UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: October 31, 2010
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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¨
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____________ to ______________
Commission file number: 000-25289
Page 1
TITAN TRADING ANALYTICS INC.
(Exact name of Registrant as specified in its charter)
Alberta, Canada
(Jurisdiction of incorporation or organization)
Unit 120, 4445 Calgary Trail, Edmonton, Alberta, Canada T6H 5R7
(Address of principal executive offices)
Kenneth Powell, (780) 438-1239, kpowell@titantrading.com,
Unit 120, 4445 Calgary Trail, Edmonton, Alberta, Canada, T6H 5R7
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person )
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
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Name of each exchange on
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which registered
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N/A
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N/A
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Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
The number of common shares outstanding as of October 31, 2010: 83,019,028.
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 if the Securities Act. Yes ¨ No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer ¨ Accelerated Filer ¨ Non-accelerated filer x
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ¨
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International Financial Reporting Standards as issued by the International Accounting Standards Board ¨
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Other x
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Page 2
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 x Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
Titan Trading Analytics Inc.
Form 20-F/A Annual Report
Table of Contents
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PART I
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6 |
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ITEM 1:
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
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6
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ITEM 2:
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OFFER STATISTICS AND EXPECTED TIMETABLE
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6
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ITEM 3:
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KEY INFORMATION
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6
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A.
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Selected Financial Data
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6
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B.
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Capitalization and Indebtedness
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7
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C.
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Reasons for the Offer and Use of Proceeds
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7
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D.
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Risk Factors
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7
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ITEM 4:
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INFORMATION ON THE COMPANY
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11
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A.
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History and Development of the Company
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11
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B.
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Business Overview
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12
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C.
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Organizational Structure
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19
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D.
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Property, Plants and Equipment
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19
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ITEM 4A:
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UNRESOLVED STAFF COMMENTS
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19
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ITEM 5:
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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19
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A.
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Operating Results
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20
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B.
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Liquidity and Capital Resources
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20
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C.
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Research and Development, Patents and Licenses, etc.
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22
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D.
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Trend Information
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22
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E.
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Off-balance Sheet Arrangements
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22
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F.
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Tabular Disclosure of Contractual Obligations
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22
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ITEM 6:
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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
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22
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A.
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Directors and Senior Management
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23
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B.
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Compensation
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25
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C.
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Board Practices
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27
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D.
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Employees
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30
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E.
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Share Ownership
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31
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ITEM 7:
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MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
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33
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A.
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Major Shareholders
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33
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B.
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Related Party Transactions
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36
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C.
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Interests of Experts and Counsel
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37
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ITEM 8:
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FINANCIAL INFORMATION
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37
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A.
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Consolidated Statements and Other Financial Information
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37
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B.
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Significant Changes
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38
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ITEM 9:
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THE OFFER AND LISTING
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38
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A.
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Offer and Listing Details
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38
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Page 3
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B.
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Plan of Distribution
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39
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C.
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Markets
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39
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D.
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Selling Shareholders
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39
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E.
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Dilution
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40
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F.
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Expenses of the Issue
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40
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ITEM 10:
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ADDITIONAL INFORMATION
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40
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A.
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Share Capital
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40
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B.
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Articles of Incorporation
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40
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C.
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Material Contracts
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41
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D.
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Exchange Controls
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41
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E.
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Taxation
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41
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F.
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Dividends and Paying Agents
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50
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G.
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Statement by Expert
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50
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H.
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Documents on Display
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50
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I.
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Subsidiary Information
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50
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ITEM 11:
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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50
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ITEM 12:
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DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES
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51
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PART II
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51 |
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ITEM 13:
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DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
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51
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ITEM 14:
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
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51
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ITEM 15:
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CONTROLS AND PROCEDURES
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51
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A.
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Disclosure Controls and Procedures
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51
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B.
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Management/Annual Report on Internal Controls over Financial Reporting
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51
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C.
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Attestation Report of the Registered Public Accounting Firm
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52
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D.
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Changes in Internal Control Over Financial Reporting
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52
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ITEM 16A:
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AUDIT COMMITTEE FINANCIAL EXPERT
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52
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ITEM 16B:
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CODE OF ETHICS
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52
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ITEM 16C:
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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52
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ITEM 16D:
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EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
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53
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ITEM 16E:
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PURCHASES OF EQUITY SECURITIES BY AFFILIATED PURCHASERS
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53
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PART III
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54 |
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ITEM 17:
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FINANCIAL STATEMENTS
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54
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ITEM 18:
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FINANCIAL STATEMENTS
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1
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ITEM 19:
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EXHIBITS
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1
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EXPLANATORY NOTE
This Annual Report on Form 20-F/A (“Amended Form 20-F”) is being filed as Amendment No. 1 to our Annual Report on Form 20-F for the year ended October 31, 2010, which was filed with the Securities and Exchange Commission on April 29, 2011 (the “Original Filing”). This Amended Form 20-F amends the Original Filing to include the audit report for the consolidated financial statements as of October 31, 2009 (amended Item 17). We have not modified or updated any other disclosures presented in our Original Filing.
NOTE REGARDING FORWARD–LOOKING STATEMENTS
Certain statements in this document constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans,
Page 4
projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Such statements are included, among other places, in this document under the headings “Business Overview”, “Operating and Financial Review and Prospects” and “Trend Information”. Forward-looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. These include, but are not limited to, our history of losses and likelihood of continued losses, our need for additional financing, our desire to acquire certain rights and interests to our software, the potential effect and impact of certain United States and Canadian securities laws on our business activities, the control certain shareholders exercise over us, competition, the market acceptance of our software, our ability to develop and release new software products and services, our dependence upon key personnel, our lack of an experienced sales staff or marketing personnel, the nature of our business, the volatility of the price for our common shares, potential product liability claims, our need for improved intellectual property protection, our common shares being deemed a “penny stock” under United States securities laws, and the potential inability for United States investors to enforce United States judgments against us or our officers or directors and the effect of our PFIC (as defined below) status on our United States shareholders. Additional information concerning these and other factors that could affect our operations or financial results are included in this document under “Item 3.D. – Risk Factors”. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance and achievements or other future events. We are under no duty to update any of our forward-looking statements after the date of this report. You should not place undue reliance on such forward-looking statements.
CURRENCY AND EXCHANGE RATES
The following table sets out the exchange rates, based on the noon buying rates in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York, for the conversion of Canadian dollars into United States dollars in effect at the end of the following periods, and the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods) and the range of high and low exchange rates for such periods.
U.S. Dollars Per Canadian Dollar
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Year Ended October 31
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||||||||
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2010
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2009
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2008
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2007
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2006
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2005
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2004
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2003
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Average for Period
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0.9635
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0.860
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0.9690
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0.9811
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0.8831
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0.8213
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0.7634
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0.6880
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The following table sets out the high and low exchange rates for one CDN $ expressed in terms of one US$ in effect at the end of the following periods.
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October
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November
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December
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January
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February
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March
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2010
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2010
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2010
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2011
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2011
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2011
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High for the Month
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0.969
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.9743
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.9825
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.9978
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1.0045
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1.0083
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Low for the Month
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0.997
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.9987
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1.0054
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1.014
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1.0268
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1.0324
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At December 31, 2008 the Federal Reserve Bank of New York ceased publishing foreign exchange quotations. As of January 1, 2009 the Company began using the closing rate for foreign exchange published by the Bank of Canada. As of April 28, 2011, the Closing exchange rate of Canadian dollars into United States dollars published by the Bank of Canada was US 1.034 (US$1.00 = CDN$.9696).
Page 5
In this Form 20-F, unless otherwise specified, all monetary amounts are expressed in Canadian dollars.
References to “Titan”, the “Company”, “we” and “us” are references to Titan Trading Analytics Inc.
PART I
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3: KEY INFORMATION
A. Selected Financial Data
The following tables set forth our financial data for our fiscal years ended October 31, 2010 through to 2006. We derived all figures from our financial statements, which were audited by our independent auditors. This information should be read in conjunction with our financial statements included in this annual report.
Our financial statements included in this annual report and in the table set forth below have been prepared in accordance with generally accepted accounting principles in Canada, which may differ from United States generally accepted accounting principles. A reconciliation to United States generally accepted accounting principles is included in Note 17 to our audited financial statements.
| FISCAL YEAR ENDED: | |||||
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OCT 31, 2010
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OCT 31, 2009
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OCT 31, 2008
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OCT 31, 2007
(Restated)
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OCT 31, 2006
(Restated)
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REVENUE
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-
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-
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-
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-
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-
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EXPENSES
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$2,977,117
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$3,529,427
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$3,081,814
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$2,587,613
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$1,716,500
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INTEREST/OTHER INCOME
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$ ---
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$678
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$5,829
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$7,975
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-
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NET LOSS FOR YEAR
CDN GAAP
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$2,977,117
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$3,528,749
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$3,075,985
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$2,579,638
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$1,716,500
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NET LOSS FOR YEAR
US GAAP
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$2,977,117
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$3,528,749
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$3,075,985
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$2,579,638
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$$1,716,500
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NET LOSS PER SHARE
CDN GAAP
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($0.05)
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($0.07)
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($0.07)
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($0.07)
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($0.06)
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Page 6
| FISCAL YEAR ENDED: |
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NET LOSS PER SHARE, BASIC AND DILUTED,
US GAAP
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($0.05)
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($0.07)
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($0.07)
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($0.07)
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($0.06)
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NET WORKING CAPITAL
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127,469
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($241,862)
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($199,946)
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($434,823)
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($104,593)
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TOTAL ASSETS
CDN GAAP
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$1,165,093
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$869,397
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$1,528,919
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$431,402
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$455,704
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TOTAL ASSETS
US GAAP
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$1,367,093
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$869,397
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$1,528,919
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$431,402
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$455,704
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NET ASSETS
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$614,928
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$291,896
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$839,586
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($252,053)
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($42,158)
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CAPITAL STOCK
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$15,845,770
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$13,591,954
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$11,707,655
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$8,795,045
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$6,717,678
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SHARES OUTSTANDING
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83,019,028
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58,317,878
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49,214,345
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37,813,699
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30,814,497
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LONG-TERM OBLIGATIONS
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360,003
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NIL
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NIL
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NIL
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NIL
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We have not, since our incorporation, paid any dividends on any of our shares and presently have no intention of paying dividends. The future dividend policy will be determined by the Board of Directors on the basis of earnings, financial requirements and other relevant factors.
B. Capitalization and Indebtedness
On August 27, 2010, the Company issued $294,000 in convertible debentures. The debentures will mature on August 26, 2012 and bear interest of 12% per annum. The maturity date can be reduced to August 26, 2011at the option of the holder. The debentures will be convertible into units at a deemed price of $0.15 per unit on or before the maturity date. Each unit consists of one common share and one share purchase warrant that is exercisable at a price of $0.30 for up to six months from the date of conversion. The debentures have an early conversion right whereby if the average trading price per share is greater than or equal to $0.40 for a period of 20 consecutive trading days, the Company shall have the right to convert the debentures at the conversion price at any time prior to the maturity date. The debentures have been bifurcated into the debt and equity components as follows:
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2010
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2009
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Face value of convertible debentures
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$ 294,000
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$ ---
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Portion of convertible debentures allocated to equity
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(11,564)
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---
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||||||
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282,436
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---
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Interest expense
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1,073
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---
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$ 283,509
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$ ---
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Page 7
CAPITALIZATION AND INDEBTEDNESS
Titan’s capitalization as of October 31, 2010, consisted of $614,928 in equity and $283,509 in long-term debt. Titan believes that the capitalization as of October 31, 2010 represents an adequate capital structure.
The table below shows a statement of capitalization and indebtedness as of October 31, 2010.
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(a)
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|||||||
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(b) Capitalization as at October 31, 2010
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Total Current Debt
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2,111 | ||||||
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Unsecured loans and advances
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2,111 | ||||||
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Total Non-Current Debt
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283,509 | ||||||
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Convertible debentures
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283,509 | ||||||
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Shareholders’ Equity
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614,928 | ||||||
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Share Capital
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15,845,770 | ||||||
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Warrants
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1,901,217 | ||||||
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Contributed Surplus
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2,899,907 | ||||||
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Convertible debentures – equity component
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11,564 | ||||||
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Deficit
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(20,043,530 | ) | |||||
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Total capitalization (A+B+C)
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900,548 | ||||||
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Indebtedness as at October 31, 2010
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|||||||
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Liquidity
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269,736 | ||||||
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Cash at bank and hand
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209,736 | ||||||
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Short-term investment
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60,000 | ||||||
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Current other receivables
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10,088 | ||||||
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Other accounts receivable
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10,088 | ||||||
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Current financial debt
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(190,082 | ) | |||||
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Current trade and other payables
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(187,971 | ) | |||||
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Unsecured loans and advances
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(2,111 | ) | |||||
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Net current financial indebtedness (A+B-C)
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89,742 | ||||||
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Non-current financial indebtedness
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(283,509 | ) | |||||
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Convertible debentures
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(283,509 | ) | |||||
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Net financial indebtedness (A+B-C-E)
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(193,767 | ) | |||||
Page 8
C. Reasons for the Offer and Use of Proceeds
The Company raised additional funds through the offering of a convertible debenture in 2010. The net proceeds from the debentures was to enhance marketing and training programs, software development and for working capital.
D. Risk Factors
The risk factors set forth below are believed to be important in that they may have a material impact upon our future financial performance and could cause actual results to differ materially from those expressed in any forward-looking statement we make. Note that unknown factors, not discussed in this annual report, could also have a material adverse effect on our actual financial and other results. The factors below should be considered in connection with any financial and forward-looking information in this Form 20-F and the cautionary note regarding forward-looking statements contained on pages 4 and 5.
The unprecedented financial events of late 2008 and the resulting global recession continue to have, a significant impact on the business climate in general. The risks below are not the only ones that the Company faces. Some risks are not yet known to the Company and some that the Company does not currently believe to be material could later turn out to be material. All of these risks could materially affect the Company’s business, revenue, operating profit, earnings, net assets and liquidity and/or capital resources.
We have had a history of losses and there is a likelihood of continuing operating losses.
We were incorporated on November 30, 1993, commenced operations in May 1994 and have yet to establish profitable business operations. To date, we have been largely engaged in product research and development and establishing a marketing strategy. Our accumulated deficit through October 31, 2010 is $20,043,530. Our initial products and planned services are just beginning to become available for market release and sale. We thus have a limited operating history and are expected to continue to incur losses and negative cash flow in the immediate future as these new products and services are completed and marketed. Our ability to succeed depends upon us achieving positive cash flow, failing which we will have to seek additional financing, and there can be no assurance that any additional financing will be available on acceptable terms, or at all.
We will need additional financing to fund our operations in the future.
As at October 31, 2010, we had $209,736 cash and receivables totaling $10,088.
We will need additional financing to fund our operations in the future. There can be no assurance that we will be successful in raising additional funds or that additional financing, if any, can be obtained on terms acceptable to us. Such financing, to the extent that it is available may result in substantial dilution to our shareholders. To the extent such financing is not available, we may not be able to, or may be delayed in, continuing to commercialize our software products and services, and we may have to curtail our operations.
Page 9
Certain of our software will be used in United States and Canadian financial markets and may result in increased regulation of our business activities.
The manner in which we market, sell and derive revenues from our automated trade selection and order entry software may result in certain United States securities laws regulating our activities, namely the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, and federal and state broker-dealer laws. If we decide to engage in business activities that are regulated by any of such laws, our legal and other compliance costs associated with operating our business will likely increase significantly.
Certain of our officers, directors and entities affiliated with us together beneficially owned a significant portion of our outstanding common shares as of April 28, 2011. These shareholders are able to exercise significant influence over matters requiring shareholder approval, including the election of directors and the approval of mergers, consolidations and sales of our assets. This fact may prevent or discourage tender offers for our common shares.
We are in later stage of development however, there is no assurance of market acceptance of our software.
Our revenue model is to exploit automated trade selection and order entry software, as follows:
· by establishing a profitable trading operation; and/or
· by licensing software and providing support services to third parties.
We are currently exploring several opportunities; however, there can be no assurance we will be successful in our efforts.
Our products and services face significant competition in the marketplace.
A number of our competitors have substantially greater financial, technical and marketing resources. In addition, the market for our software products continues to develop, and additional competitors with substantially greater financial, technical and marketing resources may enter the market and competition may intensify. Current or future competitors may develop software products that are superior to our software products or achieve greater market acceptance.
We will depend on the timely development and release of new software products and services.
The achievement of our business objectives and our future operating results is dependent upon completion and execution of our marketing strategies and on the continued development and successful deployment of our trading software products and services. Timing in this regard is crucial, as other similar services that reach the market prior to ours may capture a significant portion of market share. There can be no assurance that the timing of our business plan will allow us to achieve profitability in our operations.
We Operate in a highly competitive market
The financial services market is intensely competitive and characterized by the existence of larger established trading and trading software companies along with the frequent entry of new competitors and introductions of new software programs, features and technical innovations. Numerous competitors are already established in this marketplace. Many of these companies may have greater resources, and recognition than us. In addition, there can be no assurance that we will be successful in our efforts, or, if successful, that we will have the resources to sustain any early growth or market penetration we may achieve.
Page 10
In addition, the market for online trading of stocks and related services accessible to personal computer users is changing rapidly. The applications growth and emergence of the Internet as a low-cost source of worldwide financial market data, subscriptions, trade execution and research services, has already threatened the existence of established data and information vendors, as well as full-service brokers. This creates technical, competitive and business trends, the outcomes of which are uncertain and which may adversely affect our business.
We depend on key personnel.
We depend on key personnel whose loss of service would have an adverse effect. We depend on our Chief Technology Officer, Mr. Gossland, and our President, and CEO of Titan Trading Analytics Inc, John Coulter, for the success of our intended business plan. We currently have a formal employment agreement with Mr. Coulter and are currently working on renewing and revising the expired employment agreement for Mr. Gossland and Mr. Carrozza. The loss of their services would have a materially adverse effect upon our future operating profits and prospects.
We intend to develop a securities trading business that may result in us incurring significant trading losses.
In the future, we plan to establish proprietary in-house trading activities, most likely through a subsidiary company or partnership arrangement. Such trading activity will involve a risk that we incur trading losses. Investors, partners and subscribers must expect trading losses in actual trading operations and potentially wide fluctuations in monthly trading performance. This presents an ongoing legal and financial risk, notwithstanding the protection we are afforded by the careful use of industry standard legal disclaimers.
Our intellectual property may not be appropriately protected and we may be infringing upon the proprietary rights of third parties.
We depend on our ability to protect the core proprietary software technologies we have developed. In this regard, we rely on a combination of trade secrets, technical complexity, common law copyright and trademark protection, licensing agreements, password protection and software encryption schemes, as well as on the physical security of our source code. Despite these measures and precautions, it may be possible for an unauthorized third-party to copy our core technologies and either offer them to the marketplace as its own, or to use them without paying. To date, we have not sought to obtain copyright registration or patent protection for any of our software products, though we may do so in the future. There can be no assurance, however, that such registration will be granted if applied for. Also, certain aspects of our software products are not subject to intellectual property protection in law, and to the extent such protection might be available, practical and legal distinctions may apply in different jurisdictions. In addition, there can be no assurance that competitors will not develop similar technology, products and services, and if they do, this could reduce the value of our proprietary technology and our ability to effectively compete.
Although we believe that we have the right to use all of the intellectual property incorporated in our software products, third parties may claim that our software products violate their proprietary rights, including copyrights and patents. The cost of litigation necessary to defend our right to use the intellectual property incorporated in our software products may be prohibitive. If any such claims are made and found to be valid or we determine it prudent to settle any such claims, we may have to re-engineer our software products or obtain licenses from third parties to continue offering our software products or in whole or in part cease using such technology. Any efforts to re-engineer our software products or obtain licenses from third parties or cease using such technology may not be successful and could substantially increase our costs and have a material adverse effect on our business, financial condition and results of operations.
As a developing company, the market price of our shares may be volatile.
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Factors such as news announcements on our financial position, financial results and business developments, technical developments and innovations, competitors or third parties, industry developments in high-technology companies in general or securities trading software companies and securities trading platforms more particularly, on general stock market conditions, changes in interest rates or general economic conditions, unexpected and extreme general stock market price and volume fluctuations, or a lack of share volume liquidity, may individually or collectively have the effect of causing substantial fluctuations in the traded price of our common shares. Changes in the trading price of our shares may be unrelated to our performance or future prospects. In addition, investors in our shares may lose their entire investment if we incur large trading losses or if we fail in our business.
During the 2010 fiscal year, the closing price of our common shares as traded on the TSX Venture Exchange ranged from $0.10 to $0.35.
Our stock is ‘thinly-traded’ meaning that the number of persons interested in purchasing our common stock at or near ask prices may be relatively small.
Titan common stock is “thinly-traded” on the Over-the-Counter Bulletin Board, meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that Titan is a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if Titan came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven development stage company such as Titan or purchase or recommend the purchase of Titan’s shares until such time as it became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent. We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give no assurance that holders of our common shares will be able to sell their shares at or near ask prices or at all if they desire to liquidate their shares.
We may be subject to product liability claims.
We do not maintain product liability insurance against defects in the general performance of our software products. There can be no assurance that we will not be exposed to potential product liability claims in all markets in which we may sell or license our products or offer our services.
Our stock may be deemed a penny stock and additional disclosure requirements may be imposed when trading our common shares.
Since the trading price of our common shares is less than US$5.00 per share, trading in our common shares are subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a “penny stock”. A broker-dealer is required to deliver to a customer information regarding the risks of investing in penny stocks, its offer and bid prices for the penny stock and the amount of compensation received by the broker-dealer with respect to such transaction. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our common shares, which could reduce the liquidity of our common shares and thereby have a material adverse effect on the trading market for our securities.
A third-party may be unable to enforce U.S. judgments against us or our officers and directors.
We are incorporated under the laws of Alberta, Canada and, all of our directors and officers, with the exception of Messrs. Coulter, Terk and Carrozza, are residents of Canada. Consequently, it may be difficult for United States investors to effect service of process within the United States upon us or upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the Exchange Act. A judgment of a U.S. court predicated solely upon such civil liabilities may be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or us predicated solely upon such civil liabilities.
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Our U.S. shareholders may face adverse tax consequences resulting from our PFIC status.
We believe that we qualify as a passive foreign investment company (“PFIC”) for the fiscal year ended October 31, 2010 and may qualify as a PFIC in the future with respect to our U.S. shareholders because our only source of income is interest, a passive source of income under the PFIC rules.
See “Item 10.E. Taxation - United States Federal Income Tax Consequences” for a more detailed discussion of material United States federal income tax consequences for U.S. shareholders.
ITEM 4: INFORMATION ON THE COMPANY
A. History and Development of the Company
We were incorporated and validly exist as a corporation under a former Companies Act, as that term is defined in the Business Corporations Act (British Columbia), on November 30, 1993 under the name “KBK No. 24 Ventures Ltd.” We changed our name to “Titan Trading Analytics Inc.” by filing of an amendment to our Articles of Incorporation on November 14, 1994. The company began trading publicly on July 24, 1996. We continued the Company under the Business Corporations Act (Alberta) on April 26, 2005. Our registered and records office is located at Unit 120, 4445 Calgary Trail, Edmonton, Alberta T6H 5R7. Our telephone number is 780-438-1239.
On November 23, 1994, we incorporated Titan Trading Corp., a wholly owned subsidiary, under a former Companies Act, as that term is defined in the Business Corporations Act (British Columbia), as a wholly owned subsidiary. Titan Trading Corp. was continued under the Business Corporations Act (Alberta) on August 22, 2006. This subsidiary was originally incorporated with a view to eventually forming a separate trading business, but to date has conducted no business. It has no income, expenses, assets or liabilities and is presently an inactive subsidiary.
We have an additional wholly owned subsidiary, Titan Trading GP Inc. (“Titan GP”), a corporation established under the laws of Alberta, which is the general partner for Titan Trading Limited Partnership 2 (“TTLP2”) a limited partnership formed on January 18, 2006 under the laws of Alberta. TTLP2 was created to raise financing by offering limited partnership interests. Titan GP will receive a management fee and a share in the distributions and the carried interest with the limited partners. The purpose of TTLP2 is to raise financing and then trade the funds using our Titan TickAnalyst software (“TickAnalyst”) and the N1 Expert System software. This activity is not being pursued by the Company at the present time. Any and all trading operations are being conducted by its wholly owned subsidiary, Titan Trading USA, LLC.
Titan GP was also the general partner for Titan Trading Limited Partnership 1 (“TTLP1”), a limited partnership formed on February 14, 2005 under the laws of Alberta. TTLP1 was created to raise financing by offering limited partnership interests and after its two year term, was dissolved in 2007 and the principal investment plus interest was returned to the respective investors.
Further, we have two U.S. based wholly owned subsidiaries, Titan Trading USA, LLC (“Titan USA”), which is a Delaware limited liability company qualified to do business in New York and Florida and Titan Holdings USA, LLC (“Titan Holdings”), which is a Florida limited liability company. The purpose of Titan USA is raise financing from US subscribers and then trade the funds using the TickAnalyst software.
We have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets.
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Our principal capital expenditures and divestitures during the last three financial years are as follows:
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2010
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2009
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2008
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|
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Purchase (sale) of
property and equipment
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$ ---
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$47,179
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$731,147
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Purchase of Technology Rights
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$398,000
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$ ---
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$ ---
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Other than as set out below, there are no principal capital expenditures currently in progress or anticipated.
In 2008, the Company moved to a new home office in Edmonton, Alberta. The 4,500 square foot data center supports the Company’s market roll-out and redundancy operations, and our server room is housed in a secured 300 foot former bank vault. The server room itself is equipped with rack-mounted multi-core servers, a backup air-conditioning system, an inert-gas fire suppression system, and a 100kw diesel-powered electrical backup system.
There are no divestitures currently in progress.
There has been no indication of any public takeover offers by third parties in respect of our common shares or by us in respect of other companies’ shares during the last or in the current financial year.
B. Business Overview
Our company name became “Titan Trading Analytics Inc.” when we filed an amendment to our Articles of Incorporation on November 14, 1994. Our registered and records office is located at Unit 120, 4445 Calgary Trail, Edmonton Alberta, T6H 5R7.The telephone number of that office is 780-438-1239.
The Company is a reporting issuer in Canada and trades in Canada on the TSX Venture Exchange under the symbol “TTA”. The Company is subject to the reporting requirements of the Exchange Act, and is quoted on the Over-the-Counter Bulletin Board under the symbol “TITAF”.
The Company is a financial software developer that has developed proprietary market timing, trading analytics and automated trading execution software called Titan TickAnalyst (“TickAnalyst”). TickAnalyst, when assembled with other third party components, forms a complete automated trading system capable of transforming real-time market data into executed trading orders. TickAnalyst is now beginning to establish a real-world track record to demonstrate its potential as a revenue source.
The Company continues to expend all of its efforts developing the TickAnalyst software and the operational infrastructure required for full-time commercial use. The Company has yet to establish profitable business operations and has remained in research and development mode since its incorporation.
Beginning in 1994 and continuing through 1995, Titan was generally focused on the development of initial software products and therefore conducted few trading or trade-testing activities. From 1996 through to 2002, Titan developed and introduced several software trading products including: (a) NeuralEdge – a neural network based trading system for S&P futures contracts, (b) currency trading signals via fax, (c) VirtualTrader, a discretionary training and testing software application, (d) the “Big Board” trading model, a proprietary setup of indicators and trading screens for discretionary trading, (e) Titan Market Commentary, a web-based stock commentary subscription service, and (f) Titan Market Watch, a web-based stock trading presentation package.
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At the end of 2002, the company underwent a change of senior management and development plans. The aforementioned products were put on hold and the company began development of new products.
In June 2003, Titan acquired rights to certain automated trading and analytic software, which it then called the Titan Order Processing Software (“TOPS”), from Cignal Technologies, LLC (“Cignal”) and it has continued to develop an automated trading platform based on TOPS. Cignal is owned by Mr. Philip Carrozza, Titan’s US Director of Trading Operations. The Company has not had any significant revenues in the last 7 fiscal years, ending with 2010.
Principal Products, Services and Markets
The Company has focused its attention on development of complex event processing software trading technology over the last several years. Starting from its earlier TOPS technology, the company created a proprietary Complex Events Processing (CEP) engine. This wholly owned technology provides an end-to-end solution, from market data coming in, to the generation of trading signals. The first version of this software was based on a client-server model using two communications applications, called TopView and TopViewClient, to transmit the trading signals. This suite of applications includes the Trade Recommendation Engine, TopView, TopViewClient, and Titan’s Order Management Software (“TOMS”). This first collection of applications is now known as the TopView suite.
The target market for the business is institutional, high net worth individual investors and trading firms seeking a better than average return on investment and trading returns in their portfolios. The immediate market is primarily in Canada and the United States. The Company plans to enter into non-exclusive agreements with institutions, trading firms and/or high net-worth individuals to utilize the software for trading and share the profits with those parties, or at a later stage, to license the software as a service directly to such parties under terms. Additionally, we expect to conduct trading operations for our own behalf and/or in joint ventures. Competitors include many other firms that offer trading systems. Titan believes that few of these competitors incorporate a multi-time frame analysis the way Titan does and none would deliver signals generated by the same algorithm.
TopViewSuite is a group of software applications, used for internal trading purposes only:
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1.
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Trade Recommendation Engine (TRE), also known internally as the blackbox, used to generate trading signals.
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2.
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TOMS, Titan’s order management software, used to execute and manage trades.
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3.
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TopView and TopViewClient, used to distribute the real-time and historical trading signals.
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4.
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Several back end data management tools, with internal names to manage data.
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Titan currently trades in a proprietary trading account using the TopView suite of products. The TopView suite is a fully integrated, scalable algorithmic trading system that incorporates a variety of trading models, including trend-following, countertrend and mean reversion models shownto be effective analytical tools in normal, non-trending and highly volatile markets. Built on Titan’s comprehensive market analysis technologies, TopView has the capability to analyze data feeds available from a number of the world’s stock exchanges. With ultra high-speed analysis capabilities, TopView is designed to analyze hundreds of thousands of ticks per second per server and from that analysis generate carefully selected trading signals with a favorable probability of success for each trade.
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These parts, when assembled with other third party components, form a complete automated trading system capable of transforming real-time market data into executed trading orders. The trading system controls the trading decisions while monitoring the data arriving from the real-time data feed and looks for the pre-defined patterns of movement in price, volume, and time. When a particular pattern is found, a trading signal is generated.
The automatic order execution software is responsible for processing the trading signals and turning them into online trading orders. The orders are sent over the internet to the RediPlus trade execution engines. Several other trade execution engines (RealTick, FIX, ODL, ChoiceFX) are supported but are not used at Titan at present. The software can operate in simulation mode, where no orders are actually placed; in semi-automatic mode, where orders require a manual confirmation step, or in fully automatic mode, orders are executed with little operator intervention.
Titan has access to a $5 million proprietary trading account through a partnership with Compo Investments though a combination of manual, “GreyBox” discretionary trading and automated “BlackBox” computer based trading, as discussed below.
GreyBox Trading
GreyBox trading refers to a style of trading where electronic trading signals are delivered to the trader, and the trader applies judgment before manually allowing the signals to be executed as trades. Thus, GreyBox mode allows the power of automation to be controlled by human discretion. It is a useful mode for operation while the software is being refined to make it perform with the expertise of a human trader.
The concept behind Titan’s GreyBox trading mode has four elements:
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1.
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present the trader with high quality technical based trading opportunities;
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2.
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allow the GreyBox trader to have complete control over which trades are executed;
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3.
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automate the order entry and exit process; and
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4.
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manage risk on dozens of open positions with automation.
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In each case, the benefit to the trader of our GreyBox mode trading software is to allow that trader to execute a greater number of trades with a greater probability of achieving a profit than without the software. The combination of all four features can dramatically increase the number of trades that even an experienced trader can execute.
BlackBox Trading
BlackBox trading refers to a style of trading where electronic trading signals are delivered to the trader, and the signals are immediately and automatically executed as trades. Thus, BlackBox mode allows the power of automation to be applied with no human discretion. Titan’s goal is to conduct all of its trading operations in BlackBox mode. Achieving BlackBox mode requires a great deal of refinement in the trading systems’ rules and settings so the software can perform with the judgment of a human trader.
The concept behind Titan’s BlackBox trading mode has three elements
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1.
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generate high quality technical based trading opportunities;
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2.
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automate the order entry and exit process; and
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3.
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manage risk on dozens of open positions with automation.
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In each case, the benefit of BlackBox mode trading software mode is to allow the system to execute a large number of trades with no decision-making required on the part of the operator.
Titan External Trading Tools for other institutional and retail traders
In September, 2010, Titan migrated the “best of breed” of its TopView products to a hosted web based delivery mechanism known as TickAnalyst. Titan retained the Trade Recommendation Engine at the heart of the system and replaced the TopView-TopViewClient communications components with a browser-based client solution. It also replaced the TOM order execution software with a broker-neutral FIX engine.The TickAnalyst platform combines tightly integrated proprietary components, including the Trade Recommendation Engine (a CEP engine), a largescale tick database, a direct market access (DMA) system, and FIX integration.
The signals are now delivered quickly and easily to any trader’s desktop via a browser‐based application that is complementary to any institutional trading system.Titan manages and hosts the technology infrastructure at a neutral co‐location data center. Trade signals received in Titan’s TickAnalyst application can be electronically traded by any FIX‐based EMS or OMS. The trade signals can also be integrated into most third party charting packages.
TickAnalyst incorporates over a dozen trading models that have been shown to be effective analytical tools in all market conditions, including counter‐trend and mean reversion models for volatile sideways markets and trending models for directional trending markets.
The software is a product of years of research and development and incorporates Titan’s suite of proprietary mathematical pattern recognition algorithms that factor in human emotional elements. The software continues to been trained to recognize complex patterns through tens of thousands of iterations in Titan’s Trade Recommendation Engine™ (TRE). This pattern recognition ability allows the software to generate buy and sell signals on stocks, ETFs, futures and currencies.
Milestones
October, 2010 - The Company announced the availability of its TickAnalyst™ Automated Behavioral Trading software‐as-a‐service offering. “By incorporating behavioral elements into our proprietary models, Titan is addressing arguably the hottest area of the financial industry, which is still recognized as being technologically behind the substantial academia that already supports it,” stated Titan CEO John Coulter. “Inherent in human psychology are feelings of over‐exuberance, extreme pessimism and indifference, and these emotions directly influence the perception of risk. By applying a systematic approach, Titan is attempting to model the human mind’s attitude towards trading by overcoming these deficiencies and enabling orders to be executed in the face of adversity, particularly when known events with a high probability of success converge.”
July, 2010 - The Company established a second data center located in Atlanta, Georgia for its network operations, an important step in Titan's mission to provide a fully-redundant fault-tolerant service to its clients. The new data center operates from a colocation facility that includes physical security, fully redundant power and HVAC, controlled temperature and humidity, fire-threat detection and suppression, 24x7x365 critical monitoring, on-site staff with secure access and SAS 70 certification. Titan will use the new site to conduct its primary real-time trading operations and research. The Edmonton site will continue to provide testing and support services and redundancy will be phased in. Backup hardware to support fault tolerance is being procured.
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Company Personnel
In January 2006, David Terk CPA, B.Sc. was appointed Chief Financial Officer of Titan USA, and the Company entered into a consulting agreement with Tony Robinson to assist Titan USA with foreign exchange trading and risk management.
In April 2006, the Company appointed Eric Davidson, Technical Research Analyst, to lead the research for our GreyBox (semi-automated) Equity Trading Division. Mr. Davidson’s appointment was in preparation for the launch of our proprietary market data analysis platform, TickAnalyst. He is instrumental in the testing, implementation and ongoing operations of our BlackBox (fully automated) Division as TickAnalyst comes online.
In March 2009, the Company announced the addition of Daniel Robinson, as Head of European Trading, to its team. Mr. Robinson has been an investment analyst for Invesdar Global Advisors Ltd., a UK based investment consulting firm with an emphasis on global asset allocation, global hedge fund selection and portfolio construction since 2006. Mr. Robinson has a degree in Business Information Systems from the Nottingham Business School, in the United Kingdom. He also holds the Investment Management Certificate from CFA UK and is working towards level II of the Chartered Alternative Investment Analyst designation. Mr. Robinson will play a key role in the implementation of our internal asset management revenue model on a global scale.
In October 2009, Joseph Francese was elected to the board of directors. Mr. Francese will also serve as a member of Titan’s audit committee. Mr. Francese is Chief Investment Officer (CIO) of PROFORMA Capital Inc. and along with his partners, manages two proprietary high income funds for Institutional and High Net Worth investors. As CIO of PROFORMA, Mr. Francese chairs its investment committee and is responsible for analyzing and monitoring existing and prospective investments, as well as developing investment strategies. Prior to his role as CIO, Mr. Francese came with 15 years of experience working with high net worth investors consulting on over $100 million of investor assets during his advisory career. Mr. Francese serves and advises several local charitable groups and is a Chartered Financial Analyst (CFA) Charterholder.
In August 2010, the Company terminated consulting agreements with 2 consultants working for Titan USA and 1 consultant working for Titan Trading Analytics Inc.
In August 2010, the Company hired Brett Decker as a consultant to oversee Product Management. Mr. Decker previously held IT Management positions with Maverick Capital, one of the world’s largest hedge funds and previously at Carlson Capital, a $2 billion hedge fund in Dallas, Texas.
In September, 2010, the Company hired John J. Coulter, a management consultant with 20 years of experience in the financial trading software industry to provide management with direction and advice on product development and marketing. Mr. Coulter accepted the role of President & CEO in September 2010.
In September 2010 , the Company re-entered into service contract agreements with Mr. Philip Carrozza and Mr. Michael Gossland as well as two other long-term consultants to the Company.
In October 2010, the Company terminated the agreement of 1 consultant working for Titan USA. 1 consultant from Titan Trading Analytics Inc. resigned.
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Marketing and Sales
In conjunction with Mr. Coulter’s hiring, the Company has developed a comprehensive business and marketing plan covering operations to the end of the year and beyond. Under that plan, the Company is currently preparing for a formal product launch in 2011/Q1 and 2011/Q2.
Intellectual Property Rights
As at October 31, 2010, all pre-existing Software Transfer Agreements between the Company and Mssrs Philip Carrozza and Michael Gossland expired and were dissolved.
In September, the Company entered into negotiations with Mr. Philip Carrozza and Mr. Michael Gossland as well as two other long-term consultants to the Company to transfer any and all ownership of Intellectual Property, over which they might have claim, to the Company in exchange for a long term service contract and other consideration. The Company has made arrangements for legal assistance in the handling of these documents and it is expected to be concluded by the end of February 2011.
With the conclusion of these agreements, the Company wholly owns the TickAnalyst technology in its entirety.
Status of New Products or Services
Titan is constantly refining its trading software to maintain its integrity and marketability. As a result, we will be continuing to incur development costs. Subject to available financing, we anticipate spending approximately $750,000 over the next year on our development efforts. No new products, however, other than those described in this annual report, have been announced to the public.
Competition
Our principal competitive advantage lies in the unique multi-timeframe system logic comprising the core of the TickAnalyst Technology. Although similar analysis can be done by a properly trained human trader, once automated, a computer can find a much larger number of signals and execute them more efficiently. Management is not aware of any competitors using the same or similar software logic. A second advantage is that we utilize low cost order execution platforms without high start-up or ongoing monthly operational costs.
The financial services market, however, is intensely competitive and characterized by the frequent entry of new competitors and introductions of new software programs, features and technical innovations. Numerous competitors are already established in this marketplace. There can be no assurance that we will be successful in our efforts, or, if successful, that we will have the resources to sustain any early growth or market penetration we may achieve.
There are large numbers of established financial trading and trading software companies. Many are larger than us, have longer operating histories, more established track records, greater name recognition, a larger installed base of customers, and greater financial, technical, sales, marketing and other resources. Moreover, if we achieve significant success in penetrating the financial software market, financially stronger companies may seek to enter this market and compete for market share.
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The market for online trading of stocks and related services accessible to personal computer users is changing rapidly. The applications growth and emergence of the Internet as a low-cost source of worldwide financial market data, subscriptions, trade execution and research services, has already threatened the existence of established data and information vendors, as well as full-service brokers. This creates technical, competitive and business trends, the outcomes of which are uncertain.
Government Regulation
To date, governmental regulations have not materially restricted the use or expansion of the Internet. However, the legal and regulatory environment that pertains to the Internet is uncertain is changing. Some of the new and existing laws which may affect our operations are in the areas of:
· Sales and other taxes;
· User privacy;
· Pricing controls;
· Characteristics and quality of products and services;
· Consumer protection;
· Cross-border commerce;
· Libel and defamation;
· Copyright, trademark and patent infringement; an
· Other claims based on the nature and content of Internet materials.
These new and existing laws may impact our ability to market our products and services offered on our website in accordance with our business plans.
We may have to qualify to do business in other jurisdictions. If we make sales of our products or services, we anticipate that sales and our customers will be in multiple states and foreign countries. As our customers may reside in such states and foreign countries, such jurisdictions may claim that we are required to qualify to do business in each such state and foreign country. Failure to qualify in a jurisdiction where required to do so could subject us to taxes and penalties.
If we are successful raising funds and begin trading operations with these funds, we may fall under the provisions of the Investment Company Act of 1940 and other United States and Canadian rules and regulations governing investment companies, investment advisors and broker-dealers. In such case, we may incur significantly higher reporting and regulatory compliance costs. We did not generate revenues in the 4 last fiscal years of 2006 through 2009. Our records do not permit us to include a breakdown of total revenues by category of activity and geographic market for any of these fiscal years. Based upon the information available to us, we believe that most of our customers were located in the United States during these fiscal years.
We have four wholly owned subsidiaries: (1) Titan Trading Corp., a corporation formed under the laws of the province of British Columbia, Canada; (2) Titan Trading GP Inc., a corporation formed under the laws of Alberta and extra-provincially registered in British Columbia, the general partner TTLP2, limited partnerships formed under the laws of Alberta; (3) Titan Trading USA, LLC, a Delaware limited liability company qualified to do business in New York and Florida; and (4) Titan Holdings USA, LLC, a Florida limited liability company.
D. Property, Plants and Equipment
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We utilize about 6,500 square feet of office space in Edmonton, Alberta, and Atlanta, Georgia. We have rent obligations of approximately $15,000.00 per month. With the exception of computer equipment located in Edmonton, Alberta, Nanaimo, British Columbia, Atlanta, Georgia and the U.K., we currently do not have any property, plant or equipment located elsewhere.
ITEM 4A: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following should be read in conjunction with our audited financial statements and related notes accompanying this annual report. They have been prepared in accordance with Canadian generally accepted accounting principles. Reference should be made to Note 17 to our audited financial statements which provide a reconciliation to U.S. generally accepted accounting principles.
Critical Accounting Policies
The preparation of our consolidated financial statements and related disclosures in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of these financial statements, and revenue and expenses during the period reported. Estimates include allowance for doubtful accounts, estimated useful life of intangible assets, technology rights and capital assets, provisions for contingent liabilities, measurement of stock-based compensation, valuation allowance for future tax assets, and reflect management’s best estimates. By their nature, these estimates are subject to uncertainty and the effect on the financial statements of changes in estimates in future periods could be significant. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.
The Company has identified the following critical accounting policies that affect the more significant estimates and judgments used in preparation of its consolidated financial statements.
Research and Development Costs
Research costs are expensed when incurred. Development costs are expensed when incurred prior to the establishment of technical feasibility. Subsequent to the establishment of technical feasibility, the costs associated with the development of a commercial product for which adequate resources exist to market the product are capitalized as software and systems development. Capitalization of development costs ceases when the product is available for general release to customers. There were no development costs capitalized during the year ended October 31, 2010.
Capitalized costs are amortized commencing in the period of the product’s commercial release. The determination of whether a project is technically feasible involves establishing, at a minimum, that the Company has a detailed, documented and consistent product and program design, including high risk development issues related to the project, with the necessary resources to complete the project. If a detailed program design is not used, technological feasibility will be established when a product design or working model of the software model, consistent with the product design, is complete and tested.
Stock-based Compensation Plan
The Company accounts for stock-based compensation using a fair value based method with respect to all stock-based payments to directors, employees and non-employees. For directors and employees, the fair value of the options is measured at the date of grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is completed or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For directors, employees and non-employees, the fair value of the options is accrued and charged to operations, with the offset credit to contributed surplus, over the vesting period. If and when the stock options are exercised, the applicable amounts from contributed surplus are transferred to share capital.
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A. Operating Results
Fiscal Year Ended October 31, 2010 Compared to Fiscal Year Ended October 31, 2009
We incurred a net loss of $2,977,117 for the twelve-month period ended October 31, 2010, as compared to a net loss of $3,528,749 for the comparative period of 2009. The overall decrease in net loss in the 2010 fiscal year is due to the decreased research and development costs, totaling $873,215 compared to $1,078,379 in 2009, and decrease in general and administrative expense totaling $1,903,159 compared to $2,279,935 in 2009.
Professional fees for the year ending October 31, 2010 were $66,190, as compared to $97,495 for the same period ending October 31, 2009.
Other than as described herein, the Company did not experience any large fluctuations from quarter to quarter during 2010. The net loss for the fourth quarter of fiscal year 2010 was $1,028,725, as compared to $1,263,439 for the same period in fiscal 2009.
B. Liquidity and Capital Resources
Since our incorporation, we have financed our operations almost exclusively through the sale of our common shares and convertible debentures. We expect to finance operations through the sale of common shares in the foreseeable future. There is no assurance that we will be successful in arranging financing on acceptable terms or at all.
As at October 31, 2010, we had $209,736 cash and receivables of $10,088 as compared to $83,162 cash and receivables of $35,180 at our prior fiscal year end.
Equity Placements for the Fiscal Year Ended October 31, 2010
During 2010, the Company completed three private placements of common shares, as described below:
On May 27, 2010, the Company closed a non‐brokered private placement of units for gross proceeds of $902,250. The Company issued 4,511,250 units at $0.20 per unit. Each unit consists of one common share and one common share purchase warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring May 27, 2012. Of the gross proceeds, $661,370 and $240,880 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid a total of $4,000 in finder’s fees and incurred other share issue costs of $6,067.
On October 12, 2010, the Company closed a non-brokered private placement of units, for gross proceeds of $1,982,450. The Company issued 19,824,500 units at $0.10 per unit. Each unit consists of one common share and one warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring October 12, 2012. Of the gross proceeds, $1,600,389 and $382,061 have been allocated to common shares and warrants, respectively, using the relative fair value method. The common shares and warrants comprising the units and the common shares issuable upon exercise of the warrants are subject to a four-month restricted period, which expires February 12, 2011. The Company paid a total of $14,500 in finder’s fees to arm’s length parties and incurred other share issue costs of $11,630.
Page 22
On October 20, 2010, the Company closed a non-brokered private placement of units, which raised $45,000. The Company will issue 450,000 Units at $0.10 per unit. Each unit consists of one common share and one warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring October 12, 2012. The common shares and warrants comprising the units and the common shares issuable upon exercise of the warrants are subject to a four-month restricted period, which expires February 20, 2011. Of the gross proceeds, $35,063 and $9,937 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid $1,089 in share issue costs.
During 2010, no options were exercised.
Equity Placements for the Fiscal Year Ended October 31, 2009
On March 17, 2009, the Company closed off a non-brokered private placement of units (“Units”), which raised CDN$656,260. The Company issued 2,187,533 Units at CDN$0.30 per Unit. Each Unit consists of one common share (“Common Share”) and one-half of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $512,335 and $143,925 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 128%, risk free rate of 1.02%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.45 per Common Share during the first year following the date of closing and at CDN$0.60 per Common Share during the subsequent year and will expire March 17, 2011. The Company paid a total of CDN $44,056 in finder’s fees.
On October 15, 2009, the Company closed of a non-brokered private placement of units (“Units”), which raised CDN$1,389,000. The Company issued 5,556,000 Units at CDN$0.25 per Unit. Each Unit consists of one common share (“Common Share”) and one-half of one common share purchase warrant (a “Warrant”). Of the gross proceeds, $1,180,692 and $208,308 have been allocated to the common shares and warrants respectively using the relative fair value method. The value allocated to the common share purchase warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of $0.00, expected volatility of 88%, risk free rate of 1.68%, and expected life of 2 years. Each whole Warrant is exercisable into one Common Share at a price of CDN$0.375 per Common Share during the first year following the date of closing and at CDN$0.50 per Common Share during the subsequent year and will expire October 15, 2011. The Company paid a total of CDN $18,376 in finder’s fees.
In order to fund operations for the next 12-month period, sufficient funds will need to be raised through private placements. Upon completion of our business plan we expect to raise additional funds to support the current and future operations over a longer period. Our continuation as a going concern is dependent upon our ability to obtain equity capital and financing for working capital requirements. We have incurred significant operating losses to date and we cannot predict if we will ever earn operating income. As a result, there can be no assurance that we will be successful in raising additional funds or that additional financing, if any, can be obtained on terms acceptable to us. Such financing, to the extent that it is available may result in substantial dilution to our shareholders. To the extent such financing is not available, we may not be able to, or may be delayed in, continuing to commercialize our software products and services, and we may have to curtail our operations. In the event that future financings are not available at terms acceptable to us, the Company believes it has sufficient funds to continue for the next three months with a significant reduction in operations.
C. Research and Development, Patents and Licenses, etc.
The Company has spent the last three fiscal years in Research and Development mode. It has incurred the following R&D expenses.
|
2010
|
2009
|
2008
|
|
|
Research and Development Expenses
|
$873,215
|
$1,078,379
|
$871,222
|
Page 23
D. Trend Information
With the exception of the information disclosed in “Item 3.D. – Risk Factors”, we do not know of any trends or uncertainties that are likely to have a material effect on the Company or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
E. Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements that require disclosure under this Item 5.
F. Tabular Disclosure of Contractual Obligations
Convertible Debenture
On August 27, 2010, the Company issued $294,000 in convertible debentures. The debentures will mature on August 26, 2012 and bear interest of 12% per annum. The maturity date can be reduced to August 26, 2011 at the option of the holder. The debentures will be convertible into units at a deemed price of $0.15 per unit on or before the maturity date. Each unit consists of one common share and one share purchase warrant that is exercisable at a price of $0.30 for up to six months from the date of conversion. The debentures have an early conversion right whereby if the average trading price per share is greater than or equal to $0.40 for a period of 20 consecutive trading days, the Company shall have the right to convert the debentures at the conversion price at any time prior to the maturity date. The debentures have been bifurcated into the debt and equity components as follows:
|
2010
|
2009
|
|||||||
|
Face value of convertible debentures
|
$ | 294,000 | $ | --- | ||||
|
Portion of convertible debentures allocated to equity
|
(11,564 | ) | --- | |||||
| 282,436 | --- | |||||||
|
Interest expense
|
1,073 | --- | ||||||
| $ | 283,509 | $ | --- | |||||
|
The assumptions used to fair value the equity component of the convertible debentures are as follows:
|
||||||||||
|
Expected dividend rate
|
0%
|
|||||||||
|
Expected volatility
|
95.78%
|
|||||||||
|
Risk-free interest rate
|
1.26
|
|||||||||
|
Expected life of the debenture term
|
2 years
|
|||||||||
The present value of the contractual obligation of the convertible debentures as at October 31, 2010 is $265,000 and is calculated using the effective interest rate of 15%.
Page 24
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
As of March 31, 2011, our directors were as follows:
|
Name of Director
|
Age
|
|
John Coulter
Dr. Kenneth Powell
|
44
65
|
|
Michael Gossland
|
56
|
|
Philip S. Carrozza
|
49
|
|
Dr. Harold Elke
|
56
|
|
Joseph Francese
|
41
|
|
James Leman
|
65
|
As of March 31, 2011, our executive officers were as follows:
|
Executive Officers
|
Age
|
Office
|
|
John Coulter
|
44
|
President & Chief Executive Officer and Acting Chief Financial Officer
|
|
Michael Gossland
|
56
|
Secretary and Chief Technology Officer
|
|
David Terk
|
37
|
Chief Financial Officer of Titan USA
|
The following describes the business experience of our directors and executive officers, including other directorships held in reporting companies:
John J. Coulter, has held key senior management positions at leading financial technology providers over the last 20 years. Prior to joining Titan, John was VP of Global Partnerships and Alliances for Thomson Reuters after his previous company Vhayu Technologies was acquired in 2009. In his role as VP of Marketing and Business Development at Vhayu, Mr. Coulter created a globally recognized brand which increased revenues from $1.5 million to $12 million during his tenure. Prior to Vhayu, John was President and COO of Javelin Technologies in New York, the world’s leading FIX engine vendor with over 350 customers. Javelin was acquired by NYFIX (now owned by NYSE Euronext) in 2002 for $55 million.
John also conceptualized the indication of interest (IOI) trade management system TRIAD and led a 7 person spin-off of an existing systems integration firm Ease Technologies. TRIAD was one of the first commercially available FIX engines on Wall Street. After deploying TRIAD on 25 sell-side desks in less than two years, the system was licensed exclusively to Bridge Information and subsequently purchased by Reuters. Mr. Coulter is recognized as an authority on use of the FIX protocol as a means for brokers to lower infrastructure costs and increase order liquidity. John has also held various sales management positions at ADP, Bridge, VIE Systems and Reuters
James Leman is currently a member of the Board of Directors of the Fix Protocol Limited organization as well as a member of the Titan Board of Directors and chairman of Titan's Audit Committee. Mr. Leman served as Managing Director of Global Electronic Trading during a 22 year career at Citigroup as well as head of Electronic Trading at HSBC Securities and as President of SunGard's BRASS trading system. Mr Leman holds an MBA in Business Administration from Fordham University 1975 and an MS in Accounting from St Peter's College in New Jersey where he also serves on their Board of Regents.
Page 25
Kenneth W. Powell, DDS, B.Sc., is a graduate of the University of Alberta, holding Bachelor of Science (1966) and Doctor of Dentistry (1970) degrees. Since 1970, he has been a self-employed dentist with a dental practice in Edmonton, Alberta. Since December 2002, Dr. Powell has acted as President, Chief Executive Officer and a director of Titan, as well as a director and the Chief Financial Officer of Firestone Ventures Inc., a junior mining exploration company that is reporting in British Columbia and Alberta and trades on the TSX Venture Exchange.
Michael Gossland, M.Sc., P.Eng., is our Chief Technology Officer, Secretary and a director. Mr. Gossland has held such positions since 1994. In 1976, he was awarded the Harrington Prize for academic excellence in physics, and he received his Master of Science degree from the University of Saskatchewan in 1978. In 1989, he obtained his designation as a Professional Engineer - Electrical Branch (Association of Professional Engineers of Ontario). From 1986 to 1991, Mr. Gossland was Software Project Manager for Sciex, a division of MDS Health Group Inc. of Toronto, Ontario. In 2003, he joined APEG of BC and transferred his Professional Engineering License from Ontario to British Columbia.
Philip S. Carrozza II, is our Director of U.S. Trading Operations and the President of Cignal. Mr. Carrozza acquired his professional broker’s license in 1987. From 1993 until 1999 when he founded Cignal, he worked with several major trading firms in New York and the Bahamas. Mr. Carrozza is also an attorney and a member of the Massachusetts State Bar.
Harold Elke, DDS, B.Sc., is a graduate of the University of Lethbridge, holding Bachelor of Science (1978) and Doctor of Dental Surgery (1982) degrees. Since 1982, he has been a self-employed dentist with a dental practice in the Lethbridge, Alberta area. Dr. Elke has extensive business experience in both Europe and Asia, and in commercial real estate in Canada.
Joseph Francese, is a Chartered Financial Analyst (CFA) Charterholder, is Chief Investment Officer (CIO) of PROFORMA Capital Inc. As CIO, Mr. Francese chairs the investment committee and is responsible for analyzing and monitoring existing and prospective investments, as well as developing investment strategies. Mr. Francese has 15 years experience working with high net worth investors consulting on over $100 million of investor assets during his advisory career.
David Terk, Mr. Terk holds a Certified Public Accountant’s license in the State of New York, and a Bachelor of Science in Accounting from the University of Maryland. After three years in the field of public accounting, Mr. Terk entered the equity trading industry in 1997. Mr. Terk formed the private equity trading firm Valkyrie Management Corporation, where he actively traded equities. In 1998, Mr. Terk helped create Livetrade.com/Alex Moore Inc. Livetrade became one of the first companies to bring direct access Level 2 trading to the Internet. It was there Mr. Terk earned his series 27 license and served as the company’s Financial Operations Principal.
There are no arrangements or understandings between any of our directors or executive officers, pursuant to which they were selected to be a director or executive officer, nor are there any family relationships among any of our directors or officers.
B. Compensation
We are required, under applicable securities legislation in Canada, to disclose to our shareholders details of compensation paid to individual(s) who were acting as, or were acting in a capacity similar to, a chief executive officer or chief financial officer and the three most highly compensated executive officers whose total salary and bonus exceeded $150,000 per annum (the “Named Executive Officers”). The following fairly reflects the annual compensation for services in all capacities to the Company and its subsidiaries in respect of the Company’s Named Executive Officer in our fiscal year ended October 31, 2010.
Page 26
|
·
|
No executive officers salary/compensation exceeded $150,000 per annum for the year ended October 31, 2010.
|
We are required, under applicable securities legislation in Canada, to disclose to our shareholders details of compensation paid to our directors. The following fairly reflects all material information regarding compensation paid to our directors in our fiscal year ended October 31, 2010.
In the most recently completed financial year, the Company did not compensate directors for services rendered in their capacity as directors.
Consulting Fees
During the fiscal year ended October 31, 2010, the Company paid consulting fees to the following directors for services provided to the Company in the normal course of operations of the business:
|
·
|
Dr. Kenneth Powell - $ 79,838
|
|
·
|
Mr. John Coulter - $ 45,000
|
|
·
|
Mr. Michael Gossland – $120,000
|
|
·
|
Mr. Philip Carrozza – USD$120,000
|
Option Grants
On January 8, 2007, options with an exercise price of $0.30 and an expiry date of January 8, 2012 were granted to the following directors and/or officers:
|
·
|
Mr. Michael Gossland – 200,000 options
|
|
·
|
Mr. Phillip Carrozza – 200,000 options
|
|
·
|
Dr. Kenneth Powell – 500,000 options
|
|
·
|
Dr. Harold Elke – 150,000 options
|
|
·
|
Mr. David Terk – 100,000 options
|
On January 28, 2008, options with an exercise price of $0.37 and an expiry date of January 28, 2013 were granted to the following directors and/or officers:
|
·
|
Mr. Michael Gossland – 100,000 options
|
|
·
|
Mr. Phillip Carrozza – 100,000 options
|
|
·
|
Dr. Kenneth Powell – 100,000 options
|
|
·
|
Dr. Harold Elke – 50,000 options
|
|
·
|
Mr. David Terk – 75,000 options
|
On November 7, 2008, options with an exercise price of $0.36 and an expiry date of November 7, 2013 were granted to the following directors and/or officers:
|
·
|
Mr. Michael Gossland – 25,000 options
|
|
·
|
Mr. Phillip Carrozza – 25,000 options
|
|
·
|
Dr. Kenneth Powell – 25,000 options
|
|
·
|
Dr. Harold Elke – 25,000 options
|
|
·
|
Mr. David Terk – 25,000 options
|
On March 6, 2009, options with an exercise price of $0.33 and an expiry date of March 6, 2014 were granted to the following directors and/or officers:
|
·
|
Mr. Michael Gossland – 200,000 options
|
|
·
|
Mr. Phillip Carrozza – 200,000 options
|
|
·
|
Dr. Kenneth Powell – 750,000 options
|
|
·
|
Dr. Harold Elke – 75,000 options
|
|
·
|
Mr. David Terk – 45,000 options
|
Page 27
On November 13, 2009, options with an exercise price of $0.25 and an expiry date of November 13, 2014 were granted to the following directors and/or officers:
|
·
|
Mr. David Terk - 300,000 options
|
On March 3, 2010, options with an exercise price of $0.17 and an expiry date of March 3, 2015 were granted to the following directors and/or officers:
|
·
|
Mr. Michael Gossland – 520,000 options
|
|
·
|
Mr. Phillip Carrozza – 120,000 options
|
|
·
|
Dr. Kenneth Powell – 120,000 options
|
|
·
|
Dr. Harold Elke – 100,000 options
|
|
·
|
Mr. Joseph Francese– 50,000 options
|
On November 3, 2010, options with an exercise price of $0.11 and an expiry date of November 3, 2015 were granted to the following directors and/or officers:
|
·
|
Mr. John Coulter – 1,930,000 options
|
On November 24, 2010, options with an exercise price of $0.14 and an expiry date of November 24, 2015 were granted to the following directors and/or officers:
|
·
|
Mr. John Coulter – 2,070,000 options
|
|
·
|
Mr. Michael Gossland – 666,666 options
|
On December 3, 2010, options with an exercise price of $0.14 and an expiry date of December 3, 2015 were granted to the following directors and/or officers:
|
·
|
Mr. James Leman – 500,000 options
|
|
(1)
|
Options granted to Michael Gossland expired on February 16, 2010.
|
|
(2)
|
Options granted to Michael Gossland, Philip Carozza, Kenneth Powell and Robert Roddick expired on March 1, 2010.
|
|
(3)
|
All options granted to Mr. Robert Roddick were cancelled on November 13, 2010.
|
C. Board Practices
Dr. Powell, Mr. Gossland, Mr. Carrozza, Mr. Roddick and Dr. Elke have acted as our directors since December 23, 2002, September 15, 1995, June 6, 2003 November 29, 2004 and October 24, 2006, respectively. All such individuals were re-elected as directors and Joseph Francese was elected as a director at our annual general meeting of shareholders held on October 2, 2009. Mr. Roddick resigned from his position as director on September 13, 2010.
Mr. John Coulter was appointed to the board of directors and President & CEO in September, 2010 Mr. Coulter, a management consultant with 20 years of experience in the financial trading software industry will provide management with direction and advice on product development and marketing.
Page 28
The directors hold office until the next annual general meeting of the shareholders, at which time they may stand for re-election, or their earlier resignation or removal. We are required to hold an annual general meeting once in every calendar year and not longer than fifteen months from the last annual general meeting.
No directors or officers have service contracts with us, nor are they entitled to any termination benefits, except for the consulting agreements entered into in February 2006, with each of Cignal (a company owned by Phillip Carrozza) and Michael Gossland, whereby they will provide consulting services to us until October 31, 2008. Both Mr. Gossland and Mr. Carrozza continue to provide services to us and we expect to enter in to new consulting agreements, on substantially the same terms of the original agreements, once the Software Transfer Agreements are revised.
Audit Committee
As of March 31, 2011, our Audit Committee was comprised of Mr. Gossland, Mr. Leman, and Mr. Francese. Mr. Gossland was appointed a Director and member of the Audit Committee in 1996. Mr. Francese was appointed a Director and member of the Audit Committee on October 2, 2009. Mr. Roddick and Mr. Francese are independent members of the audit committee, and all members are financially literate.
The Audit Committee is responsible for, among other things, monitoring the integrity and adequacy of our financial information, and for recommending to our board of directors their selection of independent auditors for us.
The charter of the Company’s audit committee is as follows:
|
I.
|
Mandate
|
The primary function of the audit committee (the “Committee”) is to assist the board of directors of the Company (the “Titan Directors”) in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by the Company to regulatory authorities and shareholders, the Company’s systems of internal controls regarding finance and accounting, and the Company’s auditing, accounting and financial reporting processes. Consistent with this function, the Committee will encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels. The Committee’s primary duties and responsibilities are to:
|
·
|
Serve as an independent and objective party to monitor the Company’s financial reporting and internal control system and review the Company’s financial statements.
|
|
·
|
Review and appraise the performance of the Company’s external auditors.
|
|
·
|
Provide an open avenue of communication among the Company’s auditors, financial and senior management and the Titan Directors.
|
|
II.
|
Composition
|
The Committee shall be comprised of three directors as determined by the Titan Directors, the majority of whom shall be independent directors, pursuant to the policies of the TSX Venture Exchange.
At least one member of the Committee shall have accounting or related financial management expertise. It is the goal of the Company that all members of the Committee are financially literate. All members of the Committee that are not financially literate will work towards becoming financially literate to obtain a working familiarity with basic finance and accounting practices. For the purposes of the Company’s Charter, the definition of “financially literate” is the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can presumably be expected to be raised by the Company’s financial statements.
Page 29
The members of the Committee shall be elected by the Company’s Directors at its first meeting following the annual shareholders’ meeting. Unless a Chair is elected by the Titan Directors, the members of the Committee may designate a Chair by a majority vote of the full Committee membership.
|
III.
|
Meetings
|
The Committee shall meet a least twice annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee will meet at least annually with management and the external auditors in separate sessions.
The minutes of the Committee meetings shall accurately record the decisions reached and shall be distributed to the Audit Committee members with copies to the Company’s Directors, the Chief Financial Officer or such other officer acting in the capacity and the external auditor.
|
IV.
|
Responsibilities and Duties
|
To fulfill its responsibilities and duties, the Committee shall:
Documents/Reports Review
|
1.
|
Review and update the Charter annually.
|
|
2.
|
Review the Company’s financial statements, MD&A and any annual and interim earnings, press releases before the Company publicly discloses this information and any reports or other financial information (including quarterly financial statements), which are submitted to any governmental body, or to the public, including any certification, report, opinion, or review rendered by the external auditors.
|
External Auditors
|
1.
|
Require the external auditors to report directly to the Committee.
|
|
2.
|
Review annually the performance of the external auditors who shall be ultimately accountable to the Titan Directors and the Committee as representatives of the shareholders of the Company.
|
|
3.
|
Obtain annually, a formal written statement of external auditors setting forth all relationships between the external auditors and the Company and confirming their independence from the Company.
|
|
4.
|
Review and discuss with the external auditors any disclosed relationships or services that may impact the objectivity and independence of the external auditors.
|
|
5.
|
Take, or recommend that the Company’s Directors take, appropriate action to oversee the independence of the external auditors.
|
|
6.
|
Recommend to the Company’s Directors the selection and, where applicable, the replacement of the external auditors nominated annually for shareholder approval and the compensation of the external auditors.
|
|
7.
|
Review with management and the external auditors the terms of the external auditors’ engagement letter.
|
Page 30
|
8.
|
At each meeting, consult with the external auditors, without the presence of management, about the quality of the Company’s accounting principles, internal controls and the completeness and accuracy of the Company’s financial statements.
|
|
9.
|
Review and approve the Company's hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company.
|
|
10.
|
Review with management and the external auditors the audit plan for the year-end financial statements and intended template for such statements.
|
|
11.
|
Review and pre-approve all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by the Company’s external auditors. The pre-approval requirement is waived with respect to the provision of non-audit services if:
|
|
(i)
|
the aggregate amount of all such non-audit services provided to the Company constitutes not more than five percent of the total amount of revenues paid by the Company to its external auditors during the fiscal year in which the non-audit services are provided;
|
|
(ii)
|
such services were not recognized by the Company at the time of the engagement to be non-audit services; and
|
|
(iii)
|
such services are promptly brought to the attention of the Committee by the Company and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the Company’s Directors to whom authority to grant such approvals has been delegated by the Committee.
|
Provided the pre-approval of the non-audit services is presented to the Committee's first scheduled meeting following such approval, such authority may be delegated by the Committee to one or more independent members of the Committee.
Financial Reporting Processes
|
1.
|
In consultation with the external auditors, review with management the integrity of the Company's financial reporting process, both internal and external.
|
|
2.
|
Consider the external auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.
|
|
3.
|
Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the external auditors and management.
|
|
4.
|
Review significant judgments made by management in the preparation of the financial statements and the view of the external auditors as to appropriateness of such judgments.
|
|
5.
|
Following completion of the annual audit, review separately with management and the external auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.
|
|
6.
|
Review any significant disagreement among management and the external auditors regarding financial reporting.
|
|
7.
|
Review with the external auditors and management the extent to which changes and improvements in financial or accounting practices have been implemented.
|
Page 31
|
8.
|
Review certification process.
|
|
9.
|
Establish procedures for:
|
|
(i)
|
the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
|
|
(ii)
|
the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
|
Other
1. Review any related-party transactions.
|
V.
|
Authority
|
The Committee may:
|
1.
|
engage independent outside counsel and other advisors as it determines necessary to carry out its duties;
|
|
2.
|
set and pay the compensation for any advisors employed by the Committee; and
|
|
3.
|
communicate directly with the internal and external auditors.
|
The Committee shall have unrestricted access to the Company’s personnel and documents and will be provided with the resources necessary to carry out its responsibilities.
Remuneration Committee
We have not appointed a remuneration committee.
D. Employees
As at October, 31, 2010, the company had three employees, and the remainder of services is contracted to consultants. We have three consultants in Canada, six consultants in the United States and one consultant in the United Kingdom. Titan or Titan USA, as appropriate, have entered into intellectual property assignment agreements or consulting agreements with each of its employees and consultants.
E. Share Ownership
As of March 31, 2011 the company has 93,240,278 common shares issued and outstanding. As of March 31, 2011, our directors and officers beneficially owned the following number of our common shares:
|
Name
|
Number of Common Shares
Beneficially Owned
|
Percentage of Outstanding
Common Shares†
|
|
Kenneth Powell
|
28,951,059 (1)
|
31.05%
|
|
Harold Elke
|
9,183,964 (2)
|
9.85%
|
|
Philip S. Carrozza
|
5,220,100 (3)
|
5.60%
|
|
Joseph Francese
|
3,522,334(4)
|
3.78%
|
|
Michael Gossland
|
1,902,556 (5)
|
2.04%
|
|
John J. Coulter
|
1,651,000 (6)
|
1.77%
|
|
David Terk
|
546,071 (7)
|
.59%
|
|
James Leman
|
100,000 (8)
|
.11%
|
|
All officers and directors as a group
|
51,077,084
|
54.78%
|
Page 32
|
†
|
Percentage amounts based on 93,240,278 shares of our common stock outstanding as of March 31, 2011.
|
|
(1)
|
Includes
|
(A) 500,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014.
(E) 80,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015.
(F) 150,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2012;
(G) 2,000,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on August 14, 2012;
(H) 1,525,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to May 12, 2012.
(I) 976,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011,
(J) 7,130,000 common shares underlying warrnats that are immediately exercisable at an exercise price of $0.30 to October 12, 2012.
(K) 2,876,397 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell;
(L) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15 ,2011;
(M) 400,000 common shares underlying warrnats that are that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.30 to October 12, 2012;
(N) 187,000 common shares that are held by Mr. Cameron Powell, the son of Dr. Powell;
(O) 167,000 common shares that are held by Mr. Carson Powell, the son of Dr. Powell;
(P) 5,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2012;
(Q) 5,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2012.
( R) 10,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(S) 10,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
Page 33
|
(2)
|
Includes
|
(A) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 75,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 66,667 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 512,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(G) 80,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to May 27, 2012;
(H) 2,140,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to October 12, 2012.
|
(3)
|
Includes
|
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 80,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 3,791,571 common shares that are held by Mrs. Loraine Kuppe, the wife of Mr. Carrozza.
|
(4)
|
Includes
|
(A) 900,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire August 13, 2012;
(B) 33,334 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015.
(C) 269,500 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to October 12, 2012
|
(5)
|
Includes
|
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 346,667 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 222,222common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.14 per share until November 24, 2015;
(G) 166,667 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.10 per share until March 15, 2016;.
(H) 300,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to October 12, 2012;
(I) 17,000 common shares held in a registered education savings plan for the benefit of Mr. Gossland’s children where Mr. Gossland has a power of attorney.
Page 34
|
(6)
|
Includes
|
(A) 643,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.11 per share and expire November 3, 2015;
(B) 690,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.14 per share and expire November 24, 2015.
|
(7)
|
Includes
|
(A) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 75,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 45,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.25 per share until November 13, 2014.
|
(8)
|
Includes
|
(A) 100,000 common shares issuable pursuant to stock options granted under the stock option plan. None of the options are vested or exercisable.
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
As of March 31, 2011, we had 93,240,278 common shares issued and outstanding. As of April 30, 2010, the following shareholders beneficially owned greater than five percent (5%) of our common shares:
|
Name
|
Number of Common Shares
Beneficially Owned
|
Percentage of Outstanding
Common Shares
|
|
Kenneth Powell
|
28,951,059 (1)
|
31.05%
|
|
Harold Elke
|
9,183,964 (2)
|
9.85%
|
|
Philip S. Carrozza
|
5,220,100 (3)
|
5.60%
|
|
|
Notes:
|
|
(1)
|
Includes
|
(A) 500,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
Page 35
(D) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 80,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 150,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2010;
(G) 2,000,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.40 per common share and expire on August 14, 2010;
(H) 1,525,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to May 12, 2012;
(I) 976,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(J) 7,130,000 common shares underlying warrnats that are immediately exercisable at an exercise price of $0.30 to October 12, 2012;
(K) 2,876,397 common shares that are held by Mrs. Karen Powell, the wife of Dr. Powell;
(L) 150,000 common shares underlying warrants that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(M) 400,000 common shares underlying warrnats that are that are held by Mrs. Karen Powell, the wife of Dr. Powell and are immediately exercisable at an exercise price of $0.30 to October 12,2012;
(N) 187,000 common shares that are held by Mr. Cameron Powell, the son of Dr. Powell;
(O) 167,000 common shares that are held by Mr. Carson Powell, the son of Dr. Powell;
(P) 5,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2012;
(Q) 5,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell, that are immediately exercisable at an exercise price of $0.40 per common share and expire on July 29, 2012;
(R) 10,000 common shares underlying warrants that are held by Mr. Cameron Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(S) 10,000 common shares underlying warrants that are held by Mr. Carson Powell, the son of Dr. Powell and are immediately exercisable at an exercise price of $0.375 to October 15, 2011.
|
(2)
|
Includes
|
(A) 150,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share and expire January 8, 2012;
(B) 50,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
(D) 75,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 66,667 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 512,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.375 to October 15, 2011;
(G) 80,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to May 27, 2012;
(H) 2,140,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 to October 12, 2012.
|
(3)
|
Includes
|
(A) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.30 per share until January 8, 2012;
(B) 100,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.37 per share until January 28, 2013;
(C) 25,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.36 per share until November 7, 2013;
Page 36
(D) 200,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.33 per share until March 6, 2014;
(E) 80,000 common shares issuable pursuant to stock options granted under the stock option plan that are vested and fully exercisable at an exercise price of $0.17 per share until March 3, 2015;
(F) 3,791,571 common shares that are held by Mrs. Loraine Kuppe, the wife of Mr. Carrozza.
We are authorized to issue an unlimited number of common shares and an unlimited number of preferred shares without par value.
Each of our issued common shares entitles the holder to one vote in a general meeting of shareholders. There are no disproportionate or weighted voting privileges. Our significant shareholders do not have different voting privileges as compared to our other shareholders.
The preferred shares may from time to time be issued in one or more series. The directors may fix from time to time before such issue, the number of preferred shares which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of preferred shares including, any voting rights, the rate or amount of dividends or the method of calculating dividends, the dates of payment thereof, the terms and conditions of redemption, purchase and conversion if any, and any sinking fund or other provisions. The preferred shares are non-voting.
Of our 205 registered shareholders as at March 31, 2011, 22 were residents of the United States representing 7,759,395 common shares or 10.73% of our 93,240,278 issued and outstanding common shares as of that date.
We are not controlled directly or indirectly by any other corporation or any other foreign government or by any other natural or legal person, severally or jointly.
There are no arrangements known to us, the operation of which at a subsequent date, may result in a change in our control.
B. Related Party Transactions
The related party transactions are in the normal course of operations and are recorded at the exchange amount.
Intellectual Property Transfer Agreements
Pursuant to an agreement dated June 6, 2003 (the “License Agreement”), Cignal, which is owned and operated by a director and officer of the Company, Mr. Philip Carrozza, agreed to provide an exclusive 99-year license to the Company for the Cignal Technology and a 25% interest in all net profits third parties (subject to certain licenses being exempt) realize from the use of the Cignal technology. In consideration therefore, the Company agreed to fund all future development costs associated with the TickAnalyst Technology and development of related products. The Company was required to fund successive six month budgets (each budget not to exceed $100,000) relating to proposed developments of the TickAnalyst Technology and related products, failing which Cignal could terminate the license. Pursuant to a related agreement among Dr. Kenneth Powell, Mr. Thomas Kreilein and Mr. Phillip Carrozza dated June 3, 2003, Dr. Powell and Mr. Kreilein agreed to transfer certain common shares and grant an option with respect to additional common shares of the Company to Mr. Carrozza as an inducement to enter into this License Agreement. This agreement purported to provide Mr. Carrozza with the right to terminate the License Agreement if certain trading price benchmarks of the common shares were not met. None of these benchmarks were met but the License Agreement was not terminated within the required time periods.
Page 37
On November 4, 2004, the Company entered into a transaction to purchase the Cignal Technology from Cignal and paid Mr. Carrozza an amount of $62,335. However, the transaction was not completed and the paid amount was classified as a receivable. This amount has been repaid to the Company.
In February 2006, we entered into a software transfer agreement with Mr. Phillip Carrozza and Cignal, with respect to the transfer of certain trading models, suitable for stocks or futures and software-based formulas that implement the trading models and their accompanying indicators. Pursuant to the software transfer agreement, Cignal and Mr. Carrozza were to be issued a total of 3,000,000 common shares, 1,000,000 of which would have been issued on closing and the remaining 2,000,000 would have been issued in 1,000,000 increments in each of 2007 and 2008. Cignal was to be granted 1,000,000 performance warrants. The software transfer agreement provided Cignal with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
We also entered into a software transfer agreement with Michael Gossland, a director and officer of Titan, with respect to the transfer of certain executable programs and software-based formulas. Pursuant to the software transfer agreement, we would have issued Mr. Gossland 1,500,000 common shares and 1,000,000 performance warrants. The software transfer agreement provided Mr. Gossland with a right of first refusal, in the event that we become insolvent, to match a proposed sale of the software to a third party.
A total of 1,000,000 of the performance warrants to be issued to Cignal, Mr. Carrozza and Mr. Gossland were exercisable at a price of $0.50 per share for a six month period commencing November 1, 2007 and the remaining 1,000,000 performance warrants were exercisable at a price of $1.00 per share for a six month period commencing November 1, 2008. The release of these warrants was conditional upon the 20 day average stock price on these dates being no less than $1.00 and $2.00 per share, respectively.
In July 2006, the Company announced that the aforementioned software transfer agreements entered into between the Company, Mr. Carrozza and Cignal and between the Company and Mr. Gossland had been amended and restated (the “Software Transfer Agreements”). The total number of Titan common shares issuable pursuant to the Software Transfer Agreements did not change from 4,500,000 shares; however, these shares will only be issued upon Titan achieving certain gross revenue milestones.
Pursuant to disinterested shareholder approval on October 2, 2009, the Software Transfer Agreements were further amended and the TSX Venture Exchange approved such amendments on November 10, 2009.
According to the amended terms of the Software Transfer Agreement, commencing June 1, 2008, an aggregate of 4,500,000 shares and 2,000,000 performance warrants would be issued based on gross revenues from TickAnalyst as follows:
If, between June 1, 2009 and May 31, 2010, Titan achieves cumulative gross revenue of at least $400k, then 1.5M common shares would be released after September 30, 2009. If, in the same period, Titan achieves cumulative gross revenue of at least $800k, an additional 1.5M common shares would be released after January 31, 2010. If, in the same period, Titan achieves cumulative gross revenue of at least $1.2M, an additional 1.5M common shares would be released after May 31, 2010 and 1.0M performance warrants at $0.50 would be exercisable for the 6 month period June 1, 2010 to November 30, 2010. If, between June 1, 2010 and May 31, 2011 Titan achieves cumulative gross revenue of at least $1.8M, an additional 1.0M performance warrants at $1.00 would be exercisable for the 6 month period of June 1, 2011 to November 30, 2011.
As at year ended October 31, 2010, all pre-existing Software Transfer Agreements between the Company and Mssrs Philip Carrozza and Michael Gossland expired and were dissolved.
In September, the Company entered into negotiations with Mr. Philip Carrozza and Mr. Michael Gossland as well as two other long-term consultants to the Company to transfer any and all ownership of Intellectual Property, over which they might have claim, to the Company in exchange for a long term service contract and other consideration.
Page 38
With the conclusion of these agreements, the Company wholly owns the TickAnalyst technology in its entirety.
Management fees and research and development costs of $502,241, as compared to $332,074 in 2009, were paid to officers and directors of the Company during 2010.
Our directors or officers must disclose in writing to us the nature and extent of any interest they have in a material contract, or proposed material contract, with us. Such disclosure must be made immediately after the director or officer becomes aware of the contract or proposed contract. A director who is required to disclose an interest in a material contract or proposed material contract may not vote on any resolution to approve the contract except in very limited circumstances.
Not applicable.
ITEM 8: FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Our financial statements are set forth under “Item 17 – Financial Statements”.
Legal Proceedings
To the best of our knowledge, there are no material legal or arbitration proceedings which may have or have had in the recent past significant effects on our financial position, which includes any governmental proceedings pending or known to be contemplated.
Dividend Policy
We have never paid any dividends, and any earnings in the foreseeable future will be re-invested in our development. Under the Business Corporations Act (Alberta), the directors of a Company who vote for, or consent to, a resolution authorizing the payment of a dividend if a Company is insolvent or the payment renders the Company insolvent are jointly and severally liable to the Company to restore to the Company any loss or damage suffered by the Company as a result.
B. Significant Changes
There have been no significant changes since the date of the audited financial statements included herein other than those disclosed herein. See “Item 5.B. – Liquidity and Capital Resources”.
ITEM 9: THE OFFER AND LISTING
A. Offer and Listing Details
Our common shares trade on the TSX Venture Exchange under symbol “TTA” and on the Over-The-Counter Bulletin Board under symbol “TITAF”. Our shares have traded on the TSX Venture Exchange, and on its predecessors, the Canadian Venture Exchange, and the Vancouver Stock Exchange.
Page 39
The following table sets forth the high and low closing prices in Canadian funds of our common shares traded on these Canadian exchanges for the last five fiscal years:
|
Period
|
High
|
Low
|
|
|
Fiscal Year
|
|||
|
November 1, 2005 to October 31, 2006
|
$0.415
|
$0.11
|
|
|
November 1, 2006 to October 31, 2007
|
$1.07
|
$0.255
|
|
|
November 1, 2007 to October 31, 2008
|
$0.67
|
$0.29
|
|
|
November 1, 2008 to October 31, 2009
|
$0.42
|
$0.21
|
|
|
November 1, 2009 to October 31, 2010
|
$0.35
|
$0.08
|
|
|
Fiscal Quarter
|
|||
|
November 2008 to January 2009
|
$0.415
|
$0.26
|
|
|
February 2009 to April 2009
|
$0.38
|
$0.28
|
|
|
May 2009 to July 2009
|
$0.39
|
$0.21
|
|
|
August 2009 to October 2009
|
$0.34
|
$0.22
|
|
|
November 2009 to January 2010
|
$0.29
|
$0.16
|
|
|
February 2010 to April 30 2010
|
$0.35
|
$0.15
|
|
|
May 2010 to July 2010
|
$0.18`
|
$0.11
|
|
|
August 2010 to October 2010
|
$0.17
|
$0.08
|
|
|
November 2010 to January 2011
|
$0.16
|
$.011
|
|
|
Month
|
|||
|
October 2010
|
$0.17
|
$0.08
|
|
|
November 2010
|
$0.16
|
$0.11
|
|
|
December 2010
|
$0.16
|
$0.12
|
|
|
January 2011
|
$0.16
|
$0.12
|
|
|
February 2011
|
$0.14
|
$0.10
|
|
|
March 2011
|
$0.12
|
$0.08
|
Our common shares have been quoted for trading on the Over-The-Counter Bulletin Board since January 12, 2000. The following table sets forth the high and low closing prices in United States funds of our common shares traded on the Over-The-Counter Bulletin Board for the last five fiscal years:
|
Period
|
High
|
Low
|
|
|
Fiscal Year
|
|||
|
November 1, 2005 to October 31, 2006
|
$0.37
|
$0.105
|
|
|
November 1, 2006 to October 31, 2007
|
$0.92
|
$0.192
|
|
|
November 1, 2007 to October 31, 2008
|
$0.72
|
$0.26
|
|
|
November 1, 2008 to October 31, 2009
|
$0.33
|
$0.16
|
|
|
November 1, 2009 to October 31, 2010
|
$0.35
|
$0.08
|
|
|
Fiscal Quarter
|
|||
|
August 2008 to October 2008
|
$0.47
|
$0.26
|
|
|
November 2008 to January 2009
|
$0.32
|
$0.19
|
Page 40
|
Period
|
High
|
Low
|
|
February 2009 to April 2009
|
$0.31
|
$0.21
|
|
|
May 2009 to July 2009
|
$0.31
|
$0.16
|
|
|
August 2009 to October 2009
|
$0.28
|
$0.16
|
|
|
November 2009 to January 2010
|
$0.27
|
$0.16
|
|
|
February 2010 to April 2010
|
$0.35
|
$0.15
|
|
|
May 2010 to July 2010
August 2010 to October 2010
November 2010 to January 2011
|
$0.17
$0.17
$0.16
|
|
$0.11
$0.08
$0.11
|
|
October 2010
|
$0.17
|
$0.08
|
|
|
November 2010
|
$0.16
|
$0.11
|
|
|
December 2010
|
$0.16
|
$0.12
|
|
|
January 2011
|
$0.16
|
$0.12
|
|
|
February 2011
|
$0.14
|
$0.10
|
|
|
March 2011
|
$0.12
|
$0.08
|
|
B. Plan of Distribution
Not applicable.
C. Markets
Our common shares trade on the TSX Venture Exchange under symbol “TTA” and on the Over-The-Counter Bulletin Board under symbol “TITAF”.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10: ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Articles of Incorporation
We were duly incorporated and validly exist as a corporation under the Business Corporations Act (Alberta). Pursuant to the provisions of the Business Corporations Act (Alberta), a company may conduct any business that it is not restricted by the terms of its articles or bylaws from conducting. Our articles and bylaws contain no such restrictions.
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Our directors are required to disclose to the board of directors the nature and extent of their interest in any proposed transaction or contract and must thereafter refrain from voting in respect thereof. An interested director may be counted in the quorum when a determination as to such director’s remuneration is being considered but may not vote in respect thereof. The directors have an unlimited power to borrow money, issue debt obligations and mortgage or charge our assets provided such actions are conducted bona fide and in our best interests. There are no mandatory retirement ages for directors or any required shareholdings.
All holders of common shares are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board of directors may from time to time determine. All holders of common shares will share equally on a per share basis in any dividend declared by the board of directors. The dividend entitlement time limit will be fixed by the board of directors at the time any such dividend is declared. Each outstanding common share is entitled to one vote on all matters submitted to a vote of our shareholders in general meeting. There are no cumulative voting rights attached to any of our shares and, accordingly, the holders of more than half of the shares represented at a general meeting can elect all of the directors to be elected in a general meeting. All directors stand for re-election annually. Upon any liquidation, dissolution or winding up, all common shareholders are entitled to share ratably in all net assets available for distribution after payment to creditors. The common shares are not convertible or redeemable and have no preemptive, subscription or conversion rights. In the event of a merger or consolidation, all common shareholders will be entitled to receive the same per share consideration.
The rights of shareholders may only be altered by the shareholders passing a special resolution at a general meeting. A special resolution may only be passed when it has been circulated to all shareholders by way of an information circular and then must be passed by two-thirds of the votes cast at the general meeting.
The board of directors may call annual and extraordinary general meetings when required. One or more shareholders holding in aggregate five percent or more of our issued shares may requisition an extraordinary meeting and the directors are required to call such meeting within 21 days of such requisition. Only registered shareholders or persons duly appointed by proxy may be admitted to meetings unless otherwise permitted by the chairman of the meeting.
There are no national limitations or restrictions on the right to own our common shares.
There are no provisions in our bylaws or articles of association that would have the effect of delaying, deferring or preventing a change in control.
There are no provisions in our bylaws or articles of incorporation that establish any threshold for disclosure of ownership. However, the Alberta and British Columbia Securities Commissions require that persons that are the registered owners of, and/or have voting control over 10% or more of our common shares must file insider reports disclosing securities holdings.
C. Material Contracts
Intellectual Property Transfer Agreements
During this period all pre-existing Software Transfer Agreements between the Company and Mssrs Philip Carrozza and Michael Gossland expired and were dissolved.
In September, the Company entered into negotiations with Mr. Philip Carrozza and Mr. Michael Gossland as well as two other long-term consultants to the Company to transfer any and all ownership of Intellectual Property, over which they might have claim, to the Company in exchange for a long term service contract and other consideration.
With the conclusion of these agreements, the Company wholly owns the TickAnalyst technology in its entirety.
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There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements. See “Item 10.E. – Taxation”.
There is no limitation imposed by Canadian law or by our constituent documents on the right of a nonresident to hold or vote common shares, other than those that are provided in the Investment Canada Act (Canada). The following summarizes the principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian" individuals, governments, corporation or other entities who wish to acquire a "Canadian business" (as defined in the Investment Canada Act), or establish a "new Canadian business" (as defined in the Investment Canada Act) to file either a notification or an application for review with a governmental agency known as "Investment Canada". The Investment Canada Act requires that certain acquisition of control of Canadian business by a "non-Canadian" must be reviewed and approved by the Minister responsible for the Investment Canada Act on the basis that the Minister is satisfied that the acquisition is "likely to be of net benefit to Canada", having regard to criteria set forth in the Investment Canada Act. Only acquisitions of control are reviewable under the Investment Canada Act; however, the Investment Canada Act provides detailed rules for the determination of whether control has been acquired and, pursuant to those rules, the acquisition of one-third or more of the voting shares of a corporation may, in some circumstances, be considered to constitute an acquisition of control. Certain reviewable acquisitions of control may not be implemented before being approved by the Minister; if the Minister does not ultimately approve a reviewable acquisition, which has been completed, the acquired Canadian business must be divested. Failure to comply with the review provisions of the Investment Canada Act could result in, amongst other things, an injunction or a court order directing disposition of assets of shares.
E. Taxation
A brief description of certain provisions of the tax treaty between Canada and the United States is included below, together with a brief outline of certain taxes, including withholding provisions, to which United States security holders are subject under existing laws and regulations of Canada. The consequences, if any, of provincial, state and local taxes are not considered.
The following information is general and security holders should seek the advice of their own tax advisors, tax counsel or accountants with respect to the applicability or effect on their own individual circumstances of the matters referred to herein and of any provincial, state or local taxes.
Certain Canadian Federal Income Tax Consequences
The discussion under this heading summarizes the principal Canadian federal income tax consequences of acquiring, holding and disposing of our common shares for a shareholder of us who is not a resident of Canada but is a resident of the United States and who will acquire and hold our common shares as capital property for the purposes of the Income Tax Act (Canada) (“Canadian Tax Act”). This summary does not apply to a shareholder who carries on business in Canada through a “permanent establishment” or is otherwise situated in Canada or performs independent personal services in Canada through a fixed base in Canada if the shareholder’s holding in us is effectively connected with such permanent establishment or fixed base. This summary is based on the provisions of the Canadian Tax Act and the regulations thereunder and on an understanding of the administrative practices of Canada Revenue Agency, and takes into account all specific proposals to amend the Canadian Tax Act or regulations made by the Minister of Finance of Canada as of the date hereof. It has been assumed that there will be no other relevant amendment of any governing law although no assurance can be given in this respect. This discussion is general only and is not a substitute for independent advice from a shareholder’s own Canadian and U.S. tax advisors.
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The provisions of the Canadian Tax Act are subject to income tax treaties to which Canada is a party, including the Canada-United States Income Tax Convention (1980), as amended (“Convention”).
Dividends on Common Shares and Other Income
Under the Canadian Tax Act, a non-resident of Canada is generally subject to Canadian withholding tax at the rate of 25 percent on dividends paid or deemed to have been paid to him or her by a corporation resident in Canada. The Convention limits the rate to 15 percent if the shareholder is a resident of the United States and the dividends are beneficially owned by and paid to such shareholder, and to 5 percent if the shareholder is also a corporation that is the beneficial owner of the dividends and owns at least 10 percent of the voting stock of the payor corporation.
The amount of a stock dividend (for tax purposes) would generally be equal to the amount by which the paid up or stated capital of the Company has increased by reason of the payment of such dividend. We will furnish additional tax information to shareholders in the event of such a dividend.
The tax payable on dividends is to be withheld at source by the Company or people acting on its behalf. The Company is liable for the amount of the tax, penalties and interest if it fails to so withhold. The taxpayer is liable in any event if the Company fails to withhold.
Dispositions of Common Shares
Under the Canadian Tax Act, a taxpayer’s capital gain or capital loss from a disposition of a common share of a Company is the amount, if any, by which his or her proceeds of disposition exceed (or are exceeded by, respectively) the aggregate of his or her adjusted cost base of the share and reasonable expenses of disposition. The capital gain or loss must be computed in Canadian currency using a weighted average adjusted cost base for identical properties. Fifty percent of a capital gain is included in income and taxed at ordinary Canadian tax rates. The amount by which a shareholder’s capital loss exceeds the capital gain in a year may be deducted from a capital gain realized by the shareholder in the three previous years or any subsequent year, subject to certain restrictions in the case of a corporate shareholder.
Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax on taxable capital gains, and may realize an allowable capital loss on a disposition of “taxable Canadian property.” Our common shares will constitute taxable Canadian property if at any time in the five years immediately preceding the disposition of 25% or more of the issued shares of any class of capital stock of the Company that issued the shares were owned by persons with whom the taxpayer did not deal at arm’s length or the taxpayer together with all such persons did not deal at arm’s length and in certain other circumstances.
The Convention relieves United States residents from liability for Canadian tax on capital gains derived on a disposition of shares unless the value of the shares is derived principally from “real property” situated in Canada.
Material U.S. Federal Income Tax Considerations
The following is a general discussion of material U.S. federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of our common shares. This discussion is of a general nature only and does not take into account the particular facts and circumstances, with respect to U.S. federal income tax issues, of any particular U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Taxation – Canadian Federal Income Tax Consequences” above).
The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.
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This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any U.S. Holder or prospective U.S. Holder of our common shares, and no opinion or representation with respect to the U.S. federal income tax consequences to any such U.S. Holder or prospective U.S. Holder is made. Accordingly, U.S. Holders and prospective U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of our common shares.
Circular 230 Disclosure
Any tax statement made herein regarding any U.S. federal tax issue is not intended or written to be used, and cannot be used, by any taxpayer for purposes of avoiding any penalties. Any such statement herein is written in connection with the marketing or promotion of the transaction to which the statement relates. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
U.S. Holders.
As used herein, a “U.S. Holder” means a holder of our common shares who is (i) a citizen or individual resident of the U.S., (ii) a corporation created or organized in or under the laws of the U.S. or of any political subdivision thereof, (iii) an estate whose income is taxable in the U.S. irrespective of source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of its substantial decisions or (B) the trust was in existence on August 20, 1996 and has properly elected under applicable Treasury Regulations to continue to be treated as a United States person. If a partnership or other “pass-through” entity treated as a partnership for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax treatment of the partners or owners of such partnership or other pass-through entity generally will depend on the status of such partners or owners and the activities of such partnership or pass-through entity.
Persons Not Covered.
This summary does not address the U.S. federal income tax consequences to persons (including persons who are U.S. Holders) subject to special provisions of U.S. federal income tax law, including (i) persons who are tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, non-resident alien individuals, U.S. tax expatriates or brokers, dealers or traders in securities, (ii) persons who have a “functional currency” other than the U.S. dollar, (iii) persons who own their common shares as part of a straddle, hedging, conversion transaction, constructive sale or other arrangement involving more than one position, (iv) persons who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services, and persons that own, directly or indirectly or by arbituarly 10% or more of the company’s outstanding voting share capital or voting power. (v) persons that own an interest in an entity that owns common shares, (vi) persons who own, exercise or dispose of any options, warrants or other rights to acquire common shares, (vii) persons who are partners or owners of partnerships or other pass-through entities or (viii) persons who own their common shares other than as a capital asset within the meaning of Section 1221 of the Code. This summary is limited to U.S. Holders (e.g.) not through an intermediary entity such as a partnership, such limited liability company, or trust?
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General Rules. U.S. Holders receiving distributions (including constructive distributions) with respect to our common shares are required to include in gross income as a dividend for U.S. federal income tax purposes the gross amount of such distributions (without reduction for any Canadian income tax withheld from such distributions), equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that we have current or accumulated earnings and profits. To the extent that distributions from us exceed our current or accumulated earnings and profits, such distributions will be treated first as a return of capital, to the extent of the U.S. Holder’s adjusted basis in the common shares, and thereafter as gain from the sale or exchange of our common shares. (See more detailed discussion at “Disposition of Our Common Shares” below). Any Canadian tax withheld from a distribution by us may be credited, subject to certain limitations, against the U.S. Holder’s U.S. federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's U.S. federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below).
Currency Gain or Loss. In the case of foreign currency received as a distribution that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.
Dividend not Eligible for Reduced Tax Rate. Dividends received on or before December 31, 2012 by U.S. Holders that are individuals, estates or trusts from “qualified foreign corporations,” as defined in Section 1(h)(11) of the Code, generally are taxed at the same preferential tax rates applicable to long-term capital gains. Although not free from doubt, it appears that we would be a “qualified foreign corporation,” as defined in Section 1(h)(11) of the Code if we were not a Passive Foreign Investment Company (“PFIC”). A corporation that is properly described as a PFIC, as defined below, for its taxable year during which it pays a dividend, or for its immediately preceding taxable year will not be treated as a “qualifying foreign corporation” and dividends received by U.S. Holders that are individuals, estates or trusts generally will be subject to U.S. federal income tax at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains).
Dividends not Eligible for Dividends Received Deduction. Dividends paid on our common shares generally will not be eligible for the “dividends received deduction” allowed to corporate shareholders receiving dividends from certain U.S. corporations. The availability of the dividends received deduction is subject to several complex limitations that are beyond the scope of this discussion, and U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the dividends received deduction.
Dividend Paid to Shareholder who Made QEF Election may be Exempt from Tax. Generally, shareholders are not subject to additional income taxation on distributions made by a PFIC to the extent of the shareholder’s basis in the corporation’s shares if a Qualified Electing Fund (“QEF”) election is in effect. (Please see the QEF election discussion below.) A shareholder’s basis in this situation is usually equal to the cost of purchasing the shares plus the amount of the corporation’s income that was reported on the shareholder’s return pursuant to the QEF election less any prior distributions made by the corporation to the shareholder. Again, these rules are subject to several exceptions that are beyond the scope of this discussion, and U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding whether dividends paid by us to them will be exempt from federal income tax if a QEF election is made.
Disposition of Our Common Shares.
General Rule. Subject to the PFIC Rules discussed further below, a U.S. Holder will recognize gain or loss upon the sale or other taxable disposition of our common shares equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in our common shares. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if our common shares are held for more than one year.
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Reduced Tax Rate. Under current law, preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation (other than a corporation subject to Subchapter S of the Code). Deductions for net capital losses are subject to significant limitations. For U.S. Holders that are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted. Sales of PFIC stock are not eligible for the reduced long-term capital gains rates that are usually applicable to sales of stock unless the shareholder made a QEF election regarding such shares. As discussed below, we believe we are a PFIC.
Management Believes Company is a Passive Foreign Investment Company.
General Discussion. We believe that we qualify as a PFIC, within the meaning of Sections 1291 through 1298 of the Code, for the fiscal year ended October 31, 2010, may have qualified as a PFIC in prior years and may qualify as a PFIC in subsequent years. A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. federal income taxation under one of three alternative tax regimes at the election of each such U.S. Holder. The following is a discussion of these three alternative tax regimes. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, actually or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).
Definition of PFIC. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the U.S. and, for any taxable year, either (a) 75% or more of its gross income is “passive income” or (b) The quarterly average value during a taxable year of the corporation’s assets that produce , or are held for the productions of, passive income is 50% or more of the average value of all assets held by the corporation.“Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. However, gains resulting from commodities transactions are generally excluded from the definition of passive income if “substantially all” of a merchant’s, producer’s or handler’s business is as an active merchant, producer or handler of such commodities. For purposes of the PFIC income test and the assets test, if a foreign corporation owns (directly or indirectly) at least 25% by value of the stock of another corporation, such foreign corporation shall be treated as if it (a) held a proportionate share of the assets of such other corporation, and (b) received directly its proportionate share of the income of such other corporation. As stated above, we believe we satisfied both the 75% passive income and the 50% passive assets tests during the fiscal year ended on October 31, 2009 and 2010 and anticipate meeting both of these tests in the fiscal year that will end on October 31, 2011. There can be no assurance that our determination concerning our PFIC status will not be challenged.
Generally Applicable PFIC Rules. If a U.S. Holder does not make a timely election to be taxed in conformity with the Mark-to-Market rules or the QEF rules (discussed below) during a year in which it holds (or is deemed to have held) shares issued by us while we are a PFIC (a “Non-Electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reasons of a pledge) of the U.S. Holder’s common shares and (ii) certain “excess distributions” (generally, distributions received in the current taxable year that are in excess of 125% of the average distributions received during the three preceding years or, if shorter, the U.S. Holder’s holding period) by us.
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A Non-Electing U.S. Holder generally would be required to pro rate all gains realized on the disposition of his common shares and all excess distributions on his common shares over the entire holding period for the common shares. Under this regime, (i) the excess distribution or gain would be allocated ratably to each day of the U.S. Holder’s holding period for the Common Shares, (ii) the amount allocated to the current taxable year and to any taxable year in which the corporation was a PFIC would be treated as ordinary income for the year of disposition, and (iii) the amount allocated to each other year would be subject to tax at the highest rate of tax in effect for that year and the interest charge generally applicable to underpayments of tax would be imposed on the resulting tax attributable to each such year.
If we are a PFIC for any taxable year during which a Non-Electing U.S. Holder holds our common shares, then we will continue to be treated as a PFIC with respect to such common shares, even if we are no longer definitionally a PFIC. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC.
Mark-to-Market Election. U.S. Holders who hold, actually or constructively, marketable stock (as specifically defined in the Treasury Regulations) of a foreign corporation that qualifies as a PFIC may annually elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will generally not be subject to the special taxation rules of Section 1291 discussed above. However, if the mark-to-market election is made by a Non-Electing U.S. Holder after the beginning of the holding period for the PFIC stock, then the Section 1291 rules will apply to certain dispositions of, distributions on and other amounts taxable with respect to our common shares. A U.S. Holder who makes the mark-to market election will include in income for the taxable year for which the election was made an amount equal to the excess, if any, of the fair market value of our common shares as of the close of such tax year over such U.S. Holder’s adjusted basis in such common shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the common shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for our common shares included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior tax year but for the Section 1291 interest on tax deferral rules discussed above with respect to Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A U.S. Holder’s adjusted tax basis in our common shares will be adjusted to reflect the amount included in or deducted from income as a result of a mark-to-market election. A mark-to-market election applies to the taxable year in which the election is made and to each subsequent taxable year, unless our common shares cease to be marketable, as specifically defined, or the IRS consents to revocation of the election.
QEF Election. A U.S. Holder who elects in a timely manner to treat us as a QEF (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current U.S. federal income tax for any taxable year in which we qualify as a PFIC on the U.S. Holder’s pro rata share of our (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder’s taxable year in which (or with which) our taxable year ends, regardless of whether such amounts are actually distributed.
The effective QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his common shares (or deemed to be realized on the pledge of his shares) as capital gain; (ii) treat his share of our net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of our annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as “personal interest” that is not deductible.
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The procedure a U.S. Holder must comply with in making an effective QEF election, and the U.S. federal income tax consequences of the QEF election, will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which we are a PFIC. If the U.S. Holder makes a QEF election in such first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF election by simply filing the appropriate QEF election documents at the time the U.S. Holder files his tax return for such first year. However, if we qualified as a PFIC in a prior year, then in addition to filing the QEF election documents, the U.S. Holder must elect to recognize (i) under the rules of Section 1291 of the Code (discussed herein), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date or (ii) if we are a controlled foreign corporation, the U.S. Holder’s pro rata share of our post-1986 earnings and profits as of the qualification date. The qualification date is the first day of our first tax year in which we qualified as a QEF with respect to such U.S. Holder. The elections to recognize such gain or earnings and profits can only be made if such U.S. Holder’s holding period for our common shares includes the qualification date. By electing to recognize such gain or earnings and profits, the U.S. Holder will be deemed to have made a timely QEF election. U.S. Holders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition to the above rules, under very limited circumstances, a U.S. Holder may make a retroactive QEF election if such U.S. Holder failed to file the QEF election documents in a timely manner.
A QEF election, once made with respect to us, applies to the tax year for which it was made and to all subsequent tax years, unless the election is invalidated or terminated, or the IRS consents to revocation of the election. If a QEF election is made by a U.S. Holder and we cease to qualify as a PFIC in a subsequent tax year, the QEF election will remain in effect, although not applicable, during those tax years in which we do not qualify as a PFIC. Therefore, if we again qualify as a PFIC in a subsequent tax year, the QEF election will be effective and the U.S. Holder will be subject to the rules described above for Electing U.S. Holders in such tax year and any subsequent tax years in which we qualify as a PFIC. Generally, shareholders do not make a QEF election unless they have sufficient information to determine their proportionate shares of a corporation’s net capital gain and ordinary earnings. We have not calculated these amounts for any shareholder and do not anticipate making these calculations in the foreseeable future. Therefore, U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the QEF election before making this election regarding our shares.
Other PFIC Rules. Under Section 1291(f) of the Code, the IRS has issued Proposed Treasury Regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of our common shares in the hands of the transferee and the basis of any property received in the exchange for those common shares would be increased by the amount of gain recognized. However, the specific U.S. federal income tax consequences to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred.
Information Filing
Each U.S. Holder generally must file IRS Form 8621 reporting distributions received and gain realized with respect to each PFIC in which the U.S. Holder holds a direct or indirect interest. In addition, U.S. Holders must file such other annual information as may be required by the U.S. Treasury Department in subsequent guidance. Each U.S. Holder should consult its tax advisor regarding these and any other applicable information or other reporting requirements.
The PFIC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the PFIC rules, including the advisability of and procedure for making a QEF election or a mark-to-mark election, and how these rules may impact their particular U.S. federal income tax situation.
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Foreign Tax Credit.
A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for U.S. federal income tax purposes with respect to such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from distributions to) the U.S. Holder during that year.
There are significant and complex limitations that apply to the foreign tax credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s U.S. income tax liability that the U.S. Holder’s “foreign source” income bears to his or its worldwide taxable income. In applying this limitation, the various items of income and deduction must be classified as either “foreign source” or “U.S. source.” Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes or “baskets” of income. Under current law, there are only two baskets, “passive category income” and “general category income”. Foreign taxes assigned to a particular class of income generally cannot offset United States tax on income assigned to another class. Unused foreign tax credits can generally be carried back one year and forward ten years. Dividends distributed by us will generally constitute “foreign source” income, and will be classified as “passive category income”.
The availability of the foreign tax credit and the application of the limitations with respect to the foreign tax credit are fact specific, and each U.S. Holder of our common shares should consult their own financial advisor, legal counsel or accountant regarding the foreign tax credit rules.
Backup Withholding Tax
Backup withholding of U.S. federal income tax, currently at a rate of 28%, may apply to certain payments made to a non-corporate U.S. Holder who:
• fails to provide an accurate taxpayer identification number (generally on Form W-9);
• is notified by the IRS that backup withholding is required; or
• in certain circumstances, fails to comply with applicable certification requirements.
Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability and may entitle that holder to a refund, provided that certain required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisor regarding the backup withholding tax rules applicable to them with respect to their ownership of Common Shares.
2010 Legislative Developments
Newly enacted legislation requires certain U.S. Holders that are individuals, estates or trusts to pay up to an additional 3.8% tax on, among other things, dividends and capital gains for taxable years beginning after December 31, 2012. In addition, the Company may require U.S. Holders to provide certain tax and reporting information necessary for the Company to comply with new reporting obligations. If a U.S. Holder does not provide such information, the U.S. Holder will generally be subject to U.S. withholding tax on payments made by the Company after January 1, 2013 in accordance with this new legislation.
Page 50
Controlled Foreign Corporation
The above sections of this discussion may not describe the U.S. federal income tax consequences to U.S. Holders resulting from the ownership and disposition of our common shares if we qualify as a “Controlled Foreign Corporation” (“CFC”).
If more than 50% of the total voting power or the total value of our outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by the Code Section 7701(a)(30)), each of which own, directly or indirectly, 10% or more of the total voting power of our outstanding shares (each a “10% Shareholder”), we could be treated as a CFC under Section 957 of the Code.
We do not believe that we currently qualify as a CFC. However, there can be no assurance that we will not be considered a CFC for the current or any future taxable year. The CFC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the CFC rules and how these rules may impact their U.S. federal income tax situation.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Expert
Not applicable.
H. Documents on Display
We are required to file reports with the Securities Commissions in the province of British Columbia and the province of Alberta electronically through the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), which can be viewed at www.sedar.com.
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we file reports, registration statements and other information with the SEC. Our reports, registration statements and other information can be inspected and copies at the public reference facilities maintained by the SEC at the following locations:
|
Judiciary Plaza
Room 1024
Washington, DC 20549
|
500 West Madison
Suite 1400
Chicago, IL 60661
|
Copies of these materials can also be obtained by mail at prescribed rates from the Public Reference Section of the SEC, 100 F Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330.
I. Subsidiary Information
Not applicable.
Page 51
Because our current cash is held in Canadian dollars, our financial results are expressed in Canadian dollars and our operations are primarily paid for in Canadian dollars, we are not subject to foreign currency fluctuations that would have any material affect on our financial position or results of operations. Also, because of the status of our operations, we do not believe that we are exposed to interest rate risk, commodity price risk or any other relevant market risk at this time.
We do not engage in currency speculation. Our trading activities do not involve money market holdings.
ITEM 12: DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There have been no defaults, arrearages or delinquencies with respect to indebtedness or the payment of dividends.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There have been no material modifications to our common shares.
ITEM 15: CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
The Company's President and Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of October 31, 2008. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.
Based on this evaluation, the our President and Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2010, our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our management recognizes that any controls and procedures no matter how well designed or operated, can only provide reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. However, because of the inherent limitations in all control systems, even after the remediation efforts described above, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company, have been detected.
B. Management/Annual Report on Internal Controls over Financial Reporting
The Board of Directors and management of the Company are responsible for establishing and maintaining adequate internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal controls over financial reporting are 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 Canadian GAAP, including a reconciliation to U.S. GAAP.
Page 52
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management conducted an assessment of the effectiveness of internal controls over financial reporting based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Based on this assessment, management has concluded that internal control over financial reporting was effective as of October 31, 2010 and onwards.
C. Attestation Report of the Registered Public Accounting Firm
Not applicable.
During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT
Prior to the filing of this report, our board of directors had made the determination that two audit committee financial experts, Mr. James Leman and Mr. Joseph Francese serve on the Audit Committee. Also, we believe that Mr. Francese is “independent” under applicable rules of the Securities and Exchange Commission.
ITEM 16B: CODE OF ETHICS
Our board of directors has not adopted a code of ethics that applies to our executive officers as such a code is not required under applicable Canadian laws.
ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Collins Barrow Edmonton LLP (“Collins Barrow”), audited our consolidated financial statements for the years ended October 31, 2009 and October 31, 2008. Smythe Ratcliffe, LLP audited our consolidated financial statements for the year ended October 31, 2010.
Audit Fees
Fees billed by Symthe Ratcliffe, LLPP for professional services totaled $36,822 for the year ended October 31, 2010. Fees billed by Collins Barrow for professional services totaled $65,000 for the year ended October 31, 2009. Such fees include fees associated with the audit of our annual financial statements or services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements for those fiscal years.
Page 53
None.
All other Fees
During the fiscal years ended October 31, 2009 and October 31, 2008, Collins Barrow did not bill for any products or services other than as described above.
Our audit committee pre-approves audit engagement terms and fees prior to the commencement of any audit work, other than that which may be necessary for our independent registered chartered accountants to prepare the proposed audit approach, scope and fee estimates. Our independent auditors annually submit a written proposal that details all audit and audit related services. Audit fees are fixed and contained in the proposal, and the audit committee reviews the nature and dollar value of services provided under such proposal. Any revisions to such proposal after the engagement has begun are reviewed and pre-approved by our audit committee.
There were no fees in 2010 that were not pre-approved by our audit committee. All services described above under the captions “Audit Fees”, “Audit-Related Fees” and “Tax Fees” were approved by our audit committee pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).
Not applicable.
ITEM 16E: PURCHASES OF EQUITY SECURITIES BY AFFILIATED PURCHASERS
|
(a) Total Number of Shares
(or Units) Purchased
|
(b) Weighted Average Price
Paid per Share (or Units)
|
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
|
|
|
November 1, 2009 to November 30, 2009
|
Nil
|
N/A
|
Nil
|
Nil
|
|
December 1, 2009 to December 31, 2009
|
Nil
|
N/A
|
Nil
|
Nil
|
|
January 1, 2010 – January 31, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
February 1, 2010 to February 29, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
March 1, 2010 to March 31, 2010
|
Nil
|
$0.17
|
Nil
|
120,000(1)
|
|
April 1, 2010 to April 30, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
May 1, 2010 to May 31, 2010
|
1,525,000(2)
|
$0.20
|
1,525,000(2)
|
1,525,000(2)
|
|
June 1, 2010 to June 30, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
July 1, 2010 to July 31, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
August 1, 2010 to August 31, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
September 1, 2010 to September 30, 2010
|
Nil
|
N/A
|
Nil
|
Nil
|
|
October 1, 2010 to October 31, 2010
|
7,130,000(3)
|
$0.10
|
7,130,000(3)
|
7,130,000(3)
|
Page 54
Notes:
|
(1)
|
120,000 common shares issuable pursuant to stock options granted under our stock option plan of which shall be exercisable in accordance with the plan and shall vest (i) 1/3 within 6 months; (ii) 1/3 within 12 months from the date of the grant and (iii) 1/3 within 18 months from the date of the grant.
|
|
(2)
|
1,525,000 common shares issued pursuant to a private placement at $0.20 per common share, and 1,525,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 per common share for 24 months following the date of closing will expire May 27, 2012. The private placement closed on May 27, 2012, and its closing was publicly announced on May 27, 2012.
|
|
(3)
|
7,130,000 common shares issued pursuant to a private placement at $0.10 per common share, and 7,130,000 common shares underlying warrants that are immediately exercisable at an exercise price of $0.30 per common share for 24 months following the date of closing will expire October 12, 2012. The private placement closed on October 12, 2012, and its closing was publicly announced on October 12, 2012.
|
PART III
ITEM 17: FINANCIAL STATEMENTS
Our audited consolidated financial statements include:
|
·
|
our balance sheets as at October 31, 2010 and October 31, 2009;
|
|
·
|
statements of operations and comprehensive loss for the periods ended October 31, 2010, 2009 and 2008;
|
|
·
|
statements of shareholders’ equity for the periods ended October 31, 2010, 2009 and 2008; and
|
|
·
|
statements of cash flows for the periods ended October 31, 2010, 2009 and 2008.
|
The consolidated financial statements as at and for the year ended October 31, 2010 were audited by Symthe Ratcliffe LLP, our Independent Registered Chartered Accountants. The consolidated financial statements as at the years ended October 31, 2009 and 2008 were audited by Collins Barrow, Edmonton LLP.
Page 55
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada and are reconciled to United States generally accepted accounting principles in Note 17. All figures are expressed in Canadian dollars.
Page 56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS OF TITAN TRADING ANALYTICS INC.
(A DEVELOPMENT STAGE COMPANY)
We have audited the consolidated balance sheet of Titan Trading Analytics Inc. as of October 31, 2010 and the consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
The consolidated financial statements as at October 31, 2009 and for the years ended October 31, 2009 and 2008, and the cumulative totals from 2002 (inception of development stage) were audited by another firm of auditors who expressed an opinion without reservation on those statements in their report dated February 15, 2010.
“Smythe Ratcliffe LLP” (signed)
Chartered Accountants
Vancouver, Canada
February 8, 2011
Page 57
COMMENTS BY AUDITORS FOR US READERS
The reporting standards of the Public Company Accounting Oversight Board (United States) for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Our report to the shareholders dated February 8, 2011, is expressed in accordance with Canadian reporting standards, which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.
“Smythe Ratcliffe LLP” (signed)
Chartered Accountants
Vancouver, Canada
February 8, 2011
Page 58
Report of Independent Registered Chartered Accountants
To the Shareholders of
Titan Trading Analytics Inc.
We have audited the consolidated balance sheets of Titan Trading Analytics Inc. as at October 31, 2009 and 2008, and the consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the years in the three year period ended October 31, 2009 and for the cumulative amounts from November 1, 2001 (inception of development stage) to October 31, 2009. 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 Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2009 and 2008 and the results of its operations and its cash flows for each of the years in the three year period ended October 31, 2009 and for the cumulative amounts from November 1, 2001 (inception of development stage) to October 31, 2009 in accordance with Canadian generally accepted accounting principles.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
| “Collins Barrow Edmonton LLP” | ||
| Edmonton, Alberta, Canada | Signed | |
| February 15, 2010 | Independent Registered Chartered Accountants |
This office is independently owned and operated by Collins Barrow Edmonton LLP
The Collins Barrow trademarks are used under License.
Page 59
Comments by Independent Registered Chartered Accountants for
US Readers on Canada-United States of America Reporting Differences.
The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. Although we conducted our audit in accordance with both Canadian generally accepted accounting standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the shareholders dated February 15, 2010, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the report of the independent registered Chartered Accountants when the events and conditions are adequately disclosed in the financial statements.
| “Collins Barrow Edmonton LLP” | ||
| Edmonton, Alberta, Canada | Signed | |
| February 15, 2010 | Independent Registered Chartered Accountants |
This office is independently owned and operated by Collins Barrow Edmonton LLP
The Collins Barrow trademarks are used under License.
Page 60
|
TABLE OF CONTENTS
|
|
| PAGE |
|
|
Consolidated Balance Sheets
|
58
|
|
Consolidated Statements of Operations
|
|
|
and Comprehensive Loss
|
59
|
|
Consolidated Statements of Shareholders’ Equity
|
60
|
|
Consolidated Statements of Cash Flows
|
61
|
|
Notes to Consolidated Financial Statements
|
62 - 88
|
Page 61
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Loss
(expressed in Canadian dollars)
|
October 31,
|
October 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
|
||||||||
|
Cash
|
$ | 209,736 | $ | 83,162 | ||||
|
Short-term investment (Note 3)
|
60,000 | 90,000 | ||||||
|
Other receivables
|
10,088 | 35,180 | ||||||
|
Prepaid expenses and deposits
|
37,727 | 27,743 | ||||||
| 317,551 | 236,085 | |||||||
|
Restricted cash (Note 4)
|
--- | 2,520 | ||||||
|
Deposit
|
24,074 | 27,749 | ||||||
|
Property and equipment (Note 5)
|
425,468 | 603,043 | ||||||
|
Technology rights (Note 6)
|
398,000 | --- | ||||||
|
|
$ | 1,165,093 | $ | 869,397 | ||||
|
LIABILITIES
|
||||||||
|
CURRENT
|
||||||||
|
Accounts payable and accrued liabilities (Note 11)
|
$ | 187,971 | $ | 181,851 | ||||
|
Loans and advances (Note 7)
|
2,111 | 296,096 | ||||||
| 190,082 | 477,947 | |||||||
|
Deferred lease inducements
|
76,574 | 99,554 | ||||||
|
Convertible debentures (Note 8)
|
283,509 | --- | ||||||
| 550,165 | 577,501 | |||||||
|
SHAREHOLDERS’ EQUITY
|
||||||||
|
Share capital (Note 9)
|
15,845,770 | 13,591,954 | ||||||
|
Warrants (Note 9)
|
1,901,217 | 1,115,875 | ||||||
|
Contributed surplus (Note 9)
|
2,899,907 | 2,276,357 | ||||||
|
Convertible debentures – equity component (Note 8)
|
11,564 | --- | ||||||
|
Deficit accumulated in development stage
|
(16,888,418 | ) | (13,537,178 | ) | ||||
|
Deficit
|
(3,155,112 | ) | (3,155,112 | ) | ||||
| 614,928 | 291,896 | |||||||
| $ | 1,165,093 | $ | 869,397 | |||||
|
Nature of Operations and Going Concern (Note 1)
|
||||||||
|
Commitments (Note 12)
|
||||||||
|
Subsequent Events (Note 19)
|
||||||||
Approved by the Board:
| “John Coulter” | “James Leman” | ||
| Director | Director |
See accompanying notes to consolidated financial statements.
Page 62
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Loss
(expressed in Canadian dollars)
|
2010
|
2009
|
2008
|
Cumulative
from 2002
(inception of
development stage)
|
|||||||||||||
|
EXPENSES
|
||||||||||||||||
|
Research and development (Note 11)
|
$ | 873,215 | $ | 1,078,379 | $ | 871,222 | $ | 5,849,284 | ||||||||
|
General and administrative (Note 11)
|
1,903,159 | 2,279,935 | 1,730,916 | 9,388,200 | ||||||||||||
|
Amortization
|
177,575 | 186,774 | 147,779 | 833,184 | ||||||||||||
|
Bank charges and interest, net
|
28,455 | 11,844 | 1,671 | 109,533 | ||||||||||||
|
Loss on short-term investment
|
--- | --- | 350,467 | 353,467 | ||||||||||||
|
Gain on foreign exchange
|
(5,287 | ) | (28,183 | ) | (26,070 | ) | (19,373 | ) | ||||||||
|
|
||||||||||||||||
|
Net loss and comprehensive loss for the period
|
$ | (2,977,117 | ) | $ | (3,528,749 | ) | $ | (3,075,985 | ) | $ | (16,514,295 | ) | ||||
|
LOSS PER SHARE – Basic and diluted
|
$ | (0.05 | ) | $ | (0.07 | ) | $ | (0.07 | ) | |||||||
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
61,292,998 | 51,951,767 | 44,032,360 | |||||||||||||
Page 63
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity
(expressed in Canadian dollars)
|
Years Ended October 31, 2010, 2009 and 2008
|
||||||
|
Share
Capital
|
Warrants
|
Contributed
Surplus
|
Convertible
Debentures - Equity
|
Deficit
|
Total
|
|
|
October 31, 2007
|
$ 8,795,045
|
$ 495,776
|
$ 544,682
|
$ --
|
$(10,087,556)
|
$ (252,053)
|
|
Net loss
|
(3,075,985)
|
(3,075,985)
|
||||
|
Expired/forfeited warrants
|
(200,550)
|
200,550
|
---
|
|||
|
Stock options exercised
|
47,905
|
(14,405)
|
33,500
|
|||
|
Warrants exercised
|
733,783
|
(129,017)
|
604,766
|
|||
|
Private placements
|
2,168,586
|
812,430
|
2,981,016
|
|||
|
Warrants modified
|
(37,664)
|
37,664
|
---
|
|||
|
Stock compensation expense
|
548,342
|
548,342
|
||||
|
October 31, 2008
|
11,707,655
|
1,016,303
|
1,279,169
|
(13,163,541)
|
839,586
|
|
|
Net loss
|
(3,528,749)
|
(3,528,749)
|
||||
|
Expired/forfeited warrants
|
(239,077)
|
239,077
|
---
|
|||
|
Stock options exercised
|
169,120
|
(49,820)
|
119,300
|
|||
|
Private placements
|
1,644,179
|
338,649
|
1,982,828
|
|||
|
Shares issued for service
|
71,000
|
71,000
|
||||
|
Stock compensation expense
|
807,931
|
807,931
|
||||
|
October 31, 2009
|
13,591,954
|
1,115,875
|
2,276,357
|
(16,692,290)
|
291,896
|
|
|
Net loss
|
(2,977,117)
|
(2,977,117)
|
||||
|
Private placements
|
2,266,364
|
626,049
|
2,892,413
|
|||
|
Returned to treasury
|
(12,548)
|
(3,524)
|
(9,306)
|
(25,378)
|
||
|
Warrants extension
|
162,817
|
(162,817)
|
---
|
|||
|
Stock compensation expense
|
623,550
|
623,550
|
||||
|
Convertible debentures
|
11,564
|
11,564
|
||||
|
Technology rights payment in excess of carrying value
|
(202,000)
|
(202,000)
|
||||
|
October 31, 2010
|
$ 15,845,770
|
$ 1,901,217
|
$ 2,899,907
|
$ 11,564
|
$(20,043,530)
|
$ 614,928
|
See accompanying notes to consolidated financial statements.
Page 64
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in Canadian dollars)
|
Years Ended October 31
|
Cumulative from
2002 (inception of
development stage)
|
||||
|
2010
|
2009
|
2008
|
|||
|
OPERATING
|
|||||
|
Net loss for the period
|
$ (2,977,117)
|
$ (3,528,749)
|
$ (3,075,985)
|
$ (16,514,295)
|
|
|
Adjustments for non-cash items
|
|||||
|
Amortization of property and equipment
|
177,575
|
186,774
|
147,779
|
833,184
|
|
|
Research and development
|
---
|
71,000
|
---
|
645,235
|
|
|
Stock compensation expense
|
623,550
|
807,931
|
548,342
|
2,409,685
|
|
|
Loss on disposal of equipment
|
---
|
---
|
---
|
1,021
|
|
|
Amortization of deferred lease inducements
|
(22,980)
|
(15,316)
|
---
|
(38,296)
|
|
|
Accretion interest
|
1,073
|
---
|
---
|
1,073
|
|
|
Foreign exchange gain
|
2,469
|
---
|
---
|
2,469
|
|
|
Net changes in non-cash working capital balances:
Prepaid expenses and deposits
Other receivables
Accounts payable and accrued liabilities
|
(6,309)
25,092
6,120
|
6,690
(35,180)
61,365
|
(30,521)
---
(212,138)
|
381
(66,524)
155,265
|
|
|
Cash used in operating activities
|
(2,170,527)
|
(2,445,485)
|
(2,622,523)
|
(12,570,802)
|
|
|
INVESTING
|
|||||
|
Due from related parties
|
---
|
58,754
|
(58,754)
|
---
|
|
|
Loan receivable
|
---
|
---
|
---
|
(62,735)
|
|
|
Purchase of property and equipment
|
---
|
(47,179)
|
(731,147)
|
(980,703)
|
|
|
Purchase of technology rights
|
(600,000)
|
---
|
---
|
(600,000)
|
|
|
Proceeds from deferred lease inducements
|
---
|
114,870
|
---
|
114,870
|
|
|
Restricted cash
|
2,520
|
227,409
|
(203,972)
|
25,957
|
|
|
Short-term investment
|
30,000
|
---
|
140,628
|
(55,087)
|
|
|
Cash provided by (used in) investing activities
|
(567,480)
|
353,854
|
(853,245)
|
(1,557,698)
|
|
|
FINANCING
|
|||||
|
Issue of share capital, net of issue costs
|
2,892,413
|
2,102,128
|
3,619,282
|
13,530,618
|
|
|
Redemption of common shares
|
---
|
---
|
---
|
(15,000)
|
|
|
Loans and advances
|
(293,985)
|
(222,929)
|
131,836
|
169,731
|
|
|
Convertible debentures
|
294,000
|
---
|
---
|
294,000
|
|
|
Shares returned to treasury
|
(25,378)
|
---
|
---
|
(25,378)
|
|
|
Cash provided by financing activities
|
2,867,050
|
1,879,199
|
3,751,118
|
13,953,971
|
|
|
EFFECT OF EXCHANGE RATE CHANGES
|
(2,469)
|
(39,360)
|
40,940
|
8,848
|
|
|
INCREASE (DECREASE) IN CASH
|
126,574
|
(251,792)
|
316,290
|
(165,681)
|
|
|
CASH, BEGINNING OF PERIOD
|
83,162
|
334,954
|
18,664
|
375,417
|
|
|
CASH, END OF PERIOD
|
$ 209,736
|
$ 83,162
|
$ 334,954
|
$ 209,736
|
|
|
CASH USED IN OPERATING ACTIVITIES INCLUDES:
|
|||||
|
Bank charges and interest
|
$ 15,222
|
$ 12,522
|
$ 7,500
|
$ 111,364
|
|
|
Income taxes paid
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
|
|
Supplementary information:
Shares issued for services
|
$ ---
|
$ 71,000
|
$ ---
|
$ ---
|
|
Page 65
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
1.
|
NATURE OF OPERATIONS AND GOING CONCERN
|
Nature of Operations
Titan Trading Analytics Inc. (“Titan” or the “Company”) was incorporated on November 30, 1993. The Company is a development stage company that focuses on developing financial software for market timing, trading analytics and automated trading execution. The Company has yet to establish profitable business operations and has remained in research and development mode since its incorporation. Since 2002 the Company has been developing an automated trading platform. Cumulative balances incurred in developing the automated trading platform since 2002 have been presented in the financial statements.
Going Concern
The consolidated financial statements of Titan have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.
Several adverse conditions cast substantial doubt on the validity of this assumption. The Company has incurred significant operating losses over the past several fiscal years and has an accumulated deficit of $20,043,530 at October 31, 2010 (2009 - $16,692,290).
Management has evaluated the Company’s alternatives to enable it to pay its liabilities as they become due and payable in the next twelve-month period, including reducing operating losses and obtaining additional or new financing in order to advance its business plan. The Company believes these measures will provide liquidity for it to continue as a going concern throughout fiscal 2011. However, management can provide no assurance thereon.
If the going concern assumption was not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) with the Canadian dollar as the Company’s functional and reporting currency. The following is a summary of the significant accounting policies used in the preparation of these consolidated financial statements.
Consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Titan Trading GP Inc., Titan Trading Corp., Titan Holdings USA, LLC and Titan Trading USA, LLC. All significant inter-company balances and transactions have been eliminated on consolidation.
Page 66
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Cash Equivalents
Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, with an original maturity of less than three months at the time of purchase.
Research and Development
Research costs are expensed when incurred. Development costs are expensed when incurred prior to the establishment of technical feasibility. Subsequent to the establishment of technical feasibility, the costs associated with the development of a commercial product for which adequate resources exist to market the product are capitalized as software and systems development. Capitalization of development costs ceases when the product is available for general release to customers. There were no development costs capitalized during the year ended October 31, 2010.
Property and Equipment
Computer equipment is recorded at cost less accumulated amortization and is amortized at 30% declining balance per annum.
Office furniture is recorded at cost less accumulated amortization and is amortized at 20% declining balance per annum.
Leasehold improvements are recorded at cost less accumulated amortization and are amortized over the lease term.
The Company makes periodic reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying value of the assets would be written down to fair value when undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount.
Technology Rights
All rights to intellectual property and the mutual covenants and agreements related to the products of Titan (the “IP”) are recorded at the carrying value for transactions with related parties with the difference of the fair value of consideration paid recorded to deficit. No amortization has been recorded as at October 31, 2010 as the life of the IP is indeterminable.
Deferred Lease Inducement
Lease inducements received in the form of leasehold improvement costs are amortized over the term of the lease as a reduction of rent expense.
Page 67
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Convertible Debentures
The Company’s convertible debentures are considered to be a compound financial instrument that contains both a debt component and an equity component.
On issuance of the convertible debentures, the fair value of the equity component is determined using the Trinomial Barrier Model. This model requires the input of a number of assumptions including dividend yields, expected stock price volatility, expected time until conversion and risk-free interest rates. The value is recorded as equity and the remainder of the proceeds are allocated as a separate component of debt. Transaction costs are appointed between the debt and equity component based on their respective carrying amounts when the instruments are issued.
On conversion, the carrying amount of the debt component and the equity component are transferred to share capital. In the event that the instrument is settled in cash, the transaction is treated as an extinguishment of the instrument and a gain or loss on the extinguishment of the liability component is recognized in the current period operations while any gain or loss on the equity component is applied to contributed surplus.
The interest cost recognized in respect of the debt component represents the accretion of the liability, over its expected life using the effective interest method, to the amount that would be payable if redeemed.
Future Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Future tax assets are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized.
Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than the Canadian dollar are translated using the rate of exchange prevailing at the balance sheet date. Revenues and expenses and other assets and liabilities are translated using the exchange rate prevailing on the transaction date. Gains and losses on translation are included in operations.
Page 68
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation (continued)
The Company translates the assets and liabilities of integrated foreign operations to Canadian dollars using the temporal method of translation. Under the temporal method, monetary assets and liabilities are translated at the rate of exchange prevailing at year-end, non-monetary assets and liabilities are translated at average rates of exchange during the year, with the exception of amortization, which is translated at historical exchange rates. Revenues and expenses are translated at the rates of exchange prevailing when the transactions occurred. Gains and losses resulting from translation adjustments are included in operations.
|
(c)
|
Use of Estimates
|
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates used by management include valuation allowances for future income taxes, rates and useful lives for the amortization of property and equipment and technology rights, fair value of financial instruments, and determining the fair value of stock-based compensation and the valuation of warrants and equity portion of convertible debentures.
Warrants
Proceeds from unit placements are allocated between shares and warrants issued according to their relative fair value using the weighted average method to determine the fair value of warrants issued.
Loss per Share
Basic loss per share is determined by dividing net loss by the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method to determine the dilutive effect of stock options, warrants and similar instruments. Under this method the dilutive effect on earnings per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that proceeds received from such exercise would be used to repurchase common shares at the average market price during the year. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.
Page 69
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Stock-based Compensation
The Company accounts for stock-based compensation using a fair value based method with respect to all stock-based payments to directors, employees and non-employees. For directors and employees, the fair value of the options is measured at the date of grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is completed or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For directors, employees and non-employees, the fair value of the options is accrued and charged to operations, with the offset credit to contributed surplus, over the vesting period. If and when the stock options are exercised, the applicable amounts from contributed surplus are transferred to share capital.
Non-monetary Transactions
All non-monetary transactions are measured at the fair value of the asset surrendered or the asset received, whichever is more reliable, unless the transaction lacks commercial substance. The commercial substance requirement is met when the future cash flows are expected to change significantly as a result of the transaction.
Financial Instruments
All financial instruments are classified as one of the following: held-to-maturity, loans and receivables, held-for-trading, available-for-sale or other financial liabilities. Financial assets and liabilities held-for-trading are measured at fair value with gains and losses recognized in net income (loss). Financial assets held-to-maturity, loans and receivables, and other financial liabilities are measured at amortized cost. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) and reported in shareholders’ equity. Any financial instrument may be designated as held-for-trading upon initial recognition.
Transaction costs that are directly attributable to the acquisition or issue of financial instruments that are classified as other than held-for-trading, which are expensed as incurred, are included in the initial carrying value.
Page 70
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value Hierarchy
The Company provides information about its financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair value:
|
·
|
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
·
|
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e, as prices) or indirectly (i.e, derived from prices); and
|
|
·
|
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
Future Accounting Pronouncements
|
|
a)
|
Business Combinations, Consolidated Financial Statements and Non-Controlling Interests
|
In January 2009, the Canadian Institute of Chartered Accountants issued Sections 1582, “Business Combinations”, 1601, “Consolidated Financial Statements”, and 1602, “Non-controlling Interests”, which replace Sections 1581, “Business Combinations”, and 1600, “Consolidated Financial Statements”. Section 1582 is applicable for the Company’s business combinations with acquisition dated on or after November 1, 2011. Early adoption of this section is permitted. Section 1601 together with Section 1602 establish standards for the preparation of consolidated financial statements. Section 1601 is applicable for the Company’s financial statements for its fiscal year beginning November 1, 2011. Early adoption of this section is also permitted. If the Company chooses to early adopt any one of these sections, the other two sections must also be adopted at the same time.
Page 71
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Future Accounting Pronouncements (continued)
b) International Financial Reporting Standards (“IFRS”)
The Canadian Accounting Standards Board will require all public companies to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company will be required to prepare both current and comparative financial information using IFRS. While the conceptual framework for IFRS and Canadian GAAP are similar, there are significant differences in recognition, measurement and disclosure requirements. While the Company has begun assessing the adoption of IFRS for the fiscal year ending October 31, 2012, the financial impact of the transition to IFRS cannot be reasonably determined at this time.
3. SHORT-TERM INVESTMENT
Short-term investment consists of a $60,000 (2009 - $90,000) guaranteed investment certificate bearing interest at prime less 2.00%, maturing September 2, 2011. The investment is collateral for a $60,000 (2009 - $90,000) letter of credit, which has been issued by the Company for their leased premises.
4. RESTRICTED CASH
Restricted cash consists of amounts held in a trading account for the purpose of trading securities to test the financial trading software that the Company is developing. As at October 31, 2010 there is no restricted cash.
5. PROPERTY AND EQUIPMENT
|
2010
|
2009
|
|||||||||||||||||||||||
|
Cost
|
Accumulated
Amortization
|
Net Book
Value
|
Cost
|
Accumulated
Amortization
|
Net Book
Value
|
|||||||||||||||||||
|
Computer equipment
|
$ | 328,865 | $ | 222,256 | $ | 106,609 | $ | 328,865 | $ | 174,429 | $ | 154,436 | ||||||||||||
|
Office furniture
|
88,349 | 41,643 | 46,706 | 88,349 | 29,877 | 58,472 | ||||||||||||||||||
|
Leasehold improvements
|
589,908 | 317,755 | 272,153 | 589,908 | 199,773 | 390,135 | ||||||||||||||||||
| $ | 1,007,122 | $ | 581,654 | $ | 425,468 | $ | 1,007,122 | $ | 404,079 | $ | 603,043 | |||||||||||||
Page 72
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
The Company purchased all rights to the algorithms and codes for software from a non-arm’s length party for cash consideration of $600,000.
|
2010
|
2009
|
|||||||
|
Purchase of technology rights
|
$ | 600,000 | $ | --- | ||||
|
Allocation of excess of exchange amount from carrying value acquired from related party to deficit
|
(202,000 | ) | --- | |||||
| $ | 398,000 | $ | --- | |||||
No amortization was taken during the year.
7. LOANS AND ADVANCES
|
2010
|
2009
|
|||||||
|
Loan payable, is due to a Director of the Company. The loan is non-interest-bearing, unsecured and has no fixed terms of repayment
|
$ | 2,111 | $ | 5,198 | ||||
|
Advance from a third party, bears no interest, is unsecured and is due on demand
|
--- | 290,898 | ||||||
| $ | 2,111 | $ | 296,096 | |||||
Page 73
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
On August 27, 2010, the Company issued $294,000 in convertible debentures. The debentures will mature on August 26, 2012 and bear interest of 12% per annum. The maturity date can be reduced to August 26, 2011 at the option of the holder. The debentures will be convertible into units at a deemed price of $0.15 per unit on or before the maturity date. Each unit consists of one common share and one share purchase warrant that is exercisable at a price of $0.30 for up to six months from the date of conversion. The debentures have an early conversion right whereby if the average trading price per share is greater than or equal to $0.40 for a period of 20 consecutive trading days, the Company shall have the right to convert the debentures at the conversion price at any time prior to the maturity date. The debentures have been bifurcated into the debt and equity components as follows:
|
2010
|
2009
|
|||||||
|
Face value of convertible debentures
|
$ | 294,000 | $ | --- | ||||
|
Portion of convertible debentures allocated to equity
|
(11,564 | ) | --- | |||||
| 282,436 | --- | |||||||
|
Interest expense
|
1,073 | --- | ||||||
| $ | 283,509 | $ | --- | |||||
|
The assumptions used to fair value the equity component of the convertible debentures are as follows:
|
||||
|
Expected dividend rate
|
0 | % | ||
|
Expected volatility
|
95.78 | % | ||
|
Risk-free interest rate
|
1.26 | |||
|
Expected life of the debenture term
|
2 years
|
|||
The present value of the contractual obligation of the convertible debentures as at October 31, 2010 is $265,000 and is calculated using the effective interest rate of 15%.
Page 74
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
Authorized:
Unlimited number of common shares without par value
Unlimited number of preferred shares with no par value
Preferred shares may be issued in one or more series and the directors are authorized to fix the number of shares in each series and determine the designation, rights, privileges and conditions attached to the shares of each series.
|
Common Shares
|
Warrants
|
|||||||||||||||
|
Shares
|
Amount
|
Warrants
|
Amount
|
|||||||||||||
|
Balance, October 31, 2001
|
9,812,966 | $ | 3,715,938 | 680,000 | $ | --- | ||||||||||
|
Issued for cash
|
--- | --- | --- | --- | ||||||||||||
|
Balance, October 31, 2002
|
9,812,966 | 3,715,938 | 680,000 | --- | ||||||||||||
|
Warrants expired
|
--- | --- | (680,000 | ) | --- | |||||||||||
|
Balance, October 31, 2003
|
9,812,966 | 3,715,938 | --- | --- | ||||||||||||
|
Private placements
|
3,211,999 | 242,456 | 3,211,999 | 116,544 | ||||||||||||
|
Share issuance costs
|
--- | (9,800 | ) | --- | --- | |||||||||||
|
Balance, October 31, 2004
|
13,024,965 | 3,948,594 | 3,211,999 | 116,544 | ||||||||||||
|
Private placements
|
5,455,110 | 878,014 | 4,655,014 | 154,561 | ||||||||||||
|
Warrants exercised
|
430,000 | 72,240 | (430,000 | ) | (20,640 | ) | ||||||||||
|
Shares issued for debt
|
3,736,324 | 472,309 | --- | --- | ||||||||||||
|
Shares issuance costs
|
--- | (77,652 | ) | --- | --- | |||||||||||
|
Warrants expired and forfeited
|
--- | --- | (859,999 | ) | (21,440 | ) | ||||||||||
|
Balance, October 31, 2005
|
22,646,399 | 5,293,505 | 6,577,014 | 229,025 | ||||||||||||
|
Private placements
|
6,012,765 | 1,157,590 | 3,006,388 | 345,776 | ||||||||||||
|
Warrants exercised
|
2,155,333 | 363,920 | (2,155,333 | ) | (85,947 | ) | ||||||||||
|
Warrants issued in software transfer
|
--- | --- | (2,000,000 | ) | --- | |||||||||||
|
Warrants expired and forfeited
|
--- | --- | (983,500 | ) | (58,274 | ) | ||||||||||
|
Share issuance costs
|
--- | (97,337 | ) | --- | (21,070 | ) | ||||||||||
|
Balance, October 31, 2006
|
30,814,497 | $ | 6,717,678 | 8,444,569 | $ | 409,510 | ||||||||||
Page 75
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
9. SHARE CAPITAL (continued)
|
||||||||||||||||
|
Common Shares
|
Warrants
|
|||||||||||||||
|
Shares
|
Amount
|
Warrants
|
Amount
|
|||||||||||||
|
Balance, October 31, 2006
|
30,814,497 | $ | 6,717,678 | 8,444,569 | $ | 409,510 | ||||||||||
|
Private placement
|
3,311,299 | 957,552 | 1,655,632 | 201,413 | ||||||||||||
|
Warrants exercised
|
3,010,403 | 884,171 | (3,010,403 | ) | (86,150 | ) | ||||||||||
|
Stock options exercised
|
377,500 | 78,904 | --- | --- | ||||||||||||
|
Warrants expired and forfeited
|
--- | --- | (581,667 | ) | (11,633 | ) | ||||||||||
|
Shares issued for service
|
300,000 | 249,000 | --- | --- | ||||||||||||
|
Share issuance costs
|
--- | (92,260 | ) | --- | (17,364 | ) | ||||||||||
|
Balance, October 31, 2007
|
37,813,699 | 8,795,045 | 6,508,131 | 495,776 | ||||||||||||
|
Private placement
|
9,571,234 | 2,243,139 | 6,035,617 | 841,855 | ||||||||||||
|
Warrants exercised
|
1,494,412 | 733,783 | (1,494,412 | ) | (129,017 | ) | ||||||||||
|
Stock options exercised
|
335,000 | 47,905 | --- | --- | ||||||||||||
|
Warrants expired and forfeited
|
--- | --- | (1,358,087 | ) | (200,550 | ) | ||||||||||
|
Warrants modified
|
--- | (37,664 | ) | --- | 37,664 | |||||||||||
|
Share issuance costs
|
--- | (74,553 | ) | --- | (29,425 | ) | ||||||||||
|
Balance, October 31, 2008
|
49,214,345 | 11,707,655 | 9,691,249 | 1,016,303 | ||||||||||||
|
Private placement
|
7,743,533 | 1,693,027 | 3,871,767 | 352,233 | ||||||||||||
|
Stock options exercised
|
1,160,000 | 169,120 | --- | --- | ||||||||||||
|
Warrants expired and forfeited
|
--- | --- | (1,655,632 | ) | (239,077 | ) | ||||||||||
|
Share issuance costs
Shares issued for services
|
--- 200,000 | (48,848 | ) 71,000 | --- --- | (13,584 | ) --- | ||||||||||
|
Balance, October 31, 2009
|
58,317,878 | 13,591,954 | 11,907,384 | 1,115,875 | ||||||||||||
|
Private placements
|
24,785,750 | 2,296,821 | 24,785,750 | 632,878 | ||||||||||||
|
Warrants extended
|
--- | --- | 162,817 | |||||||||||||
|
Warrants expired and forfeited
|
--- | --- | 2,000,000 | --- | ||||||||||||
|
Share issuance costs
|
--- | (30,457 | ) | --- | (6,829 | ) | ||||||||||
|
Return to treasury
|
(84,600 | ) | (12,548 | ) | (42,300 | ) | (3,524 | ) | ||||||||
|
Balance, October 31, 2010
|
83,019,028 | $ | 15,845,770 | 34,650,834 | $ | 1,901,217 |
2010
On May 27, 2010, the Company closed a non‐brokered private placement of units for gross proceeds of $902,250. The Company issued 4,511,250 units at $0.20 per unit. Each unit consists of one common share and one common share purchase warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring May 27, 2012. Of the gross proceeds, $661,370 and $240,880 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid a total of $4,000 in finder’s fees and incurred other share issue costs of $6,067.
Page 76
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
2010 (continued)
On October 12, 2010, the Company closed a non-brokered private placement of units, for gross proceeds of $1,982,450. The Company issued 19,824,500 units at $0.10 per unit. Each unit consists of one common share and one warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring October 12, 2012. Of the gross proceeds, $1,600,389 and $382,061 have been allocated to common shares and warrants, respectively, using the relative fair value method. The common shares and warrants comprising the units and the common shares issuable upon exercise of the warrants are subject to a four-month restricted period, which expires February 12, 2011. The Company paid a total of $14,500 in finder’s fees to arm’s length parties and incurred other share issue costs of $11,630.
On October 20, 2010, the Company closed a non-brokered private placement of units, which raised $45,000. The Company will issue 450,000 Units at $0.10 per unit. Each unit consists of one common share and one warrant. Each whole warrant is exercisable into one common share at a price of $0.30 expiring October 12, 2012. The common shares and warrants comprising the units and the common shares issuable upon exercise of the warrants are subject to a four-month restricted period, which expires February 20, 2011. Of the gross proceeds, $35,063 and $9,937 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid $1,089 in share issue costs.
2009
On March 17, 2009, the Company closed a non‐brokered private placement of units for gross proceeds of $656,260. The Company issued 2,187,533 units at $0.30 per unit. Each unit consists of one common share and one‐half of one warrant. Each whole warrant is exercisable into one common share at a price of $0.45 during the first year following the date of closing and at $0.60 during the subsequent year, and will expire March 17, 2011. Of the gross proceeds, $512,335 and $143,925 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid a total of $44,056 in finder’s fees.
On October 15, 2009, the Company closed a non‐brokered private placement of units for gross proceeds of $1,389,000. The Company issued 5,556,000 units at $0.25 per unit. Each unit consists of one common share and one‐half of one warrant. Each whole warrant is exercisable into one common share at a price of $0.375 during the first year following the date of closing and at $0.50 during the subsequent year, and will expire October 15, 2011. Of the gross proceeds, $1,180,692 and $208,308 have been allocated to common shares and warrants, respectively, using the relative fair value method. The Company paid a total of $18,376 in finder’s fees.
During 2009, a total of 1,160,000 options were exercised.
In April 2009, the Company granted 200,000 shares for service to consultants of the Company. The fair value of the shares was determined on the date of issue to be $0.355 per share. As a result, the Company has recorded the cost of the shares at $71,000 and a consulting fee expense of $71,000.
Page 77
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
9. SHARE CAPITAL (continued)
2009 (continued)
Pursuant to disinterested shareholder approval on October 2, 2009, the Software Transfer Agreements were further amended and the TSX Venture Exchange approved such amendments on November 10, 2009.
According to the amended terms of the Software Transfer Agreements, commencing June 1, 2008, an aggregate of 4,500,000 shares and 2,000,000 performance warrants would be issued based on gross revenues from TickAnalyst as follows:
If, between June 1, 2009 and May 31, 2010, Titan achieves cumulative gross revenue of at least $400,000, then 1,500,000 shares would be released after September 30, 2009. If, in the same period, Titan achieves cumulative gross revenue of at least $800,000, an additional 1,500,000 shares would be released after January 31, 2010. If, in the same period, Titan achieves cumulative gross revenue of at least $1,200,000, an additional 1,500,000 shares would be released after May 31, 2010 and 1,000,000 performance warrants at $0.50 would be exercisable for the six-month period June 1, 2010 to November 30, 2010. If, between June 1, 2010 and May 31, 2011, Titan achieves cumulative gross revenue of at least $1,800,000, an additional 1,000,000 performance warrants at $1.00 would be exercisable for the six-month period of June 1, 2011 to November 30, 2011.
During the year ended October 31, 2010, the gross revenue milestones were not achieved and therefore, no common shares are issuable and the performance warrants have been forfeited. The Company is currently reviewing possible avenues for restructuring of the Software Transfer Agreements.
In connection with the Software Transfer Agreements, the Company entered into consulting agreements with each of Cignal and Mr. Gossland, whereby they provided consulting services to the Company until October 31, 2008. Both Mr. Gossland and Mr. Carrozza continue to provide services to the Company on a month to month basis. The Company is currently making formal service contract arrangements with both Mr. Gossland and Mr. Carrozza.
The fair value of the common shares and warrants and the change in fair value as a result of the modification to the terms of the warrants has not been reflected in the financial statements, as the issuance of the shares and warrants are subject to performance conditions that have not been met.
Escrowed Shares
As at October 31, 2010, there were no common shares held in escrow.
Page 78
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
9. SHARE CAPITAL (continued)
Stock Options
Under the Company’s stock option plan, options to purchase common shares of the Company may be granted to directors, officers, employees and consultants of the Company. These options entitle the holder to purchase one common share at a subscription price that shall not be less than that which may be acceptable to any stock exchange on which the Company’s shares are traded. The number of common shares reserved for issuance, within a one-year period, to any one optionee shall not exceed 5% of the outstanding common shares. The maximum number of common shares reserved for issuance at any time may not exceed 20% of the number of outstanding common shares. The Board of Directors determine the time during which options shall vest and the method of vesting, provided that the options shall not vest on more favourable terms than one-third of the total number of options granted on the date of grant and on each of the 12-month and 18-month anniversaries of the date of grant. Options expire no later than the tenth anniversary of the date of grant or as determinined by the Committee. All rights to purchase shares pursuant to the plan terminate: (i) if the Optionee shall no longer be a director or officer of, be in the employ of, or be providing ongoing management or consulting services to the Company at a certain date (the “Cessation Date”) the Option shall terminate on the earlier of the expiry date of the Option and a reasonable period (the “Cancellation Period”) following the Cessation Date where the Cancellation Period shall be at the discretion of the Committee on a case-by-case basis optionee ceasing to be a director, officer, employee or consultant; or (ii) within 12 months after the death of an optionee, unless exercised within that period.
During the year ended October 31, 2010, the Company issued the following stock options to directors, officers and consultants of the Company:
|
Date
|
# Stock Options
|
Exercise Price
|
Expiry Date
|
|
November 13, 2009
|
1,300,000
|
$0.25
|
November 13, 2014
|
|
November 25, 2009
|
25,000
|
$0.27
|
November 25, 2014
|
|
March 3, 2010
|
1,405,000
|
$0.17
|
March 3, 2015
|
|
May 28, 2010
|
1,350,000
|
$0.17
|
May 28, 2015
|
|
October 15, 2010
|
50,000
|
$0.10
|
October 15, 2015
|
The stock-based compensation relates to compensation for services as follows:
|
2010
|
2009
|
|
|
Research and development
|
$ 142,626
|
$ 277,890
|
|
General and administrative
|
480,924
|
530,041
|
|
$ 623,550
|
$ 807,931
|
Page 79
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
9. SHARE CAPITAL (continued)
Stock Options (continued)
The following table summarizes the activity of stock options as follows:
|
Year
|
2010
|
2009
|
||
|
Number of Options
|
Weighted-Average Exercise Price
|
Number of
Options
|
Weighted-
Average
Exercise Price
|
|
|
Outstanding at beginning of year
|
9,130,593
|
$ 0.33
|
7,810,593
|
$ 0.29
|
|
Granted
Exercised
Forfeited or expired
|
4,130,000
---
(1,870,593)
|
$ 0.19
$ 0.27
|
3,165,000
(1,160,000)
(685,000)
|
$ 0.34
$ 0.10
$ 0.41
|
|
Outstanding at end of year
|
11,390,000
|
$ 0.29
|
9,130,593
|
$ 0.33
|
|
Exercisable at end of year
|
8,620,004
|
$ 0.32
|
6,917,252
|
$ 0.33
|
The following table summarizes information on stock options outstanding and exercisable at October 31, 2010
|
Exercise Price
|
Number
Outstanding
|
Number
Exercisable
|
Weighted Average Remaining Contractual Life (years)
|
|
0.315
|
360,000
|
360,000
|
0.6
|
|
0.30
|
1,560,000
|
1,560,000
|
1.2
|
|
0.69
|
200,000
|
200,000
|
1.7
|
|
0.50
|
50,000
|
50,000
|
1.8
|
|
0.37
|
1,085,000
|
1,085,000
|
2.2
|
|
0.50
|
190,000
|
190,000
|
2.3
|
|
0.34
|
50,000
|
50,000
|
2.6
|
|
0.335
|
150,000
|
150,000
|
2.7
|
|
0.30
|
900,000
|
900,000
|
2.8
|
|
0.36
|
510,000
|
510,000
|
2.8
|
|
0.36
|
350,000
|
350,000
|
3.0
|
|
0.305
|
50,000
|
50,000
|
3.2
|
|
0.33
|
1,205,000
|
1,205,000
|
3.3
|
|
0.355
|
600,000
|
600,000
|
3.5
|
|
0.25
|
1,300,000
|
433,334
|
4.0
|
|
0.27
|
25,000
|
8,334
|
4.1
|
|
0.17
|
1,405,000
|
468,336
|
4.3
|
|
0.17
|
1,350,000
|
450,000
|
4.6
|
|
0.10
|
50,000
|
---
|
5.0
|
|
11,390,000
|
8,620,004
|
3.1
|
Page 80
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
9. SHARE CAPITAL (continued)
Stock Options (continued)
The Company uses the Black-Scholes option pricing model to value the options and warrants included in the units of the private placements at each grant date under the following weighted-average assumptions:
|
Options
|
Warrants
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Weighted-average grant date fair value per share option or warrant
|
0.19 | 0.25 | 0.03 | 0.09 | ||||||||||||
|
Expected dividend rate
|
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
|
Expected volatility
|
116 | % | 120 | % | 94 | % | 99 | % | ||||||||
|
Risk-free interest rate
|
2.55 | % | 2.36 | % | 1.42 | % | 1.49 | % | ||||||||
|
Expected life of options or warrants in years
|
5 yrs.
|
5 yrs.
|
2 yrs.
|
2 yrs.
|
||||||||||||
The amounts estimated according to the Black-Scholes option pricing model may not be indicative of the actual values realized upon the exercise of these options by the holders.
Warrants
The following table summarizes information on warrants outstanding at October 31, 2010:
|
Exercise Price
|
Number Outstanding
|
Expiry Date
|
|
|
$0.60
$0.35
$0.40
$0.40
$0.60
$0.50
$0.30
$0.30
$0.30
|
1,518,117
1,000,000
1,017,500
2,500,000
1,051,467
2,778,000
4,511,250
19,824,500
450,000
|
December 7, 2010
March 6, 2011
July 29, 2012
August 19, 2012
March 17, 2011
October 15, 2011
May 27, 2012
October 12, 2012
October 20, 2012
|
(*)
(*)
(*)
(*)
|
|
34,650,834
|
(*)During the year, the company extended the expiry date of warrants. The extension resulted in an additional fair value of $162,817 and it is recorded as increase to warrants and an increase in deficit.
Page 81
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
9. SHARE CAPITAL (continued)
|
|
Contributed Surplus
|
|
2010
|
2009
|
|||||||
|
Balance, beginning of year
|
$ | 2,276,357 | $ | 1,279,169 | ||||
|
Stock compensation expense
|
623,550 | 807,931 | ||||||
|
Expired and forfeited warrants
|
--- | 239,077 | ||||||
|
Exercise of stock options
|
--- | (49,820 | ) | |||||
|
Balance, end of year
|
$ | 2,899,907 | $ | 2,276,357 | ||||
10. FUTURE INCOME TAXES
Income tax expense differs from the amounts computed by applying the statuary income tax rates to loss before income taxes. The differences are as follows:
|
2010
|
2009
|
2008
|
||||||||||
|
Computed tax recovery
|
$ | (838,498 | ) | $ | (1,026,160 | ) | $ | (914,798 | ) | |||
|
Foreign rate differential
|
(56,806 | ) | (20,106 | ) | (35,139 | ) | ||||||
|
Non-deductible expenses
|
186,251 | 61,260 | 206,294 | |||||||||
|
Other temporary differences
|
31,470 | (28,157 | ) | (25,083 | ) | |||||||
|
Unrecognized losses
|
677,583 | 1,013,163 | 768,726 | |||||||||
| $ | --- | $ | --- | $ | --- | |||||||
The tax effect of significant temporary differences is as follows:
|
2010
|
2009
|
2008
|
||||||||||
|
Operating loss carry-forwards
|
$ | 3,990,920 | $ | 3,595,119 | $ | 2,819,387 | ||||||
|
Other temporary differences
|
210,281 | 98,064 | 87,947 | |||||||||
|
Future income tax assets before valuation allowance
|
4,201,201 | 3,693,183 | 2,907,334 | |||||||||
|
Valuation allowance
|
(4,201,201 | ) | (3,693,183 | ) | (2,907,334 | ) | ||||||
|
Future income tax assets
|
$ | --- | $ | --- | $ | --- | ||||||
The Company has determined that realization is not more likely than not and, therefore, a full valuation allowance against the future income tax assets has been recorded.
Page 82
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
10. FUTURE INCOME TAXES
The losses expire as follows:
|
Loss carry-forwards in the
United States
|
Loss carry-forwards
in Canada
|
Total
|
||||||||||
|
2014
|
$ | --- | $ | 458,893 | $ | 458,893 | ||||||
|
2015
|
--- | 1,362,971 | 1,362,971 | |||||||||
|
2026
|
173,617 | 3,335,533 | 3,509,150 | |||||||||
|
2027
|
318,554 | 2,028,924 | 2,347,478 | |||||||||
|
2028
|
668,114 | 1,798,540 | 2,466,654 | |||||||||
|
2029
|
335,681 | 3,112,072 | 3,447,753 | |||||||||
|
2030
|
831,308 | 1,443,651 | 2,274,959 | |||||||||
|
Total
|
$ | 2,327,274 | $ | 13,540,584 | $ | 15,867,858 | ||||||
|
|
11.
|
RELATED PARTY TRANSACTIONS
|
Included in the consolidated financial statements are the following related party transactions not disclosed elsewhere:
|
2010
|
2009
|
2008
|
||||||||||
|
Management and consulting fees
|
$ | 382,241 | $ | 94,500 | $ | 184,500 | ||||||
|
Research and development
|
$ | 120,000 | $ | 237,574 | $ | 258,182 | ||||||
|
Finders fees
|
$ | 10,000 | $ | --- | $ | --- | ||||||
Management and consulting fees are paid to directors and officers of the Company and are reflected in general and administrative expenses.
Research and development fees are paid to directors and companies controlled by directors.
Included in accounts payable and accrued liabilities is $26,614 (2009 - $27,548) payable to directors of the Company and companies controlled by directors.
The related party transactions are in the normal course of operations and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
Page 83
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
12. COMMITMENTS
The Company has lease agreements for its offices with minimum annual payments until expiration of the leases as follows:
|
Year
|
Total
|
|
|
2011
2012
|
$ 78,768
65,640
|
|
|
$ 144,408
|
13. FINANCIAL INSTRUMENTS
Financial Risk Management
The Company has classified its financial instruments as follows:
|
§
|
Cash, short-term investment and restricted cash are classified as held-for-trading.
|
|
§
|
Accounts payable, loans and advances, and convertible debentures are classified as other financial liabilities.
|
The Company’s activities are exposed to a variety of financial risks: credit risk, foreign currency risk, interest rate risk, financial market risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial and economic markets and seeks to minimize potential adverse effects on the Company’s financial performance. Risk management is carried out by financial management in conjunction with overall corporate governance. The Company’s exposure to and management of credit risk, market risk and liquidity risk related to financial instruments below have not changed for the 2010 fiscal year.
|
(a)
|
Fair Value
|
The Company's financial instruments consist of cash, short-term investment, restricted cash, accounts payable, loans and advances, and convertible debentures. The fair values of cash, short-term investment and accounts payable approximate their carrying values due to their short-term nature, unless otherwise noted. Other receivables consist of taxes receivable from a government agency and is not a financial instrument. The fair value of loans and advances cannot be reliably determined, as there is no market for loans that are non-interest-bearing and have no terms of repayment.
Page 84
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
13. FINANCIAL INSTRUMENTS (continued)
|
(b)
|
Credit Risk
|
The Company is exposed to credit risk in its cash, short-term investment and restricted cash. The maximum exposure of the credit risk is the full carrying value of the financial instrument. The Company minimizes the credit risk of cash, short-term investment and restricted cash by only dealing with credit-worthy financial institutions.
The Company’s concentration of credit risk and maximum exposure thereto is as follows:
|
2010
|
2009
|
|
|
Cash
|
$ 209,736
|
$ 83,162
|
|
Short-term investment
|
60,000
|
90,000
|
|
Restricted cash
|
---
|
2,520
|
|
$ 269,736
|
$ 175,682
|
|
(c)
|
Market Risk
|
|
(i)
|
Foreign Currency Risk
|
The Company is exposed to currency risk as a result of its operations in the United States. A significant change in the currency exchange rate between the Canadian dollar relative to the US dollar could have a material effect on the Company’s results of operations, financial position or cash flows. The Company does not use derivative financial instruments to reduce its exposure to fluctuations in foreign exchange rates. As at October 31, 2010, the Company is exposed to currency risk through its cash denominated in US dollars. As at October 31, 2010, US denominated cash amounted to US$65,007. Based on the balances at October 31, 2010, net loss will increase or decrease approximately $650 given a 1% increase or decrease, respectively, in the foreign exchange rate.
|
(ii)
|
Interest Rate Risk
|
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate due to changes in market interest rates. It is management’s opinion the Company is not exposed to any significant interest rate risk.
|
(iii)
|
Financial Market Risk
|
The Company’s exposure to financial market risk is limited since there are no significant financial instruments, including hedges on currencies or commodities, which will fluctuate as a result of changes in market prices.
Page 85
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
13. FINANCIAL INSTRUMENTS (continued)
|
(d)
|
Liquidity Risk
|
Liquidity risk is the risk that the Company will not be able to meet its financial obligations, including commitments, as they become due. In order to manage this risk, the Company forecasts its requirements to determine whether sufficient funds will be available. The Company expects to generate sufficient cash through the issuance of shares or related party loans. As at October 31, 2010, the Company had accounts payable of $101,291 (2009 - $114,541) and loans and advances payable of $2,111 (2009 - $296,096), which are due for payment in the short-term (0 – 3 months). The convertible debentures and the interest payments totaling $358,680 are due within two years.
14. SEGMENTED INFORMATION
Substantially all of the Company’s property and equipment is located in Canada.
|
15.
|
ACCRUED LIABILITIES
|
The Company’s accrued liabilities include the following amounts:
|
2010
|
2009
|
|
|
Due to employees
|
$12,699
|
$ ---
|
|
Due to taxation authorities
|
8,606
|
1,312
|
|
Others
|
57,248
|
66,000
|
|
$78,553
|
$67,312
|
|
16.
|
CAPITAL MANAGEMENT
|
The Company’s objectives when managing its capital are to safeguard the Company’s ability to pursue research and development of its software and meet its ongoing operating expenditures while at the same time providing adequate capital to fund the Company’s growth, without unwarranted dilution of the current shareholders.
The Company defines its capital as its loans and advances and the components of shareholders’ equity.
The Company sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it for changes in economic conditions and the risk characteristics of its underlying assets since inception, the Company has financed its liquidity needs through private placements.
In order to maximize ongoing research and development of its software, the Company does not pay out dividends.
Page 86
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
16.
|
CAPITAL MANAGEMENT (continued)
|
The Company expects its current capital resources will be sufficient to carry out its research and development of the software.
The Company is not subject to any externally imposed capital requirements. There have been no changes to capital management by the Company during the year.
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES
|
|
|
The Company prepares its consolidated financial statements in accordance with Canadian GAAP. There are no material variations between the financial position of the Company and the results of its operations and cash flows under Canadian GAAP and United States generally accepted accounting principles (“US GAAP”), except as follows:
|
Technology Rights
Under US GAAP, transactions with related parties are measured at the exchange amount, which is the amount of consideration agreed upon by the transacting parties. For the acquisition of technology rights, the exchange amount was $600,000. For Canadian GAAP purposes, transactions with related parties not in the normal course of business where the amount of the exchange is not supported by independent evidence is measured at the carrying value to the related party, which is $398,000, with any discrepancy recorded as a charge to deficit.
Convertible Debentures
Under US GAAP, convertible debt instruments are classified as debt until converted to equity. The conversion feature of convertible debentures is recognized separately only if the effective conversion rate is less than the market price of the common stock at the commitment date. Under Canadian GAAP, the convertible debentures are bifurcated into a debt component and an equity component. The effect of recording the convertible debentures as debt would be to reduce accretion expense by $1,073.
Research and Development
Under US GAAP, all costs incurred to establish technological feasibility of software are expensed as incurred. Costs subsequent to establishing technological feasibility are capitalized until the software is available for release to general customers. Under Canadian GAAP, development costs that meet generally accepted criteria for deferral, which includes achieving technological feasibility, are capitalized and amortized. The Company has not met the criteria of establishing technological feasibility under both Canadian and US GAAP and has not capitalized any development costs.
Page 87
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)
|
|
|
Stock-based Compensation
|
Under US GAAP, the measurement date for stock-based compensation to non-employees for goods or services rendered should be the earlier of the date on which the recipient completes performance or the date on which a performance commitment is reached. For measurement purposes, Canadian GAAP specifies the same two conditions under US GAAP described above and also lists a third condition, namely, the date at which the equity instruments are granted if they are fully vested and non-forfeitable at that date. In fiscal 2009 stock-based compensation recorded for 200,000 common shares issued to consultants for their services would be lower for US GAAP purposes by $19,000.
Page 88
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)
|
The impact of these differences is as follows:
|
Consolidated Statements of Operations and Comprehensive Loss
|
|
Years Ended October 31
|
||||||||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Net loss and comprehensive loss for the year – Canadian GAAP
|
$ | (2,977,117 | ) | $ | (3,528,749 | ) | $ | (3,075,985 | ) | |||
|
Stock compensation expense
|
- | 19,000 | - | |||||||||
|
Accretion interest
|
1,073 | - | - | |||||||||
|
Net loss and comprehensive loss for the year – US GAAP
|
$ | (2,976,044 | ) | $ | (3,509,749 | ) | $ | (3,075,985 | ) | |||
|
Loss per share – Basic and diluted, Canadian GAAP
|
$ | (0.05 | ) | $ | (0.07 | ) | $ | (0.07 | ) | |||
|
Loss per share – Basic and diluted, US GAAP
|
$ | (0.05 | ) | $ | (0.07 | ) | $ | (0.07 | ) | |||
|
Weighted average number of common shares outstanding
|
61,292,998 | 51,951,767 | 44,032,360 | |||||||||
|
Consolidated Statements of Cash Flows
|
||||||
|
Years Ended October 31
|
||||||
|
2010
|
2009
|
2008
|
||||||||||
|
Cash used in operating activities – Canadian & US GAAP
|
$ | (2,170,527 | ) | $ | (2,445,485 | ) | $ | (2,622,523 | ) | |||
|
Cash provided by (used in) investing activities – Canadian & US GAAP
|
(567,480 | ) | 353,854 | (853,245 | ) | |||||||
|
Cash provided by financing activities – Canadian & US GAAP
|
2,867,050 | 1,879,199 | 3,751,118 | |||||||||
|
Effect of foreign exchange on cash
|
(2,469 | ) | (39,360 | ) | 40,940 | |||||||
|
(Decrease) increase in cash during the year
|
126,574 | (251,792 | ) | 316,290 | ||||||||
|
Cash, beginning of year
|
83,162 | 334,954 | 18,664 | |||||||||
|
Cash, end of year – US GAAP
|
$ | 209,736 | $ | 83,162 | $ | 334,954 | ||||||
Page 89
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)
|
|
Consolidated Balance Sheets
|
||
|
October 31, 2010
|
October 31, 2009
|
|
|
Total assets – Canadian GAAP
|
$ 1,165,093
|
$ 869,397
|
|
Technology rights – exchange amount
|
202,000
|
-
|
|
Total assets – US GAAP
|
$ 1,367,093
|
$ 869,397
|
|
Total liabilities – Canadian GAAP
|
$ 550,165
|
$ 577,501
|
|
Convertible debentures – accretion interest
|
(1,073)
|
-
|
|
Convertible debentures – equity component
|
11,564
|
-
|
|
Total liabilities – US GAAP
|
560,656
|
577,501
|
|
Share capital – Canadian GAAP
|
15,845,770
|
13,591,954
|
|
Shares issued to consultants
|
(19,000)
|
(19,000)
|
|
Share capital – US GAAP
|
15,826,770
|
13,572,954
|
|
Warrants – Canadian and US GAAP
|
1,901,217
|
1,115,875
|
|
Contributed surplus – Canadian and US GAAP
|
2,899,907
|
2,276,357
|
|
Convertible debentures – equity component, Canadian GAAP
|
11,564
|
-
|
|
Convertible debentures – equity component
|
(11,564)
|
-
|
|
Convertible debentures equity component – US GAAP
|
-
|
-
|
|
Deficit accumulated in the development stage – Canadian GAAP
|
(16,888,418)
|
(13,537,178)
|
|
Stock compensation expense – shares issued to consultants
|
19,000
|
19,000
|
|
Accretion interest
|
1,073
|
-
|
|
Technology rights
|
202,000
|
-
|
|
Deficit accumulated in the development stage – US GAAP
|
(16,666,345)
|
(13,518,178)
|
|
Deficit – Canadian and US GAAP
|
(3,155,112)
|
(3,155,112)
|
|
Total shareholders' equity – Canadian GAAP
|
614,928
|
291,896
|
|
Total shareholders' equity – US GAAP
|
806,437
|
291,896
|
|
Total liabilities and shareholders' equity – Canadian GAAP
|
1,165,093
|
869,397
|
|
Total liabilities and shareholders' equity – US GAAP
|
$ 1,367,093
|
$ 869,397
|
Page 90
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)
|
|
|
Impact of Recently Adopted Accounting Standards
|
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. ASU 2009-15 amends the accounting and reporting guidance for debt (and certain preferred stock) with specific conversion features or other options. ASU 2009-15 was effective January 1, 2010.
In December 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controller through voting (or similar rights) should be consolidated. ASU 2009-17 also requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. ASU 2009-17 was effective January 1, 2010.
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. This ASU requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. ASU 2010-06 requires a reporting entity to disclose significant transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers and to present separately information about purchases, sales, issuances and settlements for fair value measurements using significant unobservable inputs. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective for interim and annual reporting periods beginning after December 15, 2010; early adoption is permitted.
The adoption of the above standards did not have a significant effect on the Company’s consolidated financial statements.
|
|
New Accounting Standards
|
In October 2009, the FASB issued ASU 2009-13, “Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements – A Consensus of the FASB Emerging Issues Task Force.” This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific evidence is not available, or estimated selling price if neither vendor-specific nor third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted.
Page 91
TITAN TRADING ANALYTICS INC.
(Continued under the Laws of Alberta)
(Development Stage Company)
Notes to Consolidated Financial Statements
Years ended October 31, 2010, 2009 and 2008
(expressed in Canadian dollars)
|
17.
|
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES (continued)
|
New Accounting Standards (continued)
In October 2009, the FASB issued ASU 2009-14, Software (Topic 985) - Certain Revenue Arrangements That Include Software Elements. ASU 2009-14 changes the accounting model for revenue arrangements that involve a combination of tangible products and software. Tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue recognition guidance in ASC 985. ASU 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 with early adoption permitted.
The adoption of the above standards is not expected not have a significant impact on the Company’s consolidated financial statements.
|
18.
|
COMPARATIVE FIGURES
|
Certain of the figures for the 2009 fiscal year have been reclassified to conform to the current year’s presentation.
|
19.
|
SUBSEQUENT EVENTS
|
On November 3, 2010, the Company granted 1,930,000 stock options to a director and officer of the Company. The options have an exercise price of $0.11 with a vesting term over an eighteen-month period and a five-year term to expiry.
On November 24, 2010, the Company grante 3,770,000 stock options, in the aggregate, to officers and consultants of the Company. The options have an exercise price of $0.14, with vesting over an eighteen-month period and a five-year term to expiry.
On December 3, 2010, the Company completed a non-brokered private placement of units, which raised $1,022,125. The private placement consisted of 10,221,250 units at $0.10 for total proceeds of $1,022,125. Each unit consists of one common share and one-half of one warrant. Each whole share purchase warrant is exercisable into one common share at a price of $0.30 during the two-year period following the date of the closing and will expire December 3, 2012. The Company paid a total of $88,250 in finder’s fees to arm’s length parties. The units and the common shares issuable upon exercise of the warrants are subject to a four-month restricted period, which expires April 4, 2011.
On December 22, 2010, the Company granted 200,000 stock options, in the aggregate, to a consultant of the Company. The options have an exercise price of $0.13, with vesting over an eighteen-month period and a five-year term to expiry.
Page 92
Page 93
|
Exhibit No.
|
Description
|
|
|
1.1*
|
Certificate of Incorporation of KBK No. 24 Ventures Ltd.
|
|
|
1.2*
|
Certificate of Change of Name of KBK No. 24 Ventures Ltd. to Titan Trading Analytics Inc.
|
|
|
1.3***
|
Articles of Continuance – Alberta Business Corporations Act
|
|
|
4.1*
|
Escrow Agreement dated January 5, 1996 among The Montreal Trust Company of Canada, Titan Trading Analytics Inc. and TTN Escrow Capital Corp.
|
|
|
4.2**
|
Licensing Agreement dated June 6, 2003 between Titan Trading Analytics Inc. and Cignal Technologies LLC
|
|
|
4.3**
|
Letter Agreement dated June 3, 2003 between Dr. Powell, Mr. Kreilein and Mr. Carrozza
|
|
|
4.4*****
|
Amended & Restated Software Transfers Agreement between Titan Trading Analytics Inc. and Philip Carrozza and Cignal Technologies, LLC and between Titan Trading Analytics Inc. and Michael Gossland
|
|
|
8.1****
|
List of Subsidiaries
|
|
|
12.1
|
Section 302 Certification - Certification of the Chief Executive Officer and Chief Financial Officer of the Corporation pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
|
|
|
13.1
|
Section 906 Certification - Certification of the Chief Executive Officer and Chief Financial Officer of the Corporation pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
|
________________
* Incorporated by reference to our registration statement on Form 20-F filed with the SEC on June 30, 1999.
** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May, 28, 2004.
*** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 17, 2005.
**** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 12, 2006.
***** Incorporated by reference to our registration statement on Form 20-F filed with the SEC on May 1, 2007.
Page 94