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— Last year, Titan extended a $50 million line of credit to SureBeam, which has drawn down half of that sum. However, SureBeam's financial results are so poor it cannot get the other half under terms of the credit facility, although it says it doesn't need it. This month, Titan warned in a filing that if SureBeam stumbles, Titan may have to write off that debt.

Now SureBeam faces the accounting flare-up. Its auditor had been Arthur Andersen, which came asunder in the wake of scandals such as Enron. SureBeam then hired KPMG, but the arrangement lasted only 14 months. On June 3, SureBeam fired KPMG. Stephenson says the accounting firm charged too much.

On June 9, it hired Deloitte & Touche. On August 19, it axed that firm. There is a critical dispute. In announcing the dismissal, SureBeam said that Deloitte "expressed concern as to the appropriateness of utilizing the percentage of completion method for revenue recognition." Simply put, the "percentage of completion" method permits a company to report income from a long-term contract based on its estimate of the percentage of the work that was completed during a certain period. Both Stephenson and Williams say that prior accounting firms and the Securities and Exchange Commission have approved this method for SureBeam.

In any case, a new accounting firm will have to get out that second-quarter report.

There are a couple of important points here. SureBeam does not appear to be a Peregrine, the San Diego software company whose top brass huddled near the end of each quarter and plotted how to inflate sales fraudulently to meet Wall Street's targets. And SureBeam may have a good system for irradiating foods -- although don't tell that to Ralph Nader's organizations, which have been a thorn in SureBeam's side.

Stephenson and Williams both say that SureBeam and Titan haven't talked too big in the past. But the anthrax experience and some other incidents belie that. Once-zapped investors don't forget.

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