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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
[ ] 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.
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(Exact name of registrant as specified in its charter)
Canada 1-12497 33-1084375
- -------------------------- ---------------------- ---------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction Identification No.)
of incorporation)
204 Edison Way
Reno, Nevada 89502
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (775) 858-3750
[ ] Securities registered pursuant to Section 12(b) of the Act: None
[X] Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value Nasdaq SmallCap Market
- --------------------------- ----------------------
(Title of Class) (Name of each exchange
on which registered)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). YES [ ] NO [X]
The aggregate market value of the common shares held by non-affiliates
of the Registrant on June 30, 2003, based upon the average bid and asked price
of the common shares on the NASDAQ SmallCap Stock Market of $1.07 per share on
June 30, 2003, was approximately $36,850,000. Common Shares held by each officer
and director and by each other person who may be deemed to be an affiliate of
the Registrant have been excluded. As of March 15, 2004, the Registrant had
48,650,140 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement on Schedule 14A for the
Registrant's 2004 Annual Meeting of Shareholders are incorporated by
reference in Part III as specified.
INDEX TO FORM 10-K
PART I..................................................................................3
Item 1: Business.....................................................................3
Item 2. Properties..................................................................28
Item 3. Legal Proceedings...........................................................29
Item 4. Submission of Matters to a Vote of Security Holders.........................29
PART II................................................................................30
Item 5. Market for the Common Shares and Related Shareholder Matters................30
Item 6. Selected Financial Data.....................................................33
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..................42
Item 8. Financial Statements and Supplementary Data.................................42
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......................................43
Item 9A. Controls and Procedures.....................................................43
Part III...............................................................................44
Item 10. Directors and Executive Officers of the Registrant..........................44
Item 11. Executive Compensation......................................................44
Item 12. Security Ownership of Certain Beneficial Owners and Management..............44
Item 13. Certain Relationships and Related Transactions..............................44
Item 14. Principal Accountant Fees and Services.......................................44
Part IV................................................................................45
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............45
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PART I
This Annual Report on Form 10-K for the year ended December 31, 2003
(this "Form 10-K") contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve risks and uncertainties. Purchasers of any of the
common shares, no par value (the "common shares") of Altair Nanotechnologies
Inc. ("Altair" or the "Company") are cautioned that the Company's actual results
will differ (and may differ significantly) from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those factors discussed herein under "Factors That May
Affect Future Results" and elsewhere in this Form 10-K generally. The reader is
also encouraged to review other filings made by the Company with the Securities
and Exchange Commission (the "Commission") describing other factors that may
affect future results of the Company.
Unless the context requires otherwise, all references to "Altair,"
"we," "Altair Nanotechnologies Inc.," or the "Company" in this Form 10-K refer
to Altair Nanotechnologies Inc. and all of its subsidiaries. Altair currently
has one wholly-owned subsidiary, Altair US Holdings, Inc., a Nevada corporation.
Altair US Holdings, Inc. directly or indirectly wholly-owns Altair
Nanomaterials, Inc., a Nevada corporation, Mineral Recovery Systems, Inc., a
Nevada corporation ("MRS"), Fine Gold Recovery Systems, Inc., a Nevada
corporation ("Fine Gold") and Tennessee Valley Titanium, Inc., a Nevada
corporation.
Item 1: Business
We are a development-stage Canadian company whose primary business is
developing and commercializing nanomaterial and titanium dioxide pigment
technologies. Our research, development, production and marketing efforts are
currently directed toward four applications of our proprietary technologies:
o the production of titanium dioxide pigments;
o the development of titanium dioxide structures in connection with a
research program aimed at developing a lower-cost process for
producing titanium metals and related alloys;
o a new active pharmaceutical ingredient that we call RenaZorb(TM),
which is designed to be useful in the treatment of elevated serum
phosphate levels in patients undergoing kidney dialysis; and
o the development of nanomaterials for use in various products, such
as thermal spray powders, dental fillings, algae removal materials,
lithium ion batteries and fuel cells.
In December 2003, our board of directors approved a plan to restructure
the Company in order to concentrate resources on the nanomaterials and titanium
dioxide pigment applications identified above, which we believe are the
applications most likely to generate significant revenues in the foreseeable
future. Our future revenues will depend on the success of these projects, the
results of our other research and development work and the success of our
marketing efforts. As a part of the restructuring, we have determined to
consolidate the assets related to the Altair Centrifugal Jig (the "Altair jig")
and our Tennessee mineral property into (or under) a single corporation, cause
such corporation to become an SEC reporting company and distribute substantially
all of the shares of common stock of such corporation to our shareholders. The
completion of this spin-off process is expected to take approximately six months
and is contingent upon receipt of shareholder approval.
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Our Nanomaterials and Titanium Dioxide Pigment Business
- -------------------------------------------------------
Background and Description of Process
In November 1999, we acquired all patent applications, technology and
tangible assets 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 and metal oxide
nanoparticles (the "nanomaterials and titanium dioxide pigment technology"), and
all tangible equipment and other assets used by BHP to develop and implement the
nanomaterials and titanium dioxide pigment technologies (the "nanomaterials and
titanium dioxide pigment assets"). These assets were being developed by BHP and
had not yet been commercially operated. We are employing the nanomaterials and
titanium dioxide pigment technology as a platform for the sale of contract
services, intellectual property licenses and for the production and sale of
metal oxide nanoparticles in various applications.
The nanomaterials and titanium dioxide pigment technology is capable of
producing conventional titanium dioxide pigment products that are finely-sized
powders consisting of titanium dioxide crystals. These powders approximate
170-300 nanometers in size. Our nanomaterials and titanium dioxide pigment
technology is also capable of producing titanium dioxide and other metal and
mixed metal oxide nanomaterials. These are specialty products with a size range
of 10 to 100 nanometers (approximately one tenth the size of conventional TiO2
pigment). The primary products currently being produced in the processing plant
are titanium dioxide (TiNano40(TM) series), lithium titanate spinel and
stabilized zirconia nanomaterials. The technology also enables the production of
customized products for catalyst support structures and porous titanium oxide
electrode structures for titanium metal production.
The nanomaterials and titanium dioxide pigment technology is based on a
proprietary dense-phase crystal growth technique that controls crystal formation
using a combination of mechanical and fluid dynamics and chemical and thermal
control. The size, phase, catalytic activity and size distribution of crystals
can be controlled within narrow limits and to specification through introduction
of small quantities of selected chemicals ("doping elements") during crystal
growth.
The technology, which is scaleable, uses standard chemical processing
industry unit operations that we believe make it suitable for large-scale
continuous production of highly uniform products.
Nanomaterials and Titanium Dioxide Pigment Tangible Assets
The nanomaterials and titanium dioxide pigment assets consist
principally of a production facility located in Reno, Nevada in a building that
we purchased from BHP. During 2000, we installed additional equipment to
increase production capacity to a nominal annual amount of 200 tons of
nanomaterials. We also added a separate pilot facility to produce large sample
quantities of product for development, test and evaluation purposes. In 2001, we
added hydration and filtering equipment to improve production processing. In
2002, we purchased advanced milling equipment to improve product quality. In
2003, we purchased pilot plant scale solvent extraction columns to test and
improve the purification unit operation process for the nanomaterials and
titanium dioxide pigment technology.
Overview of the Technology and Process
Our nanomaterials and titanium dioxide pigment technology is
fundamentally different from current commercial processing techniques. Other
processes are based on either a precipitation of materials from a solution or
4
the formation of crystallites from molten droplets of titanium oxide generated
in high temperature flame reactors. Our process is a dense-phase crystal growth
technique which controls crystal formation using a combination of mechanical and
fluid dynamics and chemical and thermal control.
Our process permits exceptional control over particle size, shape, and
crystalline form. Our titanium processing technology produces discrete anatase
crystals in nanometer sizes and may be doped to be thermally stable up to 800
degrees Centigrade. By remaining stable in high-temperature processing,
nanomaterials produced by our titanium dioxide pigment processing technology
retain the desired nanomaterials size and crystalline phase. In addition, our
technology is designed to minimize process effluents needing environmental
remediation and to accept a wide variety of low-cost, naturally occurring
titanium feed stocks.
We have not operated the nanomaterials and titanium dioxide pigment
technology at a commercial scale. Accordingly, we cannot describe processing
efficiencies and costs associated with our nanomaterials and titanium dioxide
pigment technology or compare such efficiencies and costs to those of
competitors.
In addition, our ability to capitalize on and develop our technology
may be limited by the limited amount of capital we have available and our lack
of a substantial operating history. Competing nanomaterials producers generally
are financially strong corporations with established customer relationships and
operating histories. The nanomaterials application business is a young industry
subject to rapid technological changes, and there is wide disparity within the
industry with respect to the composition and attributes of nanomaterials
products. The manufacturing methods and costs to manufacture also vary greatly,
with certain methods lending themselves to specific niche applications. As a
result, competition within the industry is driven by a variety of factors,
principally price and product attributes. Our marketing efforts have focused on
our ability to produce a wide range of products at attractive prices.
Plans for Development
The nanomaterials and titanium dioxide pigment technology has potential
to produce nanomaterials, which are sold on specialty product markets, titanium
dioxide pigments, which are commercially traded in bulk, catalyst structures and
other specialty ceramic products. During 2003, our development efforts were
directed toward new nanomaterials products, pharmaceutical products, titanium
dioxide pigment products, thermal spray powders, electrode grade powders,
catalyst support and electrode structures.
The Altair Hydrochloride TiO2 Pigment Process(TM) (AHPP)
We have named the portion of the nanomaterials and titanium dioxide
pigment technology that was developed to produce high quality titanium dioxide
pigment the Altair Hydrochloride Pigment Process(TM) (AHPP). This package of
technologies includes three US patents and over eight years of trade secrets and
know-how. The technology represents a comprehensive process to extract titanium
from raw materials, produce a high quality titanium dioxide pigment and minimize
environmental impact.
Key Features
------------
The AHPP is the first new, comprehensive technology to produce titanium
dioxide pigment in over fifty years and takes advantage of new technologies to
enable high quality pigment production. The AHPP uses a dense-phase crystal
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growth technique which controls crystal formation using a combination of
mechanical and fluid dynamics and chemical and thermal control. A third party
engineering study indicates that cost associated with this process will be lower
than costs associated with alternative processes. All hydrochloric acid waste
streams can be recycled to recover acid, and the waste solids generated from the
purification process are easily manageable iron oxides.
Target Markets
-]-------------
We intend to benefit from the titanium dioxide pigment technology
through technology license agreements with large materials companies under which
we would receive royalties and other payments. We do not anticipate being a
manufacturer of pigments or competing directly in the pigment market.
Research, Testing and Development
---------------------------------
We have continued to research, test and develop our AHPP technology
through development contracts. We have demonstrated the flexibility of the
process for use on a wide variety of low-cost ilmenite feed stocks.
In January 2004, we entered into a license agreement with Western Oil
Sands, Inc. with respect to its possible use of the AHPP for the production of
titanium dioxide pigment and pigment-related products at the Athabasca Oil Sands
Project in Alberta, Canada, and elsewhere. Upon execution of the agreement, we
granted Western Oil Sands an exclusive, conditional license to use the AHPP on
heavy minerals derived from oil sands in Alberta, Canada. The agreement also
contemplates a three-phase, five-year program pursuant to which the parties will
work together to further evaluate, develop and commercialize the AHPP. In the
first phase of the program, Western Oil Sands is expected to spend $650,000
($500,000 of which is scheduled to be paid to Altair for work performed) to
evaluate the AHPP and confirm that the AHPP will produce pigment from oil sands.
Assuming phase one is successful, Western Oil Sands may elect to commence phase
two, the construction of a demonstration titanium pigment production facility
using the AHPP. If phase two is successful, Western Oil Sands may elect to
commence phase three, the construction and operation of a full-scale commercial
titanium pigment production facility using the AHPP.
The scope of the license granted to Western Oil Sands under the
agreement will vary with Western Oil Sands' commitment to the project. The
initial license, related to use of the AHPP on heavy minerals derived from oil
sands in Alberta, Canada, will terminate if Western Oil Sands fails to complete
phase one and will convert to a non-exclusive license if Western Oil Sands
commences phase two but fails to complete, or spend at least $25 million in an
effort to complete, phase two.
If Western Oil Sands completes phase one and commences phase two,
Western Oil Sands' license will be expanded to include the right to use the AHPP
for the production of titanium dioxide pigment and pigment-related products from
oil sands resources, primary ore resources and titanium deposits in Canada and
Minnesota and for the production of titanium dioxide pigment and pigment-related
products from oil sands resources world wide. This expanded license will
continue on an exclusive basis if Western Oil Sands completes phase two and
completes, or spends at least $50 million in an effort to complete, phase three.
This expanded license will continue, but on a non-exclusive basis, if Western
Oil Sands completes phase two but, after spending more than $5 million but less
than $50 million on phase three, does not complete phase three. If Western Oil
Sands does not commence, or spends less than $5 million with respect to, phase
three, the expanded license terminates.
6
If commercialization occurs, Western Oil Sands is required to pay
Altair royalties based on a percentage of net sales revenue from any production
facility.
In addition to our work with Western Oil Sands, we have submitted
proposals to five international minerals and energy resources companies to
develop and license our titanium pigment production process. We have completed
initial testing for a company located in the Pacific Rim and submitted a
phase-two proposal for the economic evaluation of a demonstration titanium
dioxide pigment plant that could be expanded to a full-scale plant with
production capabilities of between 10,000 and 20,000 metric tons of titanium
dioxide pigment per year. We have been informed that this proposal is under
consideration and subject to due diligence evaluation. If the phase-two proposal
is accepted in some form, we would expect to generate limited revenues in
exchange for the testing and development work associated with the evaluation of
a demonstration titanium dioxide plant. A licensing agreement associated with a
full-scale plant may generate significant revenues in the long-term, but
significant up-front revenues from such an agreement are unlikely.
We submitted phased development proposals for the testing and economic
evaluation of our titanium pigment production technology to the other four
minerals and energy resources companies during the first three quarters of 2003.
We recently entered into a testing and development license with one of these
companies, called Avireco and located in Vietnam, and anticipate that we may
enter into additional testing agreements during 2004. Although we have been
verbally informed that two hundred and fifty thousand dollars have now been
authorized to begin the first phase of pilot plant testing during 2004, we have
not received a formal work authorization. If the results of testing by one or
more such companies are positive, we hope to enter into a long-term license
agreement for regional exclusive use of the pigment technology. If one or more
of such minerals and energy resources companies obtains such a license and
subsequently constructs a full-scale production plant, we would expect to
receive development fees and royalties over the long-term, but no significant
up-front payments. We can provide no assurance that the results of any testing
will be positive, that we will enter into a long-term license or that the
licensee will construct a full-scale production plant in order to use our
technology.
Proprietary Rights
------------------
We have been awarded three US and international patents protecting this
technology including: 1) Processing titaniferous ore to titanium dioxide
pigment, 2) Processing aqueous titanium chloride solutions to ultrafine titanium
dioxide and 3) Processing aqueous titanium solutions to titanium dioxide
pigment.
Catalyst Support and Electrode Structures for Titanium Metals
In July 2003 we entered into a memorandum of understanding (the"MOU")
with Titanium Metals Corporation ("TIMET") to provide custom oxide feedstocks
for a novel, four-year, titanium metal research program funded by the Department
of Defense, Defense Advanced Research Projects Agency ("DARPA"). The MOU sets up
a relationship under which TIMET and Altair will explore opportunities for
collaboration and funding of development work in connection with the DARPA
program. The DARPA program's goal is to lower the cost of titanium metal and
titanium metal alloys to enable a broader market use. DARPA is specifically
interested in lowering the cost to provide for a broader use in military
applications such as aerospace and weapons systems.
7
During 2003, we received $9,000 in connection with the MOU agreement.
In January 2004 we became a subcontractor for the DARPA program and were awarded
a $150,000 contract from TIMET to design and develop a titanium oxide electrode
structure and provide TIMET optimized titanium oxide feedstock to produce 50
pounds of titanium metal per day in batch production demonstrations.
Key Features
------------
The DARPA program seeks to lower the cost of titanium metal and
titanium metal alloys through the use of a new process for making titanium metal
(the "FCC Cambridge Process") and thereby enable a broader market use and lower
the cost of military applications. Under the terms of the MOU and subsequent
DARPA subcontract, we will attempt to develop a low-cost manufacturing process
for titanium dioxide pellets, critical to the successful commercialization of
the FCC Cambridge process for production of titanium metal. Our unique process
for making the titanium dioxide pellets may provide a superior feedstock for the
FCC Cambridge process by enabling the process to work more efficiently.
Target Markets
--------------
According to the AMPTIAC Quarterly, a Department of Defense-sponsored
publication, current global production of titanium metal is approximately 50,000
tons per year at a market value of $600 million. AMPTIAC estimates that, due to
the current state of manufacturing, titanium is produced at only about 1/20th of
its current potential world volume. It is widely believed that a reduction of
cost in the manufacturing process will expand the use of titanium metal in a
wider range of applications that include lightweight armored military vehicles,
the manufacture of automotive components and components for utility plants, oil
and gas drilling, and lightweight and durable consumer goods. Our intent is to
develop a suitable process for making the titanium dioxide pellets used by the
FCC Cambridge process but not ultimately to manufacture the pellets. We would
most likely license the technology for manufacture of the titanium dioxide
pellets to producers of metal using the FCC Cambridge Process or their
suppliers.
Research, Testing and Development
---------------------------------
We have an active, funded research program underway with TIMET to
optimize our product for use in their development-stage FCC Cambridge Process
technology to manufacture low-cost titanium metal. Both our technology and the
FCC Cambridge Process are in a development stage and are not expected to
generate significant revenue for several years, if ever.
Proprietary Rights
------------------
We have been awarded one US patent protecting the catalyst and
electrode structure technologies entitled "Method for producing catalyst
structures".
Pharmaceutical Products
RenaZorb(TM)
- ------------
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 ("API") for the treatment of hyperphosphatemia
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(elevated serum phosphate levels) in patients undergoing kidney dialysis, as
well as a new drug delivery system using inorganic ceramic nanomaterials. This
API, given the name RenaZorb(TM), showed excellent capacity for phosphate
removal in laboratory tests using standard in-vitro (laboratory) procedures.
Animal testing of this product was initiated in late 2002 and was completed
during the first quarter of 2003. Results of this pre-clinical animal testing
confirmed the efficacy for phosphate binding. We plan to conduct additional
animal testing of RenaZorb(TM) in animals starting in March, 2004. The testing
program is designed to directly compare RenaZorb(TM) with Renagel(TM) (Genzyme)
and Fosrenol (Shire Pharmaceuticals) with regard to phosphate binding per gram
of active drug. The testing is designed to determine whether, as suggested by
laboratory results and literature data, RenaZorb(TM) could require approximately
30% less drug to bind an equivalent amount of phosphate compared to either
Renagel or Fosrenol. Generally, lower drug dosages often result in smaller
tablet or capsules resulting in better patient compliance and perhaps lower side
effects. The test protocol for the animal testing that has been scheduled was
reviewed by a major pharmaceutical company that has expressed interest in
licensing RenaZorb(TM). We also expect to submit an Investigational New Drug
application to the FDA that provides data showing that it is reasonable to begin
tests of RenaZorb(TM) on humans. We continue to seek business relationships with
pharmaceutical companies that can conduct additional testing and development,
seek necessary FDA approvals and take the necessary steps to bring the new
pharmaceutical ingredient and drug delivery system to market.
Key Features
------------
RenaZorb(TM) is a highly active, lanthanum-based nanomaterial with low
intestinal solubility and excellent in vitro phosphate binding. Animal testing
of RenaZorb(TM) has been conducted in dogs and rats, but no human tests have yet
been conducted. Based upon our initial laboratory and animal testing, we believe
that RenaZorb(TM) may offer the following advantages over competing products:
o Lower dosage requirements because of better phosphate binding per
gram of drug compared with existing or currently proposed drugs;
o Fewer and less severe side effects because of less gassing and
lower dosage;
o Better patient compliance because of fewer and smaller tablets; and
o Lower cost than existing or proposed prescription drugs in this
therapeutic category.
Target Markets
--------------
Our pharmaceutical product RenaZorb(TM) was developed to treat elevated
phosphate levels in kidney dialysis patients. According to information published
by AnorMED, the worldwide market for phosphate binders for chronic renal failure
patients is approximately $400 million to $600 million annually. It is not our
intent to manufacture pharmaceuticals but, rather, to grant licenses to
pharmaceutical companies for the manufacture and sale of products developed
using our technology. We are seeking business relationships with pharmaceutical
companies that can conduct additional testing and development using their
pharmaceutical active ingredients to coat our experimental drug delivery system
and then seek necessary FDA approvals and take the other steps necessary to
bring the combined drug delivery system to market.
Research, Testing and Development
---------------------------------
We have performed laboratory (in vitro) tests using standard techniques
to determine phosphate binding efficiencies and kinetics for a wide range of
lanthanum compounds. We have entered into 12 confidentiality agreements relating
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to the development/licensing of RenaZorb(TM). Animal testing of RenaZorb(TM)
began in December 2002 and was conducted by two pharmaceutical companies, one of
which tested in dogs and both of which tested in rats. Results of these tests
were made available in March 2003, and the results showed positive indications
of phosphate binding. RenaZorb(TM) must undergo human testing and receive FDA
approval before it could be approved for marketing. Human testing typically
takes 1 to 2 years and, if merited by the results of animal testing, the process
of seeking FDA approval typically takes between 3 and 5 years. We believe,
however, that FDA approval of Fosrenol(TM), a chemically related drug, could
accelerate the approval process for RenaZorb(TM).
Proprietary Rights
------------------
We have applied for patent protection for the manufacture of
RenaZorb(TM) and a wide range of similar compounds for the application as an
orally administered phosphate binder for patients suffering from end stage renal
disease.
Competition
-----------
Existing phosphate binders include Tums(TM) antacid, which contains
calcium carbonate, and also aluminum hydroxide-based products such as
Gaviscon(TM) manufactured by Glaxo Smith Kline, both of which are available over
the counter, as well as Renagel(TM) (chemical name sevelmer) manufactured by
Genzyme, which is available only by prescription. In addition, Fosrenol(TM),
another lanthanum based active pharmaceutical agent developed by Shire
Pharmaceuticals ("Shire") of the UK, is awaiting United States FDA and foreign
regulatory approvals. Shire announced in March 2003 that it had received an
approvable letter from the FDA for Fosrenol(TM). The approvable letter requested
additional data and analysis from Shire. FDA approval is expected in the second
quarter of 2004.
While over the counter phosphate binders are relatively inexpensive,
they have several disadvantages. Calcium carbonate-containing phosphate binders,
such as Tums(TM), in high doses, may cause increased blood pressure and
increased risk of cardiovascular disease and is generally not recommended for
long-term use by dialysis patients. With prolonged use, aluminum hydroxide-based
phosphate binders, such as Gaviscon(TM), may cause toxic neurological effects
and are generally avoided by physicians. Aluminum dementia has been widely
reported in kidney dialysis patients using these products.
The prescription phosphate binder Renagel(TM) is relatively expensive
(approximately $1,300 per patient per year), has a high dosage requirement (2 x
800 mg or 4 x 400 mg capsules/tablets three times per day) and water intake is
required. The most common side effects related to the use of Renagel(TM) include
nausea (7% of patients), constipation (2% of patients), diarrhea (4% of
patients), gas or bloating (4% of patients) and heartburn or indigestion (5%
patients). Renagel is the only prescription non-calcium phosphate binder
currently approved by the United States FDA.
Fosrenol(TM) (LCTH), for which US FDA approval is pending, is expected
to be marketed as a chewable tablet with a proposed dosage of 1.5 to 3.0 grams
active drug per day. As with all medicines, Fosrenol(TM) will probably display
some side effects but these are expected to be minor. It has been reported that
the use of Fosrenol does increase serum lanthanum levels compared with levels in
patients taking a placebo. RenaZorb(TM), which is nanotechnology based, is
expected to be developed in a tablet or capsule dosage form with a projected
dosage of 0.6 to 2.0 grams per day. Although we have done no human testing on
RenaZorb(TM), we believe RenaZorb(TM) has the potential for fewer side effects,
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lower cost and better patient compliance. We base these possible advantages upon
in vitro testing conducted by Altair in which RenaZorb was compared to LCTH, the
active chemical in Fosrenol. Our in vitro testing showed that RenaZorb binds at
least 30% more phosphate per gram of drug than LCTH, therefore requiring a lower
dose. Lower dose often correlates well with a reduction of observed side effects
in chemically related homologous compounds. In all animal testing conducted on
RenaZorb(TM), which to date included three separate testing protocols, no
adverse side effects were reported. In all testing, RenaZorb(TM) was
administered to the animals by mixing the drug with the food they eat. In no
case was there any reduction in the amount of food the animals ate when
RenaZorb(TM) was mixed with the food. The drug appears to be tasteless.
Both RenaZorb(TM) and Fosrenol(TM) involve the binding of phosphate by
lanthanum compounds. In fact, the end product of the binding mechanism is
identical; lanthanum orthophosphate is formed. Based on laboratory tests
conducted by Altair comparing RenaZorb(TM) with LCTH, the active ingredient in
Fosrenol(TM), RenaZorb(TM) required 30% less drug to bind the same amount of
phosphate and shows less lanthanum going into solution in simulated stomach
fluid at pH values of 3.0 and 4.5. In addition, in Altair's testing, using
methods published by AnorMED, RenaZorb(TM) reacts with phosphate more rapidly,
possibly because of its high nanomaterials-derived surface area. In 20 minute
simulated stomach acid tests conducted by Altair, RenaZorb(TM) absorbed
approximately 140 mg of phosphate and LCTH absorbed approximately 60 mg of
phosphate.
Drug Delivery - TiNano Sphere(TM)
- ---------------------------------
Our proposed drug delivery system involves depositing drugs on or
inside hollow "wiffle ball" spheres made of titanium dioxide and other metal
oxide nanomaterials.
Because of the early stage of development of this drug delivery system,
we are unable to state with any certainty how (or if) such drug delivery system
would be used and, if used, what the uses for such system would be and what the
comparative advantages, side effects and other aspects of such drug delivery
system would be. Nevertheless, based upon our early testing, we believe that the
following uses of a nanomaterials-based drug delivery system are feasible:
o New delivery forms for existing drugs;
o Delivery methods for new drugs;
o Delivery of hard to dissolve drugs;
o Delivery of sustained release drugs;
o Delivery of dual action drugs;
o Delivery of narcotics in a system that is non-defeatable and
reduces the chances of abuse; and
o Delivery of other Class 4 (restricted) drugs
Key Features
------------
Altair's hollow sphere "wiffle ball" like structures can deliver active
chemicals or drugs in a sustained release fashion because the active component
can be "mounted" on both the outside surface and inside the hollow ball
structure. The dissolution and availability of the surface-mounted active
component will be different than the active component inside the hollow spheres.
Material inside the hollow structure will be released slowly compared to
surface-mounted material. An additional feature of Altair's nanomaterials based
hollow "wiffle ball" structures is that two different active substances could be
mounted, one inside the hollow spheres and another on the surface. This allows
the possibility for dual action pharmaceuticals to be developed using this
technology.
11
Target Markets
--------------
New Delivery Forms and New Drugs. Our drug delivery system may be
useful in connection with drugs whose patents are expiring. On average, patented
drugs generate $200 to $400 million in sales, with average sales margins of 90%
to 95%. The margin for generic drugs drops, however, to 20% to 30% or less. New
dosage forms are patentable and, if patented, may extend the drug's patent
protection for 20 years. In addition, new dosage forms may reduce the cost of
producing various drugs, increasing margins if exclusive or generic, and may
reduce undesirable side effects.
Hard to Dissolve Drugs. Our drug delivery system may also be used to
deliver drugs that work in the gastrointestinal tract without being absorbed.
These types of drugs remove unwanted materials from the digestive systems.
Possible uses for these types of drugs include lowering cholesterol. Another use
for our drug delivery system would be for highly insoluble drugs that need
greater absorption to enter the blood stream. The significant increase in
surface area of our titanium dioxide micro-spheres may allow greater drug
absorption. This greater absorption may also be used to redevelop previously
failed candidate drug compounds that were unsuccessful because of inadequate
absorption rates or amounts.
Sustained Release Drugs and Dual Action Drugs. We also believe our
system may be useful in connection with the sustained release of fungicides,
including the following applications:
o Anti-fungal drugs;
o Topical anti-fungal drugs with sustained release;
o Tile cleaning products (mold, mildew) with residual action;
o Cosmetics (preservatives);
o Mildew prevention in paints and coatings;
o Fabric mildew protection;
o Exterior cleaning systems for removal and prevention of mold,
mildew and green algae;
o Wood protection and preservation; and
o UV protection of wood.
Research, Testing and Development
---------------------------------
To date, our research on drug delivery systems involving the use of
nanomaterials has been limited to coating known drugs on the surface of titanium
dioxide nanomaterials. We have not done any animal or human testing with our new
drug delivery systems and do not have the expertise, resources or capacity to
complete such testing. We are currently seeking business relationships with
pharmaceutical companies that can conduct additional testing and development
using their pharmaceutical active ingredients to coat our nanomaterials and then
seek necessary FDA approvals and take the other steps necessary to bring the
combined drug delivery system to market.
Proprietary Rights
------------------
We have filed two patent applications regarding this field including:
1) "Pharmaceutical composition and structure containing rare earth porous
particles" and 2) "Pharmaceutical composition with controlled surface area."
12
Altium(TM) (Nanomaterials) Products
General
- -------
For the year ended December 31, 2003, we generated $17,602 of revenue
through sales of titanium dioxide, lithium titanate spinel and yttria stabilized
zirconia nanomaterials and other materials. These products were used principally
in thermal spray and catalyst applications and for developmental work on battery
materials. We are also developing nanomaterials products that may be useful in
controlling algae in swimming pools, in cosmetics, in self-cleaning and
sanitizing and in environmental purification.
Altium(TM) Thermal Spray Grade Powders (TSGP)
- ---------------------------------------------
We have developed thermal spray grade nanomaterial powders that can be
applied on the surface of metals by standard thermal "gunning" techniques. We
have sold approximately one ton of our powders to F.W. Gartner Thermal Spraying
Company for thermal application onto heavy-duty ball valves. Ball valves made of
solid titanium alloys have been introduced to control the flow and containment
of hot acidic slurry solutions in high pressure acid leach technologies applied
to metal extraction of nickel/cobalt ores. To extend the life of these critical
components, a ceramic coating is applied via a thermal spray process. These
coatings must be impervious to the acidic solution and provide protection
against wear from the abrasive solid particles. F.W. Gartner's use of our
nanomaterial powders application was delayed due to technical and political
problems associated with other aspects of the mining prospect. Thermal spray
products have use in a variety of additional harsh environment applications such
as aerospace propulsion systems, blades and vanes, medical applications, textile
and paper machinery, boilers for power plants, waste incinerators, oil and gas
industry, etc.
Key Features
------------
Our nanomaterials coatings possess enhanced toughness and increased
hardness; these features contribute to superior abrasive wear resistance over
the conventional coating of the same material. The nanomaterial coatings also
demonstrate improved porosity over standard thermal spray powders making them
more resistant to acid attack. We believe that improvements will enable longer
periods between maintenance, repairs and examinations of these critical
components therefore improving the economics of the industrial application.
Target Markets
--------------
Altair has executed an agency agreement with Global Strategy, Inc., an
international business development consultant, to seek business collaborations
and identify markets for Altium(TM) Thermal Spray Grade Powders. These markets
include companies that service, supply equipment to, and sell powders to thermal
spray shops.
Research, Testing and Development
---------------------------------
F.W. Gartner Thermal Spraying Company, Mogas Industries, Inc. and
Perpetual Technologies researchers have reported on the use of our nanomaterial
powders in tests to determine the bond strength, corrosion and abrasion
resistance and the porosity after applying ours and competitors' materials on
metal using Vacuum Plasma Spray and Atmosphere Plasma Spray. The results of
13
these researchers' tests indicate that our novel coatings possess enhanced
toughness and increased hardness; these features contribute to its superior
abrasive wear resistance over the conventional coating of the same material.
Ball valves with the new coatings have been introduced into different high
pressure acid leach autoclave installations over the past two years.
In November 2003, we contracted the National Research Council of Canada
to demonstrate and test and evaluate our powders and prepare specification
sheets of standard thermal spray gunning instructions to advise specialty
thermal spray shops how to apply our material. The goal of the project is to
produce titania coatings by thermal spraying using nano-structured titania
powders developed by Altair and compare and contrast to conventional titania
powders. The coatings will be characterized and evaluated to determine various
characteristics, including porosity and abrasion resistance. This report is
expected to be completed in the first quarter of 2004 and will be used to market
our powders.
Proprietary Rights
------------------
Our thermal spray grade powders are protected by U.S. Patent titled,
"Processing aqueous titanium chloride solutions to Ultrafine titanium dioxide".
Altium(TM) Lithium Titanate Spinel
- ----------------------------------
We have developed technologies to manufacture nano-sized specialty
materials to make electrodes for lithium ion batteries that will allow very
rapid charging and discharging of these types of batteries. We believe that
advancements in materials availability will ultimately be paired with
advancements in the electrolyte's ability to carry high current density and
result in batteries that can yield very high power and recharge in only a few
minutes. Altair has demonstrated nanomaterials that can accept a full charge
within less than one minute. Altair has now prepared special nano-sized samples
of lithium titanate, lithium manganate, and lithium cobaltate. Each of these
materials, in large crystalline sizes, is currently used by the battery
industry.
Key Features
------------
The large specific surface area of Altium(TM) Lithium Titanate Spinel
nanoparticle material enables very rapid charge and discharge rates. The
material is durable and is projected to last for thousands of charging cycles.
Target Markets
--------------
Batteries constitute a $42 billion market worldwide according to
information supplied by Telcordia (Subsidiary of SAI; Science Applications
International). Of that, around $6 billion is rechargeable and $3 billion
includes the market that has, and continues to be taken by, lithium ion
batteries. These lithium ion rechargeable batteries do not develop memory and
fail and are expected to gradually increase their share of the world market. New
developments indicate that high energy batteries of this type will ultimately be
developed for application as replacements for lead acid batteries in
automobiles, electric vehicles, and hybrid automobiles where direct electrical
energy for starting and passing will assist the gasoline engines. Also, the
development of fuel cells and solar generation systems will require enhanced
battery capabilities.
14
Research, Testing and Development
---------------------------------
We have completed a series of tests in collaboration with the EPFL
Switzerland, Heyrovsky Institute in Prague, Czech Republic and the Xoliox
subsidiary of Ntera, a display and battery technology development company. A
joint patent was filed with Ntera related to electrode performance of
nanoparticles made by Altair. We recently extended a marketing agreement with
Nissho Iwai Americas Corporation for product marketing in Japan to leading
lithium ion battery manufacturers. In addition, we have added the capability to
make test electrodes of lithium titanates, manganates, and cobaltates and have
developed a testing program for electrode performance at the University of
Nevada, Reno.
Proprietary Rights
------------------
We have filed three patent applications including 1) "Process for
making lithium titanate", 2) "High Performance Lithium Titanium Spinel for
Electrode Material", and 3) "Process for making nano-sized and sub-micron sized
lithium-transition metal oxides". We have also filed a joint patent on
nano-lithium titanate performance with Ntera.
Nanocheck(TM)
- -------------
We have developed a nano-phase compound that has an affinity for many
metal oxy anions including phosphate, arsenate, arsenite, and the like.
Immediate applications for this material include: 1) phosphate removal from
swimming pool and aquariums to arrest the growth of bacteria and 2) arsenic
removal from drinking water.
The correct management of a swimming pool is a difficult and
time-consuming task. The chemical balance of the water must be carefully
monitored to ensure that it does not become fouled with algae, or grow too much
bacteria. Either of these will make the water smell and look unpleasant, and can
be a serious health hazard. Nanocheck(TM) safely deprives algae of the phosphate
nutrients required for them to reproduce and therefore reduces algae formation.
The Safe Drinking Water Act required the EPA to revise the existing 50
parts per billion (ppb) standard for arsenic in drinking water. On January 22,
2001 the EPA adopted a new standard, and public water systems must comply with
the 10 ppb standard beginning January 23, 2006. Significantly high arsenic
levels are found in some rural Western U.S. communities that rely on well water
as a drinking water source. Low-cost, point-of-entry or point-of-use treatments
are required to comply with the new standard. We expect that Nanocheck could be
added to these point-of-entry or point-of-use treatment devices to lower arsenic
levels to compliance levels. Nanocheck is a non-regenerateable material that
would require replacement after a period of time.
Key Feature
-----------
Nanocheck(TM) is a lanthanum based compound that can be used to treat
water for the removal of a wide range of deleterious impurities. It has no
reported human health hazards and works effectively in existing filtration units
without the need of purchasing additional equipment.
15
Target Markets
--------------
We are attempting to license and sell the technology to manufacture
Nanocheck(TM) to companies that already sell products into the water treatment
market including pool and spa chemical companies and drinking water treatment
companies.
Research, Testing and Development
---------------------------------
We have conducted in-house tests for phosphate removal in swimming pool
simulations, and a pool and spa chemical company has performed materials testing
that shows effective phosphate removal and high kinetics. Larger scale swimming
pool tests are expected to be performed in the summer months beginning June
2004. We also expect to perform an arsenic removal study during the second
quarter of 2004.
Proprietary Rights
------------------
We have filed two U.S. patent applications for the application of this
product entitled "Rare Earth Compositions and Structures for Removing Phosphates
from Water" and "Ceramic structure for removing toxic elements from water."
Solid Oxide Fuel Cell ("SOFC") Materials
- ----------------------------------------
Altair has focused its efforts in the fuel cell area on the development
of materials for the solid oxide fuel cell market. Our materials are novel
precursor ceramic materials used in the construction of a solid oxide fuel cell.
Virtually every ceramic material used as functional components of the fuel
conversion element of this type of cell can be manufactured by Altair's basic
process for making nanomaterials. Raw materials used by the Altair process are
in the category of commodity chemicals available on a worldwide basis. Altair is
engaged in a process of attempting to demonstrate that 1) using its proprietary
nanotechnology, the cost of raw materials for a solid oxide fuel cell can be
reduced to below $20 per kilowatt. 2) using the specially prepared
nanomaterials, all fuel cell elements can be made from tape cast components, and
3) several fuel cells can be stacked in a single fuel conversion unit. Stages 1
and 2 have been demonstrated in concept and are being improved, and stage 3 is
under development now. Altair has recently operated its fuel cell with hydrogen
as a fuel, and the final stages of adding a compatible ceramic catalyst to the
cell are being completed by MIT under contract with Altair. The catalyst
developed by MIT is intended to overcome the high cost of the platinum catalyst
in the solid oxide fuel cell.
Key Feature
-----------
We have developed low-cost solid oxide fuel cell materials using our
proprietary nanomaterials manufacturing technology to produce the appropriate
physical and chemical characteristics required for our low-cost monolithic
fabrication design.
Research, Testing and Development
---------------------------------
We have successfully completed our single cell program, and we do not
have any ongoing research or development activities specifically for this
program other than the work of adding a compatible ceramic catalyst that is
being performed by MIT. The fundamental research is complete and testing
confirmed the feasibility of our concept. The project is on hold while Altair
searches for partners and/or funding to help defer further costs of development.
16
Proprietary Rights
------------------
We have been awarded one US patent for the application of this product
entitled "Method for producing catalyst structures."
Nanosensors Program
- -------------------
In September 2003, we entered into an agreement with Western Michigan
University ("WMU") to provide research services and materials to support
research involving a technology used in the detection of chemical, biological
and radiological agents. The teaming/research agreement with WMU, funded by the
Department of Energy, provides for total payments to Altair of $356,500 over a
two-year period. During 2003, we received $36,600 in connection with this
research agreement. In December 2003, WMU was awarded a second, one-year
Department of Energy grant for which Altair will also participate as a
subcontractor. The project is a collaboration involving WMU, Altair and the
University of Nevada, Reno. The $2 million was included in the Omnibus
Appropriations Bill passed by the U.S. House of Representatives December 9,
2003. WMU and Altair have a joint partnership for seeking Federal support for
nanotechnology research and development and will utilize the new grant funding
equally.
Altium(TM) TiNano40(TM)
- -----------------------
We have developed a line of titanium dioxide nanomaterial products that
cover a range of chemical and physical characteristics suitable for a variety of
applications that include cosmetics, photocatalysts, thermal spray powders,
self-cleaning, solar cells, chemical mechanical planarization, plastics and
environmental remediation.
Research, Testing and Development
---------------------------------
We have completed developing the TiNano40 series (40 nanometer nominal
particle size) and are now focusing on TiNano20 and TiNano10 products that have
nominal particle size characteristics of 20 nanometers and 10 nanometers,
respectively. The TiNano20 product series is being developed in conjunction with
our research activities with Western Michigan University. It is also being used
in test solar cells. Our TiNano10 product has extremely high specific surface
area and applications may include commercial use as photocatalysts and catalyst
support.
Proprietary Rights
------------------
We have been awarded one US patent protecting this technology titled,
"Processing Aqueous Titanium Chloride Solutions to Ultrafine Titanium Dioxide."
Tennessee Mineral Property
- --------------------------
The Tennessee mineral property presently consists of approximately
3,100 acres of land containing fine, heavy minerals that we have leased in or
near Camden, Tennessee since 1996.
17
Between 1996 and 2000, we conducted, and hired consultants to conduct,
various tests and pre-feasibility studies on approximately 14,000 acres of
property in Tennessee on which we held mineral leases. Based on the positive
results of initial testing and reports, we designed and commissioned
construction of a spiral-based pilot plant for testing at the Tennessee mineral
property in 2000. The plant includes dedicated electrical service, a lay-down
area for heavy mineral sand samples, and a combined water storage/sand placement
structure. Plant elements include a feed system, conveyors, trommel, two stages
of cyclones, and a five-stage spiral plant. During 2001, we excavated 970 tons
of material from four sites on the Tennessee mineral property and processed it
through the test facility. Plant operations closely approximated design
expectations; we incurred no significant operating problems, and test results
were generally consistent with expectations. During 2002 and 2003, we
significantly curtailed our testing on the Tennessee mineral property in order
to conserve capital. During that same period, we actively sought to enter into
joint venture or other relationships with larger mining operations that could
provide capital and other resources necessary to complete testing of the
Tennessee mineral property and, if merited, develop a mine on the property. Such
efforts were not successful.
During late 2003, our board of directors determined to more narrowly
focus our limited resources on the development and exploitation of our
nanomaterials and titanium dioxide pigment technology and to limit our
expenditures on our centrifugal jig and our Tennessee mineral property to the
minimum amount necessary to preserve their basic value for the short term.
Consistent with this determination, during 2003, we assessed the properties
under lease to determine whether we could reduce lease costs while maintaining a
viable quantity of leased acreage. As a result of our assessment, we identified
3,100 acres that represent the most important core holdings to support a
potential commercial mining venture. We renegotiated the leases with respect to
such 3,100 acres in order to extend the term of the leases and reduce the lease
payments. The leases with respect to the remaining acres are terminable at any
time by the property owners in light of our decision not to make any further
lease payments with respect to such leases.
For 2004, our board of directors approved a minimum workscope and
budget for maintaining the Tennessee mineral property, making sample products
for consumer testing and continuing baseline samples for permitting purposes. In
the meantime, we are consolidating the assets related to the Tennessee mineral
property, together with those related to the Altair jig, into (or under) a
single corporation with the intent of causing such corporation to become an SEC
reporting company and, subject to shareholder approval, distributing
substantially all of the shares of common stock of such corporation to our
shareholders.
The Altair Jig
- --------------
Description of the Altair jig
- -----------------------------
The Altair Jig segregates particles based on differences in their
specific gravity. A conventional jig separates a slurry of mineral particles as
it flows across the top of a screen. Water is periodically pulsed up through the
screen to eliminate interparticle friction and allow differential settling
according to the variations in the net specific gravities of the ore. Heavier
minerals are allowed to pass downward through the screen while lighter materials
flow across the screen to a discharge point. The Altair jig operates according
to conventional jig principles except that the screen surface is cylindrical and
is rotated to subject the particles to centrifugal forces. As currently
designed, materials to be processed by the Altair jig are introduced into the
top of the Altair jig in a slurry mix with water. The slurry is diffused across
18
the top of the interior of a vertical cylindrical screen which is rotating.
Water is pulsed through the screen allowing differential separation in the
slurry material. Heavy particles pass through the screen, are collected, and
exit the machine in a "concentrate" stream. Lighter particles flow down the
screen interior, are collected and exit out the bottom of the machine in a
separate "tails" stream. Use of the Altair jig requires no chemical additives.
In operation, the Altair jig utilizes a combination of standard mechanical jig
and centrifugal technologies. The Altair jig is of simple mechanical design with
few wear surfaces. To compete as a viable commercial unit, the Altair jig must
perform reliably over long time periods. The 600+ hours that we have tested and
operated the Series 30 Jig is insufficient to give assurance as to the length of
the operating life of the Altair jig.
Preliminary demonstration tests conducted by Altair and a previous
owner of the Altair jig suggest that the Altair jig could be commercially useful
in a number of applications, including:
o Recovery of ultra fine gold from waste streams or former tailings;
o Recovery of zircon, rutile, ilmenite, leucoxene, and other valuable
fractions from heavy mineral sand operations;
o Sulfur and ash removal from fine coal;
o Recovery of tin and iron ore fines from fine tailings;
o Concentration of heavy minerals, such as anatase, aparite, barite,
cassiterite, chromite, columbite, industrial diamonds, fluorite,
various garnets, monazite, tantalite and wolframite; and
o Remediation of nuclear waste.
Initial patents related to the concept of the Altair jig as a whole
were issued in the United States, South Africa, United Kingdom, Australia and
Canada. These patents expired on various dates between May 1999 and December
2000. A series of second patents with respect to the process by which water is
pulsed through the cylindrical screen on the Altair jig, a critical component
differentiating the Altair jig from competing products, have been issued in the
United States, South Africa, Japan, Europe, Australia, Canada, United Kingdom,
Germany and France. These patents expire on various dates between January 2010
and January 2011. A third series of patents with respect to an efficiency
enhancing component of the Altair jig have been issued in the United States,
Europe, Australia, Japan, South Africa, Canada and Brazil. These patents have
expiration dates between April and November 2018.
Technology License Agreement
In September 2003, we entered into a technology license agreement with
Bateman Luxembourg SA ("Bateman") for the manufacture, installation and
operation of the Altair jig. After an initial six-month evaluation period that
will conclude in August 2004, Bateman is expected to have exclusive use of the
Altair jig for specifically identified applications in selected territories
throughout the world. If and when Bateman utilizes the Altair jig in commercial
applications, it is required to compensate Altair through a licensing fee for
each project managed by Bateman that utilizes the Altair jig. The compensation,
if any, is based on Bateman's profits generated through utilization of the
Altair jig and will vary based on the size and scope of the individual projects.
Disposition of the Altair jig
Notwithstanding the execution of the Bateman agreement, during late
2003, our board of directors determined to more narrowly focus our limited
resources on the development and exploitation of our nanomaterials and titanium
dioxide pigment technology and to limit our expenditures on the Altair jig and
our Tennessee mineral property to the minimum amount necessary to preserve their
basic value for the short term. Consistent with this determination, we are
19
consolidating the assets related to the Altair jig, together with the assets
related to the Tennessee mineral property, into (or under) a single corporation
with the intent of causing such corporation to become an SEC reporting company
and, subject to shareholder approval, distributing substantially all of the
shares of common stock of such corporation to our shareholders.
Government Regulation and Environmental Concerns
- ------------------------------------------------
Government Regulation
Most of our current and proposed activities are subject to a number of
federal, state, and local laws and regulations concerning machine safety and
environmental protection. Such laws include, without limitation, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response Compensation Liability Act. Such laws
require that we take steps to, among other things, maintain air and water
quality standards, protect threatened, endangered and other species of wildlife
and vegetation, preserve certain cultural resources, and reclaim exploration,
mining and processing sites.
Compliance with federal, state, or local laws or regulations represents
a small part of our present budget. If we fail to comply with any such laws or
regulations, however, a government entity may levy a fine on us or require us to
take costly measures to ensure compliance. Any such fine or expenditure may
adversely affect our development.
We are committed to complying with and, to our knowledge, are in
compliance with, all governmental regulations. We cannot predict the extent to
which future legislation and regulation could cause us to incur additional
operating expenses, capital expenditures, and/or restrictions and delays in the
development of our products and properties.
Environmental Regulation and Liability
Any proposed processing operation at our main operating facility in
Reno, Nevada or any other property we use will be subject to federal, state, and
local environmental laws. In addition, our operations on the Tennessee mineral
property have been, and will continue to be, subject to such environmental laws.
Under such laws, we may be jointly and severally liable with prior property
owners for the treatment, cleanup, remediation, and/or removal of substances
discovered at any other property used by us, to the extent the substances are
deemed by the federal and/or state government to be toxic or hazardous
("Hazardous Substances"). Courts or government agencies may impose liability
for, among other things, the improper release, discharge, storage, use,
disposal, or transportation of Hazardous Substances. We use Hazardous Substances
in our testing and operations and, although we employ all reasonably practicable
safeguards to prevent any liability under applicable laws relating to Hazardous
Substances, companies engaged in materials production are inherently subject to
substantial risk that environmental remediation will be required.
Subsidiaries
- ------------
Altair Nanotechnologies Inc. was incorporated under the laws of the
province of Ontario, Canada in April 1973 under the name Diversified Mines
Limited, which was subsequently changed to Tex-U.S. Oil & Gas Inc. in February
1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold Company
Inc. in July 1988, then to Altair International Gold Inc. in March 1994, then to
Altair International Inc. in November 1996 and then to Altair Nanotechnologies
20
Inc. in July 2002. In July 2002, Altair Nanotechnologies Inc. redomesticated
from the Ontario Business Corporations Act to Canada's federal corporate
statutes, the Canada Business Corporations Act.
Altair US Holdings, Inc. was incorporated by Altair in December 2003
for the purpose of facilitating a corporate restructuring and consolidation of
all U.S. subsidiaries under a U.S. holding company. At the completion of the
corporate restructuring, Fine Gold, MRS and Altair Nanomaterials, Inc. were
direct wholly-owned subsidiaries of Altair US Holdings, Inc., while Tennessee
Valley Titanium, Inc. remained a wholly-owned subsidiary of MRS.
Fine Gold was acquired by Altair in April 1994. Fine Gold has earned no
operating revenues to date. Fine Gold acquired the intellectual property
associated with the Altair jig in 1996. Altair intends that Fine Gold will hold
and maintain jig technology rights, including patents.
MRS was incorporated by Altair in April, 1987 and was formerly known as
Carlin Gold Company. MRS previously has been involved in the exploration for
minerals on unpatented mining claims in Nevada, Oregon and California. All
mining claims have now been abandoned. MRS currently holds, directly or
indirectly, all of Altair's interest in the Tennessee mineral property. Its
wholly-owned subsidiary, Tennessee Valley Titanium, does not presently have any
assets or operations.
Altair Nanomaterials, Inc. was incorporated in 1998 as a wholly-owned
subsidiary of MRS and holds all of the Company's interest in our nanomaterials
and titanium dioxide pigment technology and related assets.
Corporate History
- -----------------
Altair Nanotechnologies Inc. was incorporated under the laws of the
Province of Ontario, Canada in April 1973 for the purpose of acquiring and
exploring mineral properties. It was redomesticated in July 2002 from the
Business Corporations Act (Ontario) to the Canada Business Corporations Act, a
change which causes Altair to be governed by Canada's federal corporate statute.
The change reduced the requirement for resident Canadian directors from 50% to
25% of the board of directors, which gives us greater flexibility in selecting
qualified nominees to our board.
During the period from inception through 1994, we acquired and explored
multiple mineral properties. In each case, sub-economic mineralization was
encountered and the exploration was abandoned.
Since 1996, we have leased mineral property near Camden, Tennessee and
owned the rights to the Altair jig. However, as discussed above, our board of
directors has determined to more narrowly focus our limited resources on the
development and exploitation of our nanomaterials and titanium dioxide pigment
technology and to limit our expenditures on our centrifugal jig and our
Tennessee mineral property to the minimum amount necessary to preserve their
basic value for the short term as we assess viability and desirability of
various strategic alternatives for disposing of the Tennessee mineral property
and the Altair jig.
In November 1999, we acquired all the rights of BHP in the
nanomaterials and titanium dioxide pigment technologies and the nanomaterials
and titanium dioxide pigment assets from BHP. We are employing the nanomaterials
and titanium dioxide pigment technology as a platform for the sale of contract
services, intellectual property licenses and for the production and sale of
metal oxide nanoparticles in various applications.
21
We have experienced an operating loss in every year of operation. In
the fiscal year ended December 31, 2003, we experienced a net loss of
$6,237,939.
Employees
- ---------
The business of Altair is currently managed by Dr. William P. Long,
Chief Executive Officer of the Company, Dr. Rudi E. Moerck, President of the
Company and Mr. Douglas Ellsworth, Senior Vice President of the Company and
President of Altair Nanomaterials, Inc. In addition, we employ a Chief Financial
Officer, twelve employees devoted principally to research and development, four
operating employees and four clerical employees. Aside from Dr. Long and the
Chief Financial Officer, we have no employment agreements with any of our
personnel.
During 2004, we expect to hire 5-7 additional employees, principally
scientific and technical staff, to assist with research, development and
production work.
Enforceability of Civil Liabilities Against Foreign Persons
- -----------------------------------------------------------
We are a Canadian corporation, and two of our directors are residents
of Canada. In addition, certain of our experts (including Canadian legal
counsel) are located in Canada. As a result, investors may be unable to effect
service of process upon such persons within the United States and may be unable
to enforce court judgments against such persons predicated upon civil liability
provisions of the United States securities laws. It is uncertain whether
Canadian courts would (i) enforce judgments of United States courts obtained
against us or such directors, officers or experts predicated upon the civil
liability provisions of United States securities laws or (ii) impose liability
in original actions against Altair or its directors, officers or experts
predicated upon United States securities laws.
Forward-looking Statements
- --------------------------
This Form 10-K contains various forward-looking statements. 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. When considering such forward-looking
statements, you should keep in mind the risk factors noted in the following
section and other cautionary statements throughout this Form 10-K and our other
filings with the Commission. You should also 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. If one or more risks identified in this Form
10-K or any other applicable filings materializes, or any other underlying
assumptions prove incorrect, our actual results may vary materially from those
anticipated, estimated, projected, or intended.
Among the key factors that may have a direct bearing on our operating
results are risks and uncertainties described under "Factors That May Affect
Future Results," including those attributable to the absence of significant
operating revenues, the absence of profits, risks related to our proposed
development and exploitation of our nanomaterials and titanium dioxide pigment
technology and nanomaterials and titanium dioxide pigment assets and
uncertainties regarding our ability to obtain capital sufficient to continue our
operations and pursue our proposed business strategy.
22
Factors that May Affect Future Results
- --------------------------------------
We have not generated any substantial operating revenues and may not ever
generate substantial revenues.
- --------------------------------------------------------------------------------
To date, we have not generated substantial revenues from operations. As
of December 31, 2003, we have generated $340,892 of revenues from our
nanomaterials and titanium dioxide pigment technology and $28,270 from the use
of our centrifugal jig in consulting contracts. We have not generated any
revenue from our Tennessee mineral property. We believe that our nanomaterials
and titanium dioxide pigment technology is the only one of our three lines of
business that may generate significant revenues in the foreseeable future.
Although we currently have approximately $1.1 million in unfulfilled contractual
commitments, such commitments primarily relate to our provision of research and
development services or to sales of products for experimental purposes. We have
no sales or other commitments with respect to on-going revenues from our
nanomaterials and titanium dioxide pigment technology and can provide no
assurance that we will generate additional revenues.
We may continue to experience significant losses from operations.
- --------------------------------------------------------------------------------
We have experienced a loss from operations in every fiscal year since
our inception. Our losses from operations were $5,785,210 in 2003 and $7,856,711
in 2002. We will continue to experience a net operating loss until, and if, one
of the applications of our nanomaterials and titanium dioxide pigment technology
begins generating significant revenues. Even if any or all applications of the
nanomaterials and titanium dioxide pigment technology begin generating
significant revenues, the revenues may not exceed our costs of production and
operating expenses. We may not ever realize a profit from operations.
We may not be able to raise sufficient capital to meet future obligations.
- --------------------------------------------------------------------------------
As of February 25, 2004, we had $11.9 million in cash, an amount
sufficient to fund our ongoing operations until December 31, 2006 at current
working capital expenditure levels. However, we may use our existing capital
sooner than projected in connection with an unanticipated transaction,
litigation or another unplanned event. We may also use more capital than
projected as we expand our research, development and marketing efforts. Unless
we experience a significant increase in revenue, we will need to raise
significant amounts of additional capital in the future in order to sustain our
ongoing operations, continue unfinished testing and additional development work
and, if certain of our products have been commercialized, produce and market
such products.
We may not be able to obtain the amount of additional capital needed or
may be forced to pay an extremely high price for capital. Factors affecting the
availability and price of capital may include the following:
o market factors affecting the availability and cost of capital
generally;
o the price, volatility and trading volume of our shares of common
stock;
o our financial results, particularly the amount of revenue we are
generating from operations;
o the amount of our capital needs;
o the market's perception of nanotechnology and/or chemical stocks;
o the economics of projects being pursued;
23
o the market's perception of our ability to generate revenue through
the licensing or use of our nanoparticle technology for
pharmaceutical, pigment production, nanoparticle production and
other uses; and
o the market's perception of the value of our centrifugal jig and our
Tennessee mineral property as we attempt to dispose of or
distribute such assets.
If we are unable to obtain sufficient capital or are forced to pay a high price
for capital, we may be unable to meet future obligations or adequately exploit
existing or future opportunities, and may be forced to discontinue operations.
Our patents and other protective measures may not adequately protect our
proprietary intellectual property, and we may be infringing on the rights of
others.
- --------------------------------------------------------------------------------
We regard our intellectual property, particularly our proprietary
rights in our nanomaterials and titanium dioxide pigment technology, as critical
to our success. We have received various patents, and filed other patent
applications, for various applications and aspects of our nanomaterials and
titanium dioxide pigment technology and other intellectual property. In
addition, we generally enter into confidentiality and invention agreements with
our employees and consultants. Such patents and agreements and various other
measures we take to protect our intellectual property from use by others may not
be effective for various reasons, including the following:
o Our pending patent applications may not be granted for various
reasons, including the existence of similar patents or defects in
the applications;
o The patents we have been granted may be challenged, invalidated or
circumvented because of the pre-existence of similar patented or
unpatented intellectual property rights or for other reasons;
o Parties to the confidentiality and invention agreements may have
such agreements declared unenforceable or, even if the agreements
are enforceable, may breach such agreements;
o The costs associated with enforcing patents, confidentiality and
invention agreements or other intellectual property rights may make
aggressive enforcement cost prohibitive;
o Even if we enforce our rights aggressively, injunctions, fines and
other penalties may be insufficient to deter violations of our
intellectual property rights; and
o Other persons may independently develop proprietary information and
techniques that, although functionally equivalent or superior to
our intellectual proprietary information and techniques, do not
breach our patented or unpatented proprietary rights.
Because the value of our company and common stock is rooted primarily in our
proprietary intellectual property rights, our inability to protect our
proprietary intellectual property rights or gain a competitive advantage from
such rights could have a material adverse effect on our business.
In addition, we may inadvertently be infringing on the proprietary
rights of other persons and may be required to obtain licenses to certain
intellectual property or other proprietary rights from third parties. Such
licenses or proprietary rights may not be made available under acceptable terms,
if at all. If we do not obtain required licenses or proprietary rights, we could
encounter delays in product development or find that the development or sale of
products requiring such licenses is foreclosed.
24
We have a substantial number of warrants and options outstanding and may issue a
significant number of additional shares upon exercise thereof.
- --------------------------------------------------------------------------------
As of March 15, 2004, there were outstanding warrants to purchase up to
5,416,455 shares of common stock and options to purchase up to 3,446,200 shares
of common stock. The existence of such warrants and options, and any additional
warrants and options we issue in the future, may hinder future equity offerings,
and the exercise of such warrants and options may further dilute the interests
of all shareholders. The shares of common stock issuable upon the exercise of
many of our outstanding warrants are subject to resale registration statements,
and all of our options are subject to a registration statement on Form S-8.
Accordingly, future resale of the shares of common stock issuable on the
exercise of such warrants and options may generally occur immediately after
exercise and may have an adverse effect on the prevailing market price of the
shares of common stock.
Our competitors have more resources than we do, which may give them a
competitive advantage.
- --------------------------------------------------------------------------------
We have limited financial and other resources and, because of our early
stage of development, have limited access to capital. We compete or may compete
against entities that are much larger than we are, have more extensive resources
than we do and have an established reputation and operating history. Because of
their size, resources, reputation, history and other factors, certain of our
competitors may be able to exploit acquisition, development and joint venture
opportunities more rapidly, easily or thoroughly than we can. In addition,
potential customers may choose to do business with our more established
competitors, without regard to the comparative quality of our products, because
of their perception that our competitors are more stable, are more likely to
complete various projects, are more likely to continue as a going concern and
lend greater credibility to any joint venture.
We may be unable to exploit any potential pharmaceutical application of our
nanomaterials and titanium dioxide pigment technology.
- --------------------------------------------------------------------------------
We do not presently have the technical or financial resources to
conduct clinical tests on, and take to market, any pharmaceutical application of
our nanomaterials and titanium dioxide pigment technology. In order for us to
get any significant, long-term benefit from any potential pharmaceutical
application of our technology, the following must occur:
o we must enter into an evaluation license or similar agreement with
a pharmaceutical company under which such company would pay a fixed
or contingent fee for the right to evaluate a pharmaceutical use of
our technology for a specific period of time and for an option to
purchase or receive a license for such use of our technology;
o clinical tests conducted by such pharmaceutical company or a third
party would have to indicate that the pharmaceutical use of our
technology is safe, technically viable and financially viable;
o such pharmaceutical company would have to apply for and obtain FDA
approval of the pharmaceutical use of our technology, or any
related products, which would involve extensive additional testing;
and
o such pharmaceutical company would have to successfully market the
product incorporating our technology.
As of the date of this report, we have not entered into an evaluation license or
similar agreement with a pharmaceutical company. We may never enter into any
such license or agreement. If we do enter into such a license or similar
agreement, we may receive some payments in various stages of the testing and
evaluation of the pharmaceutical application of our technology. We do not,
however, expect to receive significant ongoing revenue unless and until an end
product incorporating the technology goes to market.
25
We may not benefit from licenses to use our technology for titanium dioxide
pigment production.
- --------------------------------------------------------------------------------
Because of our relatively small size and limited resources, we do not
plan to use our titanium processing technology for large-scale production of
titanium dioxide pigments. We have entered into discussions with various
minerals and materials companies about licensing our technology to such entities
for large-scale production of titanium dioxide pigments. To date, we have
entered into a license agreement with only one such entity, Western Oil Sands,
Inc. Under our license agreement with Western Oil Sands, we expect to receive a
limited amount of revenue during the early testing and development phase of the
agreement but will receive significant royalties only if Western Oil Sands and
licensees of Western Oil Sands determine in their discretion, after testing at a
demonstration plant, to construct or license the construction of a full-scale
titanium pigment production facility. If we enter into other license agreements,
we expect that, as with the Western Oil Sands agreement, we would not receive
significant revenues from such licenses unless and until feasibility testing
yielded positive results and the licensee determined, in its discretion, to
construct and operate a titanium pigment production facility.
We may not be able to sell nanoparticles produced using the nanomaterials and
titanium dioxide pigment technology.
- --------------------------------------------------------------------------------
We plan to use the nanomaterials and titanium dioxide pigment
technology to produce titanium dioxide nanoparticles. Titanium dioxide
nanoparticles and other products we intend to initially produce with the
nanomaterials and titanium dioxide pigment technology generally must be
customized for a specific application working in cooperation with the end user.
We are still testing and customizing our titanium dioxide nanoparticle products
for various applications and have no long-term agreements with end users to
purchase any of our titanium dioxide nanoparticle products. We may be unable to
recoup our investment in the nanomaterials and titanium dioxide pigment
technology and nanomaterials and titanium dioxide pigment equipment for various
reasons, including the following:
o products utilizing our titanium dioxide nanoparticle products, most
of which are in the research or development stage, may not be
completed or, if completed, may not be readily accepted by expected
end users;
o we may be unable to customize our titanium dioxide nanoparticle
products to meet the distinct needs of potential customers;
o potential customers may purchase from competitors because of
perceived or actual quality or compatibility differences;
o our marketing and branding efforts may be insufficient to attract a
sufficient number of customers; and
o because of our limited funding, we may be unable to continue our
development efforts until a strong market for nanoparticles
develops.
Our costs of production may be too high to permit profitability.
- --------------------------------------------------------------------------------
We have not produced any pigments, nanoparticles or other products
using our nanomaterials and titanium dioxide pigment technology and equipment on
a commercial basis. Our actual costs of production, or those of our licensees,
may exceed those of competitors and, even if our costs of production are lower,
competitors may be able to sell titanium dioxide and other products at a lower
price than is economical for us or our licensees.
We have not created a production model of our centrifugal jig and are presently
focusing our resources on other projects.
- --------------------------------------------------------------------------------
We have not developed a production model of any series of our
centrifugal jig and have determined to discontinue investing significant assets
on its development. In October 2003, we entered into a technology license
26
agreement with Bateman Luxembourg S.A. for the manufacture, installation and
operation of our centrifugal jig. Such agreement permits Bateman to opt out
after a six-month testing period. In addition, the agreement does not require
Bateman to manufacture or utilize our centrifugal jig. There is no assurance
that Bateman will ever utilize our centrifugal jig in its projects or pay fees
to us. We do not otherwise expect to complete our own testing and development of
our centrifugal jig and have determined to focus most of our limited resources
on the nanomaterials and titanium dioxide pigment technology.
Even if we or Bateman were to complete development of and begin
marketing a production model of our centrifugal jig, it may not prove attractive
to potential end users, may be rendered obsolete by competing technologies or
may not recover end product at a commercially viable rate. Even if technology
included in our centrifugal jig initially proves attractive to potential end
users, performance problems and maintenance issues may limit the market for our
centrifugal jig.
In addition, all of the initial patents issued on our centrifugal jig
have expired, and we are unable to prevent competitors from copying the
technology once protected by such patents. Additional patents related to the
process through which water is pulsed through the cylindrical screen on our
centrifugal jig expire beginning in 2010, and patents for an
efficiency-enhancing aspect of the cylindrical screen expire during 2018. The
cost of enforcing patents is often significant. We may be unable to enforce even
our patents that have not yet expired.
We have suspended exploration of our Tennessee mineral property and do not
expect to restart testing efforts.
- --------------------------------------------------------------------------------
We have suspended feasibility testing of our Tennessee mineral property
and do not expect to start feasibility testing of our Tennessee mineral property
in the future. If a mine is developed on the Tennessee mineral property in the
future, which may or may not occur, the development will likely occur under the
control of another party, and our financial interest in the development will
likely be limited, and may be nonexistent.
Our disposition of centrifugal jig and our Tennessee mineral property may not
enhance the value of our common stock.
- --------------------------------------------------------------------------------
We have determined to consolidate the assets related to the Tennessee
mineral property and the Altair jig into (or under) a single corporation with
the intent of causing such corporation to become an SEC reporting company and,
subject to shareholder approval, distributing substantially all of the shares of
common stock of such corporation to our shareholders. We may not receive
shareholder approval for such spin-off. If shareholder approval is not received,
our alternatives will be limited, and we may be compelled to abandon any
interest in the Tennessee mineral property and the Altair jig. Such abandonment
would likely involve out of pocket costs for remediation of the Tennessee
mineral property and would eliminate any possibility of Altair shareholders
receiving any benefit from Altair's investment in the Altair jig and Tennessee
mineral property. Even if the proposed spin-off is approved and effected, we
expect that the shares of the spin-off corporation will have a very low market
value in the short-term and can provide no assurance that such shares will
increase in value over time.
We have issued a $3,000,000 note to secure the purchase of the land and the
building where our nanomaterials and titanium dioxide pigment assets are
located.
- --------------------------------------------------------------------------------
In August 2002, we entered into a purchase and sale agreement with BHP
Minerals International Inc. to purchase the land, building and fixtures in Reno,
Nevada where our nanomaterials and titanium dioxide pigment assets are located.
In connection with this transaction, we issued to BHP a note in the amount of
27
$3,000,000, at an interest rate of 7%, secured by the property we acquired. The
first payment of $600,000 of principal plus accrued interest is due February 8,
2006. Additional payments of $600,000 plus accrued interest are due annually on
February 8, 2007 through 2010. If we fail to make the required payments on the
note, BHP has the right to foreclose and take the property. If this should
occur, we would be required to relocate our primary operating assets and
offices, causing a significant disruption in our business.
Operations using the nanomaterials and titanium dioxide pigment technology, our
centrifugal jig or our Tennessee mineral property may lead to substantial
environmental liability.
- --------------------------------------------------------------------------------
Virtually any prior or future use of the nanomaterials and titanium
dioxide pigment technology, our centrifugal jig or our Tennessee mineral
property is subject to federal, state and local environmental laws. Under such
laws, we may be jointly and severally liable with prior property owners for the
treatment, cleanup, remediation and/or removal of any hazardous substances
discovered at any property we use. In addition, courts or government agencies
may impose liability for, among other things, the improper release, discharge,
storage, use, disposal or transportation of hazardous substances.
Certain of our experts and directors reside in Canada and may be able to avoid
civil liability.
- --------------------------------------------------------------------------------
We are a Canadian corporation, and two of our directors and our
Canadian legal counsel are residents of Canada. As a result, investors may be
unable to effect service of process upon such persons within the United States
and may be unable to enforce court judgments against such persons predicated
upon civil liability provisions of the U.S. securities laws. It is uncertain
whether Canadian courts would (i) enforce judgments of U.S. courts obtained
against us or such directors, officers or experts predicated upon the civil
liability provisions of U.S. securities laws or (ii) impose liability in
original actions against us or our directors, officers or experts predicated
upon U.S. securities laws.
We are dependent on key personnel.
- --------------------------------------------------------------------------------
Our continued success will depend to a significant extent on the
services of Dr. Rudi Moerck, our President, Doug Ellsworth, our Senior Vice
President and the senior vice president of our new life sciences division that
we intend to recruit. Our failure to recruit a competent life sciences Vice
President, or the loss or unavailability of Dr. Moerck or Mr. Ellsworth could
have a material adverse effect on our business and the market price of our
shares of common stock. We do not carry key man insurance on the lives of any of
our personnel and do not have agreements requiring any of them to remain with
our company.
In addition, we have recently announced the pending resignation of our
Chief Executive Officer and as a director, Dr. William P. Long. Although we
intend to recruit a new Chairman of Board of Directors, we do not presently
intend to hire a replacement Chief Executive Officer. Dr. Long's efforts have
been instrumental in the strategic decision making, capital raising, shareholder
relations and other aspects of our business. The resignation of Dr. Long may
have a material adverse effect on these or other aspects of our operations.
We may issue substantial amounts of additional shares without stockholder
approval.
- --------------------------------------------------------------------------------
Our articles of incorporation authorize the issuance of an unlimited
number of shares of common stock that may be issued without any action or
approval by our stockholders. In addition, we have two stock option plans and a
stock purchase plan that have potential for diluting the ownership interests of
our stockholders. The issuance of any additional shares of common stock would
further dilute the percentage ownership of Altair held by existing stockholders.
28
The market price of our common stock may increase or decrease dramatically at
any time for any or no apparent reason.
- --------------------------------------------------------------------------------
The market price of our common stock, like that of the securities of
other early stage companies, may be highly volatile. Our stock price may change
dramatically as the result of announcements of our quarterly results, new
products or innovations by us or our competitors, uncertainty regarding the
viability of the nanomaterials and titanium dioxide pigment technology,
significant customer contracts, significant litigation or other factors or
events that would be expected to affect our business, financial condition,
results of operations and future prospects. In addition, the market price for
our common stock may be affected by various factors not directly related to our
business or future prospects, including the following:
o Intentional manipulation of our stock price by existing or future
shareholders;
o A single acquisition or disposition, or several related
acquisitions or dispositions, of a large number of our shares;
o The interest of the market in our business sector, without regard
to our financial condition, results of operations or business
prospects;
o Positive or negative statements or projections about our company,
or our industry, by analysts, stock gurus and other persons;
o The adoption of governmental regulations or government grant
programs and similar developments in the United States or abroad
that may enhance or detract from our ability to offer our products
and services or affect our cost structure;
o Economic and other external market factors, such as a general
decline in market prices due to poor economic indicators or
investor distrust; and
o Speculation by short sellers of our common stock or other persons
who stand to profit from a rapid increase or decrease in the price
of our common stock.
We have never declared a cash dividend and do not intend to declare a cash
dividend in the foreseeable future.
- --------------------------------------------------------------------------------
We have never declared or paid cash dividends on our common stock. We
currently intend to retain any future earnings, if any, for use in our business
and, therefore, do not anticipate paying dividends on our common stock in the
foreseeable future.
Item 2. Properties
Our corporate headquarters is located at 204 Edison Way, Reno, Nevada
89502 in a building we purchased in August 2002. Our nanomaterials and titanium
dioxide pigment assets are located in this building which contains approximately
80,000 square feet of production, laboratory, testing and office space.
We also maintain a registered office at 56 Temperance Street, Toronto,
Ontario M5H 3V5. We do not lease any space for, or conduct any operations out
of, the Toronto, Ontario registered office. In addition, we lease 900 square
feet of office space at 1725 Sheridan Avenue, Suite 140, Cody, Wyoming 82414,
which serves as an administrative office for Altair and its subsidiaries. Our
lease for the Cody, Wyoming office space may be terminated by either party on 30
days' prior written notice.
We believe that the existing offices and test facilities of Altair and
its subsidiaries are adequate for our current needs. In the event that
alternative or additional office space is required, we believe we could obtain
additional space on commercially acceptable terms.
29
We no longer view the Tennessee mineral property as being materially
important to our business. We have determined to limit our expenditures on our
Tennessee mineral property to the minimum necessary to preserve its core value
for the short term and are in the process of consolidating the assets related to
the Tennessee mineral property and the Altair jig into (or under) a single
corporation with the intent of causing such corporation to become an SEC
reporting company and, subject to shareholder approval, distributing
substantially all of the shares of common stock of such corporation to our
shareholders.
Consistent with the determination to minimize expenses with respect to
the Tennessee mineral property, during 2003, we assessed the properties under
lease to determine whether we could reduce lease costs while maintaining a
viable quantity of leased acreage. As a result of our assessment, we identified
3,100 acres then subject to mineral leases that represent the most important
core holdings to support a potential commercial mining venture. We renegotiated
the leases with respect to such 3,100 acres in order to extend the term of the
leases and reduce the lease payments. The leases with respect to the remaining
acres once included in the Tennessee mineral property are terminable at any time
by the property owners in light of our decision not to make any further lease
payments with respect to such leases.
The renegotiated leases on the Tennessee mineral property grant MRS
certain exclusive rights, including the right to explore, test, mine, extract,
process, and sell any minerals or other materials found on the land, in exchange
for the payment of minimum annual advance royalty payments prior to commencement
of production on the properties (or after commencement of production, to the
extent production royalty payments do not equal nominal royalty payments) and,
thereafter, production royalty payments in an amount equal to a percentage of
the value of minerals mined and sold from the property. See the Notes to the
Consolidated Financial Statements for information regarding present and future
minimum advance royalty payments. The leases typically are for a minimum term of
ten years, and may be extended indefinitely at MRS' option, provided MRS is
actively conducting exploration, development, or mining operations. The leases
are cancelable by MRS at any time, and are cancelable by the lessor in the event
MRS breaches the terms of the lease. The minerals on the Tennessee mineral
property have not proven to be a reserve, our historic operations plan with
respect to it is exploratory in nature, and we presently are conducting only
minimal maintenance operations with respect to such property. The Tennessee
mineral property is accessed by public roads and, to our knowledge, has not been
used in prior mining operations.
Item 3. Legal Proceedings
We are from time to time involved in routine litigation incidental to
the conduct of our business. We are currently not involved in any suit, action
or other legal proceedings, nor are we aware of any threatened suit, action or
other legal proceedings which management believes will materially and adversely
affect the business or operations of Altair or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of security holders during the
fourth quarter of the 2003 fiscal year.
30
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters
Market Price
- ------------
Our common shares are traded on the Nasdaq SmallCap Market under the
symbol "ALTI." The following table sets forth, for the periods indicated, the
high and low sales prices for our common shares, as reported on our principal
trading market at the time.
Fiscal Year Ended December 31, 2002 Low High
--------- ---------
1st Quarter....... $0.750 $1.560
2nd Quarter....... $0.370 $1.140
3rd Quarter....... $0.300 $0.930
4th Quarter....... $0.450 $0.800
Fiscal Year Ended December 31, 2003 Low High
--------- ---------
1st Quarter....... $0.310 $0.560
2nd Quarter....... $0.300 $1.480
3rd Quarter....... $0.730 $1.650
4th Quarter....... $1.120 $2.900
The last sale price of our common shares, as reported on the Nasdaq
SmallCap Market, on March 14, 2004 was $2.62 per share.
Outstanding Shares and Number of Shareholders
- ---------------------------------------------
As of March 15, 2004, the number of common shares outstanding was
48,650,140 held by approximately 500 holders of record. In addition, as of the
same date, we have reserved 4,514,200 common shares for issuance upon exercise
of options that have been, or may be, granted under our employee stock option
plans and 5,416,455 common shares for issuance upon exercise of outstanding
warrants.
Dividends
- ---------
We have never declared or paid cash dividends on our common shares.
Moreover, we currently intend to retain any future earnings for use in our
business and, therefore, do not anticipate paying any dividends on our common
shares in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
- ------------------------------------------------------------------
We have stock option plans administered by the Board of Directors that
provide for the granting of options to employees, officers, directors and other
service providers of the Company. All option plans have been approved by
security holders. We also have an Employee Stock Purchase Plan ("ESPP") which
allows employees to purchase common shares through payroll deductions when, as
and if determined by our board of directors. The ESPP, which is a broadly-based
plan open to all employees, other than executive officers, has not been approved
by shareholders. The following table sets forth certain information with respect
to compensation plans under which equity securities are authorized for issuance
at December 31, 2003:
31
- -----------------------------------------------------------------------------------------------------
Number of Number of securities
securities to be remaining available for
issued upon future issuance under
exercise of Weighted-average equity compensation
outstanding exercise price of plans (excluding
options, warrants outstanding options, securities reflected in
and rights warrants and rights column (a))
Plan Category (a) (b) (c)
- -----------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 3,663,600 $3.11 1,235,000
- -----------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders None N/A 348,552
- -----------------------------------------------------------------------------------------------------
Total 3,663,600 $3.11 1,583,552
- -----------------------------------------------------------------------------------------------------
Recent Sales of Unregistered Securities
- ---------------------------------------
Except as previously reported, we did not sell any securities in
transactions that were not registered under the Securities Act in the quarter
ended December 31, 2003.
Transfer Agent and Registrar
- ----------------------------
The Transfer Agent and Registrar for our common shares is Equity
Transfer Services, Inc., Suite 420, 120 Adelaide Street West, Toronto, Ontario,
M5H 4C3.
Canadian Taxation Considerations
- --------------------------------
Dividends paid on common shares owned by non-residents of Canada are
subject to Canadian withholding tax. The rate of withholding tax on dividends
under the Income Tax Act (Canada) (the "Act") is 25%. However, Article X of the
reciprocal tax treaty between Canada and the United States of America (the
"Treaty") generally limits the rate of withholding tax on dividends paid to
United States residents to 15%. The Treaty further generally limits the rate of
withholding tax to 5% if the beneficial owner of the dividends is a U.S.
corporation which owns at least 10% of the voting shares of the Company.
If the beneficial owner of the dividend carries on business in Canada
through a permanent establishment in Canada, or performs in Canada independent
personal services from a fixed base in Canada, and the shares of stock with
respect to which the dividends are paid is effectively connected with such
permanent establishment or fixed base, the dividends are taxable in Canada as
business profits at rates which may exceed the 5% or 15% rates