UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
-----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________
TO _________________
ALTAIR NANOTECHNOLOGIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Canada 1-12497 None
---------------------------- --------------------- -------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (307) 587-8245
ALTAIR INTERNATIONAL INC.
---------------------------
(Former name of registrant)
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 [ ]
As of August 13, 2002 the registrant had 24,633,791
Common Shares outstanding.
This Amendment No. 1 on Form 10-Q/A (this "Amendment") is being filed
in order to revise Part I, Item 1, "Financial Statements" of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (the "Form
10-Q") in order to reflect a change in the Company's consolidated statements of
operations for the period ended June 30, 2002. We have also revised certain
cross references in Part I, Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" to be consistent with the changes
to the consolidated statement of operations in Part I, Item 1. As discussed in
Note 6 to the consolidated financial statements, subsequent to the original
filing of the Form 10-Q, management determined that the asset impairment charge
reflected on the statement of operations should have been classified as part of
operating expenses rather than as part of other expenses. The effect of the
reclassification of the impairment charge is to increase operating expenses and
loss from operations for each affected period by approximately $2,760,000 and to
decrease other expenses by the same amount. There is no net effect on net loss
or net loss per share.
In order to facilitate understanding of the Form 10-Q, as amended by
this Amendment, in addition to inserting the information described in the
preceding paragraph, this Amendment restates in its entirety all information
contained in the Form 10-Q. Sections of the Form 10-Q not identified above as
having been revised are being restated without amendment. All subsequent
references to "Form 10-Q" shall refer to the initial Form 10-Q as amended by
this Amendment.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
(Unaudited)
June 30, December 31,
2002 2001
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 274,531 $ 599,884
Other current assets 74,741 33,651
------------ ------------
Total current assets 349,272 633,535
Property and Equipment, net 5,265,096 5,987,950
Patents and Related Expenditures, net 1,189,090 3,739,864
Other Assets 349,220 491,894
------------ ------------
Total Assets $ 7,152,678 $ 10,853,243
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 618,406 $ 528,405
Note payable - current portion 1,677,238 --
Stock purchase advances 617,123 --
Loans payable - related parties -- 143,000
Capital lease obligations - current portion -- 2,312
Deferred revenue -- 40,972
------------ ------------
Total current liabilities 2,912,767 714,689
------------ ------------
Note Payable, Long-Term Portion -- 1,462,060
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Common stock, no par value, unlimited
shares authorized; 24,583,791 and
22,694,142 shares issued and outstanding
at June 30, 2002 and December 31, 2001 39,920,522 38,089,320
Deficit accumulated during the development stage (35,680,611) (29,412,826)
------------ ------------
Total Shareholders' Equity 4,239,911 8,676,494
------------ ------------
Total Liabilities and Shareholders' Equity $ 7,152,678 $ 10,853,243
============ ============
(See Notes to Financial Statements)
1
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
Period
April 9,
1973
(date of
inception)
Three Months Ended June 30, Six Months Ended June 30, to
---------------------------- ---------------------------- June 30,
2002 2001 2002 2001 2002
(As restated- (As restated- (As restated-
See Note 6) See Note 6) See Note 6)
------------ ------------ ------------ ------------ ------------
Sales $ 4,734 None $ 53,671 None $ 96,487
Cost of sales 1,151 None 31,326 None 49,501
------------ ------------ ------------ ------------ ------------
Gross Margin 3,583 None 22,345 None 46,986
------------ ------------ ------------ ------------ ------------
Operating Expenses
Mineral exploration and development 206,589 $ 238,300 358,777 $ 599,754 6,277,442
Research and development 164,040 145,383 302,649 268,271 3,431,608
Professional services 229,367 208,525 455,440 313,656 3,019,352
General and administrative expenses 638,086 766,985 1,246,214 1,570,805 13,093,696
Depreciation and amortization 285,702 284,813 571,401 564,693 5,088,815
Asset impairment 2,759,956 -- 2,759,956 -- 2,759,956
------------ ------------ ------------ ------------ ------------
Total operating expenses 4,283,740 1,644,006 5,694,437 3,317,179 33,670,869
------------ ------------ ------------ ------------ ------------
Loss from Operations 4,280,157 1,644,006 5,672,092 3,317,179 33,623,883
------------ ------------ ------------ ------------ ------------
Other (Income) Expense:
Interest expense 308,539 734,027 596,837 1,034,267 3,980,788
Interest income (832) (43,172) (1,534) (112,577) (815,374)
Loss (gain) on foreign exchange 390 443 390 209 (558,387)
------------ ------------ ------------ ------------ ------------
Total other expense, net 308,097 691,298 595,693 921,899 2,607,027
------------ ------------ ------------ ------------ ------------
Loss before extraordinary items 4,588,254 2,335,304 6,267,785 4,239,078 36,230,910
------------ ------------ ------------ ------------ ------------
Extraordinary items:
Gain on forgiveness of debt -- -- -- -- (795,972)
Loss on redemption of convertible
debentures -- -- -- -- 193,256
------------ ------------ ------------ ------------ ------------
Total extraordinary items -- -- -- -- (602,716)
------------ ------------ ------------ ------------ ------------
Net loss 4,588,254 2,335,304 6,267,785 4,239,078 35,628,194
Preferential Warrant Dividend -- -- -- -- 52,417
------------ ------------ ------------ ------------ ------------
Net Loss Applicable to Shareholders $ 4,588,254 $ 2,335,304 $ 6,267,785 $ 4,239,078 $ 35,680,611
============ ============ ============ ============ ============
Loss per Common Share:
Loss before extraordinary items
Basic and diluted $ 0.19 $ 0.12 $ 0.27 $ 0.22 $ 4.73
Effect of extraordinary items
on earnings per share:
Basic and diluted -- -- -- -- (0.08)
------------ ------------ ------------ ------------ ------------
Loss per common share - Basic and diluted $ 0.19 $ 0.12 $ 0.27 $ 0.22 $ 4.65
============ ============ ============ ============ ============
Weighted average shares - Basic and diluted 24,021,819 19,276,553 23,435,395 19,306,218 7,665,690
============ ============ ============ ============ ============
(See Notes to Financial Statements)
2
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
Period
April 9, 1973
(date of
inception) to
Six Months Ended June 30, June 30,
2002 2001 2002
---------- ---------- ----------
Cash flows from development activities:
Net loss $ (6,267,785) $ (4,239,078) $(35,628,194)
Adjustments to reconcile net loss to net cash
used in development activities:
Depreciation and amortization 571,401 564,693 5,088,815
Shares issued for services -- -- 99,926
Shares issued for interest 160,985 -- 984,812
Issuance of stock options to non-employees 4,732 112,353 3,008,272
Issuance of stock options to employees -- 81,600 78,220
Issuance of stock warrants 108,556 314,077 924,861
Amortization of discount on note payable 215,179 206,223 630,252
Amortization of debt issuance costs 220,674 -- 320,674
Asset impairment 2,759,956 -- 2,759,956
Loss on redemption of convertible debenture -- -- 193,256
Gain on forgiveness of debt -- -- (795,972)
Loss on disposal of fixed assets -- -- 1,945
Gain on foreign currency translation -- -- (559,179)
Deferred financing costs written off -- -- 515,842
Changes in assets and liabilities (net of
effects of acquisition):
Restricted cash -- 729,140 --
Other current assets 16,170 375,165 1,717,117
Other assets (2,000) 49,998 (170,720)
Accounts payable and accrued liabilities 88,193 359,919 347,384
Stock purchase advances 617,123 -- 617,123
Deferred revenue (40,972) -- --
---------- ---------- ----------
Net cash used in development activities (1,547,788) (1,445,910) (19,865,610)
---------- ---------- ----------
Cash flows from investing activities:
Asset acquisition -- -- (2,422,417)
Purchase of property and equipment (57,730) (154,964) (1,193,239)
Purchase of patents and related expenditures -- -- (1,882,187)
---------- ---------- ----------
Net cash used in investing activities (57,730) (154,964) (5,497,843)
---------- ---------- ----------
(continued)
(See Notes to Financial Statements)
3
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
Period
April 9, 1973
(date of
inception) to
Six Months Ended June 30, June 30,
2002 2001 2002
---------- ---------- ----------
Cash flows from financing activities:
Issuance of common shares for cash, net of
share issue costs $ 1,125,000 $ 1,300,000 $ 19,298,659
Collection of stock subscription receivable -- 561,300 561,300
Issuance of convertible debenture -- -- 5,000,000
Proceeds from exercise of stock options -- 40,000 2,708,491
Proceeds from exercise of warrants 300,477 -- 4,917,805
Issuance of related party notes 6,243 -- 174,243
Issuance of notes payable -- -- 7,000,000
Payment of notes payable -- (1,520,635) (11,120,816)
Payment of related party notes (149,243) -- (174,243)
Payment on capital lease (2,312) -- (27,075)
Purchase of call options -- -- (449,442)
Redemption of convertible debentures -- -- (2,250,938)
---------- ---------- ----------
Net cash provided by financing activities 1,280,165 380,665 25,637,984
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (325,353) (1,220,209) 274,531
Cash and cash equivalents, beginning of period 599,884 1,335,729 None
---------- ---------- ----------
Cash and cash equivalents, end of period $ 274,531 $ 115,520 $ 274,531
Supplemental disclosures: ========== ========== ==========
Cash paid for interest None $ 279,728
========== ==========
Cash paid for income taxes None None
========== ==========
Supplemental schedule of non-cash investing and financing activities:
For the six months ended June 30, 2002:
- None
For the six months ended June 30, 2001:
- We cancelled call options on 228,456 shares of our common stock to pay
$97,743 of principal and $244,941 of interest on the Doral 18, LLC 2000
Note. In addition, the cancellation of the call options resulted in an
additional interest expense of $210,568.
(concluded)
(See Notes to Financial Statements)
4
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Preparation of Financial Statements
These unaudited interim financial statements of Altair Nanotechnologies
Inc. and its subsidiaries (collectively, "Altair", "We" or the "Company") have
been prepared in accordance with the rules and regulations of the United States
Securities and Exchange Commission (the "Commission"). Such rules and
regulations allow the omission of certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States, so long as the statements
are not misleading. In the opinion of Company management, these financial
statements and accompanying notes contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial position
and results of operations for the periods shown. These interim financial
statements should be read in conjunction with the audited financial statements
and notes thereto contained in our Annual Report on Form 10-K for the year ended
December 31, 2001, as filed on April 1, 2002.
At our annual meeting held on June 12, 2002, the shareholders of the
Company approved an amendment to our articles of incorporation formally changing
our name to "Altair Nanotechnologies Inc."
Prior to fiscal year 1998, we prepared our financial statements in
accordance with accounting principles generally accepted in Canada. Due to
substantially all of our operations being located in the United States, we have
elected to present our financial statements in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP").
Accordingly, the foregoing unaudited interim financial statements are
denominated in U.S. Dollars and presented in accordance with U.S. GAAP.
The accompanying consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
consolidated financial statements for the quarter ended June 30, 2002, we
incurred a net loss of $4,588,254, and since the date of inception have incurred
cumulative net losses of $35,628,194. At June 30, 2002, current liabilities
exceeded current assets by $2,563,495. These factors, among others, may raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include certain
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern. Our continuation as a going
concern is dependent upon our ability to generate sufficient cash flow to meet
our obligations on a timely basis, to obtain additional financing or refinancing
as may be required, to develop commercially viable products and processes, and
ultimately to establish successful operations. We are in the process of
developing the titanium processing technology. The recoverability of amounts
capitalized as property and equipment and patents and related expenditures is
dependent upon our ability to successfully develop and commercialize the
titanium processing technology.
At June 30, 2002, we had cash and cash equivalents of $274,531, an
amount that would be sufficient to fund our basic operations through July 31,
2002. In order to extend operations through at least August 31, 2002, we have
reduced our cash expenditures to the extent possible without significantly
affecting our development efforts with respect to the titanium processing
technology. We anticipate that we will receive the remaining $642,877 of the
purchase price owed under the amended and restated stock purchase agreement
described below in Note 3 on or before August 31, 2002. If we receive the
remainder of the purchase price during August 2002, we expect that this
additional capital will be sufficient to fund our basic operations through at
least October 31, 2002. If we do not receive the remainder of the purchase price
during August 2002, we will require additional financing during August 2002 in
order to provide working capital to fund our day-to-day operations.
In order to reduce the rate at which we are using cash we have taken
several cost cutting measures, the most significant of which is the reduction of
expenditures on the Tennessee mineral property and the jig to the minimum amount
necessary to maintain these assets with no ongoing development activity.
5
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Nevertheless, even with such cost cutting measures, as stated above, we will
need additional financing to fund our basic, day-to-day operations sometime
between August 31, 2002 and October 31, 2002. Because our projected near-term
sales of nanoparticle products are minimal, we expect to generate such funds
through additional private placements of our common stock and warrants to
purchase our common stock or other debt or equity securities. As of August 13,
2002, we have no commitments to provide additional financing or to purchase a
significant quantity of nanoparticle products. If we are unable to obtain
financing on a timely basis, we may be forced to more significantly curtail and,
at some point, discontinue operations.
The results of operations for the three- and six-month periods ended
June 30, 2002 are not necessarily indicative of the results to be expected for
the full year.
Note 2. Summary of Significant Accounting Policies
Net Loss Per Common Share - Basic net loss per common share is
calculated by dividing net loss by the weighted average number of common shares
outstanding during the period. The existence of stock options, warrants, and
convertible securities affects the calculation of loss per share on a fully
diluted basis. When a net loss is reported, the number of shares used for basic
and diluted net loss per share is the same since the effect of including the
additional common stock equivalents would be antidilutive.
Stock -Based Compensation - We have elected to follow the accounting
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and to furnish the pro forma disclosures required
under Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation.
Recent Accounting Pronouncements - In June 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 142, Goodwill and Other
Intangible Assets, which addresses the financial accounting and reporting
standards for the acquisition of intangible assets outside of a business
combination and for goodwill and other intangible assets subsequent to their
acquisition. This accounting standard requires annual impairment testing for
goodwill and intangible assets, and the elimination of periodic amortization of
goodwill and certain intangibles. We adopted SFAS No. 142 on January 1, 2002.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses accounting
and reporting for the impairment or disposal of long-lived assets, including the
disposal of a segment of business. We adopted SFAS No. 144 on January 1, 2002.
During the quarter ended June 30, 2002, changes in circumstances regarding the
development and use of the jig indicated that an impairment adjustment for the
jigs was required. See Note 6 for information regarding the adjustments we have
recorded for asset impairment.
Note 3. Common Stock
Common stock transactions during the six months ended June 30, 2002 were
as follows:
Common Stock
---------------------------------
Stated
Shares Amount
---------------------------------
Balance, December 31, 2001 22,694,142 $38,089,320
Common stock issued through private placements 1,350,000 1,125,000
Shares issued on exercise of warrants 286,169 300,477
Stock options issued to non-employees 4,732
Warrants issued for services 108,556
Shares issued for services 50,000 76,000
Shares issued for payment of interest on
Doral 18, LLC note 203,480 216,437
---------------------------------
Balance, June 30, 2002 24,583,791 $39,920,522
=================================
6
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 11, 2002, we entered into a stock purchase agreement with an
investor that provided for the sale of 666,667 common shares and 1,000,000
warrants for total consideration of $1,000,000. At June 30, 2002, the investor
had remitted $617,123 toward the purchase price. This amount is recorded as
stock purchase advances in the accompanying Consolidated Balance Sheets. On
April 26, 2002, we entered into an amended and restated stock purchase agreement
with the investor wherein the number of shares purchased was increased to
1,200,000, the number of warrants was increased to 1,800,000 and the total
purchase price was increased to $1,260,000. The purchase price was to be paid in
full by July 31, 2002 but has been informally extended to August 31, 2002.
On April 16, 2002, we reduced the exercise price of 582,500 outstanding
warrants, held by an investor, to $1.05 per share for the period April 26, 2002
through June 30, 2002. A total of 286,169 warrants were exercised prior to the
expiration date. The warrants had been previously issued with exercise prices
ranging from $3.50 to $5.00. The fair value of the warrants at the date of
modification, as determined by the Black Scholes pricing model, was not
significantly different from the fair value of the warrants prior to the
modification of terms.
During the six months ended June 30, 2002, we issued 562,500 warrants in
connection with the issuance of common stock. The exercise price of the warrants
ranged from $1.13 to $2.50.
Note 4. Note Payable
Note payable consisted of the following at June 30, 2002 and December
31, 2001:
June 30, 2002 December 31, 2001
---------------------- ----------------------
Note payable to Doral 18, LLC $ 1,920,716 $ 1,867,857
Less discount resulting from allocation
of debt proceeds to warrant (243,478) (405,797)
Less current portion (1,677,238) --
---------------------- ----------------------
Long-term portion of notes payable $ -- $ 1,462,060
====================== ======================
Note 5. Intangible Assets
Our intangible assets consist of patents and related expenditures
associated with the titanium processing technology. In accordance with SFAS No.
142, we are amortizing these assets over their useful lives. The amortized
intangible asset balance as of June 30, 2002 was:
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
--------------- ---------------- ---------------
Patents and related
expenditures $ 4,030,450 $ (2,841,360) $ 1,189,090
The weighted average amortization period for intangible assets is
approximately 16.5 years. Amortization expense was $184,622 for the six months
ended June 30, 2002, which represented the amortization relating to the
identified intangible assets still required to be amortized under SFAS No. 142.
This amount included $141,779 of amortization expense related to the jig patents
which was recorded prior to an adjustment for asset impairment at June 30, 2002.
For each of the next five years, amortization expense relating to intangibles
will be $85,680 per year.
Note 6. Impairment of Assets
-----------------------------
During the quarter ended June 30, 2002, due to a shortage of cash, we
elected to reduce expenditures on the Tennessee mineral property to the minimum
amount required to maintain it. As a result of this, development activities have
been delayed, including our intended use of the jig to enhance the recovery of
heavy minerals on the property. Although we have entered an agreement to perform
jig tests for fine particle recovery at a third party's facility and we continue
to seek manufacturers and distributors for marketing the jig under licensing
and/or distributorship agreements, we cannot determine when and if the jig will
7
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Impairment of Assets, con'd
------------------------------------
generate substantial revenues and profits. This, in combination with our lack of
funds to further develop the jig for commercial use, causes us to believe that
the jig assets are impaired. Since we cannot determine when adequate funds will
be available to further develop and utilize the jig, we have recorded an
impairment of jig assets in the amount of $2,759,956, which represents the
remaining net asset value of the jig patents and related expenditures
($2,366,155) and jigs in property and equipment ($393,801) at June 30, 2002.
We also assessed the carrying value of the titanium processing
technology and titanium processing assets during the quarter ended June 30, 2002
by analyzing future estimated cash flows associated with these assets over the
succeeding ten-year period. These assets have begun generating sales revenues,
we have entered into development contracts and non-disclosure agreements with
companies interested in joint development and/or testing of certain
nanomaterials products, and we are in discussions regarding licensing of our
technology to others. In our future estimated cash flow analysis, we examined
product markets, assessed our opportunities for market entry and sales based on
current sales and/or customer interest, including samples supplied and
development agreements signed, and estimated the costs, including capital costs,
associated with the generation of revenues. At the same time, we took into
consideration recent developments with respect to licensing our technology to
others and pharmaceutical applications that have signficant revenue potential,
and estimated future cash flows associated with these activities. Although we
have not yet generated significant revenues, our future estimated cash flow
analysis indicates that we will produce sufficient cash flows to support the
carrying value of the assets at June 30, 2002.
Subsequent to the original filing of the Form 10-Q for the quarter
ended June 30, 2002, management determined that the asset impairment charge
should have been classified as part of operating expenses rather than an other
expense item. As a result, the consolidated statements of operations for the
three months ended June 30, 2002, the six months ended June 30, 2002, and the
period April 9, 1973 (date of inception) to June 30, 2002, have been restated to
give effect to that reclassification. The effect of the restatement was to
increase operating expenses and loss from operations for each period by
approximately $2,760,000 and decrease other expense by the same amount. There
was no effect to net loss or net loss per share.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion summarizes the material changes in our
financial condition between December 31, 2001 and June 30, 2002 and the material
changes in our results of operations and financial condition between the three-
and six-month periods ended June 30, 2001 and June 30, 2002. This discussion
gives effect to the restatement discussed in Note 6 to the consolidated
financial statements and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.
Overview
From inception through the end of 1993, our business consisted
principally of the exploration of mineral properties for acquisition and
exploration. During 1994, our focus changed as we became engaged in the
acquisition, development and testing of mineral processing equipment for use in
the recovery of fine, heavy mineral particles including gold, titanium, zircon
and environmental contaminants. Since that time, we have continued exploring
mineral properties on which we might use our patented mineral processing
equipment.
In 1996, we acquired all patent rights to the Campbell Centrifugal Jig,
since modified and renamed the Altair Centrifugal Jig. Since April 1996, we have
acquired mineral leaseholds on approximately 9,700 acres of land in Tennessee. A
prefeasibility study issued in July 1998 confirmed the existence of heavy
minerals and suggests that the property warrants further exploration. Based on
the results of these independent studies, we have initiated additional
feasibility testing.
In November 1999, we acquired all patent applications and technology
related to a hydrometallurgical process developed by BHP Minerals International,
Inc. ("BHP") primarily for the production of titanium dioxide products from
titanium bearing ores or concentrates (the "titanium processing technology") and
all tangible equipment and other assets (the "titanium processing assets") used
by BHP to develop and implement the titanium processing technology.
In the second quarter of 2002, we initiated research and development
efforts directed toward the utilization of nanomaterials in the pharmaceuticals
industry. In July 2002, we announced the development of a new active
pharmaceutical ingredient for the treatment of hyperphosphatemia (elevated serum
phosphate levels) in patients undergoing kidney dialysis, as well as a new drug
delivery system using inorganic ceramic nanoparticles. We intend to file patent
applications covering these developments and are currently seeking business
relationships with pharmaceutical companies that can conduct additional testing
and development, seek necessary FDA approvals and take the other steps necessary
to bring the new pharmaceutical ingredient and drug delivery system to market.
Although we are presently in discussions with several pharmaceutical companies
regarding such a business relationship, we can provide no assurance that we will
enter into any agreements with any such company or otherwise exploit the
potential value of these new developments.
Critical Accounting Policies and Estimates
Management based the following discussion and analysis of our financial
condition and results of operations on our consolidated financial statements.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our critical accounting policies and estimates,
including those related to long-lived assets and stock-based compensation. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements. These judgments and estimates affect the reported amounts
of assets and liabilities and the reported amounts of revenues and expenses
during the reporting periods. Changes to these judgments and estimates could
adversely affect the Company's future results of operations and cash flows.
9
o Long-lived assets. Our long-lived assets consist principally of pigment
production equipment, centrifugal jig equipment and intellectual
property (patents and patent applications) associated with each. At
June 30, 2002, the carrying value of these assets was $6,425,194, or
90% of total assets. We evaluate the carrying value of long-lived
assets when events or circumstances indicate that an impairment may
exist. In our evaluation, we estimate the net undiscounted cash flows
expected to be generated by the assets, and recognize impairment when
such cash flows will be less than the carrying values. Events or
circumstances that could indicate the existence of a possible
impairment include obsolescence of the technology, an absence of market
demand for the product, and/or continuing technology rights protection.
During the three-month period ended June 30, 2002 we recorded an
impairment adjustment related to the jig assets of $2,759,956. See
Results of Operations below for additional information with respect to
this adjustment.
o Stock-Based Compensation. We have two stock option plans which provide
for the issuance of stock options to employees and service providers.
Although SFAS No. 123, Accounting for Stock Based Compensation,
encourages entities to adopt a fair-value-based method of accounting
for stock options and similar equity instruments, it also allows an
entity to continue measuring compensation cost for stock-based
compensation using the intrinsic-value method of accounting prescribed
by APB 25, Accounting for Stock Issued to Employees. We have elected to
follow the accounting provisions of APB 25 and to furnish the pro forma
disclosures required under SFAS No. 123. We calculate the compensation
expense that would be recognized under SFAS No. 123 using a modified
Black-Scholes option pricing model. In so doing, we estimate certain
key variables used in the model. We believe the estimates we use are
appropriate and reasonable.
Results of Operations
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
-----------------------------------------------------------------------------
For the three months ended June 30, 2002, net losses totaled $4,588,254
($.20 per share) compared to $2,335,304 ($.12 per share) for the same period of
2001. Principal factors contributing to the losses during these periods were the
lack of substantial revenue together with the incurrence of operating expenses.
For the three months ended June 30, 2002, we generated revenues of
$4,734 through sales of titanium dioxide nanoparticles and lithium titanate
nanoparticles.
Mineral exploration and development expenses decreased by $31,711 from
$238,300 in the quarter ended June 30, 2001 to $206,589 in the quarter ended
June 30, 2002. The decrease is attributable to $49,000 of expenses related to
the start-up of the pilot plant facility at our Tennessee mineral property that
were incurred in the second quarter of 2001. Comparable expenses were not
incurred in 2002. In addition, other exploration and development expenses
associated with the Tennessee mineral property decreased by $43,000 in the
second quarter of 2002 when compared to the comparable quarter of 2001,
principally as a result of our efforts to reduce expenditures. These decreases
were partially offset by increased advance royalty payments of $60,000 for the
mineral leaseholds.
Our research and development ("R&D") efforts in the second quarter of
2002 were directed principally to batteries, thermal spray coatings and fuel
cells. R&D expenses increased by $18,657 from $145,383 in the second quarter of
2001 to $164,040 in the same period of 2002 as a result of increased staff time
being devoted to these R&D projects with a resulting decrease in time spent on
construction projects and administrative and general activities. We also
experienced an increase in payroll overhead costs charged to R&D due to a rise
in employee health insurance costs.
Professional services, which consist principally of legal, consulting
and audit expenses, increased from $208,525 during the second quarter 2001 to
$229,367 in the second quarter 2002. The increase is attributable to an increase
in consulting expenses of $67,000 for assistance with financing activities, and
an increase of $9,000 for legal charges associated with nanotechnology patent
applications. These increases are offset partially by a decrease in audit
expenses of $54,000.
10
General and administrative expenses decreased from $766,985 in second
quarter 2001 to $638,086 in the same period of 2002. Investor relations expense
decreased by $141,000 as we cut back some of our investor relations programs. At
our Altair Nanomaterials subsidiary, general operating costs for items such as
tools, operating supplies, laboratory supplies and sample costs decreased by
$70,000 as a result of our efforts to reduce costs. These decreases were
partially offset by an increase in payroll of $30,000 resulting from hiring the
president of Altair Nanotechnologies, an increase of $18,000 for employee health
insurance and an increase in stock exchange fees of $22,000.
Interest expense decreased by $425,488 from $734,027 in the quarter
ended June 30, 2001 to $308,539 for the quarter ended June 30, 2002. During
second quarter 2001, in connection with our $7,000,000 Asset-Backed Exchangeable
Term Note (the "Note"), we paid $118,000 of redemption premiums associated with
principal payments and $100,000 of fees in connection with extending the
deadline for the effectiveness of a registration statement associated with the
Note. In addition to this, interest expense of $194,000 was incurred related to
the estimated fair value of warrants issued to the lender in exchange for the
waiver of penalties that would have accrued due to late effectiveness of the
registration statement and modification to the Note terms involving the
redemption of exchange amounts. Expenses comparable to these were not incurred
in the second quarter of 2002.
During the second quarter of 2001, we had in excess of $3,200,000 of
restricted cash that was received in connection with our issuance of the Note.
Interest income earned on this cash was $39,000 during the quarter. On December
28, 2001, the Note was exchanged for a new note and the restricted cash was paid
to the lender. As a result of this, our cash balance available for investment
was significantly reduced during the second quarter of 2002 and interest income
declined.
During the quarter ended June 30, 2002, due to a shortage of cash, we
elected to reduce expenditures on the Tennessee mineral property to the minimum
amount required to maintain it. As a result of this, development activities have
been delayed, including our intended use of the jig to enhance the recovery of
heavy minerals on the property. This, in combination with our lack of funds to
further develop the jig for commercial use, causes us to believe that the jig
assets are impaired. Since we cannot determine when adequate funds will be
available to further develop and utilize the jig, we recorded an impairment of
jig assets in the amount of $2,759,956, which represents the remaining net asset
value of the jig patents and related expenditures ($2,366,155) and jigs in
property and equipment ($393,801) at June 30, 2002. In the meantime, we have
entered an agreement to perform jig tests for fine particle recovery at a third
party's facility and we continue to seek manufacturers and distributors for
marketing the jig under licensing and/or distributorship agreements, but we
cannot determine when and if the jig will generate substantial revenues and
profits.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
-------------------------------------------------------------------------
For the six months ended June 30, 2002, net losses totaled $6,267,785
($.27 per share) compared to $4,239,078 ($.22 per share) for the same period of
2001.
In the six months ended June 30, 2002, we generated revenues of $53,671
through sales of titanium dioxide nanoparticles, lithium titanate nanoparticles
and other materials. Sales revenues included $40,972 of previously deferred
revenues for which product shipments were made during the first quarter of 2002.
These products were used primarily in thermal spray coatings.
During the six months ended June 30, 2001, we completed the installation
and began testing of the pilot plant facility at our Tennessee mineral property.
In connection with this, we incurred and expensed costs of $135,000 for
completion of fabrication and installation of the pilot plant and $69,000 for
internal labor, overheads, supplies and materials for construction and
subsequent operation of the facility. We incurred no comparable mineral
exploration and development expenses during the six months ended June 30, 2002.
Other exploration and development expenses associated with the Tennessee mineral
property decreased by $77,000 in the six months ended June 30, 2002 when
compared to the comparable quarter of 2001, principally as a result of our
efforts to reduce expenditures, but this was offset by increased advance royalty
payments of $33,000 for the mineral leaseholds.
Our R&D efforts in the six months ended June 30, 2002 were directed
principally to batteries, thermal spray coatings and fuel cells. R&D expenses
increased by $34,378 from $268,271 in the six months ended June 30, 2001 to
$302,649 in the same period of 2002 as a result of increased staff time being
11
devoted to these R&D projects with a resulting decrease in time spent on
construction projects and administrative and general activities. We also
experienced an increase in payroll overhead costs charged to R&D due to a rise
in employee health insurance costs.
Professional services increased from $313,656 during the six months
ended June 30, 2001 to $455,440 in the same period of 2002. The increase is
attributable to an increase in consulting expenses of $175,000 for assistance
with financing activities, and an increase of $14,000 for legal charges
associated with nanotechnology patent applications. These increases are offset
partially by a decrease in audit expenses of $43,000.
General and administrative expenses decreased from $1,570,805 in the six
months ended June 30, 2001 to $1,246,214 in the same period of 2002. Expenses
associated with stock options issued to employees and service providers
decreased by $186,000. In the first six months of 2001, we repriced certain
options granted to employees at a cost of $81,000 and issued options to service
providers at a cost of $105,000. Comparable costs in the six months ended June
30, 2002 were only $7,000. Investor relations expense decreased by $161,000 as
we cut back some of our investor relations programs. At our Altair Nanomaterials
subsidiary, general operating costs for items such as tools, operating supplies,
laboratory supplies and sample costs decreased by $32,000 as a result of our
efforts to reduce costs. These decreases were partially offset by an increase in
payroll of $36,000 resulting from hiring the president of Altair
Nanotechnologies and an increase of $29,000 for employee health insurance.
Interest expense decreased by $437,430 from $1,034,267 in the six months
ended June 30, 2001 to $596,837 for the comparable period of 2002. The reason
for this decline is as explained above in the section titled "Three Months Ended
June 30, 2002 Compared to Three Months Ended June 30, 2001."
Interest income decreased by $111,043 from $112,577 in the six months
ended June 30, 2001 to $1,534 in the same period of 2002. This decrease is the
result of a decrease in restricted cash in the bank as described above in the
section titled "Three Months Ended June 30, 2002 Compared to Three Months Ended
June 30, 2001."
In the six months ended June 30, 2002, we recorded an asset impairment
of $2,759,956 as described above in the section titled "Three Months Ended June
30, 2002 Compared to Three Months Ended June 30, 2001.
Liquidity and Capital Resources
We generated $53,671 of sales revenues in the first six months of 2002
but incurred a net loss of $6,267,785. At June 30, 2002, our accumulated deficit
was $35,680,611, or an increase of $6,267,785 over the accumulated deficit at
December 31, 2001. This increase was due to the net loss for the period.
Our cash and short-term investments decreased from $599,884 at December
31, 2001 to $274,531 at June 30, 2002 due to the incurrence of operating costs
and the effect of financing transactions which are described below.
On March 11, 2002, we entered into a stock subscription agreement with a
private investor which provided for the purchase and sale, for $1,000,000 to be
paid on or before May 31, 2002, of 666,667 common shares and 1,000,000 warrants
to purchase common shares at exercise prices between $2.00 and $3.00 per share.
At June 30, 2002, we had received $617,123 of advances toward the purchase price
of the shares. On April 26, 2002, we entered into an amended and restated stock
purchase agreement with the investor wherein the number of shares purchased was
increased to 1,200,000, the number of warrants was increased to 1,800,000 and
the total purchase price was increased to $1,260,000 payable in full by July 31,
2002. This date was subsequently informally extended to August 31, 2002.
One-third of the warrants are exercisable at $1.50 per share and expire on the
earlier of five years from the date of issue or the date 30 days following the
fifth day (whether or not consecutive) the closing price of our common shares
equals or exceeds $4.50. A further one-third of the warrants are exercisable at
$2.00 per share and expire on the earlier of five years from the date of issue
or the date 30 days following the fifth day (whether or not consecutive) the
closing price of our common shares equals or exceeds $5.00. The final one-third
of the warrants are exercisable at $2.50 per share and expire on the earlier of
five years from the date of issue or the date 30 days following the fifth day
(whether or not consecutive) the closing price of our common shares equals or
exceeds $5.50.
On April 16, 2002, we reduced the exercise price on 582,500 warrants to
$1.05 per share for the period April 26, 2002 through June 30, 2002. The
warrants had been previously issued with exercise prices ranging from $3.50 to
12
$5.00. A total of 286,169 warrants were exercised prior to the expiration date
resulting in net proceeds to us of $300,477.
On May 7, 2002, we entered into a securities purchase agreement with
private investors pursuant to which they purchased 1,250,000 common shares and
312,500 warrants to purchase common shares for an aggregate purchase price of
$1,000,000. The warrants expire five years from the date of issuance and are
exercisable at $1.13 per share.
At June 30, 2002, we had cash and cash equivalents of $274,531, an
amount that would be sufficient to fund our basic operations through July 31,
2002. In order to extend operations through at least August 31, 2002, we have
reduced our cash expenditures to the extent possible without significantly
affecting our development efforts with respect to the titanium processing
technology. We anticipate that we will receive the remaining $642,877 of the
purchase price owed under the amended and restated stock purchase agreement
described above on or before August 31, 2002. If we receive the remainder of the
purchase price during August 2002, we expect that this additional capital will
be sufficient to fund our basic operations through at least October 31, 2002. If
we do not receive the remainder of the purchase price during August 2002, we
will require additional financing during August 2002 in order to provide working
capital to fund our day-to-day operations.
In order to reduce the rate at which we are using cash we have taken
several cost cutting measures, the most significant of which is the reduction of
expenditures on the Tennessee mineral property and the jig to the minimum amount
necessary to maintain these assets with no ongoing development activity.
Nevertheless, even with such cost cutting measures, as stated above, we will
need additional financing to fund our basic, day-to-day operations sometime
between August 31, 2002 and October 31, 2002. Because our projected near-term
sales of nanoparticle products are minimal, we expect to generate such funds
through additional private placements of our common stock and warrants to
purchase our common stock or other debt or equity securities. As of August 13,
2002, we have no commitments to provide additional financing or to purchase a
significant quantity of nanoparticle products. If we are unable to obtain
financing on a timely basis, we may be forced to more significantly curtail and,
at some point, discontinue operations.
We expect that our long-term capital requirements will be met through
sales of nanoparticle products, licensing of the titanium processing technology
and development of the Tennessee mineral property. To the extent that additional
capital is required, we expect to generate it through additional private
placements of our common stock and warrants and other equity or debt securities.
On January 22, 2002, the Securities and Exchange Commission issued
FR-61, Commission Statement about Management's Discussion and Analysis of
Financial Condition and Results of Operations. The release sets forth certain
views of the Commission regarding disclosure that should be considered by
registrants. Disclosure matters addressed by the release are liquidity and
capital resources including off-balance sheet arrangements, certain trading
activities that include non-exchange traded contracts accounted for at fair
value, and effects of transactions with related and certain other parties. The
following table sets forth the information in a format described in the release
with regard to disclosures about contractual obligations and commercial
commitments.
The following table discloses aggregate information about our
contractual obligations including note payable, mineral lease payments,
facilities lease payments and contractual service agreements, and the periods in
which payments are due as of June 30, 2002:
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Less Than
Contractual Obligations Total 1 Year 1-3 years 4-5 Years After 5
Years
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Note Payable $2,000,000 $2,000,000
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Mineral Leases 1,135,021 147,467 $452,868 $392,055 $142,631
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Contractual Service Agreements 250,493 250,493
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Facilities Lease 99,343 99,343
--------------------------------------- ------------- ------------- -------------- ------------- -------------
Total Contractual Obligations $3,484,857 $2,497,303 $452,868 $392,055 $142,631
--------------------------------------- ============= ============= ============== ============= =============
13
Forward-Looking Statements
This Quarterly Report on Form 10-Q/A contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements can be identified by the use of the forward-looking words
"anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or
similar words. These statements discuss future expectations, contain projections
regarding future developments, operations, or financial conditions, or state
other forward-looking information. Statements in this report regarding the
ability of the Company to raise working capital necessary to fund our
operations, development of the titanium processing technology and assets
(including for pharmaceutical use), development of the centrifugal jig and the
Tennessee mineral property, and any future acquisition activities are
forward-looking statements. You should keep in mind that all forward-looking
statements are based on management's existing beliefs about present and future
events outside of management's control and on assumptions that may prove to be
incorrect.
Among the key factors that may have a direct bearing on the Company's
operating results are various risks and uncertainties including, but not limited
to, the following:
o We have not generated any substantial operating revenues and may not
ever generate substantial revenues.
o As shown in the consolidated financial statements for the quarter ended
June 30, 2002, we incurred a net loss of $4,588,254, and since the date
of inception have incurred cumulative net losses of $35,628,194. At
June 30, 2002, current liabilities exceeded current assets by
$2,563,495. These factors, among others, may raise substantial doubt
about the Company's ability to continue as a going concern.
o We may not be able to raise sufficient capital to meet future
obligations. As described in this Report, we need to raise additional
capital in the short-term and in the long-term in order to continue our
basic, day-to-day operations and continue development of the titanium
processing technology. If we are unable to obtain sufficient capital,
we may be unable to meet future obligations or adequately exploit
existing or future opportunities, and may be forced to discontinue
operations.
o The sale in the open market of common shares issuable upon the exercise
of exchange rights under existing and recently terminated notes and
warrants may place downward pressure on the market price of our common
shares. Speculative traders may anticipate the exercise of exchange
rights or warrants and, in anticipation of a decline in the market
price of our common shares, engage in short sales of our common shares.
Such short sales could further negatively affect the market price of
our common shares.
o We have pledged all of the intellectual property, fixed assets and
common stock of Altair Nanomaterials, Inc., our second-tier
wholly-owned subsidiary, to secure repayment of a Secured Term Note
with a face value of $2,000,000 issued on December 28, 2001. Altair
Nanomaterials, Inc. owns and operates the titanium processing
technology we acquired from BHP in 1999. The Secured Term Note is also
secured by a pledge of the common stock and leasehold assets of Mineral
Recovery Systems, Inc., which owns and operates our leasehold interests
in the Camden, Tennessee area. The Note is due and payable on March 31,
2003. If we default on the Secured Term Note, severe remedies will
likely be available to the holder of the Secured Term Note, including
immediate seizure and disposition of all pledged assets.
o In order to avoid being delisted from the Nasdaq National Market on
account of our failure to satisfy the $1.00 per share minimum bid
requirement, we expect to apply for listing on the Nasdaq SmallCap
Market during August 2002. If such application is not accepted, we
expect to be delisted from the Nasdaq National Market. Even if the
application is accepted, our ability to remain listed on the Nasdaq
SmallCap Market will depend upon our ability to increase the market
price of our common stock to $1.00 per share and to satisfy other
listing criteria by the end of a probationary period (which expires in
December 2002 but may be extended an additional 180 days). Delisting
from the Nasdaq National Market and/or SmallCap Market may have a
significant negative impact on the trading price, volume and
marketability of our common shares.
o In the short run, we plan to use the titanium processing technology to
produce TiO2 nanoparticles, and we also intend to license the
technology to others. TiO2 nanoparticles and other products we intend
14
to initially produce with the titanium processing technology generally
must be customized for a specific application working in cooperation
with the end user. We are still testing and customizing our TiO2
nanoparticle products for various applications and have no long-term
agreements with end users to purchase any of our TiO2 nanoparticle
products. In addition, we have not yet entered into any agreements to
license the technology. We may be unable to recoup our investment in
the titanium processing technology and titanium processing equipment.
o We have not completed testing of, or developed a production model of,
any series of the jig. In part because of our liquidity shortage, we do
not expect to complete testing and development of the jig during the
coming year and have determined to focus most of our limited resources
on the titanium processing technology. We may never develop a
production model of the jig.
o Our capital shortage has also forced us to discontinue development work
on the Tennessee mineral property and make only those expenditures that
are necessary to maintain the property. If additional capital becomes
available, we intend to resume the process of conducting feasibility
testing of the Tennessee mineral property. Because we are at an early
stage of testing, we are unable to provide any assurance that mining of
the Tennessee mineral property is feasible. Our test production at the
pilot plant, economic analysis and additional exploration activities
may indicate any of the following:
o that the Tennessee mineral property does not contain heavy
minerals of a sufficient quantity, quality or continuity to
permit any mining;
o that production costs exceed anticipated revenues;
o that end products do not meet market requirements or customer
expectations;
o that there is an insufficient market for products minable from
the Tennessee mineral property; or
o that mining the Tennessee mineral property is otherwise not
economically or technically feasible.
In addition to the foregoing, we recommend that you review the risk
factors and other cautionary statements contained in the Company's other filings
with the Securities and Exchange Commission, including the Company's Annual
Report on Form 10-K for the year ended December 31, 2001, as filed on April 1,
2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not have any derivative instruments, commodity instruments, or
other financial instruments for trading or speculative purposes, nor are we
presently at risk for changes in foreign currency exchange rates.
15
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) As reported and further described in our Current Report on Form 8-K
filed on July 18, 2002, (a) the name of our company had changed from "Altair
International Inc." to "Altair Nanotechnologies Inc.", (b) the Company was
continued (i.e. redomesticated) from the Business Corporation Act (Ontario) to
Canada's federal corporate statute, called the Canada Business Corporations Act,
(c) the directors were authorized to appoint one or more additional directors
between meetings of shareholders to hold office for a term expiring not later
than the next annual meeting of shareholders, provided that the total number of
directors so appointed may not exceed one third of the number of directors
elected at the previous annual meeting of shareholders, (d) the Company was
authorized to have meetings of shareholders outside of Canada in the State of
Nevada, and (e) the board of directors was authorized from time to time and in
such amounts and on such terms as it deems expedient, to: (i) borrow money on
the credit of the Company; (ii) issue, sell or pledge debt obligations
(including bonds, debentures, notes or other similar obligations, secured or
unsecured) of the Company; and (iii) charge, mortgage, hypothecate or pledge all
of any of the currently owned or subsequently acquired real or personal, movable
or immovable, property of the Company, including book debts, rights, powers,
franchises and undertaking, to secure any debt obligations or any money
borrowed, or other debt or liability of the Company.
(c) On May 7, 2002, we sold 1,250,000 common shares together with
warrants to purchase 312,500 common shares in a private placement for gross
proceeds of $1,000,000. The warrants entitle the holders to purchase an
aggregate of 312,500 shares of common stock at an initial exercise price of
$1.13 per share at any time on or before May 7, 2007. The warrants also contain
a net exercise provision which permits a holder to receive upon the exercise of
the warrant a number of shares of common stock with a fair market value equal to
the difference between the fair market value of the number of shares of common
stock with respect to which the warrant is exercised and the aggregate exercise
price applicable to such shares. Net exercise is not permitted prior to May 7,
2003. The warrants also include a mandatory exercise provision that allows us to
require that the holders exercise or forfeit the warrants if the closing sale
price for the common stock is greater than 250% of the exercise price for a
period of 20 consecutive trading days.
On March 11, 2002, we entered into a stock subscription agreement with a
private investor which provided for the purchase and sale, for $1,000,000 to be
paid on or before May 31, 2002, of 666,667 common shares and 1,000,000 warrants
to purchase common shares at exercise prices between $2.00 and $3.00 per share.
At June 30, 2002, we had received $617,123 of advances toward the purchase price
of the shares. On April 26, 2002, we entered into an amended and restated stock
purchase agreement with the investor wherein the number of shares purchased was
increased to 1,200,000, the number of warrants was increased to 1,800,000 and
the total purchase price was increased to $1,260,000 payable in full by July 31,
2002. This date was subsequently informally extended toAugust 31, 2002.
One-third of the warrants are exercisable at $1.50 per share and expire on the
earlier of five years from the date of issue or the date 30 days following the
fifth day (whether or not consecutive) the closing price of our common shares
equals or exceeds $4.50. A further one-third of the warrants are exercisable at
$2.00 per share and expire on the earlier of five years from the date of issue
or the date 30 days following the fifth day (whether or not consecutive) the
closing price of our common shares equals or exceeds $5.00. The final one-third
of the warrants are exercisable at $2.50 per share and expire on the earlier of
five years from the date of issue or the date 30 days following the fifth day
(whether or not consecutive) the closing price of our common shares equals or
exceeds $5.50.
The above-described common shares and warrants were offered and sold in
reliance upon the exemption for sales of securities not involving a public
offering, as set forth in Section 4(2) of the Securities Act based upon the
following: (a) each investor represented and warranted to the Company that it
was an "accredited investor," as defined in Rule 501 of Regulation D promulgated
under the Securities Act and had such background, education, and experience in
financial and business matters as to be able to evaluate the merits and risks of
an investment in the securities; (b) there was no public offering or general
solicitation with respect to the offering, and each investor represented and
warranted that it was acquiring the securities for its own account and not with
an intent to distribute such securities; (c) each investor was provided with a
copy of the most recent Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K of the Company and all other information
requested by the investor with respect to the Company, (d) each investor
acknowledged that all securities being purchased were "restricted securities"
16
for purposes of the Securities Act, and agreed to transfer such securities only
in a transaction registered with the SEC under the Securities Act or exempt from
registration under the Securities Act; and (e) a legend was placed on the
certificates and other documents representing each such security stating that it
was restricted and could only be transferred if subsequently registered under
the Securities Act or transferred in a transaction exempt from registration
under the Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders.
We held an Annual Meeting of Shareholders on June 12, 2002 at which the
shareholders considered and voted as follows on the items described below:
1. The shareholders considered whether to elect the following persons as
directors, each to serve until the next annual meeting of shareholders and until
his respective successor shall have been duly elected and shall qualify:
Name of Nominee Votes For Votes Withheld/Abstentions Broker Non-Votes
William Long 19,218,608 185,851 -0-
James Golla 19,212,208 192,251 -0-
George Hartman 19,195,136 209,323 -0-
Robert Sheldon 19,207,308 197,151 -0-
Edward Dickinson 19,188,008 216,451 -0-
2. The shareholders considered whether to appoint Deloitte & Touche, LLP
as auditors and authorize the Board of Directors to fix their remuneration.
There were 19,260,450 votes cast in favor, no votes cast against, 144,009 votes
withheld, and no broker non-votes.
3. The shareholders considered a proposed special resolution authorizing
the filing of articles of continuance having the effect of: (a) continuing the
Company under the laws of Canada pursuant to the provisions of the Canada
Business Corporations Act (the "CBCA"); (b) changing the name of the Company to
"Altair Nanotechnologies Inc." or such other name as is acceptable to Industry
Canada and the applicable regulatory authorities; (c) authorizing the directors
to appoint one or more additional directors between meetings of shareholders to
hold office for a term expiring until not later than the next annual meeting of
shareholders provided that the total number of directors so appointed may not
exceed one third of the number of directors elected at the previous annual
meeting of shareholders; (d) authorizing the Company to have meetings of
shareholders outside of Canada in the State of Nevada; and (e) authorizing the
board of directors from time to time and in such amounts and on such terms as it
deems expedient, to: (I) borrow money on the credit of the Company; (II) issue,
sell or pledge debt obligations (including bonds, debentures, notes or other
similar obligations, secured or unsecured) of the Company; and (III) charge,
mortgage, hypothecate or pledge all of any of the currently owned or
subsequently acquired real or personal, movable or immovable, property of the
Company, including book debts, rights, powers, franchises and undertaking, to
secure any debt obligations or any money borrowed, or other debt or liability of
the Company. There were 4,491,192 votes cast in favor, 304,923 votes cast
against, no votes withheld, and 14,608,344 broker non-votes.
4. The shareholders considered a proposed resolution authorizing a new
general by-law for the Company. There were 4,462,662 votes cast in favor,
333,453 votes cast against, no votes withheld, and 14,608,344 broker non-votes.
17
Item 6. Exhibits and Reports on Form 8-K
a) See Exhibit Index attached hereto.
b) On May 10, 2002, we filed a Current Report on Form 8-K reporting that
we entered into a securities purchase agreement with two investors
pursuant to which we issued 1,250,000 shares of common stock and
warrants to purchase 312,500 shares of common stock in exchange for
$1,000,000. We also entered into a registration rights agreement with
the investors pursuant to which we agreed to file, as soon as possible
and in no event later than within 60 days of May 7, 2002, a
registration statement registering the re-sale of the shares of common
stock purchased under the purchase agreement and issuable upon exercise
of the warrants.
c) On July 18, 2002, we filed a Current Report on Form 8-K reporting that
(a) the name of our company had changed from "Altair International
Inc." to "Altair Nanotechnologies Inc.," (b) the Company was continued
(i.e. redomesticated) from the Business Corporation Act (Ontario) to
Canada's federal corporate statute, called the Canada Business
Corporations Act, (c) the directors were authorized to appoint one or
more additional directors between meetings of shareholders to hold
office for a term expiring not later than the next annual meeting of
shareholders, provided that the total number of directors so appointed
may not exceed one third of the number of directors elected at the
previous annual meeting of shareholders, (d) the Company was authorized
to have meetings of shareholders outside of Canada in the State of
Nevada, and (e) the board of directors was authorized from time to time
and in such amounts and on such terms as it deems expedient, to: (i)
borrow money on the credit of the Company; (ii) issue, sell or pledge
debt obligations (including bonds, debentures, notes or other similar
obligations, secured or unsecured) of the Company; and (iii) charge,
mortgage, hypothecate or pledge all of any of the currently owned or
subsequently acquired real or personal, movable or immovable, property
of the Company, including book debts, rights, powers, franchises and
undertaking, to secure any debt obligations or any money borrowed, or
other debt or liability of the Company.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Altair Nanotechnologies Inc.
October 10, 2002 By: /s/ William P. Long
---------------- ---------------------------------------------
Date William P. Long, Chief Executive Officer
October 10, 2002 By: /s/ Edward H. Dickinson
---------------- -------------------------------------------------
Date Edward H. Dickinson, Chief Financial Officer
CERTIFICATIONS
I, William P. Long, Chief Executive Officer, certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of
Altair Nanotechnologies Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
October 10, 2002 By: /s/ William P. Long
---------------- ---------------------------------------------
Date William P. Long, Chief Executive Officer
I, Edward H. Dickinson, Chief Financial Officer, certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of
Altair Nanotechnologies Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
October 10, 2002 By: /s/ Edward H. Dickinson
---------------- -------------------------------------------------
Date Edward H. Dickinson, Chief Financial Officer
19
EXHIBIT INDEX
Exhibit No. Exhibit Incorporated by Reference/ Filed Herewith
--------------- --------------------------------------------------- --------------------------------------------
3.1 Articles of Continuance Incorporated by reference to the Current
Report on Form 8-K filed with the SEC on
July 18, 2002
4.1 Bylaw No. 1 Incorporated by reference to the Current
Report on Form 8-K filed with the SEC on
July 18, 2002
4.2 Form of Investor Warrant issued May 7, 2002 Incorporated by reference to Current
Report on Form 8-K filed with the SEC on
May 10, 2002
4.3 Repricing Amendment to Common Share Purchase Incorporated by reference to the Company's
Warrants Quarterly Report on Form 10-Q for the
period ended June 30, 2002 filed with the
SEC on May 15, 2002
10.1 Securities Purchase Agreement dated May 7, 2002 Incorporated by reference to Current
Report on Form 8-K filed with the SEC on
May 10, 2002
10.2 Registration Rights Agreement dated May 7, 2002 Incorporated by reference to Current
Report on Form 8-K filed with the SEC on
May 10, 2002
10.3 Amended and Restated Stock Purchase and Incorporated by reference to the Company's
Subscription Agreement dated April 2002 Quarterly Report on Form 10-Q for the
period ended June 30, 2002 filed with the
SEC on May 15, 2002
20