UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
(Amendment No. 1)
[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
fiscal year ended July 31, 2008
[
] TRANSITIION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission
File Number: 0-25024
TITAN
TECHNOLOGIES, INC.
(Name of
small business issuer in its charter)
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New
Mexico
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85-0206831
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(State
or other jurisdiction of incorporation
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(I.R.S.
Employer Identification No.)
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or
other organization)
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3206 Candelaria Road, N.E.,
Albuquerque, New Mexico 87107
(Address
of principal executive offices)(Zip Code)
Issuer’s
telephone number: 505-884-0272
Securities
registered pursuant to Section 12(b) of the Exchange Act: None
Securities
registered pursuant to Section 12(g) of the Act:
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Title of each class
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Name of Exchange on which
registered
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No
Par Value Common Stock
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None
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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/A or any amendment to this Form 10-KSB/A. [ ]
State
issuer’s revenues for its most recent fiscal year: $0
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such stock as
of November 14,
2008: $5,384,046.
EXPLANATORY
NOTE
We
are filing this Amendment No. 1 on Form 10-KSB/A to our Annual Report on Form
10-KSB for the twelve month period ending July 31, 2008, which was filed on
November 14, 2008 (the “Form 10-KSB”) to amend Item 8A, “Controls and
Procedures”, replacing it in its entirety with Item 8A(T), “Controls and
Procedures”.
This
amendment does result in a change to our original conclusion that our
disclosure controls and our internal control over financial reporting is
effective for the year ended July 31, 2008.
We
have filed the following exhibits with this amendment:
Exhibit 31 Certification of Principal Executive
Officer, Principal Financial Officer, pursuant to Rule 13a-15(f)/15d-15(f) of
the Securities Exchange Act of 1934.
Exhibit 32
Certification pursuant to 18 U.S.C. 1350.
Except for the above-mentioned items, our Form
10-KSB has not been amended.
DOCUMENTS
INCORPORATED BY REFERENCE
The
following document is incorporated by reference herein:
Part III
– Items 9, 10, 11 and 12 – Registrant’s Definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on December 22, 2008, which will be
filed with the Commission within 120 days after the end of the fiscal year ended
July 31, 2008.
PART I
Unless otherwise indicated, “The
Company”, the “Registrant”, and “Titan” are used in this report to refer to the
business of Titan Technologies, Incorporated.
ITEM
I. DESCRIPTION OF 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 and electronic
scrap. Titan believes it has reached an advanced state of development
of its tire recycling technology which was used in three plants, which were
built and operated 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 in 1999. TRTC
was directly involved in licensing the Company’s proprietary technology, as well
as construction of two plants in South Korea. Both Korean plants have
reportedly been shut down because of the insolvency of the owners, which
reportedly was unrelated to operation of the plants. Titan has not
received any current information on the status of these plants within the last
year. A third plant utilizing the Company’s tire recycling technology
was in operation, in Taiwan, for more than three years, by Forest All Industry
Corporation until the Taiwanese government began using automobile tires for
other purposes (such as generating electricity) and thus cut the supply of tires
to Forest All Industries to approximately 10 days per month which made their
operation impractical. At present the Taiwan plant is not in
operation.
Currently, two licensees are actively
pursuing the construction of plants, PPT Holdings, Ltd., a Texas limited
partnership, is building a recycling facility in Nuevo Laredo, Tamaulipas,
Mexico and Ally Investment, L.L.C. (“Ally”) is building a facility in Port
Arthur, Texas. Both of the licensees are in the financing and design
state. Both licensees have completed all or most of the governmental
approvals necessary and have acquired the land for their recycling
plants. It is anticipated that each licensee will complete its
process of financing in the near future and commence construction of each of their
plants during fiscal 2009, at which time initial license fees will become due to
Titan.
Titan
continues its working relationship with Adherent Technologies, Inc.
(“Adherent”), a 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 and shareholder of Titan
Technologies, Inc. Pursuant to a technical assistance agreement among
the Company, Adherent and Dr. Allred, Adherent and Dr. Allred will receive a
percentage of all future Company revenue that results primarily from
advancements made to Titan’s technology by Adherent’s research and development
efforts.
Business
Development
Management contemplates that all future
plants constructed and operated outside the U.S. pursuant to a license agreement
will result in payment to the Company of a negotiated production royalty based
upon gross sales plus a negotiated up-front fee per plant see (“General” below,
page 8). In order to promote continued development of its tire recycling
technology (and other technologies); Titan will retain the flexibility to modify
terms of its licensing agreement as it deems necessary. Titan plans
to remain actively involved in construction and operation of future plants on a
consultative basis, in addition to receiving licensing fees. As an
alternative and as developments warrant, Titan may also consider joint venture
arrangements in which it would acquire, directly or indirectly, an ownership
interest in new plants. For example, Titan holds a 7% equity
ownership in PPT Holdings, Ltd., the licensee of the Mexican
plants. In addition, in December 2007, the Company agreed to take a
10% interest in each future plant built by Ally in the U.S. in exchange for any
future franchise fees and royalty fees payable to Titan after the first
plant.
In addition to its tire recycling
technology, Titan has been working with Adherent in developing new technologies
for recycling electronic (computer) scrap and waste plastic. Titan and Adherent
believe that the plastics contained in these materials can be recycled and
recovered in the form of marketable plastic polymers and liquid and gaseous
hydrocarbons. Also, the electronic scrap contains recoverable metals,
including precious metals. Titan and Adherent believe that this
technology has now been developed to a point where a commercial pilot facility
is warranted, particularly for the electronic scrap.
Description
of Technology
The first step in all of the Company’s
recycling technology involves shredding the feed waste using conventional
equipment which is commercially available from a number of
manufacturers.
The next step of the Titan technology
utilizes thermolysis (together with a proprietary catalyst) to recycle tires and
other scrap material. Thermolysis is a process which breaks down its
raw material feed into basic products through a combination of elevated
temperature and other components, including absence of oxygen and use of a
proprietary catalyst. In the case of the Company’s proprietary tire
recycling technology, destructive distillation 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 primary raw components, which consist are primarily
oil, steel and carbon black. As mentioned, the Titan technology uses
a proprietary reactor catalyst in connection with the thermolysis
process. The lower temperature allows recovery of these components in
marketable form. Titan also holds process patents covering the feed
and discharge components of its system, which it believes represent an
advancement over conventional pyrolysis equipment. Although not
trademarked, the Titan tire recycling technology is often referred to informally
as “TRTM-150” technology.
In addition to its relatively low
operating temperatures, the Company considers its technology to be
environmentally friendly because the TRTM-150 process is a closed system and the
only emissions are exhaust gases in the form of clean-burning fuels (most of
which are generated and re-used in the process itself) and a small amount of
dirt and ash which is environmentally suitable for normal
landfills. In fact, non-condensable gases recovered during the
TRTM-150 process provide sufficient fuel to generate the required heat for
further thermolysis.
The Company’s technology to recover
hydrocarbons, carbon and metals from electronic scrap also utilizes its TRTM-150
process to recover the hydrocarbons and carbon, followed by other conventional
processes to separate and recover the metals.
Based upon data from the Taiwan and
Korean facilities, a plant design improvement program was undertaken in 2003 to
further optimize Titan’s thermolysis process and adapt it for plants to be built
in North America. The results of this program provided the basis for
the Phase III plant design in fiscal 2003. The Phase III design is
capable of processing 150 tons per day while recovering a higher percentage of
marketable products than the Phase II design.
The Phase III design accomplishes the
following:
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Provides
greater operating efficiencies for the process as a
whole
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Recovers
a higher percentage of marketable
products
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Lowers
the amount of process waste materials
generated
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Lowers
the per ton operating cost for processing
tires
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Lowers
the per ton capital cost for processing
tires
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Produces
higher quality products.
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The Phase
III design will be used for future plants. To the best of the
Company’s knowledge there are no commercial tire recycling plants operating
today that are comparable to Titan’s Phase III design. Although the
engineering principles utilized in Titan’s processing sequences are considered
to be state-of-the-art for existing processing plants, it is not possible to
patent Titan’s overall design concept because certain elements include existing
technologies and equipment.
Titan
did develop and patent its sealed feed and discharge system
technology. These unique features give Titan the ability to design
technically sound and economically viable tire processing
facilities. Titan’s design is based upon a processing sequence that
utilizes a number of proven chemical engineering principles working together in
an innovative configuration.
The
underlying engineering principles that are used in this process are as
follows:
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Unique
design for thermal expansion,
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Filtration
of carbon particles from high temperature gas
stream,
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Magnetic
separation of ferrous materials,
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Gas,
liquid and solid separation
criteria,
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Thermo
dynamics of gas/solids heat
transfer.
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All of
these principles are utilized in Titan’s Phase III plant design. What
is most
important
is their integration into a technically sound, overall plant design
configuration. The know-how obtained from the operating plants in
Korea and Taiwan helped the Company form the design improvements currently
incorporated in the Phase III design.
A tire recycling plant can only extract
what is contained in the discarded tires. Many tire manufacturers use
different ingredients in their individual tires. Furthermore,
passenger tire compounds differ in content from truck tires.
A tire recycling plant must have the
capability of extracting marketable products from the wide range of differing
compounds in the various tires they process. Some tire manufacturers
use polyisoprene in their compounding mixture, while others use styrene and
butadiene, yet others use polybutadine. All, however, use carbon
black for strength and add natural extenders such as calcium carbonate in their
tire compounding. In view of the variations in rubber compositions,
it is important to have a process that extracts the highest possible yield of
marketable products from whatever the tire’s component may be.
The
average discarded tire is a common passenger tire with an average bulk density
of 28 /lbs/cu.ft. One hundred (100) raw tires make one
ton. An average new passenger tire weights 25 lbs. An
average used passenger tire weighs about 20 lbs. and has the following breakdown
by weight:
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41%
rubber (natural and synthetic)
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17%
fabric, performance extenders, etc.
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Products
and Marketing
Titan estimates that a single plant
using TRTM-150 technology processing shredded tires at the rate of 150 tons of
tires per day will produce on an annual basis:
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(1)
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Approximately
165,000 barrels of oil (34 degree
API)
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(2)
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Approximately 4,545
tons of high quality scrap steel
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(3)
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Approximately.
14,850 tons of carbon black
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The
supply of waste tires available for recycling is sufficient to supply a
significant number of plants processing 150 tons of tires per
day. Titan reasonably believes that the commercial viability of its
TRTM-150 technology and the resulting products has been established through
pilot plant operations and the three plants that have operated in
Asia.
It is
anticipated that the two licensees that are currently in the process of building
recycling plants in Texas and Mexico will prove the viability of Titan’s Phase
III TRTM-150 technology as the most efficient method for recycling tires during
the next two fiscal years.
Oil
Management believes that Titan has
established a legitimate potential to become a major player in the fields of oil
production from recycling and alternative energy production. The oil
produced, using TRTM-150 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. Accordingly, the oil is readily marketable at prices
comparable to light, sweet crude oil. At the current price of $65/bbl for crude,
one year’s estimated production of 165,000 bbls of oil will yield approximately
$10,725,000. Current publicly available information indicates that
more than 250 million tires are being disposed of annually in the United States,
which represents a potential supply of about 9 million barrels of recoverable
oil per year.
Steel
The scrap steel recovered using
TRTM-150 technology is good quality carbon-steel used in manufacturing tires and
is also readily marketable, except for having been shredded it is essentially
the same steel wire which was incorporated into the original manufacture of
tires. Although the quantity recovered in a 150 ton per day plant is
relatively minor, it nevertheless represents about $1,452,000 at $200.00
ton/year in revenue recovered at minimal cost.
Carbon
Products
Conventional
carbon black is produced through controlled burning of natural gas and oil (much
like soot) and is relatively free of impurities. The largest use of
carbon black (by a significant margin) is for manufacture of tires, although
carbon black is also used extensively in production of ink, paint, shoe polish,
plastics, moldings, gaskets and similar applications in which a black product is
necessary or deemed desirable. Many different grades of carbon black
are produced depending upon the intended use, but virtually all conventionally
produced carbon black is nearly ash-free.
Carbon
black produced through TRTM-150 thermolysis consists of the various grades which
went into manufacture of the tire. Because of the very fine physical
composition of the material, it is not realistically practicable to separate the
product by grade. In addition, carbon black produced through
thermolysis contains varying amounts of ash attributable to other minor
materials used in manufacturing the tire.
The world demand for carbon black is
expected to exceed 8.2 million metric tons (over 16 billion pounds) in
2008. While world prices for this commodity have been low for the
past several years, consumption and prices are expected to rise as the demand
for tires increases and the price of hydrocarbon products rise.
Market
research indicates that a market exists for Titan’s carbon
black. Moreover, it may be possible to use TRTM-150 carbon black in
normal tire production in the United States when blended with other grades of
carbon black. Titan believes that once a TRTM-150 plant has been
established in the United States or Europe, there will be ample demand for the
carbon product once consumers have an opportunity to evaluate a steady and
consistent supply of the product. Titan believes that carbon black
can be produced using the TRTM-150 process at a lower cost than conventional
carbon black, which should be of major significance in achieving market
penetration once a plant is operational in the United States or
Europe.
The
Company conducted testing on a bulk sample of carbon black. produced by Forest
All in Taiwan and using commercially available equipment. Although
the activation process is expected to generate only about 50-60% of the product
weight of the carbon black fed into the activation process, this is more than
offset by the much higher market price and the ability to obtain a secure market
for product. In addition to Titan’s own work, samples of the carbon
black were also successfully processed into activated carbon black at the
University of Illinois’ laboratory under the direction of a well known expert in
the field, who has been working on thermolysis-produced carbon black as a source
for production of activated carbon for many years. The results of
this testing were made available to Titan and confirm the Company’s optimism
that firm markets can be developed for its TRTM-150 carbon black or activated
carbon products once a commercial plant is operating in the United
States. The preliminary information recently received by Titan
indicates that thermolysis–produced carbon black from tires may produce a
superior activated carbon for certain applications.
The
Company and Adherent have also demonstrated with a bench scale working model,
that most of the ash impurities can be removed from the carbon black using a
conventional hydro-metallurgical process. Although further test work
must be performed to confirm that removal of ash is feasible on a commercial
scale, a relatively ash-free carbon black product would enhance product use in
applications requiring higher product purity. At present, Titan does
not have the funds required to complete this phase of test work and believes
that it will be necessary to establish its basic technology for recycling tires
through construction and operation of a commercial plant in North America in
order to fully evaluate available markets for the full range of carbon products
that it will be generated utilizing its thermolysis technology.
Review
of 2008
General:
During the fiscal year ended July 31,
2008, Titan received numerous inquiries regarding use of its tire recycling
technology in the United States and other countries. Several
inquiries have resulted in serious discussions, the signing of License
Agreements, some of which are continuing to date.
On August 23, 2006 Titan signed a
Licensing Agreement with Ally Investments, LLC a Texas Limited Liability
Partnership, located in Port Arthur, Texas (Ally) for a 300 ton/day plant to be
located in Port Arthur, Texas. On August 23, 2006, Ally paid an
initial non-refundable deposit of $100,000 for the exclusive right to construct
plants in Mississippi, Texas, Oklahoma and Louisiana. The $100,000
will be applied to the Licensing fee for Ally’s first plant. The
License Agreement with Ally contained requirements for construction commencement
of its initial plant in Port Arthur, Texas by March, 2007 and commencement of
additional plants at approximately one year intervals after completion of the
first plant, up to a total of 4 plants. Ally engaged Lockwood Greene
to obtain an air permit from the State of Texas for its first proposed plant in
Port Arthur through its wholly owned subsidiary. The License Agreement with Ally
Investments, LLC “Ally”) was amended on February 23, 2007 by mutual agreement to
allow Ally until such time as Ally obtains financing and obtains governmental
approval for its initial plant in Port Arthur, Texas. Ally obtained a
permit to build from the State of Texas Commission on Environmental Quality in
August 2007.
On December 12, 2007, Ally Investments,
LLC (“Ally”) and the Company entered into a Second Amendment of their Franchise
Agreement which eliminated any deadline for commencing the construction of
Ally’s first Plant in Port Arthur, Texas, but retained requirement that a new
plant be commenced within 12 months after the commencement of the first and each
subsequent plant.
The Amendment also provided, among
other terms, that in exchange for Titan’s eliminating its initial franchise fee
of $1.6 Million and its royalty fees on all subsequent plants and enlarging the
territory of Ally’s license to include the entire United States, Ally would give
Titan a Ten (10%) percent membership or equity interest in each subsequent plant
built by Ally in the U.S. In addition, on December 12, 2007 Ally and
the Company executed a Memorandum of Understanding related to a joint venture to
develop Titan’s technology for use in recycling scrap
electronics. Since December 2007, Ally has been working to secure
financing for one or more of its proposed plants. As of October 27,
2008 even though delayed by two recent hurricanes that
required mandatory evacuation of Port Arthur, Texas and the recent
financial crisis, Ally reports that it has commitments for $15 Million of
financing and three other financing sources currently evaluating an equity
investment and that Ally remains confident that it will be able to finalize
funding for its first Plant within the coming weeks.
The Second Amendment to the Ally
Franchise Agreement and the Memorandum of Understanding were attached to the
Registrant’s current report on Form 8-K filed December 21,
2007.
Over the last four years, Titan
Technologies, Inc. has received cumulative non-refundable deposits aggregating
$550,000 as payment for three TRTM–150 plants in Mexico and the exclusive right
to use Titan’s TRTM-150 technology in Mexico from International Tire Recycling
and, its successor, PPT Holdings Ltd, a Texas Limited Liability Company (“PPT”)
located in Laredo, Texas. The latest payment of $50,000 was received from PPT in
October 2008 and was subject to a consulting fee of $20,000 payable to Edmundo
Peredo, of which $5,000 was paid in October 2008.
On October 16, 2006, PPT engaged
Lockwood Greene as its prime engineering firm to design and build the core
process utilizing Titan’s TRTM-150 process as its initial proposed plant in
Nuevo Laredo, Mexico. PPT has also engaged the Mexican architectural and
engineering firm, Dycusa located in Monterrey, Mexico as its general contractor
for the ancillary infrastructure required for a fully operational plant,
including, but not limited to the building, storage silos, shredding equipment,
roads, and utilities.
Upon receipt of sufficient revenue, or
a financial partner, Titan plans to develop and test its recycling technology
for other hydrocarbon based materials, such as electronic scrap and
plastics and high sulfur coal. These efforts have been conducted in
conjunction with Adherent Technologies and continue to represent a significant
potential for independent recycling plants, as well as for expansion of tire
recycling plants based upon Titan’s technology.
Outlook
During the fiscal year ending July 31,
2009, the Company’s efforts will continue to be directed toward development of
new licenses and operations in the Americans, outside the U. S., Mexico and
European and Asian markets.
Although
the Company continues to have contact with a number of interestedprospective
licenses, it believes that as soon as a plant is built and operating inTexas or
Mexico that demonstrates the economic and technical viability of its tire
recycling technology that it will be far easier to license its technology on for
more favorable terms in the rest of the world outside the U. S. and
Mexico.
Titan believes that its technologies
offer an environmentally sound and commercially viable solution for dealing with
significant worldwide waste disposal problems, which appear to be continuing to
growing at an ever-increasing rate. For example, it is estimated that
more than 3 million tons of tires are now in U. S. waste disposal
facilities.
Similarly,
Titan and Adherent intend to continue research with respect to electronic waste,
which contains a large amount of non-biodegradable plastic
waste. Preliminary research indicates that these can be converted
into marketable hydrocarbon products through the Titan process. In addition,
electronic scrap typically contains several metals (including precious metals)
which Titan believes can be recovered and marketed on a commercial basis based
upon research and development work performed to date. Although
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 encouraged by the results achieved to date and intend to
continue research with the objective of establishing commercial processes in
these technologies provided funding for such research is available.
In August 2005, Titan applied for and
obtained a Provisional Patent for a new liquid seal feed system that will
replace Titan’s original patent which expired in August 2005. In
fiscal 2006, Titan applied for a utility patent for the liquid feed system, and
applied for provisional patents for a high temperature carbon & gas filter
and a fractional destructive distillation array. In 2007, Titan
applied for utility patents for the last two referenced provisional
patents.
Titan believes that fiscal 2009 will be
a more successful year than fiscal 2008 based on the assumption that
one or both of Ally or PPT will commence construction of a plant utilizing
Titan’s TRTM-150 technology.
Titan received an additional partial
payment of PPT Holdings, Ltd.’s franchise fee of $50,000 in October
2008. Said $50,000 is subject to a $20,000 consulting fee due Edmundo
Peredo, a principal and control person affiliated with PPT Holdings,
Ltd. $5,000 of which was paid in October 2008.
The
Industry and the Registrant’s Competition
Tires
Historically, most scrap tires have
been piled or buried, neither of which offers an efficient or environmentally
acceptable solution to disposal of scrap tires.
There are three areas of potential
competitors: other pyrolysis systems, other uses for scrap tires, and
other suppliers of carbon black. Blending oil and scrap steel are
commodity items, and therefore, there will be no significant competitive
pressures coming from these products.
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 has developed into separate industries that will compete with the
Company 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 wearing apparel and rubber products, but such uses 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. 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.
There are no commercially sized
pyrolytic tire recycling plants operating in the United States as of
today. Several companies are trying to develop an economically viable
process to recycle scrap tires using pyrolysis or similar technologies, but none
have been successful to-date.
Although not checked on during the last
year, the following companies have attempted, or are attempting, to develop
commercially sized tire pyrolysis plants:
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Internal
Hydro International, Inc., of Tampa Florida, focuses on generating energy
using used tires. On September 27, 2006 it entered into a joint
venture to produce a 100 ton per day tire to oil remediation project near
Springfield Illinois.
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Environmental
Waste International, Ajax, Ontario. Has developed a prototype
system using microwaves and are concentrating their efforts on medical
waste.
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Integrated
Technologies Group, Inc., Ardmore, OK. Owners of Safe Tire, a
tire shredding business, developed a tire pyrolysis system that was
featured in Popular
Mechanics magazine in 2001. No prototype or production
plant has been built.
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Other
companies such as Petra Group’s Green Rubber Global haveindicated an
interest in locating a tire recycling plant in Gallup,
NM. |
The Company believes that burning tires
as a substitute fuel, provides only marginal savings for the user and that 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 two industries consume less than twelve percent of the waste tires
discarded in the United States each year.
The only technology comparable to
Titan’s continuous process is pyrolysis process, which operates at much higher
temperatures and on a “batch” basis. Such pyrolytic facilities
currently exist in Japan, Taiwan, Germany and possibly South
Africa. However, they are believed to 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.
Titan is not aware of any other uses
for waste tires that are reasonably competitive with the benefits which can be
derived from the TRTM-150 process. However, research into the problem
of waste tire disposal is continuing throughout the world and it should be
anticipated that new and novel recycling approaches may, from time to time, be
proposed as solutions to the problem of waste tire disposal.
The Company estimates that there is a
potential for approximately fifty TRTM-150 tire recycling plants in the United
States alone if a first U. S. plant can be built and successfully operated to
demonstrate in the U. S. that the TRTM-150 technology is commercially
viable. This estimate is based upon industry statistics that state
that scrap tire stockpiles contain approximately 27.1 scrap tires per capita of
population. Given this figure, it appears that a population base of
approximately one million people generate sufficient scrap tires to sustain the
operations of a TRTM-150 recycling plant.
Titan’s marketing efforts in the United
States have been focused on larger population areas. The Company
believes that, because of the current policies of providing incentives and
inducements to promote recycling, market conditions for implementation of its
technology should continue to improve in the near future.
Plastics
The Company believes that its plastic
recycling technology (developed with the assistance of Adherent Technologies) is
ready for commercial implementation. Titan’s objective is to
establish a plastics recycling plant at some location in the United States,
either on the east or the west coast near a major metropolitan
area. No specific location has yet been selected and funding for an
initial plant has not yet been arranged. Titan believes that there is
a reasonable possibility that a site could be selected during fiscal 2009 or
2010 and financing arranged for the construction of an initial plant, either
involving Titan as a participant or through a license or joint venture
arrangement with others.
On December 1, 1999, Titan, Adherent
Technologies, and Dr. Allred reestablished the research and development
parameters through which Adherent operates to advance the Registrant’s
technology. Adherent and Dr. Allred were granted a royalty ranging
from 1% to 5% on all proceeds received by the Company from any tire recycling
plant and 50% of all proceeds received by the Company from any recycling plant
for products other than tires. In addition, Titan sold to Adherent (a
company owned by Dr. Allred) 1,000,000 shares of its common stock for a
consideration of $10,000. Management believes that the continued
relationship with Adherent is to Titan’s advantage and that the compensation
given to Adherent and Dr. Allred is reasonable in light of the substantial
advances that Adherent has made in the Company’s technology over the past 8
years. It is hoped that the continued affiliation between the Company
and Adherent will generate a continual stream of new applications for Titan’s
technology in the future.
All developments relating to the
technology will be owned by Titan subject to the Royalty Agreement with Ronald
Allred described above.
Employees
The registrant has four full time
employees, one of which is paid $5700 a month and each of the other three are
paid $3500 per month.
ITEM
2: DESCRIPTION OF
PROPERTY.
Titan has the exclusive right to use
the TRTM-150 technology utilized in its TRTM-150 plants and the right to develop
such technology for the recycling of plastics and other organic
materials. In addition, Titan owns a mobile research and development
plant 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.
Titan leases approximately 2,150 square
feet for its executive offices located at 3206 Candelaria, NE, Albuquerque, New
Mexico on a month to month basis at a rent of $1,025 per
month. Titan’s Management believes that the executive offices now
leased by it will be adequate for the Company’s business for the near
future.
ITEM
3: LEGAL PROCEEDINGS.
At the date of this report, there are
no known legal proceedings pending or threatened against Titan or against any
director or officer of the Registrant in their capacity as such.
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,
2008.
PART
II
ITEM
5: MARKET FOR REGISTRANT’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:
|
Quarter
Ended
|
High
|
Low
|
|
|
|
|
|
Quarter
ended September 30, 2006
|
$0.30
|
$0.10
|
|
Quarter
ended December 31, 2006
|
$0.35
|
$0.18
|
|
Quarter
ended March 31, 2007
|
$0.26
|
$0.19
|
|
Quarter
ended June 30, 2007
|
$0.26
|
$0.15
|
|
Quarter
ended September 30, 2007
|
$0.21
|
$0.17
|
|
Quarter
ended December 31, 2007
|
$0.21
|
$0.17
|
|
Quarter
ended March 31, 2008
|
$0.21
|
$0.17
|
|
Quarter
ended June 30, 2008
|
$0.20
|
$0.15
|
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 27, 2008, the Company had approximately 933
shareholders of record.
ITEM
6: MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following Plan of Operation should
be read in connection with the Company’s financial statements and notes
hereto. Information discussed herein, as well as this Annual Report
on Form 10-KSB/A, includes forward-looking statements or opinions regarding
future events or the future financial performance of the Company, and are
subject to a number of risks and other factors which could cause the actual
results to differ materially from those contained in forward looking statements.
Among such factors are: general business and economic conditions; customer
acceptance of anticipated products which may be produced from plants using the
Company’s licensees to obtain financing for such plants; the ability of any
additional plants, if financed, in this Form 10-KSB/A or listed from time to
time in documents filed by the Company with the Securities and Exchange
Commission.
Plan
of Operation
General
As described above under Item 1, the
Company’s objectives and its primary activities relate to expanding use of
Titan’s patented and proprietary technology for construction and operation of
commercial plants designed to recycle waste tires and plastics into marketable
products. The Company believes that commercial viability of its tire
recycling technology has already been established through construction and
operation of three plants in Asia under license from Titan. The focus
of efforts during the next twelve months will be to license use of 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 any such
plants. Additionally, the Company plans to perform on-going research
and analysis devoted to establishing additional uses for its technology, subject
to availability of adequate funds to do so.
Next Twelve Months
The
objectives of the Company have not changed, and Titan believes it has an
excellent opportunity to license one or more plants using its Phase III
technology for construction and operation in the United States (or elsewhere)
during the next year. The key elements required to accomplish this
objective are as follows:
|
·
|
Assist the two existing licenses to start construction of their new
plants, which will include a payment for licensing fee in order to provide
the Company with working capital to support its on-going general and
administrative expenses and cost of additional research and
development.
|
|
·
|
Development of additional product and marketing information with respect
to gasification and destructive distillation of
coal.
|
As described
under Item 1, the Company believes that due to the work that has been
accomplished during the previous fiscal year, there may be one or two operating
TRTM-150 plants in North America by the end of calendar 2009.
Financial
Condition and Cash Requirements
The
Company’s cash position decreased by $26,122 to $ 4,461 at July 31, 2008 from
$30,583 at July 31, 2007. During fiscal 2008, the Company sold shares of its
common stock in reliance upon certain exemptions from registration under the
Securities Act of 1933, as amended. In addition, 187,500 shares were
issued for cash in the amount of $15,000, subsequent to July 31,
2008. The proceeds of these limited sales and the Company’s cash
position will not be sufficient to cover anticipated expenses for the next
twelve months. If licensing fees do not materialize, it will be necessary for
the Company to raise additional funds through private placements (or joint
venture or similar arrangement) in order to continue with its
business. Based on prior experience, however, the Company believes it
will be able to do so for at least the next twelve months, although there can be
no assurance that such additional funding will be available. The
Company has no significant debt.
The Company’s costs and expenses of
operations were $273,719 during fiscal 2008, primarily resulting from the
Company’s efforts to license a plant in the United States or Mexico and to
conduct research and development for applications of new
technology. There was no income from operations during the 2008
fiscal year. As conditions warrant, the Company will also take such
action to reduce cash administrative expenses to the extent practicable,
including issuance of stock and notes payable were possible for payment of
expenses. At present, the Company does not expect to spend any significant
amount of money for equipment during the next twelve months or significantly
increase its number of employees. These factors could change if
licensing fees or a joint venture (or similar arrangement) materializes during
such twelve month period. Cash requirements for fiscal 2009
costs and expenses are expected to approximate those incurred in fiscal
2008.
Research
and Development
During
the twelve months, the ability of the Company to conduct a
significant
amount of
further research and development will depend upon receipt of licensing fees or
research and development which may be funded through joint ventures (or similar
arrangements) with other parties. Accordingly, there can be no
assurance that additional research and development will be conducted by the
Company during the next twelve months.
ITEM
7: FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Shareholders
and Board of Directors
Titan
Technologies, Inc.
We have
audited the accompanying balance sheet of Titan Technologies, Inc. as of July
31, 2008, and the related statements of operations, changes in stockholders’
equity, and cash flows for the years ended July 31, 2008 and
2007. 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 standards of the Public Company
Accounting Oversight Board (United States).These 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, 2008, and the results of its operations and its cash flows for the years
ended July 31, 2008 and 2007 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred significant losses from
operations and is reliant on raising capital to initiate its business
plan. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard
to these matters are also discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/
Stark Winter Schenkein & Co., LLP
Stark
Winter Schenkein & Co., LLP
Denver,
Colorado
October
30, 2008
Titan
Technologies, Inc.
Balance
Sheet
as of
July 31, 2008
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
|
|
$ |
4,461 |
|
|
Prepaid
expenses
|
|
|
- |
|
|
|
Total
current assets
|
|
|
4,461 |
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
- |
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
25,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,070 |
|
|
|
|
|
|
|
|
| |
LIABILITIES
AND STOCKHOLDERS' ( DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
14,752 |
|
|
Deferred
revenue
|
|
|
470,000 |
|
|
|
Total
current liabilities
|
|
|
484,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
(DEFICIT)
|
|
|
|
|
|
Common
stock, no par value; 50,000,000 shares authorized
|
|
|
|
|
|
48,183,277
shares issued, 48,166,277 shares outstanding
|
|
|
4,147,014 |
|
|
Treasury
stock, 17,000 shares at cost
|
|
|
- |
|
|
Accumulated
(deficit)
|
|
|
(4,601,696 |
) |
|
|
|
|
|
(454,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
30,070 |
|
The
accompanying notes are an integral part of these financial
statements
|
Titan
Technologies, Inc.
|
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended July 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
REVENUE
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
268,141 |
|
|
|
271,000 |
|
|
General
and administrative non-cash stock compensation
|
|
|
- |
|
|
|
24,308 |
|
|
Outside
services
|
|
|
5,525 |
|
|
|
8,530 |
|
|
Depreciation
|
|
|
53 |
|
|
|
107 |
|
|
|
|
|
273,719 |
|
|
|
303,945 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
(LOSS) BEFORE INCOME TAXES
|
|
|
(273,719 |
) |
|
|
(303,945 |
) |
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
NET
(LOSS)
|
|
$ |
(273,719 |
) |
|
$ |
(303,945 |
) |
|
|
|
|
|
|
|
|
|
|
|
PER
SHARE INFORMATION
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding -
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
47,137,714 |
|
|
|
45,223,302 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
( loss ) per common share - basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
The
accompanying notes are an integral part of these financial
statements
|
Titan
Technologies, Inc.
|
|
|
Statement
of Changes in Stockholders' (Deficit)
|
|
|
For
the Years Ended July 31, 2007 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Treasury
Stock
|
|
|
|
|
|
Total
|
|
|
|
|
Number
of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
(Deficit)
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 31, 2006
|
|
|
44,731,538 |
|
|
$ |
3,744,932 |
|
|
|
17,000 |
|
|
|
- |
|
|
$ |
(4,024,032 |
) |
|
$ |
(279,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash
|
|
|
1,157,499 |
|
|
|
146,500 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
146,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
90,802 |
|
|
|
24,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
( Loss )
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
(303,945 |
) |
|
$ |
(303,945 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 31, 2007
|
|
|
45,979,839 |
|
|
|
3,915,740 |
|
|
|
17,000 |
|
|
|
- |
|
|
|
(4,327,977 |
) |
|
|
(412,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash
|
|
|
2,186,438 |
|
|
|
231,274 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
231,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
( Loss )
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(273,719 |
) |
|
|
(273,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 31, 2008
|
|
|
48,166,277 |
|
|
$ |
4,147,014 |
|
|
|
17,000 |
|
|
$ |
- |
|
|
$ |
(4,601,696 |
) |
|
$ |
(454,682 |
) |
The
accompanying notes are an integral part of these financial
statements
|
Titan
Technologies, Inc.
|
|
|
Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended
|
|
|
|
|
July
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
CASH
FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$ |
(273,719 |
) |
|
$ |
(303,945 |
) |
|
Adjustments
to reconcile net (loss) to net cash
|
|
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
Stock
compensation expense
|
|
|
- |
|
|
|
24,308 |
|
|
Depreciation
and amortization
|
|
|
53 |
|
|
|
107 |
|
|
Decrease
(increase) in prepaid expense
|
|
|
2,525 |
|
|
|
(2,525 |
) |
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
13,745 |
|
|
|
(18,764 |
) |
|
Increase
in deferred revenue
|
|
|
- |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in ) operating expenses
|
|
|
(257,396 |
) |
|
|
(150,819 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
(Increase)
in other assets
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) investing activities
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from common stock issuances for cash
|
|
|
231,274 |
|
|
|
146,500 |
|
|
Net
cash provided by financing activities
|
|
|
231,274 |
|
|
|
146,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) in cash
|
|
|
(26,122 |
) |
|
|
(4,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
Beginning
cash
|
|
|
30,583 |
|
|
|
34,902 |
|
|
|
|
|
|
|
|
|
|
|
|
Ending
cash
|
|
$ |
4,461 |
|
|
$ |
30,583 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest expense
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these financial
statements
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
Note 1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Organization
Titan
Technologies, Inc. (the "Company") was incorporated on July 3, 1955 as a New
Mexico corporation. The Company is an international licensor of
proprietary technologies. The Company’s primary technology involves
the construction of tire recycling plants.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash
and cash equivalents
For
purposes of balance sheet classification and the statements of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Property
and equipment
Property
and equipment is stated at cost. Depreciation is calculated using
accelerated methods over estimated economic lives of five to seven
years.
Revenue
recognition
The
Company recognizes revenue from the licensing of its technology over the term of
the license agreement, and when the Company has substantially performed all
material services relating to the contract. In cases where a license
covers a specific number of facilities, the revenue is deferred and recorded as
income on a pro-rata basis at the completion of each of the licensed
facilities.
On
contracts where the Company acts only as technical adviser during 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.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
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.
Research
and development
Research
and development costs are charged to operations when incurred and are included
in general and administrative expenses. For the years ended July 31,
2008 and 2007, the Company incurred no research and development
costs.
Stock-based
compensation
The
Company accounts for equity instruments issued to employees for services based
on the fair value of the equity instruments and accounts for equity instruments
issued to other than employees based on the fair value of the consideration
received or the fair value of the equity instruments, whichever is more reliably
measurable.
The
Company accounts for stock-based compensation in accordance with Statement of
Financial Accounting Standards 123 (R) “Share-based Payment” (“SFAS
No. 123R”, revised 2004). This statement requires that the cost resulting from
all share-based transactions be recorded in the financial statements. This
statement establishes fair value as the measurement objective in accounting for
share-based payment arrangements and requires all entities to apply a
fair-value-based measurement in accounting for share-based payment transactions
with employees. This statement also establishes fair value as the measurement
objective for transactions in which an entity acquires goods or services from
non-employees in share-based transactions.. This statement replaces SFAS No. 123
“Accounting for Stock Based
Compensation,” and supersedes ABP
Opinion No. 25, “Accounting
for Stock Issued to Employees.” The provisions of this
statement were effective for the Company beginning with the quarterly period
that began on August 1, 2006.
Fair
value of financial instruments
SFAS 107,
"Disclosures About Fair Value
of Financial Instruments," requires disclosure of fair value information
about financial instruments. SFAS No. 157, “Fair Value Measurements”
(SFAS 157) defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair
value measurements. Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to
management as of May 31, 2008.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
The
respective carrying value of certain on-balance-sheet financial instruments
approximate their fair values. These financial instruments include
cash, accounts payable and accrued expenses Fair values were assumed to
approximate carrying values for these financial instruments since they are short
term in nature and their carrying amounts approximate fair value.
Net
(loss) per common share
The
Company calculates net income (loss) per share as required by SFAS 128, “Earnings Per
Share”. Basic earnings (loss) per common share calculations
are determined by dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings
(loss) per common share calculations are determined by dividing net income
(loss) by the weighted average number of common shares and dilutive common share
equivalents outstanding. During the periods in which the Company
incurs losses, common stock equivalents, if any, are not considered in the
computation, as their effect would be antilidilutive.
Impairment
of long-lived assets
The
Company periodically reviews the carrying amount of its identifiable tangible
and intangible assets to determine whether current events or circumstances
warrant adjustments to such carrying amounts. If an impairment adjustment is
deemed necessary, such loss is measured by the amount that the carrying value of
such assets exceeds their fair value. Considerable management
judgment is necessary to estimate the fair value of assets; accordingly, actual
results could vary significantly from such estimates. Assets to be
disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell.
Recent
pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). Under this
standard, an entity is required to provide additional information that will
assist investors and other users of financial information to more easily
understand the effect of the company’s choice to use fair value on its earnings.
Further, the entity is required to display the fair value of those assets and
liabilities for which the company has chosen to use fair value on the face of
the balance sheet. This standard does not eliminate the disclosure requirements
about fair value measurements included in SFAS 157 and SFAS No. 107,
discussed above. SFAS 159 is effective for our fiscal year beginning June 1,
2008. SFAS 159 is not expected to have a significant impact on our
financial statements.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
In
December 2007 the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”
("SFAS 141R"). This statement replaces SFAS 141, “Business Combinations”. The
statement provides guidance for how the acquirer recognizes and measures the
identifiable assets acquired, liabilities assumed and any non-controlling
interest in the acquiree. SFAS 141R provides for how the acquirer
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase. The statement determines which information to
disclose to enable users to be able to evaluate the nature and financial effects
of the business combination. The provisions of SFAS 141R will be effective
for our fiscal year beginning June 1, 2009 and do not allow early
adoption. Management is currently evaluating the impact of adopting
this statement.
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (SFAS 160), which will be
effective for our fiscal year beginning June 1, 2009. This standard
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the non-controlling interest,
changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. Management is
currently evaluating the impact of adopting this statement.
In
February 2008, FASB Staff Position (FSP) FSP No. 157-2, “Effective Date of FASB Statement
No. 157” (FSP No. 157-2) was issued. FSP No. 157-2 defers
the effective date of SFAS No. 157 to fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years, for all
non-financial assets and liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). Examples of items within the scope of FSP No. 157-2 are
non-financial assets and non-financial liabilities initially measured at fair
value in a business combination (but not measured at fair value in subsequent
periods), and long-lived assets, such as property, plant and equipment and
intangible assets measured at fair value for an impairment assessment under SFAS
No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets.” The Company is
currently assessing the impact, if any, of adopting this standard.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an Amendment of FASB Statement No.
133” (SFAS 161), which becomes effective on November 15, 2008. This
standard changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. Management is currently evaluating the impact of adopting
this statement.
In April
2008, the FASB FSP 142-3, “Determination of the Useful Life of
Intangible Assets.” This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible
Assets.” The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under Statement 142 and the period
of expected cash flows used to measure the fair value of the asset under FASB
Statement No. 141 (Revised 2007), “Business Combinations,” and other U.S.
generally accepted accounting principles (GAAP). This FSP is effective for
financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Early adoption is
prohibited. The Company does not expect the adoption of FAS 142-3 to have
a material effect on its results of operations and financial
condition.
In May
2008, the FASB FSP No. APB 14-1 “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (FSP APB 14-1). FSP APB 14-1 requires the issuer
of certain convertible debt instruments that may be settled in cash (or other
assets) on conversion to separately account for the liability (debt) and equity
(conversion option) components of the instrument in a manner that reflects the
issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for
fiscal years beginning after December 15, 2008 on a retroactive basis. The
Company does not expect the adoption of FSP APB 14-1 to have a material effect
on its results of operations and financial condition.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles (SFAS 162), which becomes effective upon approval by the
SEC”. This standard sets forth the sources of accounting principles and
provides entities with a framework for selecting the principles used in the
preparation of financial statements that are presented in conformity with
GAAP. It is not expected to change any of our current accounting
principles or practices and therefore, is not expected to have a material impact
on our financial statements.
There
were various other accounting standards and interpretations issued during 2008
and 2007, none of which are expected to a have a material impact on the
Company's financial position, operations or cash flows.
Note
2. GOING CONCERN
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of the Company as a going concern.
The
Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature. For the
years ended July 31, 2008 and 2007, the Company incurred net (losses) of
$(273,719) and $(303,945), respectively. At July 31, 2008, the Company had a
working capital deficit of ($480,291) and stockholders’ deficit of $(454,682).
In addition, the Company has not been able to generate significant operating
revenues through the licensing of its proprietary technologies.
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:
|
|
·
|
Improve
marketing efforts for recycling plants and bring plastics technology to a
marketable product.
|
|
|
·
|
Reduce
operating and administrative expenses, and issue stock and notes payable
in lieu of cash when possible
|
|
|
·
|
Defer
officer salaries if required.
|
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Note
3. LICENSE AGREEMENTS
On April
2, 2004, and as modified on October 30, 2004, the Company entered into an
Agreement with a group of investors, to provide for the construction of three
tire recycling plants to be built in the Republic of Mexico (“Mexico”). During
the year ended July 31, 2005, the Company received a non-refundable deposit of
$180,000, which was originally recorded as deferred revenue. Under the terms of
the agreement, the Company was to receive a payment of
$500,000. $300,000 was to be credited to licensing fees, ($100,000
for each of the three initial recycling plants), and the remaining $200,000 for
an exclusive right to license the Titan technology in Mexico. The original
Agreement was extended from September 30, 2004 to March 31, 2005, whereupon it
was terminated effective March 31, 2005, due to non-performance by the licensee.
As more fully discussed below, the $180,000 previously paid to Titan under this
agreement was recognized as revenue, and credit has been given to the successor
investor, PPT Holding, Ltd. ("PPT"), in this amount.
Effective
February 9, 2006, the Registrant executed a License Agreement with PPT, a Texas
Limited Partnership and successor to the investor group discussed above, for the
exclusive right to build recycling facilities in Mexico, utilizing Titan’s
patented tire recycling technology (the “Mexican License”). The Agreement
provides for the initial construction of three facilities within three years,
commencing initially on or about September 15, 2006, which date has been
verbally extended to the date on which PPT has obtained the necessary building
permit for its first plant in Nuevo Laredo, Mexico, and has secured sufficient
financing to commence construction of the plant. PPT has obtained the building
permit for the first plant, but has not secured sufficient financing to commence
construction. Upon commencement of the construction of the first
plant PPT will become obligated to pay Titan an initial installment of $300,000
of the remaining $900,000 for the license fee for the first
plant. The Agreement also calls for a $200,000 payment for the
exclusive license, for PPT to utilize Titan's tire recycling technology in
Mexico, which amount has been previously received, as stated
above.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
The
Mexican License provides for a $1,000,000 license fee for each plant, payable as
follows: (i) a deposit of $100,000 paid by April 30, 2006; (ii) $300,000 payable
upon commencement of construction; (iii) $300,000 upon completion of
construction; and (iv) $300,000 upon reaching full capacity. During
the year ended July 31, 2006, PPT and its predecessor paid Titan $320,000, and
PPT received credit for the $180,000 previously paid by its predecessor.
Therefore, the total initial $500,000 requirement, including the $300,000
deposit for the first three plants as well as $200,000 for the exclusive license
for the Republic of Mexico, has been satisfied. An additional $50,000 was
received during the fiscal year ended July 31, 2007. Since
construction has not yet commenced, the entire deposit is presented as deferred
revenue at July 31, 2008.
The
Mexican License further provides that Licensee will pay Titan royalty payments
equal to $4.00 per ton of tires processed in the recycling plants in Mexico
after full capacity is reached. Failure by PPT to make the required
royalty payments for first three plants could result in Titan terminating the
License Agreement and loss of the exclusive license for Mexico and all monies
paid to date by PPT and its predecessor.
Additionally,
Titan has agreed to purchase a seven percent (7%) ownership interest in PPT for
$100,000, of which $75,000 was paid during fiscal 2005 pursuant to previous
agreements that were subsequently deemed void. Titan has been given
credit for its previous payments, towards the purchase of its investment in
PPT. Since PPT is in the organizational stages, the final $25,000
paid in fiscal 2006 is presented as a deposit at April 30, 2008.
Effective
August 23, 2006, the Company entered into another licensing agreement with an
unrelated investor group, Ally Investments, LLC (“Ally”), for the use of Titan's
recycling patents and technology within the states of Texas, Louisiana,
Mississippi and Oklahoma, and received a non-refundable deposit in the amount of
$100,000, which amount is included in deferred revenue at July 31, 2008. The
licensing fee agreement provided for a licensing fee for each plant of
$1,600,000 upon securing both a construction site and construction financing,
and production royalties of 1.5% of gross revenues derived from the sale of all
products generated using Titan technology, upon reaching full
capacity.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
|
On
December 12, 2007, the Company and Ally entered into a Second Amendment to
License Agreement that modified the original License Agreement in the
following respects:
|
|
1.
|
The
Territory was expanded from the four states to the entire United
States.
|
|
2.
|
The
license fee of $1,600,000 and the royalty payment of 1.5% of all products
produced was amended to a Ten (10%) percent membership interest in each of
the single purpose entities formed to own and operate each plant beyond
the first plant (the second and each subsequent
plant).
|
|
3.
|
The
obligation to pay the initial license fee for the first plant of
$1,600,000 remains unchanged, but the obligation to commence construction
of the first plant, as amended on February 23, 2007, to commence, on or
before December 31, 2007, and be in operation, no later that December 31,
2008 was modified to require that construction of the first plant commence
when (i) government agencies have granted construction approval and (ii)
Ally has obtained financing to build the first
plant.
|
As of
July 31, 2008 construction had not commenced.
|
4.
|
The
termination of the Exclusive License was also modified to
provide that the exclusive license for the U.S. will terminate if Ally
should fail to commence to obtain a permit and prepare a feasibility study
for the next plant within twelve (12) months after the previous plant has
reached full capacity.
|
Also on
December 12, 2007, the Registrant and Ally Investment entered into a Memorandum
of Understanding regarding Plastics Scrap, including but not limited to the
following terms:
|
1.
|
The
grant of an exclusive license for Titan's Technology and patents for the
recycling of scrap electronics throughout the United
States.
|
|
2.
|
A
license fee of $500,000 each to the Registrant and Adherent Technologies,
upon Ally securing sufficient funding and government approvals to commence
construction of the first plastics recycling
plant.
|
|
3.
|
The
grant to the Registrant of a ten (10%) percent ownership in each entity
established to own and operate a plastics recycling plant anywhere in the
U.S.
|
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
|
4.
|
A
research and development time table for testing a sample of constituent
materials and development of a plastics recycling plant in the
U.S.
|
|
5.
|
A
commitment by Ally to fund and commence construction of the first plastics
recycling plant in the U.S. within four years after delivery of the first
sample of test material by Ally to
Titan.
|
Note 4. RESEARCH
AND DEVELOPMENT AGREEMENT
The
Company has an arrangement with a research facility (“Adherent”) owned by a
director of the Company. Under the terms of the agreement the Company
is entitled to all of Adherent’s findings and developments. Adherent
is in the process of researching a waste plastics recycling process using the
Company's technology.
Under the
terms of the agreement, Adherent is entitled to 50% of the net income received
by the Company resulting from the sale and/or licensing of product, plant,
technology or otherwise of its technology related to feedstock, other than those
for tires.
Adherent
is entitled to an amount derived from tire revenue as follows: 5% of the first
$2,000,000 of net revenues, 3% of net revenue of $2,000,000 to $5,000,000, 2% of
net
revenue
of $5,000,000 to $10,000,000, and 1% of all net revenue in excess of
$10,000,000.
No
amounts were paid to Adherent for the years ended July 31, 2008 and
2007.
Note
5. STOCKHOLDERS’ EQUITY (DEFICIT)
During
the year ended July 31, 2008 the Company issued 2,186,438 shares of common stock
at $0.10 to $ 0.12 per share, for total cash proceeds
of $231,274.
During
the year ended July 31, 2007 the Company issued 1,157,499 shares of common stock
at $0.10 to $ 0.15 per share, for total cash proceeds of $146,500. In
addition, 90,802 shares were issued for services at $0.26 and $0.30 per share,
the fair market value of the Company's stock on the date of issue, resulting in
non-cash stock compensation in the amount of $24,308.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
Treasury
stock, consisting of 17,000 shares of common stock, was reserved for future
issuances to shareholders of the Company who had not exchanged their shares in
the previous entity for shares in the Company. No shares of treasury
stock were issued during the years ended July 31, 2008 or 2007.
In March
1997, the Company exchanged 3,000,000 restricted 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. Under a settlement
agreement, the 3,000,000 shares of the Company’s common stock were to be
transferred back to the Company in exchange for return its 28.5% interest in
ESA. During the year ended July 31, 2004 the Company retired a
certificate related to this settlement agreement for 1,200,000
shares. The Company is seeking return of the remaining 1,800,000
shares of common stock. Due to the uncertainty of the Company's
ability to gain possession, 1,800,000 of the shares have been reflected as
outstanding as of July 31, 2008 and 2007. Also, as part of the
settlement, the Company has agreed to pay $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.
Note
6. STOCK OPTIONS
The
Company has a compensatory stock option plan. Under the plan, the Company may
grant options for up to 1,350,000 shares of common stock. The Board of Directors
shall determine the exercise price and term of the options. The options vest on
the date granted. All options outstanding at July 31, 2008 were
granted to employees or directors and expire in the year ending July 31,
2015.
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
Summarized
information relative to the Company’s stock option plan is as
follows:
|
|
|
Number
of
|
|
|
Weighted
Average
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at July 31, 2006
|
|
|
1,350,000 |
|
|
$ |
0.12 |
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
Forfeited
|
|
|
- |
|
|
|
- |
|
|
Outstanding
at July 31, 2007
|
|
|
1,350,000 |
|
|
|
0.12 |
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
Exercised
|
|
|
300,000 |
|
|
|
.12 |
|
|
Forfeited
|
|
|
|
|
|
|
|
|
Outstanding
at July 31, 2008
|
|
|
1,050,000 |
|
|
$ |
. 0.12 |
|
Note
7. INCOME TAXES
The
Company accounts for income taxes under SFAF 109, "Accounting for Income Taxes",
which requires use of the liability method. SFAS 109 provides that
deferred tax assets and liabilities are recorded based on the differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes, referred to as temporary
differences. Deferred tax assets and liabilities at the end of each
period are determined using the currently enacted tax rates applied to taxable
income in the periods in which the deferred tax assets and liabilities are
expected to be settled or realized.
The types
of temporary differences between the tax bases of assets and their financial
reporting amounts that give rise to a significant portion of the deferred tax
asset are as follows:
|
|
|
Reconciling
Item
|
|
|
Tax
Effect
|
|
|
Net
operating loss carryforward
|
|
$ |
4,477,000 |
|
|
$ |
1,746,000 |
|
|
Research
and development credit
|
|
|
9,000 |
|
|
|
4,000 |
|
|
|
|
$ |
4,486,000 |
|
|
$ |
,1,750,000 |
|
Titan
Technologies, Inc.
Notes
to Financial Statements
July
31, 2008
At July
31, 2008, the Company has loss carryforwards of approximately $4,486,000, which
can be used to reduce future taxable income and will expire throughout 2009 to
2028. In addition, the Company has a research credit of $9,000
available to offset income tax liabilities through 2022.
The
change in the valuation allowance for the deferred tax asset during the year
ended July 31, 2008 was ($108,000).
Note
8. RELATED PARTY TRANSACTIONS
The
Company has an agreement with a shareholder to provide legal services and to
serve as Secretary of the Company for a monthly fee of $1,500. Total
expenses incurred under this agreement were $18,000 for both of the years ended
July 31, 2008 and 2007, which are included in general and administrative
expenses.
The
Company has an agreement with a related party to provide the use of an employee
at cost. The amount received under this agreement for the year ended
July 31, 2008 was $33,618. The Company has netted these amounts
against payroll expense.
Note
9. COMMITMENTS
During
the year ended July 31, 2004, the Company entered into four employment contracts
with its employees including two officers, and a consulting contract with a
third officer. The contracts are in effect for the five year period from January
1, 2003 to December 31, 2008, and call for annual aggregate payments of
$214,010. They are terminable by either party upon written notice and include a
two year non-compete provision.
Note
10. SUBSEQUENT EVENTS
Subsequent
to July 31, 2008 the Company issued 187,500 shares of common stock for cash of
$15,000.
On
October 21, 2008, the Company received a partial payment from PPT Holding, Ltd.
in the amount of $50,000 as part of the franchise fee for PPT’s proposed plant
in Nuevo Laredo, Tamaulipas, Mexico. PPT has now paid a total of $150,000 of the
$1,000,000.00 franchise fee for its proposed Nuevo Laredo plant. The
partial payment was subject to a consulting fee to be paid to an affiliate of
PPT in the amount of $20,000.00 of which $5,000.00 was paid on October 22,
2008.
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 Titan’s two (2) most recent
fiscal years.
ITEM
8A(T): INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure
Controls and Procedures
Our
management, under the supervision and with the participation of our Chief
Executive Officer (“CEO”) and Chief Financial Officer (CFO”) Ronald Wilder, has
evaluated the effectiveness of our disclosure controls and procedures as defined
in Securities Exchange Act Rules 240.13a-15(f) and 15d-15(f) as of the end of
the period covered by this Annual Report.
Based on
the evaluation of our internal control over financial reporting described below,
our CEO and CFO concluded that, as of July 31, 2008 our disclosure controls and
procedures were ineffective in ensuring that (a) information required to be
disclosed by the Company in reports it files or submits to the Securities and
Exchange Commission under the Exchange Act is recorded, processed, summarized,
and reported within the time periods specified in applicable rules and forms and
(b) material information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to our management, including our
CEO and CFO, as appropriate, to allow for accurate and timely decisions
regarding required disclosure.
Management
acknowledges that in Item 8A of Form 10-KSB filed for the year ended July 31,
2008, the Company omitted management’s assessment of the effectiveness of
internal control over financial reporting for the fiscal year ended July 31,
2008, including a statement as to whether or not internal control over financial
reporting was effective in accordance with Item 308(T)(a)(3) of Regulation
S-B.
Due to
the inadvertent omission, the Company determined Disclosure Controls and
Procedures were ineffective for the period ended July 31, 2008. The CEO/CFO has
taken actions to address the ineffectiveness of and deficiencies in the
Company’s disclosure controls and procedures and internal control over financial
reporting. Specifically, in June 2009, the Company’s management adopted
additional review and disclosure systems designed to improve the Company’s
system of internal control over financial reporting, including:
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A.
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Our
disclosure controls and procedures have been redesigned in accordance with
the interpretive guideline issued by the S.E.C. in its Release 34-55929
and procedures for assessment and evaluation of the design and operation
of the Company’s internal control over financial reporting based upon the
criteria in the Internal Control over Financial Reporting – Guidance for
Smaller Public Companies issued by the Committee of Sponsoring
Organizations of the Treadway Commission to ensure that information
required to be disclosed in the reports we file or submit under the
Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in the S.E.C.’s
rules and forms. The newly designed disclosures and
procedures include (a) maintaining an open dialogue with the Company’s
auditors to ensure that the auditor’s review of and report on the
Company’s year-end financial statements is complete and satisfies all
relevant S.E.C. rules and regulations; and (b) continuously reviewing the
Company’s financial statements while drafting quarterly and annual reports
to ensure the statements have not been altered during the preparation or
filing of such reports.
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B.
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Amending
the relevant statements and Management’s Report in the Company’s Report on
Form 10-KSB and Reports on Form 10-QSB in order to rectify the errors and
omission as stated above.
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The
Company’s CEO/CFO believes that the effective implementation of the above
procedures will correct the weakness cited above in its Disclosure Controls and
Procedures and internal controls over financial reporting. The
Company will continue to review and monitor its Disclosure Controls and
Procedures and internal controls over financial reporting to adopt further
changes, if and when management determines that such changes are necessary, to
ensure accuracy in the Company’s future filings.
Management’s Report on
Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Registrant as defined in Exchange Act
Rules 13(a) – 15(f) and 15d -15(f). The Company’s internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation and fair
presentation of financial statements for external purposes in accordance with
generally accepted accounting principles.
The term
internal control over financial reporting is defined as a process designed by,
or under the supervision of, the Registrant’s principal executive and principal
financial officer, or persons performing similar functions, and effected by the
registrant’s board of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
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1)
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Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and disposition of the assets of the
registrant;
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2)
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Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
registrant are being made only in accordance with authorizations of
management and directors of the registrant;
and
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3)
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Provide
reasonable assurance regarding prevention and timely detection of
unauthorized acquisition, use and disposition of the registrant’s assets
that could have a material effect on the financial
statements.
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Internal control over
financial reporting and fraud, no matter how well designed, has inherent
limitations and may not prevent or detect misstatements. Therefore,
even effective internal control over financial reporting and fraud can only
provide reasonable assurance with respect to the financial statement preparation
and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Material
weakness is a deficiency, or combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely
basis. The Company’s CEO/CFO conducted an evaluation of the design
and operation of he Company’s internal control over financial reporting as of
July 31, 2008, based upon the criteria in a framework developed by the Committee
of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, documentation of controls, evaluation of the
design effectiveness of controls, walkthroughs of operating effectiveness of
controls and a conclusion on this evaluation.
Based
upon this assessment and evaluation of our internal control over financial
reporting, we concluded there was a material weakness in our internal controls
over financial reporting related to the timely filing of reports with the S.E.C.
and the disclosure required by Item 8A(T). Accordingly, our controls
are ineffective based on the above said criteria and guidance.
This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this Annual
Report.
Changes in Internal Control
Over Financial Reporting.
There
were no changes in our internal control over financial reporting (as defined in
Rules 240.13(a)-15(f) and 15d-15(f) during the fourth quarter ended July 31,
2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Subsequent
to July 31, 2008, changes were made in our internal control over financial
reporting, which changes are disclosed in “Management’s Report on Internal
Control over Financial Reporting” above.
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
which will be contained in the Company's Definitive Proxy Statement for the 2008
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 which
will be contained in the Company's Definitive Proxy Statement for the 2008
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 which
will be contained in the Company's Definitive Proxy Statement for the 2008
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 which
will be contained in the Company's Definitive Proxy Statement for the 2008
Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders
Thereof," "Executive Compensation" and "Certain Transactions."
ITEM
13: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The
following exhibits are incorporated herein by reference to the
Registrant's Form 10-SB, File No. 0-25024
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Exhibit
Number
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Title
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3.
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Articles
of Incorporation and By-laws.
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(i)
Articles of Incorporation:
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Articles
of Incorporation dated July 14, 1954.
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Articles
of Amendment to Articles of Incorporation
dated
October 2, 1986.
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(ii)
By-laws currently in effect.
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10.
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Material
Contracts.
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10.1
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Consulting
Agreement dated September 15, 1992, Titan and Ronald E.
Allred.
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10.2
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Purchase
and Nonexclusive Licensing Agreement dated June 9, 1993, between Titan and
Geotechnologies Corporation and Dong Kook Steel Material Company,
Ltd.
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10.3
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Technical
License Agreement dated July 23, 1993, between Titan and Hannam Co.,
Ltd.
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10.4
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Technical
License Agreement dated July 23, 1993, between Titan and Dong Kook Steel
Material Co., Ltd.
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10.5
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Purchase
and Nonexclusive Licensing Agreement dated July 21,1994, between Titan and
Geotechnologies Corp.
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10.6
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Purchase
and Nonexclusive Licensing Agreement dated July 21, 1994, between Titan
and Geotechnologies Corp. and Southeast Environmental Tire Recycling
Corporation.
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The
following exhibit is incorporated herein by reference to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended July 31,
1995.
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10.7
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Option
agreement between the Registrant and Joseph Henry dated September
19,1995.
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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:
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10.8
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License
Agreement as amended dated February 16, 1996, with Environmental Solutions
Agency, Inc., relating to Europe, South Africa and North and South
America.
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10.9
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Marketing
and License Agreement dated March 19, 1996, with Dowan Company, Ltd.,
relating to Asia.
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10.10
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Agreement
dated April 25, 1996, with Skoda Klatovy S.P.D., relating to the
construction of a TRTM recycling plant in Austria.
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10.11
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Addendum
to Skoda Klatovy S.P.D Agreement dated April 25, 1996.
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10.12
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Irrevocable
Option Agreement with Abtech Industries, LLC, dated June 10,
1996.
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10.13
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Option
Agreement between Titan, Adherent Technologies and Fiberite, Inc. dated
September 4, 1996.
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10.14
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Promissory
Note dated September 24, 1996.
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The
following exhibits are incorporated by reference to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended July 31,
2000:
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10.15
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Consulting
Agreement between the Registrant and Adherent Technology and Ronald Allred
dated December 1, 1999.
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The
following exhibits are incorporated by reference to the Registrant's
Quarterly Report on Form 10-QSB for the Quarter ended January 31,
2003:
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10.16
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Agreement
with United States Recycling, LLC dated February 20,
2003
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10.17
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License
Agreement with United States Recycling, LLC dated February 20,
2003
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The
following exhibit is incorporated by reference to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended April 30,
2003:
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10.18
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Letter
Agreement dated June 4, 2003 amending Agreement and License Agreement with
United States Recycling, LLC dated February 20, 2003.
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10.19
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License
Agreement with Jose Louis Edmundo Perera Tornero d/b/a International Tire
Recycling dated April 2, 2004.
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10.20
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Letter
Agreement dated October 29, 2004 amending the License Agreement with Jose
Louis Edmundo Perera Tornero d/b/a International Tire Recycling dated
April, 2, 2004.
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The
following exhibit is incorporated by reference to the Registrant's Current
Report on Form 8-K dated May 23, 2005:
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10.21
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License
Agreement with James Samis, Randall Gideon, and Pat Teagarden dated May
17, 2005.
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The
following exhibit is incorporated by reference to the Registrant's Current
Report on Form 8-K dated February 13, 2006:
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10.22
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License
Agreement dated February 1, 2006 for three plants in Mexico between the
Company and PPT Holding, Ltd.
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The
following exhibit is incorporated by reference to the Registrant's Current
Report on Form 8-K dated August 23, 2006:
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10.23
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License
Agreement dated August 23, for the states of Texas, Louisiana, Mississippi
and Oklahoma between the Company and Ally Investments, LLP, a Texas
limited liability partnership.
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| The following
exhibits are incorporated by reference to Registrant's Current Report on
Form 8-K dated December 21, 2007: |
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| 10.24 |
Second Amendment to License
Agreement between the Registrant and Ally Investments, LLC dated December
12, 2007. |
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| 10.25 |
Memorandum of Understanding –
Scrap Electronics between the Registrant and Ally Investments, LLC dated
December 12, 2007 |
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21.
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Subsidiaries
of the Small Business Issuer.
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The
Company has no subsidiaries
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The
following exhibits are incorporated herein:
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31.
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Certification
of CEO pursuant to Securities Exchange Act Rules 13a-15(f) and 15d-15(f)
as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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32.
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Certification
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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