's current estimated prices and
royalties, each plant must be custom made for the country and area in which it
may be located and negotiations for any such plant may result in price and
royalty structures that vary substantially from such present intentions.
It was previously reported that the Registrant concluded an agreement with
the a corporation named ESA Gmbh of Austria and Skoda Klatovy, a wholly owned
subsidiary of the Czech Republic conglomerate Skoda Holding, a.c., for the sale
and construction of a TRTM tire recycling plant to be built in Austria. After
the last report, the principal of the Austrian corporation was arrested and
convicted of embezzlement from an Austrian bank. Because of that crime, all
effort by the Austrian corporation was terminated and all agreements between the
Registrant and that corporation were ended.
The preliminary engineering and design and site preparation work for the
Austrian plant was completed prior to Mr. Steiner's arrest and conviction. Mr.
Wilder has met with representatives of Skoda in Austria, Czechoslovakia and the
United States to assure that Skoda remains ready, willing and able to fabricate
and deliver a completed plant to any Austrian or other European purchaser. At
the date of this report, Mr. Wilder has more than once traveled to Austria to
try to salvage the Austrian plant by interesting others in its financing and
construction. Management is of the belief that the financial backing for the
Austrian plant will be forthcoming and that a license for an Austrian plant will
be negotiated by the end of the current fiscal year.
Skoda has also been negotiating with the Registrant for certain license
rights related to former Eastern Block countries and Management believes that an
agreement with Skoda related to such licensing will occur during the current
fiscal year.
Because of the completion of the third plant in Asia, and with negotiations
underway for a second plant in Taiwan, Management believes that the sale and
construction of plants in Asia will accelerate. Management also believes that
the Austrian plant will be constructed. The Registrant is told that certain
people remain interested in having a TRTM plant erected in Portugal and that a
plant and license will be purchased for that location when and if the required
funding is available.
Products Recovered by the TRTM Process.
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Oil:
The oil recovered by the TRTM tire recycling process in Korea has been as
high as 34.1 gravity extender oil, oil with an extremely high percentage of
usage fuels (in the range of 99.4% gasoline, naphtha and kerosene), that is used
primarily to lighten heavier oils either before or after refining. It can also
be used in the manufacture of carbon black and rubber products.
A TRTM tire recycling plant typically recovers about one gallon of oil per
tire. At 100 ton capacity, a plant is capable of recovering 250 barrels of oil
per day from 100 tons of tires.
While it is impossible to predict the future market price for the recovered
oil, in 1992 the Registrant sold oil produced from its Bradley plant for $15.00
per barrel. Any price received for the oil will necessarily be based upon the
then current market for crude oil.
Carbon Black:
The carbon black recovered by the TRTM tire recycling process is a
semi-reinforcing carbon black. North America manufacturing facilities consume
nearly 3 billion pounds of carbon black annually, of which 50 percent are of the
semi-reinforcing type.
Carbon black, when combined with rubber, substantially increases the
hardness and durability of the product. The wear characteristic of carbon black
is a function of the particle size. The finer the particles, the better the
rubber reinforcing properties. Particle size is measured by numerical grade, in
nanometers (nm). The highest grade with particle sizes under 20 nm is designed
as super abrasion furnace. The lowest grades are the semi-reinforcing furnace
blacks with particle sizes from 50 nm to 1000 nm.
Tire manufacturers traditionally use grades 500 to 700 in the interior of
the tire, and grade 200 for the sidewalls and tread. Grade 100 is typically used
in the production of very high abrasion products such as automobile racing
tires, while the various other industrial applications use varying grades,
depending upon the performance required.
Because much of the tread has been worn away in a scrap tire, the carbon
black recovered by the TRTM tire recycling process is dominated by grades 500 to
700. It is this category which is the target market for TRTM recovered carbon
black. In 1990, the market demand for grade 700 was 300 million pounds. Initial
test results of the carbon black produced from the Registrant's Bradley plant
were found to be a substitute for IRB 5 carbon black for which the market price
varies between $0.30 and $0.32 per pound. Because the costs of operation of the
TRTM plant are nominal, recovered carbon black might be offered for sale at a
price significantly lower than the prevailing market rate for IRB 5 carbon
black.
A market price for TRTM carbon black remains to be established, but
preliminary indications are that a price of ten cents to fifteen cents per pound
should be maintainable. The Registrant and its licensees are working together to
develop methods to enhance the quality of the carbon black. To date, there have
been limited improvements in the quality, but the Registrant believes that the
correct process to enhance the product will be developed.
At one hundred ton capacity, the TRTM tire recycling plant is capable of
recovering 50,000 pounds of carbon black per day.
Steel:
Scrap steel can be used in a variety of applications, and there is a large
and very active market for such steel. The steel recovered from a scrap tire is
comprised of woven steel threads. Thus, this steel is more easily recycled by a
recycler of steel and consequently generates a higher market price than solid
scrap steel pieces.
In general, 10 percent of the weight of a tire is steel, assuming it is a
steel belted tire. At full capacity, the TRTM tire recycling plant should
recover twelve to fifteen tons of steel per day. The market price for such steel
varies, but during fiscal 1999, generally priced in a range between $80 and $100
per ton.
The Industry and the Registrant's Competition.
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Historically, scrap tires have been piled or buried, neither of which offer
a solution to disposal of scrap tires.
The scrap Tire Management Council in its Scrap Tire Use Disposal Study
published September 11, 1990, identified two basic areas in which waste tires
have been used in industry. Each of these areas have developed into separate
industries that will compete with the Registrant for tires. These areas and
industries are: (i) a substitute for traditional fossil fuels in cement kilns,
paper mills, utilities, and dedicated tire-to-energy facilities, and (ii) as an
ingredient for asphalt paving. Limited numbers of tires have been made into
sandals and other rubber products, but have not and probably will not contribute
significantly to waste tire disposal. Numerous companies now exist that are
using waste tires in their products, including, ball-point pens, video
cassettes, bulletin boards, flooring products, rubber mats, rubber protection
devices for marine applications, garden products, various forms of hoses, belts,
and similar products that have historically been made from new product. It is
unknown what percentage of used tires these competing products use, rubber.
Management believes that these products consume a very small percentage of the
more than 250 million scrap tires that are discarded in the United States each
year.
Management believes that as a substitute fuel, waste tires provide only
marginal savings for the user, while their use in asphalt paving has yet to be
proven viable or to meet the expectations that it will substantially extend
asphalt service life. At present, these industries consume less than twelve
percent of the waste tires discarded in this country each year.
With respect to recycling, the only technology at all comparable to that
developed by the Registrant is pyrolysis. Such pyrolytic facilities as currently
exist in Japan and Germany, however, rely on government subsidies because they
involve significant capital outlays and operating costs and are unable to handle
any significant tonnage of scrap tire rubber. The Scrap Tire Management Council
has observed, "the volume capability of pyrolysis is negligible". Furthermore,
due to the high temperatures employed in pyrolysis, the by-products recovered
from the scrap tire rubber are of a lower, less marketable quality than those
derived through the TRTM process as demonstrated at its Bradley, Oklahoma plant.
Because the TRTM process operates efficiently at temperatures of approximately
450 degrees Fahrenheit the oil and carbon black recovered through the TRTM
process undergo minimal degradation and have correspondingly higher market value
than pyrolytic byproducts.
The Registrant does not know of any other uses for the tires that might
compete with its business, however, continual research into the problem of waste
tires is continuing throughout the world and it should be anticipated that new
and novel approaches to a solution to the problem will, from time to time, be
put forward.
Marketing Arrangements.
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As previously reported, as a result of a series of transaction that
occurred in the early 1990's, a former marketer claimed to have contacted
approximately 67 corporations located world wide, Management does not believe
those contacts were made. Upon cancellation of that marketing arrangement, the
Registrant agreed that if any sale of a plant to be constructed within the
United States is made to any of those corporation that were actually contacted,
the Company will pay the former marketer a fee for such sale.
Subsequently, the Registrant entered into a new marketing agreement with a
corporation organized under the laws of Korea named Dowon Company, Ltd. (Dowon).
Under the agreement with Dowon, Dowon has the exclusive marketing and
manufacturing rights on the continent of Asia, with the exception of the Asiatic
portions of the Commonwealth of Independent States. The Registrant believes that
because of Dowon's location and business contacts in Asia it will be able to
effectively develop and implement a marketing strategy for the Registrant's tire
recycling plants in all of the areas covered by the agreement. Dowon sold a TRTM
plant to a Taiwanese group and the construction of that plant was completed
during the past fiscal year. Dowan has purchased certain technology relating to
the activation of carbon black, thereby enhancing that by-product and the
Registrant has agreed that in exchange for its ability to use that technology on
a world wide basis in its other plants, it waived any license fee and waived any
royalty payments until the plant is in full operation, which is expected to
occur in approximately two years. When the plant is in full operation, the
Registrant will, during the subsequent two years, be paid a royalty of 3.25% of
all products produced by the plant. After that initial two years, the royalty
will increase to 5%.
Management estimates that there is a market for approximately one hundred
TRTM tire recycling plants in the United States alone. This estimate is based on
demographic to scrap tire stockpile ratios indicating approximately 27.1 scrap
tires per capita of population. Given this figure, it appears that a population
base of approximately one million people will generate sufficient scrap tires to
sustain the operations of a TRTM recycling machine.
Preliminarily, marketing efforts in the United States have been focused on
the larger population centers. Management believes that because of the current
policies of providing incentives and inducements to promote recycling, market
conditions for its technology should continue to improve.
TRTM Plastics Technologies.
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The Registrant, with the assistance and through an arrangement with and
under the direction of Adherent Technologies, Inc., a company owned by Dr.
Ronald E. Allred, is currently working on the initial development efforts toward
creating a low-temperature catalytic conversion process for reclaiming waste
plastics, scrap electronics, and other organic materials. It is believed by
Management that the Registrant has developed a new unique process that will
allow efficient and economical reclamation of many types of waste plastics by
turning them into valuable fuels and chemical products. Initial testing has been
extremely encouraging and Adherent Technologies' research has been funded by
grants and contracts from the United States Air Force and Navy , the Defense
Department's Advanced Research Projects Agency and by the National Science
Foundation and the Department of Energy. The effort to develop this new
technology is in its formative stages and has not yet been commercialized.
All developments relating to the technology belong to the Registrant and
the Registrant is not obligated by contract or otherwise to reimburse any
research and development expenses incurred by Adherent Technologies. The
Registrant believes that this technology is now ready for commercialization.
Other Developments.
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The Registrant and AbTech, LLC, of Phoenix, Arizona, have executed an
agreement through which AbTech, LLC has acquired the exclusive right to use the
Registrant's plastics recycling process for the recovery of oil and hydrocarbon
chemicals from polymer wafers that AbTech, LLC manufactures. The AbTech, LLC
product is unique and the only known effective technique for rapid clean up and
full recovery of petroleum spills. At the present time, the only way that the
wafers can be disposed of is as hazardous waste. The Registrant and AbTech, LLC
believe that the Registrant's tertiary recycling technology is a method through
which the oil and hydrocarbons contained in the wafers may be recovered. There
has been no further development of this effort during the past fiscal year.
Management has recently begun looking at the feasibility of establishing
recycling centers wherein the full range of the Registrant's technology could be
applied to a variety of items, including tires, plastics, and electronics.
Management has discussed this possibility with certain stockpiles of recyclable
products and the discussion relating to this proposal is being pursued. The cost
estimate for the construction of such a center is $50,000,000 to $75,000,000,
depending upon many factors. To accomplish such an undertaking Management
believes that it may be necessary to create a new corporation in which all
interested parties will be owners and then to seek the required financing from
public and/or private sources. At the present, this concept is so preliminary
that Management is not able to predict whether or not it has sufficient merit to
warrant going forward.
Employees.
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The Registrant has three full time employees, each of whom is presently
paid at the rate of $3,000 per month.
ITEM 2: DESCRIPTION OF PROPERTIES
The Registrant has the exclusive right to use the technology incorporated
into its TRTM plants and the right to develop such technology for the recycling
of plastics and other organic materials. In addition, the Registrant owns its
research and development facility now located in Oklahoma which has an estimated
replacement value of approximately $500,000. Since the plant was built for
research and development purposes, all plant expenditures have been charged to
operations. It also owns certain office furniture having an estimated
replacement value of approximately $12,000. Management believes that its
facility and equipment is adequate for the Registrant's needs at the present and
during the foreseeable future.
The Registrant leases approximately 2,150 square feet for its executive
offices located at 3206 Candelaria, N.E., Albuquerque, New Mexico 87107 at a
month to month rent of $1,025. The facility has moved to Albuquerque, New
Mexico. The Registrant's Management believes that the executive offices now
leased by it will be adequate for the Registrant's business for the near future.
ITEM 3: LEGAL PROCEEDINGS
At the date of this report there are no known legal proceedings pending, or
judgment against the Registrant or against any director or officer of the
Registrant in their capacity as such.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended July 31, 1999.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this item is incorporated by reference to the item
in the Registrant's Annual Report to Shareholders for the year ended July 31,
1999 entitled "Market Price and Dividends on the Company's Common Equity and
Related Stockholder Matters."
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this item is incorporated by reference to the
item in the Registrant's Annual report to Shareholders for the fiscal year ended
July 31, 1999 entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
ITEM 7: FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
Financial Statements in the Registrant's Annual Report to Shareholders for the
fiscal year ended July 31, 1999 which is attached as an exhibit to this report.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with Accountants of the kind
described by Item 304 of Regulation S-B at any time during the Registrant's two
(2) most recent fiscal years.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this item is incorporated by reference to the
items in the Registrant's Definitive Proxy Statement for the 1999 Annual Meeting
of Shareholders entitled "Election of Directors" and "Directors and Executive
Officers". All reports required by Section 16(a) of the Exchange Act to be filed
during the fiscal year were filed.
ITEM 10: EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
item in the Registrant's Definitive Proxy Statement for the 1999 Annual Meeting
of Shareholders entitled "Executive Compensation".
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
item in the Registrant's Definitive Proxy Statement for the 1999 Annual meeting
of Shareholders entitled "Voting Securities and Principal Holders Thereof".
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
item in the Registrant's Definitive Proxy Statement for the 1999 Annual Meeting
of Shareholders entitled "Voting Securities and Principal Holders Thereof,"
"Executive Compensation" and "Certain Transactions."
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSB
Financial Statements, incorporated by reference to the Registrant's Annual
Report to Shareholders as of and for each of the two years in the period ended
July 31, 1999:
Report of Independent Certified Public Accountants
Balance Sheet
Statement of Operations
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Consolidated Financial Statements
Exhibits:
The following exhibits are incorporated herein by reference to the Registrant's
Form 10-SB, File no. 0-25024
Exhibit
Number Title
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3. Articles of Incorporation and By-laws.
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(i) Articles of Incorporation:
Articles of Incorporation dated July 14, 1954.
Articles of Amendment to Articles of
Incorporation dated October 2, 1986.
(ii) By-laws currently in effect.
10. Material Contracts.
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Consulting Agreement dated September 15, 1992, the Registrant and
Ronald E. Allred.
Purchase and Nonexclusive Licensing Agreement dated June 9, 1993,
between the Registrants and Geotechnologies Corporation and
Dong Kook Steel Material Company, Ltd.
Technical License Agreement dated July 23, 1993, between the
Registrant and Hannam Co., Ltd.
Technical License Agreement dated July 23, 1993, the Registrant
and Dong Kook Steel Material Co., Ltd.
Purchase and Nonexclusive Licensing Agreement dated July 21, 1994,
between the Registrant and Geotechnologies Corporation.
Purchase and Nonexclusive Licensing Agreement dated July 21, 1994,
between the Registrant and Geotechnologies Corporation and
Southeast Environmental Tire Recycling Corporation.
The following exhibit is incorporated herein by reference to the Registrants
Annual Report on Form 10-KSB for the fiscal year ended July 31, 1995.
Option agreement between the Registrant and Joseph Henry dated
September 19, 1995.
The following exhibits are incorporated by reference to the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended July 31, 1996:
License Agreement as amended dated February 16, 1996, with
Environmental Solutions Agency, Inc., relating to Europe, South
Africa and North and South America.
Marketing and License Agreement dated March 19,1996, with Dowan
Company, Ltd., relating to Asia.
Agreement dated April 25, 1996, with SKODA Klatovy S.P.D.,
relating to the construction of a TRTM recycling plant in
Austria.
Addendum to SKODA Klotovy S.P.D. Agreement dated April 25, 1996.
Irrevocable Option Agreement with Abtech Industries, LLC, dated
June 10, 1996.
Option agreement between the Registrant, Adherent Technologies and
Fiberite, Inc. dated September 4, 1996.
Promissory Note dated September 24, 1996.
No Exhibits are filed with this Annual Report. on Form 10-KSB.
13. Annual Report to Shareholders for the Fiscal year ended July 31, 1999.
21. Subsidiaries of the Small Business Issuer.
The Registrant has no subsidiaries
All other exhibits required by Item 601 of Regulation S-B are inapplicable to
this Registrant in this filing.
(b) Reports on Form 8-K:
No report on Form 8-K was filed by the Registrant during the last quarter
of the period covered by this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TITAN TECHNOLOGIES, INC.
By Ronald L. Wilder
--------------------------------
Ronald L. Wilder, President, Chief Executive Officer,
Chief Operating Officer, and Director
By Ronald L. Wilder
--------------------------------
Ronald L. Wilder, Acting Secretary
Date: October 20, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons in behalf of the Registrant and in the capacities and on the
dates indicated.
By Ronald L. Wilder
-------------------------------
Ronald L. Wilder, Director
Date: October 20, 1999
By Dr. Donald E. Allred
-------------------------------
Dr. Ronald E. Allred, Director
Date: October 20, 1999
By Dr. Jelle deBoer
-------------------------------
Dr. Dr. Jelle deBoer, Director
Date: October 20, 1999
TITAN TECHNOLOGIES, INC.
ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED JULY 31, 1999
TITAN TECHNOLOGIES, INCORPORATED
Unless otherwise indicated, "the Company" and "Titan" are used in this
report to refer to the business of Titan Technologies, Incorporated.
TITAN'S BUSINESS
Summary
Titan Technologies, Incorporated was incorporated under the laws of New
Mexico on July 14, 1954. In its early years, the Company was involved in the
uranium industry under the original name of Titan Uranium Corporation. The
corporate name was changed in 1986 when Titan began to seek business
opportunities in other industries. In recent years, Titan has focused its
efforts on several recycling technologies, particularly in the area of tires,
electronic scrap and certain components of salvaged automobiles. Titan believes
it has reached an advanced stage of development of its tire recycling
technology, which is now being used in two operating plants in the Far East
(South Korea and Taiwan).
Historically, much of Titan's business was performed through Tire Recycling
Technologies Corporation ("TRTC"), formerly a wholly owned subsidiary which was
merged into Titan during the fiscal year ended July 31, 1999. TRTC was directly
involved in licensing the Company's proprietary technology, as well as
construction of the two operating plants in South Korea. One of these plants was
shut down because of the economic downturn in the Asian economy and the
bankruptcy of its owner. The Company has been informally advised that this plant
is expected to resume operations under different ownership in the near future.
More recently, a third plant was built in Taiwan under the direction of TRTC
using the Company's technology which has now been operating for more than 5
months.
Titan has also established an excellent working relationship with Adherent
Technologies, Inc. ("Adherent"), an independently owned research and development
laboratory in Albuquerque which has provided the Company with major assistance
in developing its technologies and product analysis. The President and principal
shareholder of Adherent, Dr.Ronald E. Allred, is a director of the Company.
Business Development
The Titan tire recycling technology (known in the industry as "TRTM")was
developed at a research and development pilot plant owned by the Company located
in Oklahoma. Titan has also constructed and operated a portable R&D unit to test
recycling of plastic waste and clean-up of oil soaked sand.
The three plants in Asia have been constructed as a result of a marketing
agreement entered into during 1993 between Titan and Dowon Company, Ltd.
("Dowon"), a South Korean company affiliated with Dong Kook Steel Material
Company, Ltd.. Pursuant to this agreement, the Company's tire recycling
technology was exclusively licensed to Dowon for use in Asia, except for certain
Asiatic portions of the Commonwealth of Independent States. In order to
encourage construction of plants and use of the TRTM technology, Titan waived
royalty rights for the two Korean plants but is entitled to future production
royalties from the Taiwan plant once it becomes fully operational. The royalties
will be at 3.25% of sales for the first two years of full operations and
increase to 5% of sales thereafter.
Titan has provided engineering and design assistance to Dowon for
construction of the plants, for which Titan has been reimbursed for its
out-of-pocket costs and expenses, including salaries for the engineering
personnel involved.
Future plants constructed and operated pursuant to the arrangement with
Dowon are scheduled to pay the Company a production royalty equal to 7.5% of
sales, plus a negotiated up-front fee per plant. However, in order to promote
continued development of its TRTM and other technologies, Titan will retain the
flexibility to modify these arrangements as it deems necessary. Titan plans on
remaining actively involved in construction and operation of future plants on a
cost-plus basis in addition to receiving licensing fees.
In addition to its tire recycling technology, Titan has been working
closely with Adherent in developing new technologies for recycling electronic
(computer) scrap and waste plastic recovered from automobile salvage (auto
"fluff"). Titan and Adherent believe that the plastics contained in these
materials can be recycled and recovered in the form of marketable liquid and
gaseous hydrocarbons. Also, the electronic scrap contains recoverable metals,
including precious metals.
Description of Technology
The first step in all of the Company's recycle technology involves
shredding the feed waste using conventional equipment which has been
commercially proven in many applications.
The TRTM technology utilizes pyrolysis (together with a proprietary
catalyst) to recycle tires and other scrap material. Pyrolysis is a process
which breaks down its raw material feed into basic products through a
combination of elevated temperature and other components, including a catalyst
which is proprietary to Titan. In the case of the Company's proprietary TRTM
technology, pyrolysis is accomplished at lower temperatures than are normally
associated with conventional pyrolysis techniques for recycling. Titan's process
is referred to as a "tertiary" process because it reduces the tire feed to its
raw components: (I) oil; (ii) steel; and (iii) carbon. As mentioned, the TRTM
technology uses a proprietary reactor catalyst in connection with the pyrolysis
process. The lower pyrolysis temperature allows recovery of these products in
marketable form and is the key to commercial success of plants using the
technology.
The oil produced using the TRTM technology is low in sulfur content and
viscosity (it flows readily at room temperature) and contains a high percentage
of "fuel" oils which are attractive for direct feed (without blending) into
refineries world-wide. Accordingly, the oil is easily marketable at prices
comparable to light, sweet crude oil. The scrap steel recovered using the TRTM
technology is also readily marketable and is essentially in the form which was
incorporated into the original manufacture of tires.
Titan, working with its licensees, will be closely involved in the effort
to optimize the market for the third component of tire recycling, which is
commonly referred to as "carbon black." The objective is to ensure that the
quality of the carbon black meets specifications for re-use in tire
manufacturing and asphalt production (primary markets). However, the Company has
also acquired access to licensed technology (at no cost) which appears to have
the capability for upgrading the quality of carbon black, as well as converting
the product into activated carbon which would command a significantly higher
market price. The results of this work are particularly important to Titan
because the carbon recovered in the TRTM process is by far and away the largest
portion of material produced through tire recycling. In this regard, Titan
estimates that a single plant using the TRTM technology at the rate of 100 tons
of tires per day will produce on an annual basis:
(1) approximately 80,000 barrels of oil (34o API);
(2) approximately 3,300 tons of high quality scrap steel; and
(3) approximately 8,000 tons of carbon black (or other carbon products).
The supply of tires available for recycle is virtually unlimited in terms
of plants processing 100 tons per day, and Titan believes that its TRTM
technology is a leader in terms of establishing the commerciability of the
process. The Company is particularly encouraged as a result of work conducted by
Titan and others to improve marketability of the carbon black produced through
recycling using the TRTM technology and believes that plants using its process
will ultimately be able to achieve a sufficient share of the market for carbon
black to ensure the commerciability of its TRTM process. Titan is fully aware of
the significance of being able to secure these markets and expects it will
encounter strong resistance from existing producers of carbon black to protect
their current markets. However, the Company believes that its costs of
production will be less than those of current producers of the product and that
it will have access to available markets for the product once consistent quality
of its carbon has been established commercially.
In addition to its relatively low operating temperatures, the Company's
technology is regarded as environmentally friendly. The tire recycling process
is a closed system and the only emissions are exhaust gases from clean-burning
fuels (most of which are generated by the process itself) and a small amount of
dirt and ash which is environmentally suitable for normal landfill.
The technology used to recover hydrocarbons, carbon and metals from
electronic scrap and automobile fluff also utilizes pyrolysis to recover the
hydrocarbons and carbon, plus other conventional processes to recover the
metals.
The Company designed and built a fully operational mobile unit which it has
used for research and development on most plastics, oil recovery from oil soaked
sand, and now is researching the neutralization of poultry waste. Unlike
laboratory testing, this unit has the capacity to test large volumes of material
and because it is mounted on a trailer can be operated at any location. The
Company believes that it can manufacture and market this type of unit worldwide
for oil spill recovery and for processing animal waste.
Review of 1999
Asia
The fiscal year ended July 31, 1999 was a year of continued progress for
the Company, particularly with respect to construction and commissioning of the
plant in Taiwan, which has now been operating for more than 5 months. Based upon
visits to the plant and information furnished by Dowon, the Company's management
believes that most of the difficulties encountered in achieving fully
operational status have been the result of design modifications made in an
effort to accommodate a market for scrap rubber being sold as fuel. This product
is not a part of the Titan technology and, although financially attractive for
the Taiwan operation, modified the primary feed to the plant in a manner that
adversely impacted overall operations. The Company was successfully able to
identify the cause of the difficulty and believes that steps have been taken by
Dowon to eliminate what it believed to have been a relatively minor operating
problem.
Titan will continue to work closely with Dowon to resolve any further
difficulties encountered in operations with the expectation that the Taiwan
plant will become fully operational during the current year. Titan enjoys an
excellent relationship with Dowon and believes that the work performed at the
Taiwan plant has been useful in establishing a wider range of operating
parameters and capabilities for the TRTM technology. In this regard, the Taiwan
plant incorporated modifications to the process design, which have further
improved the overall technology, on the basis of observations made from
operation of the Korean plants. Such improvements are part of normal commercial
process development and the Company expects that further improvements will be
made as additional plants are constructed and operated.
Europe
The 1999 fiscal year was also marked by adverse developments involving
Environmental Solutions Agency, Inc. ("ESA"), which had been licensed by Titan
(and TRTC) to market the Company's technology in Europe and other arenas in the
world market for tire recycling.
In November, 1998, Titan was compelled to terminate its relationship with
ESA after becoming aware that the principal of ESA had serious legal problems
(including conviction of criminal financial activities) in Europe which
effectively prevented ESA from completing its plans to market the TRTM
technology in Europe and, in particular, arrange for financing and construction
of a prototype plant in Austria. These developments were a complete surprise to
the Company, which had no involvement whatsoever in the legal problems
encountered by ESA or the source of financing. Nevertheless, these events have
had an adverse effect on the Company because ESA had virtually assured Titan and
its shareholders that the project and financing were proceeding as planned, with
the expectation that the Austrian plant would be completed and operating during
the fiscal year, thereby generating significant revenue for Titan through
payment of the licensing fee by ESA.
At the time these developments occurred, arrangements were well advanced
with koda Klatovy s.r.o. ("Skoda") for construction of a TRTM plant in Austria
under license from the Company and ESA. Skoda is a wholly-owned subsidiary of a
major manufacturing company in the Czech Republic and had performed a
significant amount of design and engineering work on the anticipated plant
construction pursuant to a 1996 Memorandum of Agreement with the Company, which
also terminated following the problems with ESA. In recent months, discussions
with Skoda have been renewed with the objective of proceeding with construction
of a plant in the Czech Republic under direct license from the Company. In
addition, the Company has recently held discussions with other parties with
respect to licensing the TRTM technology for other European plants. Although
there can be no assurance that agreements for new plant construction and
operation will result from these efforts, the Company is very encouraged by the
discussions and believes that there is a strong level of European interest in
the Titan TRTM technology.
Research and Development
The 1999 year also resulted in progress in development by Titan's of other
recycling technologies for electronic scrap and plastics recovered from
automobile salvage (referred to as "fluff"). These efforts have been conducted
in conjunction with Adherent and represent a significant potential for
independent recycling plants, as well as for expansion of plants based upon the
TRTM technology.
Outlook
* During the fiscal year ending July 31, 2000, the Company's efforts
will be directed toward continued efforts with Dowon to optimize and
expand profitable operations in the Asian market.
* Conclusion of contractual arrangements to establish the Company's
technologies in one or more European markets through joint venture and
licensing agreements for the TRTM technology.
* Additional research and development (working with Adherent) of Titan
technologies for recovery of saleable products, especially through
recycling of electronic scrap and auto fluff.
Completion of preliminary arrangements to enter the North American market
for tire recycling using TRTM technology in combination with the recycling of
scrap electronics and auto fluff.
Titan believes that its technologies offer an environmentally sound and
commercially viable solution for dealing with significant world-wide waste
disposal problems which are growing at an alarming rate. For example, it is
estimated that more than 3 billion tires are now in U.S. dumps and tire
stockpiles that continue to grow at an ever-increasing rate. Similarly, little
thought has been given to disposal of computer waste and auto fluff which
contains a large amount of non-biodegradable plastic waste. Through the Titan
processes, these can be converted into marketable hydrocarbon products. In
addition, electronic scrap contains several metals (including precious metals)
which Titan believes can be recovered and marketed on a commercially viable
basis based upon research and development work performed to date. Although a
considerable amount of additional research and development work must be
performed in order to confirm commercial viability of the electronic scrap and
auto fluff technologies, Titan and Adherent are very encouraged at the results
achieved to date and intend to continue work towards establishing commercial
processes in these technologies.
MARKET FOR COMPANY'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information: The Company's common stock is listed on the bulletin board
under the symbol "TITT' and is traded over the counter. The high and low bid
prices for the Company's common stock for the past two years, as furnished by
National Quotation Bureau, Inc. is as follows:
High Low
---- ---
Quarter ended September 30, 1997: $0.875 $0.50
Quarter ended December 31, 1997: $0.71875 $0.28125
Quarter ended March 31, 1998: $0.44 $0.28125
Quarter ended June 30, 1998: $0.375 $0.21
Quarter ended September 30, 1998: $0.37 $0.125
Quarter ended December 31, 1998: $0.25 $0.10
Quarter ended March 31, 1999: $0.34 $0.08
Quarter ended June 30, 1999: $0.218 $0.009
Dividends: The Company has never paid dividends and its earnings have not
warranted such payment. However, it should be anticipated that, should the
Company experience earnings that might otherwise warrant the payment of
dividends, the possible future business development needs of the Company could
result in no dividends being paid in the foreseeable future.
Shareholders: At October 12, 1999, the Company had approximately 850
shareholders of record.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As stated above, the Company's primary activities are to manufacture and sell
commercial plants designed to recycle waste tires and plastics, these plants are
licensed to use the Company's technology subject to a reservation of a royalty
relating to the sale from the plants of the various products produced and sold
from them. Additionally, the Company performs ongoing research and analysis
devoted to establishing additional uses for its technology.
Results of Operations
The delay in completion and full commercial operation of the TRTM plants in
Korea, Taiwan and Austria has continued to have a material and adverse impact
upon the Company's ability to market additional plants. Prospective purchasers
of the TRTM technology continue to await the ongoing operations of the plants to
measure their economics. Management believes that the Taiwan plant can
demonstrate to any prospective purchaser that the plants are profitable. We
continue to believe that the construction of a plant in Austria will occur as
envisioned by ESA Gmbh and that the sale and construction of plants in both Asia
and Europe should result in ever increasing plant sales. However, delay and
frustration has seemed to cast doubt on our past predictions. Hopefully those
days are soon to be behind us.
The Company continues to discuss the sale of additional licenses in Portugal and
the Czech Republic, but the purchasers have not yet been able to secure the
funding necessary to purchase a plant.
During the years ended July 31, 1998 and 1999, the Company again had no revenue
from plant licensing. Total revenues were $93,054 in fiscal 1999 compared to
$12,574 in fiscal 1998. As a result of the lack of revenue and the ongoing
operating expenses and costs associated with selling activities, the Company
experienced a loss of $227,173 during the current fiscal year compared to a net
loss of $294,602 for the previous fiscal year. Management anticipates receipt of
a license payment from the second Taiwan plant of approximately $1,000,000 in
the current fiscal year and believes that it will also receive a license fee for
a plant in Austria during the current fiscal year of approximately $500,000. If
licensing of any of the additional plants that are in discussion are made, the
Company will receive substantial additional revenue. However, there can be no
present assurance when the Company will receive any payment from any purchaser
or the time that any closing of any such sale might occur.
Financial Condition
The Company's cash position decreased to $6,881 in fiscal 1999 from $45,427 in
fiscal 1998. Following the end of the fiscal year, the Company sold 950,000
shares of its common stock Company in reliance upon certain exemptions from
registration under the Securities Act of 1933, as amended, and received proceeds
from those sales of approximately $95,000.
Following the end of the last fiscal year, as part of a settlement of
litigation, a $100,000 promissory note owned to Mr. Josef Strauss and the
interest accumulated thereon were canceled. That transaction significantly
improved the Company's financial condition by eliminating nearly all of the
Company's debt.
As previously reported, at the end of the 1998 fiscal year the Company received
back 2,000,000 shares of stock that had previously been exchanged for a
twenty-eight percent interest in the Austrian plant. At the request of ESA Gmbh,
that certificate was returned to Mr. Josef Steiner for the purpose of having the
certificate canceled on its Austrian records. Because of Mr. Steiner's arrest
immediately upon his return to Europe from his trip to Albuquerque, no one has
yet determined the location of the certificate representing those shares. The
transfer agent has been instructed to cancel the shares if and when delivered to
it by any person, but for the time being the transfer agent shows those shares
as being issued and outstanding.
During the year, as approved by the Shareholders, the Company granted options to
four individuals. Each may purchase up to a total of 300,000 shares of the
Company's common stock at an exercise price of $0.16 per share for the five year
period following the date of the grant. The proceeds received from the sale of
sock and any proceeds that might be received by the Company from the exercise of
the options, which exercise cannot be assured, will be used by the Company as
working capital.
The Company's costs and expenses of operations went up from $307,000 in fiscal
1998 to $320,000 during fiscal 1999. As stated above, operations provided no
revenue during either year. Because of this shortfall of income, the Company has
been forced to secure operating funds through the sale of shares of its common
stock. Management believes that the proceeds of the sale of common stock
substantially improved its liquidity and have provided adequate funds to meet
the Company's operating needs for the next fiscal year.
ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JULY 31, 1999, FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE COMPANY'S
SHARES AS OF THE CLOSE OF BUSINESS ON NOVEMBER 17, 1999. ANY EXHIBIT WILL BE
PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF FURNISHING THE
EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO RONALD L. WILDER,
PRESIDENT, TITAN TECHNOLOGIES, INC., 3206 CANDELARIA ROAD, N.E., ALBUQUERQUE,
NEW MEXICO 87107.
Report of Independent Certified Public Accountants
Stockholders
Titan Technologies, Inc.
We have audited the accompanying balance sheets of Titan Technologies, Inc., as
of July 31, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows 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 the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Titan Technologies, Inc., as of
July 31, 1999 and 1998, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note J to the
financial statements, the Company has suffered recurring losses and net cash
outflows from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note J. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
September 3, 1999
Titan Technologies, Inc.
BALANCE SHEETS
July 31,
ASSETS 1999 1998
----------- -----------
CURRENT ASSETS
Cash ........................................... $ 6,881 $ 45,427
Prepaid expenses ............................... 5,555 --
----------- -----------
Total current assets ................ 12,436 45,427
PROPERTY AND EQUIPMENT - AT COST
Furniture and fixtures ......................... 5,407 5,407
Machinery ...................................... 7,706 7,706
----------- -----------
13,113 13,113
Less accumulated depreciation ................ 7,843 5,197
----------- -----------
5,270 7,916
OTHER ASSETS ..................................... 609 609
----------- -----------
$ 18,315 $ 53,952
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable ............................... $ 3,062 $ 914
Accounts and note payable to stockholders and
officers (notes C and F) .................... 7,634 147,650
Accrued interest payable (note F) .............. -- 24,864
Other accrued liabilities ...................... 4,577 3,480
Deferred revenue (note A3) ..................... -- 39,353
----------- -----------
Total current liabilities ...... 15,273 216,261
COMMITMENTS AND CONTINGENCIES (notes I and K) .... -- --
STOCKHOLDERS' EQUITY (DEFICIT) (notes F and H)
Common stock - no par value; authorized,
50,000,000 shares; issued and outstanding,
28,120,411 shares in 1999 and 23,095,411
shares in 1998 ............................... 1,819,468 1,426,944
Accumulated deficit ............................ (1,816,426) (1,589,253)
----------- -----------
3,042 (162,309)
----------- -----------
$ 18,315 $ 53,952
=========== ===========
The accompanying notes are an integral part of these statements.
Titan Technologies, Inc.
STATEMENTS OF OPERATIONS
Year ended July 31,
1999 1998
------------ ------------
Revenues
Other income (note C) ...................... $ 93,054 $ 12,748
Costs and expenses
General and administrative ................. 304,476 276,211
Outside services ........................... 9,744 14,832
Depreciation and amortization .............. 2,646 2,136
Interest ................................... 3,361 13,443
Loss on disposal of assets ................. -- 174
Research and development ................... -- 554
------------ ------------
320,227 307,350
------------ ------------
Net loss before income taxes ....... (227,173) (294,602)
Provision for income taxes (note D) .......... -- --
------------ ------------
NET LOSS ........................... $ (227,173) $ (294,602)
============ ============
Weighted average common shares outstanding ... 26,912,274 22,075,109
============ ============
Net loss per common share .................... $ (.01) $ (.01)
============ ============
The accompanying notes are an integral part of these statements.
Titan Technologies, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
Common stock
-----------
no par value Accumulated
----------- -----------
Shares Amount deficit Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at August 1, 1997 ........................................ 21,436,411 $ 1,160,694 $(1,294,651) $ (133,957)
Issuance of common stock (note F) ................................ 1,659,000 260,250 -- 260,250
Issuance of stock options (note F) ............................... -- 6,000 -- 6,000
Net loss ......................................................... -- -- (294,602) (294,602)
----------- ----------- ----------- -----------
Balance at July 31, 1998 ......................................... 23,095,411 1,426,944 (1,589,253) (162,309)
Issuance of common stock (note F) ................................ 5,025,000 392,524 -- 392,524
Net loss ......................................................... -- -- (227,173) (227,173)
----------- ----------- ----------- -----------
Balance at July 31, 1999 ......................................... 28,120,411 $ 1,819,468 $(1,816,426) $ 3,042
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
Titan Technologies, Inc.
STATEMENTS OF CASH FLOWS
Year ended July 31,
1999 1998
--------- ---------
Increase (Decrease) in Cash
Cash flows from operating activities
Cash received from contract advance .............. $ -- $ 39,353
Cash received from subcontractor ................. 50,040 --
Interest and insurance proceeds received ......... 3,724 5,908
Cash paid to suppliers and employees ............. (344,609) (255,538)
--------- ---------
Net cash used in
operating activities ............. (290,845) (210,277)
Cash flows from investing activities
Cash paid for property and equipment ............. -- (32,277)
Proceeds from disposal of property
and equipment .................................. -- 24,606
--------- ---------
Net cash used in investing
activities ....................... -- (7,671)
Cash flows from financing activities
Proceeds from sale of common stock ............... 252,299 260,250
--------- ---------
NET INCREASE (DECREASE)
IN CASH .......................... (38,546) 42,302
Cash at beginning of year .......................... 45,427 3,125
--------- ---------
Cash at end of year ................................ $ 6,881 $ 45,427
========= =========
Reconciliation of Net Loss to Net Cash Used in Operating Activities
Net loss ........................................... $(227,173) $(294,602)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization .................... 2,646 2,136
Noncash compensation ............................. -- 6,000
Loss on disposal of assets ....................... -- 174
Change in assets and liabilities
Increase in prepaid expenses ................... (5,555) --
Increase (decrease) in accounts payable ........ 2,148 (1,625)
Increase in accrued interest payable ........... 3,361 13,440
Increase (decrease) in accrued liabilities ..... 1,097 (10,803)
Increase (decrease) in deferred revenue ........ (39,353) 39,353
Increase (decrease) in accounts and note
payable to stockholders
and officers ............................ (28,016) 35,650
--------- ---------
Net cash used in operating
activities ....................... $(290,845) $(210,277)
========= =========
Noncash investing and financing activities:
During 1999, the Company exchanged 2,500,000 shares of common stock in
settlement of debt and accrued interest to a stockholder which had a book value
at the time of the exchange of $140,225.
The accompanying notes are an integral part of these statements.
Titan Technologies, Inc.
NOTES TO FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
Titan Technologies, Inc. (the "Company"), located in Albuquerque, New
Mexico, invests in businesses developing new technology. Tire Recycling
Corporation ("Tire Recycling"), wholly owned by the Company, also located in
Albuquerque, developed a tire recycling process marketed throughout the
world. On March 18, 1999, Tire Recycling Corporation merged with the Company
and was dissolved. The Company has licensed its technology for use in two
operating recycling plants in South Korea.
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Property and Equipment and Accumulated Depreciation
Depreciation is provided using straight-line and accelerated methods over
economic lives of five to seven years.
2. Income Taxes
The Company provides for deferred income taxes relating to carryforwards and
temporary differences between the bases of certain assets and liabilities
for financial and tax reporting purposes.
3. Revenue Recognition
Revenue from the license of technology for plants is recognized when all
material services relating to the contract have been substantially performed
by the Company. On contracts where the Company acts only as technical
adviser during the construction, substantial performance is generally
defined as installation of the catalyst. Any amounts received under the
contracts prior to the installation of the catalyst are treated as deferred
revenue and are not recognized as revenue until substantial performance
under the contract has occurred or the contract has expired with no further
obligation of the Company.
Direct expenses under contracts are deferred and are matched against
contract revenue when substantial performance occurs. The deferred expenses
are evaluated periodically under the contract terms to ensure they are
recoverable under the contract.
4. Net Loss Per Common Share
Net loss per common share is calculated using the weighted average number of
shares outstanding during each year. Basic and diluted earnings per share
are the same because the inclusion of options to purchase additional shares
of stock (Note H) are antidilutive.
5. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures;
accordingly, actual results could differ from those estimates.
NOTE B - SALE OF LICENSES AND MARKETING RIGHTS
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 license 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 July 31, 1999.
Marketing agreements with current marketers for North American and Asian
rights require, among other things, the marketers to sell certain numbers of
plants per year, and require payment to the Company, by the owner of the
plant, of a 7.5% royalty on the net sales of by-products. Unless other
arrangements are negotiated, the plants will be constructed by the Company
and sold to the marketer at cost of the plant, plus a one-third markup on
plant and installation cost. As a result of the repurchase of marketing
rights from a previous marketer, the Company must pay $400,000 to the former
owner of the rights for any plant sale or license of technology made to any
one of approximately sixty-seven specifically-identified corporations.
NOTE C - RELATED PARTY TRANSACTIONS
During 1999, the Company was paid $50,040 for a Company employee used by a
research company owned by a director of the Company.
During 1998, the Company sold a truck to an employee (son of the President
of the Company) for $19,830. A right was granted to the Company to continue
to use the truck for business and to repur-chase the truck. The Company also
received an advance from an officer of $8,650 and deferred payments of
salaries to officers of $27,000.
Interest expense of approximately $3,300 and $13,000 to a stockholder was
recorded during the years ended July 31, 1999 and 1998, respectively.
NOTE D - INCOME TAXES
The Company had no current or deferred income tax expense for the years
ended July 31, 1999 and 1998.
The income tax provision is reconciled to the tax computed at statutory
rates as follows:
July 31,
--------------------------
1999 1998
--------- ---------
Tax benefit at statutory rates ......... $ (77,239) $(100,165)
Change in valuation allowance .......... (6,991) 113,847
Other .................................. (12,560) (13,682)
Expiration of foreign tax credits ...... 96,790 --
--------- ---------
$ -- $ --
========= =========
At July 31, 1999, the Company has loss carryforwards of approximately
$1,700,000, which can be used to reduce taxable income and will expire 2005
through 2019.
At July 31, 1999, the Company has a "research credit" of $49,076 available
to offset income tax liabilities through 2006 and a "foreign tax credit" of
$48,389 available to offset income tax liabilities through 2000.
Amounts of deferred tax assets and valuation allowance are as follows at
July 31:
1999 1998
-------- --------
Deferred tax assets
Accounts receivable allowance ......... $ 10,183 $ --
Net operating loss carryforwards ...... 676,885 597,269
Research credit ....................... 49,076 49,076
Foreign tax credit .................... 48,389 145,179
-------- --------
784,533 791,524
Less valuation allowance ............ 784,533 791,524
-------- --------
Net deferred tax asset ...... $ -- $ --
======== ========
Due to a previous change in controlling ownership, the use of net operating
losses of approximately $445,000 will be limited in any year to an amount
determined by multiplying the value of the respective company's equity just
prior to the ownership change by the federal long-term exempt rate. Any
unused limitation may be carried forward and added to the next year's
limitation.
NOTE E - RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company has an arrangement with a research company owned by a director
of the Company whereby that company will research a waste plastics recycling
process using the Company's technology. In return, the Company will get the
findings and developments of the research company. Although the research
company receives money under government and private grants, the Company is
not a party to the grant contracts, conducts no research under the
contracts, and has no obligation to repay any amounts under the contracts.
No amounts were paid to the research company for the years ended July 31,
1999 and 1998.
NOTE F - COMMON STOCK
During the year ended July 31, 1999, the Company sold 2,525,000 shares of
common stock for which it received $252,300. Additionally, the Company
exchanged 2,500,000 shares of common stock in settlement of debt and accrued
interest which had a book value at the time of the exchange of $140,225. The
shares have not been registered under the United States Securities Act of
1933 ("Securities Act").
During the year ended July 31, 1998, the Company sold 1,659,000 shares of
common stock for which it received $260,250. The shares have not been
registered under the Securities Act.
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 was nominal. ESA had no operations but
planned to develop a tire recycling plant in Europe. The Company shares
issued were not registered under the Securities Act and, as restricted
securities, could be sold only upon compliance with Rule 144 under the
Securities Act. Under a settlement agreement, the 3,000,000 shares of the
common stock were to be transferred back to the Company in exchange for its
28.5% interest in ESA. At July 31, 1999, the Company is seeking return of
2,000,000 shares of common stock from the former holders in Europe and the
appropriate signatures from former stockholders to retire the 1,000,000
shares currently in the possession of the Company. Due to the uncertainty of
the Company's ability to gain possession, all of the shares have been
reflected as outstanding through July 31, 1999. Also, as part of the
settlement, the Company has agreed to pay the plaintiff $300,000 from the
proceeds from each of the first five sales of recycling plants anywhere in
the world except Asia.
These payments are due when the Company receives its final payment for each
plant.
The Company entered into an agreement with two legal consultants in May
1998, whereby the Company will pay each consultant $1,500 a month through
May 2003 (see Note K) and granted each consultant options to purchase up to
150,000 shares of the Company's common stock at an exercise price per share
equal to the bid price for such shares published by the National Quotation
Bureau on the date of the agreement (see Note H). The consultants may
terminate their services at any time without penalty. The options will be
valid for the longer of the period ending five years from the date of the
agreement or twelve months after the date that the Company has paid the
consultants all consideration due under the agreement. The options or any
portion thereof are assignable at any time to any person in a private
transaction that does not violate the Securities Act, as amended. The
Company recorded legal expense based upon the estimated fair market value of
the options.
NOTE G - FINANCIAL INSTRUMENTS
The following table includes information about estimated fair values as of
July 31, 1999 and 1998 as required by Statement of Financial Accounting
Standards ("SFAS") No. 107, Disclosure About Fair Value of Financial
Instruments. Such information, which pertains to the Company's financial
instruments, is based on the requirements set forth in SFAS No. 107 and does
not purport to represent the aggregate net fair value of the Company.
None of the financial instruments are held for trading purposes.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash. The carrying amount approximates fair value because the Company
has the contractual right to receive immediate payment on the deposit
accounts.
Note Payable to Stockholder. The note was in default at July 31, 1998 and
it was not practicable to estimate fair value.
The estimated fair values of the Company's financial instruments as of July
31 are as follows:
Carrying Estimated
amount fair value
of assets of assets
(liabilities) (liabilities)
----------- -----------
1999
Cash $ 6,881 $ 6,881
1998
Cash $ 45,427 $ 45,427
Note payable to stockholder (112,000) --
NOTE H - STOCK OPTIONS
In December 1998, the Company approved a stock option plan for issuance of
up to 1,500,000 shares of stock to key employees and directors of the
Company. The stock options vest immediately.
The Company uses the intrinsic value method to account for its stock option
plan in which compensation is recognized only when the fair value of each
option exceeds its exercise price at the date of grant. Accordingly, no
compensation cost has been recognized for the options issued. Had
compensation cost been determined based on the fair value of the options at
the grant dates, the Company's net loss and loss per share would have been
increased to the pro forma amounts for the year ended July 31, 1999.
Net loss
As reported $(227,173)
Pro forma $(272,347)
Loss per share
As reported $ (.01)
Pro forma $ (.01)
The fair value of each grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1999: no expected divi-dends; expected
volatility of 138%; risk-free interest rate of 5.5%; and expected lives of
five years. The exercise price of all options equaled or exceeded market
price of the stock at the date of grant.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
A summary of the status of the Company's stock options as of July 31, 1999
and 1998 and changes during the years then ending is presented below.
1999 1998
-------------------- -------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
--------- ------ -------- ------
Outstanding at beginning of year ..... 300,000 $ 0.26 -- $ --
Granted .............................. 1,500,000 0.16 300,000 0.26
Exercised ............................ -- -- -- --
Forfeited ............................ -- -- -- --
--------- ------ ------- ------
Outstanding at end of year ........... 1,800,000 $ 0.18 300,000 $ 0.26
========= ====== ======= ======
Options exercisable at year end ...... 1,800,000 $ 0.18 300,000 $ 0.26
========= =======
Weighted average fair value of options
granted during the year ............ $ 0.03 $ 0.02
The following table summarizes information about stock options outstanding at
July 31, 1999:
Weighted-
average Weighted-
remaining average
Number contractual exercise
outstanding life price
----------- ----------- ---------
1,500,000 4.22 years $0.16
300,000 3.67 years $0.26
NOTE I - LITIGATION
From time to time, the Company is engaged in various lawsuits either as
plaintiff or defendant which have arisen in the conduct of its business
which, in the opinion of management and based upon advice of counsel, would
not have a material effect on the Company's financial position or results of
operations.
NOTE J - MANAGEMENT'S PLANS FOR OPERATIONS
The Company has experienced significant losses from operations in recent
years and the Company has used rather than provided cash in its operations.
At July 31, 1999, the Company's current liabilities exceed current assets by
$2,837.
The Company's ability to continue as a going concern is contingent upon its
ability to maintain adequate financing or obtain capital from other sources
and to attain profitable operations. The financial statements do not include
any adjustments relating to the recoverability and classification of
recorded asset amounts that might be necessary should the Company be unable
to continue in existence.
Management has taken the following steps to address the financial and
operating condition of the Company which it believes will be sufficient to
provide the Company with the ability to continue in existence:
o Improve marketing efforts for recycling plants and bring plastics
technology to a marketable product. o Reduce operating and administrative
expenses, and issue stock and notes payable where possible.
o Defer officer salaries if required.
NOTE K - COMMITMENTS
The Company entered into an agreement in 1998 for legal services. The
minimum commitment payments are as follows:
2000 $ 36,000
2001 36,000
2002 36,000
2003 27,000
--------
$135,000
========
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