altair_10q-093007.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2007
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM _________________ TO
_________________
ALTAIR
NANOTECHNOLOGIES
INC.
(Exact
name of registrant as specified in its charter)
Canada
|
1-12497
|
33-1084375
|
(State
or other jurisdiction
|
(Commission
File No.)
|
(IRS
Employer
|
of
incorporation)
|
|
Identification
No.)
|
204
Edison Way
Reno,
Nevada 89502
(Address
of principal executive offices, including zip code)
Registrant’s
telephone number, including area code: (775) 856-2500
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 o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act (Check one):
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act): YES o NO x
As
of November 1, 2007 the registrant had 70,457,477 Common Shares
outstanding.
PART
I - FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(Expressed
in United States Dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
10,847,392
|
|
|
$ |
12,679,254
|
|
Investment
in available for sale securities
|
|
|
3,907,733
|
|
|
|
14,541,103
|
|
Accounts
receivable, net
|
|
|
1,244,378
|
|
|
|
1,129,825
|
|
Accounts
receivable from related party, net
|
|
|
361,499
|
|
|
|
495,000
|
|
Notes
receivable from related party, current portion
|
|
|
1,235,479
|
|
|
|
-
|
|
Product
inventories
|
|
|
1,234,319
|
|
|
|
169,666
|
|
Prepaid
expenses and other current assets
|
|
|
542,998
|
|
|
|
413,390
|
|
Total
current assets
|
|
|
19,373,798
|
|
|
|
29,428,238
|
|
|
|
|
|
|
|
|
|
|
Investment
in Available for Sale Securities
|
|
|
1,012,800
|
|
|
|
1,306,420
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment, net
|
|
|
13,108,022
|
|
|
|
11,229,406
|
|
|
|
|
|
|
|
|
|
|
Patents,
net
|
|
|
741,637
|
|
|
|
805,248
|
|
|
|
|
|
|
|
|
|
|
Notes
Receivable from related party, long-term portion
|
|
|
356,957
|
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
122,718
|
|
|
|
21,261
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
34,715,932
|
|
|
$ |
43,120,573
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
$ |
2,065,900
|
|
|
$ |
1,533,047
|
|
Accrued
salaries and benefits
|
|
|
1,821,910
|
|
|
|
840,219
|
|
Accrued
liabilities
|
|
|
876,917
|
|
|
|
526,596
|
|
Note
payable, current portion
|
|
|
600,000
|
|
|
|
600,000
|
|
Total
current liabilities
|
|
|
5,364,727
|
|
|
|
3,499,862
|
|
|
|
|
|
|
|
|
|
|
Note
Payable, Long-Term Portion
|
|
|
1,200,000
|
|
|
|
1,800,000
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest in Subsidiary
|
|
|
1,605,802
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Common
stock, no par value, unlimited shares authorized;
|
|
|
|
|
|
|
|
|
70,148,787
and 69,079,270 shares issued and
|
|
|
|
|
|
|
|
|
outstanding
at September 30, 2007 and December 31, 2006
|
|
|
119,417,717
|
|
|
|
115,989,879
|
|
Additional
paid in capital
|
|
|
4,348,533
|
|
|
|
2,002,220
|
|
Accumulated
deficit
|
|
|
(97,095,447) |
|
|
|
(80,353,188) |
|
Accumulated
other comprehensive (loss)/income
|
|
|
(125,400) |
|
|
|
181,800
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
26,545,403
|
|
|
|
37,820,711
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
34,715,932
|
|
|
$ |
43,120,573
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to the unaudited condensed consolidated financial
statements.
|
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
(Expressed
in United States Dollars)
|
|
|
|
(Unaudited)
|
|
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
1,864,330
|
|
|
$ |
22,940
|
|
|
$ |
3,797,333
|
|
|
$ |
33,598
|
|
License
fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
364,720
|
|
Commercial
collaborations
|
|
|
980,478
|
|
|
|
339,116
|
|
|
|
2,062,550
|
|
|
|
1,058,622
|
|
Contracts
and grants
|
|
|
525,326
|
|
|
|
387,842
|
|
|
|
1,717,051
|
|
|
|
895,082
|
|
Total
revenues
|
|
|
3,370,134
|
|
|
|
749,898
|
|
|
|
7,576,934
|
|
|
|
2,352,022
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of product sales
|
|
|
2,083,729
|
|
|
|
28,237
|
|
|
|
4,486,467
|
|
|
|
30,953
|
|
Research
and development
|
|
|
4,423,159
|
|
|
|
2,763,566
|
|
|
|
10,659,356
|
|
|
|
6,917,218
|
|
Sales
and marketing
|
|
|
519,464
|
|
|
|
423,615
|
|
|
|
1,309,230
|
|
|
|
1,384,787
|
|
General
and administrative
|
|
|
2,385,871
|
|
|
|
1,288,191
|
|
|
|
7,597,903
|
|
|
|
5,746,759
|
|
Depreciation
and amortization
|
|
|
506,970
|
|
|
|
405,072
|
|
|
|
1,412,019
|
|
|
|
1,085,190
|
|
Total
operating expenses
|
|
|
9,619,193
|
|
|
|
4,908,681
|
|
|
|
25,464,975
|
|
|
|
15,164,907
|
|
Loss
from Operations
|
|
|
(6,549,059) |
|
|
|
(4,158,783) |
|
|
|
(17,888,041) |
|
|
|
(12,812,885) |
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(33,402) |
|
|
|
(42,000) |
|
|
|
(99,902) |
|
|
|
(129,500) |
|
Interest
income
|
|
|
214,841
|
|
|
|
146,235
|
|
|
|
850,879
|
|
|
|
539,060
|
|
Gain/(Loss)
on foreign exchange
|
|
|
892
|
|
|
|
(138) |
|
|
|
607
|
|
|
|
(444) |
|
Total
other income, net
|
|
|
182,331
|
|
|
|
104,097
|
|
|
|
751,584
|
|
|
|
409,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Continuing Operations Before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest Share
|
|
|
(6,366,728) |
|
|
|
(4,054,686) |
|
|
|
(17,136,457) |
|
|
|
(12,403,769) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest Share
|
|
|
236,518
|
|
|
|
-
|
|
|
|
394,198
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(6,130,210) |
|
|
$ |
(4,054,686) |
|
|
$ |
(16,742,259) |
|
|
$ |
(12,403,769) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share - Basic and diluted
|
|
$ |
(0.09) |
|
|
$ |
(0.07) |
|
|
$ |
(0.24) |
|
|
$ |
(0.21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares - Basic and diluted
|
|
|
70,023,935
|
|
|
|
59,461,244
|
|
|
|
69,741,148
|
|
|
|
59,325,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to the unaudited condensed consolidated financial
statements.
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
LOSS
|
(Expressed
in United States Dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
hensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, JANUARY
1, 2007
|
|
|
69,079,270
|
|
|
$ |
115,989,879
|
|
|
$ |
2,002,220
|
|
|
$ |
(80,353,188) |
|
|
$ |
181,800
|
|
|
$ |
37,820,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,742,259) |
|
|
|
-
|
|
|
|
(16,742,259) |
|
Other
comprehensive loss,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes of $0
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(307,200) |
|
|
|
(307,200) |
|
Comprehensive
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,049,459) |
|
Share-based
compensation
|
|
|
-
|
|
|
|
217,215
|
|
|
|
2,346,313
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,563,528
|
|
Exercise
of stock options
|
|
|
70,085
|
|
|
|
118,824
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
118,824
|
|
Exercise
of warrants
|
|
|
34,000
|
|
|
|
91,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,800
|
|
Issuance
of restricted stock,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of cancellations/expired shares
|
|
|
69,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued
|
|
|
895,523
|
|
|
|
3,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, SEPTEMBER
30, 2007
|
|
|
70,148,787
|
|
|
$ |
119,417,717
|
|
|
$ |
4,348,533
|
|
|
$ |
(97,095,447) |
|
|
$ |
(125,400) |
|
|
$ |
26,545,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Expressed
in United States Dollars)
|
(Unaudited)
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(16,742,259) |
|
|
$ |
(12,403,769) |
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,412,019
|
|
|
|
1,085,190
|
|
Minority
interest in operations
|
|
|
(394,198) |
|
|
|
-
|
|
Securities
received in payment of license fees
|
|
|
(13,580) |
|
|
|
(521,472) |
|
Share-based
compensation
|
|
|
2,563,528
|
|
|
|
1,417,504
|
|
Loss
on disposal of fixed assets
|
|
|
-
|
|
|
|
21,098
|
|
Accrued
interest on notes receivable
|
|
|
(46,733) |
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(114,553) |
|
|
|
384,706
|
|
Accounts
receivable from related party, net
|
|
|
133,501
|
|
|
|
(495,000) |
|
Notes
receivable from related party, net
|
|
|
(1,215,703) |
|
|
|
-
|
|
Product
inventories
|
|
|
(1,018,718) |
|
|
|
(407,104) |
|
Prepaid
expenses and other current assets
|
|
|
(129,608) |
|
|
|
(203,708) |
|
Other
assets
|
|
|
5,061
|
|
|
|
49,939
|
|
Trade
accounts payable
|
|
|
219,137
|
|
|
|
395,162
|
|
Accrued
salaries and benefits
|
|
|
981,691
|
|
|
|
315,925
|
|
Accrued
liabilities
|
|
|
243,803
|
|
|
|
177,202
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(14,116,612) |
|
|
|
(10,184,327) |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Sale
of available for sale securities
|
|
|
33,675,000
|
|
|
|
26,050,000
|
|
Purchase
of available for sale securities
|
|
|
(23,041,630) |
|
|
|
(12,973,949) |
|
Purchase
of property and equipment
|
|
|
(2,959,244) |
|
|
|
(2,956,423) |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
7,674,126
|
|
|
|
10,119,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued)
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Expressed
in United States Dollars)
|
(Unaudited)
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
Issuance
of common shares for cash
|
|
|
3,000,000
|
|
|
|
-
|
|
Proceeds
from exercise of stock options
|
|
|
118,824
|
|
|
|
340,685
|
|
Proceeds
from exercise of warrants
|
|
|
91,800
|
|
|
|
166,670
|
|
Payment
of notes payable
|
|
|
(600,000) |
|
|
|
(600,000) |
|
Minority
interest
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
4,610,624
|
|
|
|
(92,645) |
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(1,831,862) |
|
|
|
(157,344) |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
12,679,254
|
|
|
|
2,264,418
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
10,847,392
|
|
|
$ |
2,107,074
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
168,000
|
|
|
$ |
105,000
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
None
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2007:
|
|
|
|
|
|
|
|
|
-
We received 1,000,000 of common stock valued at $106,518 in connection
with the Phoenix Motorcars, Inc. January 2007 purchase agreement. The
investment was recorded with an offset to deferred
revenue.
|
|
|
|
-
We issued 75,575 shares of restricted stock to employees having a
fair
value of approximately $237,000 for which no cash will be
received.
|
|
|
|
-
We made property and equipment purchases of $313,716, which are included
in trade accounts payable at September 30, 2007.
|
|
|
|
-
We had an unrealized loss on available for sale securities of
$307,200.
|
|
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2006:
|
|
|
|
|
|
|
|
|
- We issued 56,875 shares of restricted stock to employees having
a fair
value of approximately $180,000
for which no cash will be received.
|
|
|
|
- We made property and equipment purchases of $94,564, which are
included
in trade accounts payable at September 30, 2006.
|
|
|
|
- We had an unrealized gain on available for sale securities of
$291,400.
|
|
|
|
(concluded)
|
|
|
|
|
|
|
|
|
|
|
See
notes to the unaudited condensed consolidated financial
statements.
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
1. Basis of Preparation of Consolidated Financial
Statements
These
unaudited interim condensed consolidated financial statements of Altair
Nanotechnologies Inc. and its subsidiaries (collectively, “Altair” “we” or the
“Company”) have been prepared in accordance with the rules and regulations of
the United States Securities and Exchange Commission (the
“Commission”). Such rules and regulations allow the omission of
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, so long as the statements are not
misleading. In the opinion of Company management,
these consolidated financial statements and accompanying notes contain all
adjustments (consisting of only normal recurring items) necessary to present
fairly the financial position and results of operations for the periods
shown. These unaudited interim condensed consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto contained in our Annual Report on
Form 10-K for the year ended December 31, 2006, as filed with the Commission
on
March 13, 2007.
The
results of operations for the nine-month period ended September 30,
2007 are not necessarily indicative of the results to be expected for the
full year.
Note
2. Summary of Significant Accounting Policies
Cash,
Cash Equivalents and Investment in Available for Sale Securities (short-term)
-
Cash, cash equivalents and investment in
available for sale securities (short-term) consist principally of bank deposits,
institutional money market funds and corporate notes. Short-term
investments that are highly liquid have insignificant interest rate risk and
maturities of 90 days or less are classified as cash and cash
equivalents. Investments that do not meet the definition of cash
equivalents are classified as held-to-maturity or
available-for-sale.
Our
cash
balances are maintained in bank accounts that are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to a maximum of $100,000. At
September 30, 2007 and December 31, 2006, we had cash deposits of approximately
$2.0 million and $3.0 million, respectively, in excess of FDIC insurance
limits.
Investment
in Available for Sale
Securities (long-term) -
Available for sale securities
(long-term) includes publicly traded equity
investments that are classified as available for sale and recorded at market
using the specific identification method. Unrealized gains and losses
(except for other than temporary impairments) are recorded in other
comprehensive income (loss), which is reported as a component of stockholders’
equity. We evaluate our investments on a quarterly basis to determine
if a potential other than temporary impairment exists. Our evaluation
considers the investees’ specific business conditions as well as general
industry and market conditions.
Inventory
– The Company values its
inventories at the lower of cost (first-in, first-out method) or
market. We employ a full absorption procedure using standard cost
techniques, which approximates actual cost. The standards are
customarily reviewed and adjusted annually.
Accumulated
Other Comprehensive Loss -
Accumulated other comprehensive
loss consists entirely of unrealized
(gain)/loss on the investment in available for sale securities. The
components of comprehensive loss for the nine-month periods ended September
30,
2007 and 2006 are as follows:
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$ |
16,742,259
|
|
|
$ |
12,403,769
|
|
Unrealized
(gain)/loss on investment in available
|
|
|
|
|
|
|
|
|
for
sale securities, net of taxes of $0
|
|
|
307,200
|
|
|
|
(291,400) |
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$ |
17,049,459
|
|
|
$ |
12,112,369
|
|
Long-Lived
Assets - We evaluate the carrying value of long-term
assets, including intangibles, when events or circumstance indicate the
existence of a possible impairment, based on projected undiscounted cash flows,
and recognize impairment when such cash flows will be less than the carrying
values. Measurement of the amounts of impairments, if any, is based
upon the difference between carrying value and fair value. Events or
circumstances that could indicate the existence of a possible impairment include
obsolescence of the technology, an absence of market demand for the product,
and/or continuing technology rights protection.
Deferred
Income Taxes - We use the asset and liability approach for financial
accounting and reporting for income taxes. Deferred income taxes are
provided for temporary differences in the bases of assets and liabilities as
reported for financial statement purposes and income tax purposes. We have
recorded a valuation allowance against all net deferred tax
assets. The valuation allowance reduces deferred tax assets to
an amount that represents management’s best estimate of the amount of such
deferred tax assets that more likely than not will be realized.
Revenue
Recognition - We recognize revenue when persuasive evidence of an
arrangement exists, delivery has occurred or service has been performed, the
fee
is fixed and determinable, and collectibility is probable. Our revenues
were derived from product sales, commercial collaborations and contracts and
grants. Revenue for product sales is recognized upon delivery of the product,
unless specific contractual terms dictate otherwise. Based on the
specific terms and conditions of each contract/grant, revenues are recognized
on
a time and materials basis, a percentage of completion basis and/or a completed
contract basis. Revenue under contracts based on time and materials
is recognized at contractually billable rates as labor hours and expenses are
incurred. Revenue under contracts based on a fixed fee arrangement is
recognized based on various performance measures, such as stipulated
milestones. As these milestones are achieved, revenue is recognized.
>From time to time, facts develop that may require us to revise our estimated
total costs or revenues expected. The cumulative effect of revised
estimates is recorded in the period in which the facts requiring revisions
become known. The full amount of anticipated losses on any type of
contract is recognized in the period in which it becomes
known. Payments received in advance relating to the future
performance of services or delivery of products are deferred until the
performance of the service is complete or the product is
shipped. Upfront payments received in connection with certain rights
granted in contractual arrangements are deferred and amortized over the related
time period over which the benefits are received. Based on specific
customer bill and hold agreements, revenue is recognized when the inventory
is
shipped to a third party storage warehouse, the inventory is segregated and
marked as sold, the customer takes the full rights of ownership and title to
the
inventory upon shipment to the warehouse per the bill and hold
agreement. When contract terms include multiple components that are
considered separate units of accounting, the revenue is attributed to each
component and revenue recognition may occur at different points in time for
product shipment, installation, and service contracts based on substantial
completion of the earnings process.
Accrued
Warranty - We provide a limited warranty for battery packs and energy
storage systems. A liability is recorded for estimated warranty
obligations at the date products are sold. Since these are new
products, the estimated cost of warranty coverage is based on cell and module
life cycle testing and compared for reasonableness to warranty rates on
competing battery products. As sufficient actual historical data is
collected on the new product, the estimated cost of warranty coverage will
be
adjusted accordingly.
Overhead
Allocation - Facilities overhead, which is comprised primarily of
occupancy and related expenses, is initially recorded in general and
administrative expenses and then allocated to research and development and
product inventories based on relative labor costs.
Minority
Interest – In April 2007, the Company and
The Sherwin-Williams Company (“Sherwin”) entered into an agreement to form
AlSher Titania LLC, a Delaware limited liability company
(“AlSher”). AlSher is a joint venture combining certain technologies
of the Company and Sherwin in order to develop and produce titanium dioxide
pigment for use in paint and coatings and nano titanium dioxide materials for
use in a variety of applications, including those related to removing
contaminants from air and water. Pursuant to a Contribution Agreement
dated April 24, 2007 among Altairnano, Sherwin, and AlSher, Altairnano
contributed to AlSher an exclusive license to use Altairnano’s technology
(including its hydrochloride pigment process) for the production of titanium
dioxide pigment and other titanium containing materials (other than battery
or
nanoelectrode materials) and certain pilot plants assets with a net book value
of $3,110,000. Altairnano received no consideration for the license
granted to AlSher other than its ownership interest in
AlSher. Sherwin agreed to contribute to AlSher cash and a license
agreement related to a technology for the manufacture of titanium dioxide using
the digestion of ilmenite in hydrochloric acid. As a condition to
enter into the second phase of the joint venture, we agreed to complete the
pigment pilot processing plant and related development activities by January
2008. The costs associated with this effort are expected to be
partially reimbursed by AlSher. Altairnano contributes any work in
process and fixed assets associated with completion of the pigment pilot
processing plant to the AlSher joint venture. For each reporting
period, AlSher is consolidated with the Company’s subsidiaries because the
Company has a controlling interest in AlSher and any inter-company transactions
are eliminated (refer to Note 1 – Basis of Preparation of Consolidated Financial
Statements). The minority shareholder’s interest in the net assets
and net income or loss of AlSher are reported as minority interest in subsidiary
on the condensed consolidated balance sheet and as minority interest share
in
the condensed consolidated statement of operations, respectively.
Net
Loss Per Common Share - Basic loss per
share is computed using the weighted average number of common shares outstanding
during the period. Diluted loss per share is computed using the
weighted average number of common and potentially dilutive shares outstanding
during the period. Potentially dilutive shares consist of the incremental
common shares issuable upon the exercise of stock options and warrants.
Potentially dilutive shares are excluded from the computation if their effect
is
anti-dilutive. We had a net loss for all periods presented herein;
therefore, none of the stock options and warrants outstanding during each of
the
periods presented were included in the computation of diluted loss per share
as
they were anti-dilutive.
Reclassifications
- Certain reclassifications have been
made to prior period amounts to conform to classifications adopted in the
current period.
Note
3. Investment in Available for Sale Securities
Investments
in available for sale securities (short-term) consist of auction rate corporate
notes. The notes are long-term instruments with expiration dates
through 2041. Interest is settled and the rate is reset every 7 to 28
days.
Investment
in available for sale securities (long-term) consists of 240,000 shares of
Spectrum Pharmaceuticals, Inc. (“Spectrum”) common stock. Although
the Spectrum shares are eligible for resale under Rule 144, the Company
currently intends to hold them indefinitely. The shares were received
as partial payment of licensing fees when Spectrum entered into a license
agreement for RenaZorb in January 2005 and in payment of the first milestone
achieved in June 2006. On receipt, the shares were recorded at their
market value of $1,138,200 as measured by their closing price on the Nasdaq
Capital Market. At September 30, 2007, their fair value was
approximately $1,012,800, representing a cumulative unrealized holding loss
of
approximately $125,400. We evaluated this investment to determine if
there is an other than temporary impairment at September 30,
2007. Our evaluation took into consideration published investment
analysis, levels of institutional ownership of the investee’s common stock and
other factors. Based on our evaluation and our ability and intent to
hold the investment for a reasonable period of time sufficient for an expected
recovery of fair value, we do not consider this investment to be other than
temporarily impaired at September 30, 2007.
Note
4. Product Inventories
Product
inventories consist of the
following:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
Raw
Materials
|
|
$ |
1,119,304
|
|
|
$ |
-
|
|
Work
in Process
|
|
|
115,015
|
|
|
|
112,500
|
|
Demo
Units
|
|
|
-
|
|
|
|
57,165
|
|
Total
Product Inventories
|
|
$ |
1
,234,319
|
|
|
$ |
169,666
|
|
As
products reach the commercialization
stage, the related inventory is recorded. The costs associated with
products undergoing research and development are expensed as
incurred. As of September 30, 2007 and December 31, 2006, inventory
consisted primarily of battery cells and modules in various stages of the
manufacturing process.
Note
5. Patents
Our
patents are associated with the nanomaterials and titanium dioxide pigment
technology. We are amortizing these assets over their useful
lives. The amortized patents balances as of September 30, 2007 and
December 31, 2006 were:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Patents
and patent applications
|
|
$ |
1,517,736
|
|
|
$ |
1,517,736
|
|
Less
accumulated amortization
|
|
|
(776,099) |
|
|
|
(712,488) |
|
Total
patents and patent applications
|
|
$ |
741,637
|
|
|
$ |
805,248
|
|
The
weighted average amortization period for patents is approximately 16.5
years. Amortization expense, which represents the amortization
relating to the identified amortizable patents, was $21,204 for the three months
ended September 30, 2007 and 2006, and $63,611 for the nine months
ended September 30, 2007 and 2006. For each of the next five
years, amortization expense relating to patents is expected to be
approximately $85,000 per year. Management believes the net carrying
amount of patents will be recovered by future cash flows generated by
commercialization of the titanium processing technology.
Note
6. Accounts Receivable and Notes Receivable from Related
Party
Related
Party Accounts Receivable
activity consists of the following:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Beginning
Balance - January
|
|
$ |
495,000
|
|
|
$ |
-
|
|
Additions
|
|
|
1,846,022
|
|
|
|
495,000
|
|
Less
cash collected
|
|
|
(1,979,523) |
|
|
|
-
|
|
Ending
Balance
|
|
$ |
361,499
|
|
|
$ |
495,000
|
|
Based
on battery pack orders fulfilled
in the fourth quarter of 2006 for Phoenix Motorcars, Inc. (“Phoenix”), a total
of $825,000 was recorded as revenue of which 60% - $495,000 was reflected in
accounts receivable due in 30 days and 40% - $330,000 was recorded as a note
receivable per terms of the 2006 orders (refer to notes receivable activity
below).
Payment
terms based on the January 2007
Purchase and Supply Agreement with Phoenix are as follows: 33% of the
release order value is due upon placement of the order, 27% is due within 30
days of the receipt of the invoice by Phoenix, and 40% is due in the form of
a
note payable as described below. For the nine months ended September
30, 2007, $2,049,068 of cash was received from Phoenix, of which $1,072,500
was
prepaid against release orders. Of the prepaid balance, $1,002,955
was applied to accounts receivable and $69,545 is recorded in deferred
revenue.
Related
Party Notes Receivable activity consists of the following:
|
|
September
30, 2007
|
|
|
December
31, 2006
|
|
Beginning
Balance - January
|
|
$ |
330,000
|
|
|
$ |
-
|
|
Additions
|
|
|
1,215,703
|
|
|
|
330,000
|
|
Plus
interest earned
|
|
|
46,733
|
|
|
|
-
|
|
Ending
Balance
|
|
|
1,592,436
|
|
|
|
330,000
|
|
Less
current portion
|
|
|
1,235,479
|
|
|
|
-
|
|
Long
term portion
|
|
$ |
356,957
|
|
|
$ |
330,000
|
|
On
December 31, 2006, we received a $330,000 unsecured note receivable from Phoenix
Motorcars, Inc. (refer to Note 11 – Related Party Transactions) in connection
with the sale of battery packs, which bears interest at 10.5%. The
principal and interest are due by December 30, 2008 with no pre-payment
penalty. Notes receivable issued in 2007 carry interest at prime plus
1% as set forth in the Wall Street Journal and are due within 360 days of the
delivery date based on the terms of the January 2007 Phoenix Motorcars, Inc.
supply agreement. The due date of these notes is accelerated if
Phoenix sells the Zero Emission credits associated with the sales of motorcars
containing the Altair Nanosafe battery packs.
Note
7. Note Payable
The
current and long term amount of the
note payable are as follows:
|
|
September
31, 2007
|
|
|
December
31, 2006
|
|
Note
payable to BHP Minerals
|
|
|
|
|
|
|
International,
Inc.
|
|
$ |
1,800,000
|
|
|
$ |
2,400,000
|
|
Less
current portion
|
|
|
(600,000) |
|
|
|
(600,000) |
|
Long-term
portion of notes payable
|
|
$ |
1,200,000
|
|
|
$ |
1,800,000
|
|
The
note
payable to BHP Minerals International, Inc., in the face amount of
$3,000,000, was entered into on August 8, 2002 and is secured by the
property we acquired The first two payments of $600,000 of principal
plus accrued interest were due and paid on February 8, 2006 and February 8,
2007. Additional payments of $600,000 plus accrued interest are due annually
on
February 8, 2008 through 2010.
Note
8. Stock-Based Compensation
We
have a
stock incentive plan, administered by the Board of Directors,
which provides for the granting of options and restricted shares to
employees, officers, directors and other service providers of the Company.
The
total
compensation cost charged in connection with these plans was $762,192 and
$410,157 for the three-months ended and $2,563,528 and $1,417,504 for the
nine-months ended September 30, 2007 and September 30, 2006,
respectively.
Stock
Options
The
total
number of shares authorized to be granted under the 2005 stock plan was
increased from 3,000,000 to an aggregate of 9,000,000 based on the proposal
approved at the annual and special meeting of shareholders on May
30, 2007. Prior stock option plans, which are now terminated,
authorized a total of 6,600,000 shares, of which options for 5,745,500 were
granted and options for 1,630,600 are outstanding and unexercised at
September 30, 2007. The total number of options relating to the 2005 plan
that are outstanding and unexercised at September 30, 2007 is
2,776,960.
Total
options granted for the nine-month periods ended September 30, 2007
and September 30, 2006 were 1,687,382 and 1,279,631,
respectively. The weighted average grant date fair value of options
granted during the nine months ended September 30, 2007 and September 30,
2006 was $1.93 and $2.29, respectively.
As
of
September 30, 2007, there was $1,328,300 of total unrecognized compensation
cost related to non-vested options granted under the plans. That cost
is expected to be recognized over a weighted average period of 0.7 years as
of September 30, 2007. Cash received from stock option and
warrant exercises was $210,624 and $507,355 during the nine-months
ended September 30, 2007 and September 30, 2006, respectively.
Restricted
Stock
During
the nine-months ended September 30, 2007, the Board of Directors granted 75,575
shares of restricted stock under the plan with a weighted average fair value
of
$3.13 per share. During the nine-months ended September 30, 2006, the
Board of Directors granted 56,875 shares of restricted stock under the plan
with
a weighted average fair value of $3.17 per share.
As
of
September 30, 2007 we had $272,585 of total unrecognized compensation
expense related to restricted stock which will be recognized over the weighted
average period of 1.8 years.
Note
9. Other Transactions
In
March
2007, The AES Corporation (“AES”) privately purchased 895,523 unregistered
common shares of the Company at a price of $3.35 per share. Total
proceeds received relating to the purchase were $3,000,000. No
underwriting commission was paid in connection with this
transaction. The Company agreed to prepare and file a registration
statement to register the shares within 30 days of the closing date of the
transaction, which was effective on March 5, 2007. Due to additional
time required by AES to review the registration statement and prepare related
documents, the registration statement was not filed until April 10, 2007 and
became effective on May 30, 2007.
Note
10. Income Taxes
In
June
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48 “Accounting for Uncertainty in Income Taxes– an interpretation of
FASB Statement 109”. FIN 48 establishes a single model to address accounting for
uncertain tax positions. FIN 48 clarifies the accounting for income taxes by
prescribing a minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48 also provides
guidance on de-recognition, measurement classification, interest and penalties,
accounting in interim periods, disclosure and transition. Upon adoption as
of January 1, 2007, we had no uncertain tax positions. However, in
reviewing the U.S. and Canadian income tax treatment of certain expenses we
concluded that errors had been made in the allocation of those expenses between
the U.S. and Canadian entities.
Based
on
our review, we determined that the Canadian net operating loss will be reduced
by approximately $5.9 million as a result of filing amended returns. We
also determined that the gross amount of the Canadian deferred tax asset is
overstated for 2002 through 2005. This deferred tax asset has been
fully reserved and, therefore, there will be no net income tax effect on the
financial statements relating to this correction.
For
U.S.
tax purposes, the gross deferred tax asset has been understated for expense
items that should be recorded on the U.S. books for 2002 through
2006. The additional expenses to be recorded on the U.S. books
during 2007 will increase the U.S. net operating loss by approximately
$3.0 million. Although the gross amount of the deferred tax asset will
be increased as a result of the expenses to be recorded on the U.S. books,
the
additional amount of the deferred tax asset will also be fully
reserved.
Note
11. Related Party Transactions
In
January 2007, we entered into a multi-year purchase and supply agreement with
Phoenix Motorcars, Inc. (“Phoenix”) for up to 500 battery pack
systems. Two release orders were placed pursuant to this agreement in
January 2007 and in May 2007 with a value of $1,040,000 and $2,210,000,
respectively. For the three and nine month periods ended September
30, 2007, revenue of $1,519,625 and $3,039,257, respectively, has been recorded
in connection with these orders. Title has passed and Phoenix assumes
all risk of loss for purchases under these release orders. In
the third quarter, Phoenix notified us of their plan to redesign the packs
for
their Generation II vehicle. Based on their request, we continue to
segregate and hold the packs in a storage facility pending receipt of the new
design specifications. We anticipate performing the redesign work on
a time and materials basis. The only unfulfilled items relating to
the first two release orders are the battery management systems valued at
$210,743, which will be billed as a separate component upon
delivery. We may also receive additional payments from Phoenix in
2007 and 2008 related to the technology fee, which is based on their sale of
Zero Emission Credits (“ZEV credits”) associated with each electric
vehicle. ZEV credits are issued in connection with zero emission
vehicles as defined by the California Air Resources Board. Through
September 30, 2007, no ZEV credits have been sold by Phoenix. Total
accounts receivable and notes receivable including accrued interest (see Note
6)
due from Phoenix at September 30, 2007 totaled $361,499 and $1,592,436,
respectively. Total deferred revenue of $149,435 at September 30,
2007, reflects pre-payment for battery purchase orders and the unamortized
balance of the investment described below.
Additionally,
Phoenix issued 1,000,000 shares of its common stock in consideration for the
three-year exclusivity agreement within the United States of America included
in
the contract. Phoenix must meet minimum battery pack purchases,
annually, to maintain the limited exclusivity agreement through its expiration
in December 2009. The common stock shares received represented a
16.6% ownership interest in Phoenix. The investment was recorded at
$106,518 with the offset to deferred revenue, which is recognized on a
straight-line basis over the three year term of the exclusivity
period.
On
July
20, 2007, we entered into a multi-year Joint Development and Equipment Purchase
Agreement with AES. A member of the executive management team of AES
also serves on our board of directors. Under the terms of the
agreement we will work jointly with AES to develop a suite of energy storage
solutions for purchase by AES and potentially third parties. On
August 3, 2007, we received an initial $1,000,000 order, of which $500,000
was
prepaid, in connection with the AES Joint Development and Equipment Purchase
Agreement for a 500 kilowatt-hour energy storage product. This
product will be designed, manufactured, and tested at our Indiana and Reno
facilities, and is expected to ship by the end of the fourth quarter of
2007. Through September 30, 2007, $352,795 of revenue has been
recorded in connection with this purchase order on a time and materials basis
and $147,205 of the prepaid balance is reflected in deferred
revenue.
Note
12. Business Segment Information
Management
views the Company as
operating in three business segments: Performance Materials, Life
Sciences, and Power and Energy Group, previously known as Advanced
Materials and Power Systems (“AMPS”). In the third quarter of 2007,
the Altair Hydrochloride Pigment Process Division (“AHP”), which includes the
AlSher Titania joint venture, was combined with Performance Materials in order
to leverage and manage their inter-related operations. For all
quarters presented, the activity relating to the former AHP Division has been
reclassified to Performance Materials.
The
Performance Materials segment produces advanced materials for coatings, sensors,
alternative energy devices and markets and licenses our titanium dioxide pigment
production technology. Beginning in the third quarter of 2007, sales
of nano-structured lithium titanate spinel (“LTO”) were moved from Performance
Materials to the Power and Energy segment. All previous activity has
been re-classified accordingly. The Life Sciences segment produces
pharmaceutical products, drug delivery products and dental
materials. The Power and Energy Group develops, produces, and
sells nano-structured LTO, NanoSafe nano lithium Titanate battery
cells, and battery packs and provides related design and test
services.
The
accounting policies of these business segments are the same as described in
Note
2 to the unaudited condensed consolidated financial
statements. Reportable segment data reconciled to the consolidated
financial statements as of and for the three- and nine-month periods ended
September 30, 2007 and September 30, 2006 was as follows:
|
|
|
|
|
Loss/(Income)
From
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Net
Sales
|
|
|
Operations
|
|
|
Amortization
|
|
|
Assets
|
|
September
30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
514,878
|
|
|
$ |
973,379
|
|
|
$ |
247,570
|
|
|
$ |
5,806,332
|
|
Power
and Energy Group
|
|
|
2,452,753
|
|
|
|
2,451,157
|
|
|
|
217,410
|
|
|
|
9,567,691
|
|
Life
Sciences
|
|
|
402,504
|
|
|
|
(142,201) |
|
|
|
8,199
|
|
|
|
1,501,868
|
|
Corporate
|
|
|
-
|
|
|
|
3,266,723
|
|
|
|
33,791
|
|
|
|
17,840,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
3,370,134
|
|
|
$ |
6,549,059
|
|
|
$ |
506,970
|
|
|
$ |
34,715,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
506,856
|
|
|
$ |
1,284,568
|
|
|
$ |
281,764
|
|
|
$ |
5,458,925
|
|
Power
and Energy Group
|
|
|
238,810
|
|
|
|
1,300,836
|
|
|
|
90,038
|
|
|
|
4,046,264
|
|
Life
Sciences
|
|
|
4,232
|
|
|
|
163,674
|
|
|
|
2,669
|
|
|
|
1,375,828
|
|
Corporate
|
|
|
-
|
|
|
|
1,409,705
|
|
|
|
30,601
|
|
|
|
12,778,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
749,898
|
|
|
$ |
4,158,783
|
|
|
$ |
405,072
|
|
|
$ |
23,659,359
|
|
|
|
|
|
|
Loss/(Income)
From
|
|
|
|
|
|
|
|
Nine
months ended
|
|
Net
Sales
|
|
|
Operations
|
|
|
Amortization
|
|
|
Assets
|
|
September
30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
1,962,078
|
|
|
$ |
1,927,529
|
|
|
$ |
684,824
|
|
|
$ |
5,806,332
|
|
Power
and Energy Group
|
|
|
4,754,769
|
|
|
|
6,475,302
|
|
|
|
605,841
|
|
|
|
9,567,691
|
|
Life
Sciences
|
|
|
860,088
|
|
|
|
(147,129) |
|
|
|
22,202
|
|
|
|
1,501,868
|
|
Corporate
|
|
|
-
|
|
|
|
9,632,338
|
|
|
|
99,152
|
|
|
|
17,840,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
7,576,934
|
|
|
$ |
17,888,041
|
|
|
$ |
1,412,019
|
|
|
$ |
34,715,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
1,408,647
|
|
|
$ |
3,159,215
|
|
|
$ |
795,723
|
|
|
$ |
5,458,925
|
|
Power
and Energy Group
|
|
|
428,535
|
|
|
|
3,582,422
|
|
|
|
194,434
|
|
|
|
4,046,264
|
|
Life
Sciences
|
|
|
514,840
|
|
|
|
(147,356) |
|
|
|
7,374
|
|
|
|
1,375,828
|
|
Corporate
|
|
|
-
|
|
|
|
6,218,604
|
|
|
|
87,660
|
|
|
|
12,778,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
2,352,022
|
|
|
$ |
12,812,885
|
|
|
$ |
1,085,190
|
|
|
$ |
23,659,359
|
|
In
the
table above, corporate expense in the Loss From Operations column includes
such
expenses as investor relations, business consulting, general legal expense,
accounting and audit, general insurance expense, shareholder information expense
and general office expense.
For
the
three months ended September 30, 2007, we had sales to three major customers,
each of which accounted for 10% or more of revenues. Total sales to these
customers for the three months ended September 30, 2007 and the balance of
their
accounts receivable at September 30, 2007 were as follows:
|
|
|
|
|
Accounts
Receivable and
|
|
|
|
Sales
- 3 Months Ended
|
|
|
Notes
Receivable at
|
|
Customer
|
|
September
30, 2007
|
|
|
September
30, 2007
|
|
Performance
Materials Division:
|
|
|
|
|
|
|
Department
of Energy
|
|
$ |
73,472
|
|
|
$ |
15,958
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group:
|
|
|
|
|
|
|
|
|
Phoenix
Motorcars, Inc.
|
|
$ |
1,528,503
|
|
|
$ |
1,953,935
|
|
Department
of Energy
|
|
$ |
190,915
|
|
|
$ |
167,400
|
|
AES
Energy Storage, LLC.
|
|
$ |
352,795
|
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
Life
Sciences Division:
|
|
|
|
|
|
|
|
|
Department
of Energy
|
|
$ |
103,904
|
|
|
$ |
23,025
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended September
30, 2006, we had sales to four major customers, each of which accounted for
10%
or more of revenues. Total sales to these customers for the three months ended
September 30, 2006 and the balance of their accounts receivable at September
30,
2006 were as follows:
|
|
Revenues
- 3 Months Ended
|
|
|
Accounts
Receivable at
|
|
Customer
|
|
September
30, 2006
|
|
|
September
30, 2006
|
|
Performance
Materials Division:
|
|
|
|
|
|
|
Western
Oil Sands
|
|
$ |
298,730
|
|
|
$ |
190,305
|
|
UNLV
Research Foundation
|
|
$ |
74,152
|
|
|
$ |
52,266
|
|
Department
of Energy
|
|
$ |
97,819
|
|
|
$ |
84,025
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group:
|
|
|
|
|
|
|
|
|
National
Science Foundation
|
|
$ |
51,184
|
|
|
$ |
111,146
|
|
Department
of Energy
|
|
$ |
152,438
|
|
|
$ |
136,575
|
|
For
the
nine months ended September 30, 2007, we had sales to four major customers,
each
of which accounted for 10% or more of revenues. Total sales to these customers
for the nine months ended September 30, 2007 and the balance of their accounts
receivable at September 30, 2007 were as follows:
|
|
|
|
|
Accounts
Receivable and
|
|
|
|
Sales
- 9 Months Ended
|
|
|
Notes
Receivable at
|
|
Customer
|
|
September
30, 2007
|
|
|
September
30, 2007
|
|
Performance
Materials Division:
|
|
|
|
|
|
|
Western
Oil Sands
|
|
$ |
897,829
|
|
|
$ |
100,858
|
|
Department
of Energy
|
|
$ |
472,268
|
|
|
$ |
15,958
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group:
|
|
|
|
|
|
|
|
|
Phoenix
Motorcars, Inc.
|
|
$ |
3,067,121
|
|
|
$ |
1,953,935
|
|
Department
of Energy
|
|
$ |
595,264
|
|
|
$ |
167,400
|
|
|
|
|
|
|
|
|
|
|
Life
Sciences Division:
|
|
|
|
|
|
|
|
|
Elanco
Animal Health/Eli Lilly
|
|
$ |
727,629
|
|
|
$ |
294,600
|
|
Department
of Energy
|
|
$ |
127,565
|
|
|
$ |
23,025
|
|
For
the
nine months ended September 30, 2006, we had sales to five major customers,
each
of which accounted for 10% or more of revenues. Total sales to these customers
for the nine months ended September 30, 2006 and the balance of their accounts
receivable at September 30, 2006 were as follows:
|
|
Revenues
- 9 Months Ended
|
|
|
Accounts
Receivable at
|
|
Customer
|
|
September
30, 2006
|
|
|
September
30, 2006
|
|
Performance
Materials Division:
|
|
|
|
|
|
|
Western
Oil Sands
|
|
$ |
819,117
|
|
|
$ |
190,305
|
|
UNLV
Research Foundation
|
|
$ |
377,406
|
|
|
$ |
52,266
|
|
Department
of Energy
|
|
$ |
97,819
|
|
|
$ |
84,025
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group:
|
|
|
|
|
|
|
|
|
National
Science Foundation
|
|
$ |
198,125
|
|
|
$ |
111,146
|
|
Department
of Energy
|
|
$ |
152,438
|
|
|
$ |
136,575
|
|
|
|
|
|
|
|
|
|
|
Life
Sciences Division:
|
|
|
|
|
|
|
|
|
Spectrum
Pharmaceuticals, Inc.
|
|
$ |
514,840
|
|
|
$ |
1,232
|
|
Revenues
for the three-month periods ended September 30, 2007 and 2006 by geographic
area
were as follows:
|
|
Revenues
-
|
|
|
Revenues
-
|
|
|
|
3
Months Ended
|
|
|
3
Months Ended
|
|
Geographic
information (a):
|
|
September
30, 2007
|
|
|
September
30, 2006
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
2,864,455
|
|
|
$ |
428,228
|
|
Canada
|
|
|
274,649
|
|
|
|
298,730
|
|
Other
foreign countries
|
|
|
231,031
|
|
|
|
22,940
|
|
Total
|
|
$ |
3,370,134
|
|
|
$ |
749,898
|
|
|
|
|
|
|
|
|
|
|
(a)
Revenues are attributed to countries based on location of
customer.
|
Revenues
for the nine-month periods ended September 30, 2007 and 2006 by geographic
area
were as follows:
|
|
Revenues
-
|
|
|
Revenues
-
|
|
|
|
9
Months Ended
|
|
|
9
Months Ended
|
|
Geographic
information (a):
|
|
September
30, 2007
|
|
|
September
30, 2006
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
6,253,966
|
|
|
$ |
1,457,421
|
|
Canada
|
|
|
904,774
|
|
|
|
821,781
|
|
Other
foreign countries
|
|
|
418,194
|
|
|
|
72,820
|
|
Total
|
|
$ |
7,576,934
|
|
|
$ |
2,352,022
|
|
|
|
|
|
|
|
|
|
|
(a)
Revenues are attributed to countries based on location of
customer.
|
Note
13. Commitments
On
July
18, 2007, we signed a new lease agreement effective as of July 1, 2007 for
30,000 square feet of space in the Flagship Business Accelerator Building
located at 3019 Enterprise Drive, Anderson, Indiana. The lease is for
an initial term of 5 years with a single one-year renewal term. Total
rent to be paid over the 5 year term including real estate taxes is
$570,625. The landlord will provide the first $110,000 in additional
leasehold improvements at no cost. We expect to spend $220,000 on
build-out and leasehold improvements, net of the $110,000 credit to be received
from the landlord through the first quarter of 2008. We plan to move
from the current office and laboratory space leased in the Flagship Enterprise
Center Building, an aggregate of 8,199 square feet, to the Accelerator Building
over a period of several months, with expected completion of the move in January
2008.
On
July
20, 2007 we entered into a multi-year Joint Development and Equipment
Purchase Agreement with AES. We agreed to pay a royalty (based on
gross sales) on energy storage products exceeding specified power capacities
made to customers other than AES or its affiliates. Royalties will be
recorded to sales and marketing expense as incurred. Further, we agreed to
issue
AES warrants to purchase common shares of the Company based on a
formula derived from revenue received from sales of' energy storage systems
to
AES and its affiliates. As qualifying sales are incurred, the warrant sales
incentive expense will be recorded to cost of goods sold and accrued
as a liability until the warrants are issued, at which time the liability
will be reclassified to additional paid in capital in equity.
Item
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q (this “Report”) 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 Part II – Other Information, “Item
1A. Risk Factors” and other cautionary statements throughout this Report and our
other filings with the Securities and Exchange 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 Report 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.
Unless
the context requires otherwise, all references to “Altair,” “we,” “Altair
Nanotechnologies Inc.,” or the “Company” in this Report 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 Altairnano, Inc., a Nevada corporation, Mineral Recovery Systems, Inc.,
a
Nevada corporation, Fine Gold Recovery Systems, Inc., a Nevada corporation
and a
controlling interest in AlSher Titania LLC (“AlSher Titania”), a joint venture
with The Sherwin-Williams Company (“Sherwin-Williams”). We have
registered or are in the process of registering the following trademarks: Altair
Nanotechnologies®, Altair Nanomaterials®, Altairnano™, TiNano®, NanoSafe™,
Nanocheck© and RenaZorb®. Any other trademarks and service marks used
in this Report are the property of their respective holders.
Overview
The
following discussion summarizes the material changes in our financial condition
between December 31, 2006 and September 30, 2007 and the material changes in
our
results of operations and financial condition between the three-and nine-month
periods ended September 30, 2007 and September 30, 2006. This
discussion should be read in conjunction with Management’s Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2006.
We
are a
Canadian corporation, with principal assets and operations in the United States,
whose primary business is developing and commercializing nanomaterial and
titanium dioxide pigment technologies. We are organized into
three divisions, a Power and Energy Systems Division (formally known as the
Advanced Materials and Power Systems Division), a Life Sciences Division, and
a
Performance Materials Division. In the third quarter of 2007, the
Altair Hydrochloride Pigment Process Division (“AHP”), which includes the AlSher
Titania joint venture, was combined with Performance Materials in order to
leverage and manage their inter-related operations. Our research,
development, production and marketing efforts are currently directed toward
three primary market applications that utilize our proprietary
technologies:
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Power
and Energy Systems
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o
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The
design, development, and production of our NanoSafe brand nanoTitanate
battery cells, batteries, and battery packs as well as related design
and
test services.
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o
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The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion
batteries
called lithium nanoTitanate
batteries.
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o
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The
co-development of RenaZorb, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in patients undergoing kidney
dialysis.
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o
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The
co-development of a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in animals suffering from chronic renal
disease.
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o
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The
testing, development, marketing and/or licensing of nano-structured
ceramic powders for use in various applications, such as advanced
performance coatings, air and water purification systems, and nano-sensor
applications. As part of the AlSher Titania joint
venture, an exclusive license was granted to AlSher Titania to produce
nano titanium dioxide materials that will be purchased by the Company
for
internal development and commercial
sales.
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o
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In
April 2007, the AlSher Titania joint venture was formed to develop
and
produce high quality titanium dioxide pigment for use in paint and
coatings, and nano titanium dioxide materials for use in a variety
of
applications including those related to removing contaminants from
air and
water. The Performance Materials Division works with current
customers utilizing the Altair Hydrochloride Pigment Process technology
and also conducts internal research and development
activities.
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We
also
provide contract research services on select projects where we can utilize
our
resources to develop intellectual property and/or new products and
technology.
Our
revenues have been, and we expect them to continue to be, generated by license
fees, product sales, commercial collaborations and contracts and
grants. We currently have agreements in place to (1) provide research
involving a technology used in the detection of chemical, biological and
radiological agents, (2) provide laboratory space and services in connection
with testing and development related to the use of our AHP to produce titanium
dioxide pigment and
pigment-related products from titanium-bearing oil sands, (3) supply nano-sized
anode and cathode materials for design and development of high capacity lithium
ion battery and super capacitor applications, (4) provide research utilizing
nanotechnology processes for the production and commercialization of solar-based
hydrogen technologies, (5) produce battery packs, (6) provide research to
further develop battery electrode materials, nanosensors, and nanomaterials
characterization, (7) jointly develop a suite of energy storage solutions,
and
(8) to develop a nanometal oxide material to be used as a primer in aerospace
applications. In addition, we have entered into a licensing agreement
for RenaZorb, our pharmaceutical candidate for treatment of chronic renal
failure in humans; we have licensed all potential pharmaceutical products for
animal applications; have entered into a joint venture to develop and produce
titanium dioxide pigment for use in paint and coatings and nano titanium dioxide
materials for use in a variety of advanced materials applications; and we have
made product sales consisting principally of battery packs and lithium
titanate. Future revenues will depend on the success of our
contracted projects, the results of our other research and development work,
the
success of the RenaZorb and animal application licensees
in
obtaining regulatory approval for the drugs, or other products, the successful
completion of pilot plant operations in connection with AlSher Titania, the
successful completion of pilot plant operations in connection with energy
storage devices, and the success of our marketing efforts with respect to both
product sales and technology licenses.
General
Outlook
We
have
generated net losses in each fiscal year since incorporation. In
fiscal 2006, revenues from product sales, commercial collaborations and
contracts and grants began to increase significantly, but operating expenses
also increased significantly as we added employees and committed additional
funds to our customer contracts, battery initiative, pigment process technology
and sales and marketing efforts. Our gross profit margins on
customer contracts for research and development work are very low, and in order
that we may be profitable in the long run, our business plan focuses on the
development of products and technologies that we expect will eventually bring
a
substantial amount of higher-margin revenues from licensing, manufacturing,
product sales and other sources. We expect our NanoSafe nano lithium Titanate
battery cells and packs to be a source of such higher-margin
revenues. In 2007, we have increased spending for the battery
initiative, manufacturing of the potential drug candidates, and pigment process
development.
As
we attempt to significantly expand our revenues from licensing, manufacturing,
sales and other sources, some of the key near-term events that will affect
our
long-term success prospects include the following:
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We
must continue the development work on our nano-structured lithium
titanate
spinel (“LTO”) electrode materials, produce sufficient quantities of
batteries and battery cells for test purposes, obtain satisfactory
test
results and successfully market the materials. Toward that end,
we have hired additional employees, have constructed test and production
facilities and are purchasing equipment. Our intent is to
initially market our LTO electrode materials to the automotive industry
and stationary power markets where we must be able to demonstrate
to
prospective customers that our nano-structured LTO electrode materials
offer significant advantages over existing
technologies.
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On
July 20, 2007, we entered into a multi-year joint development and
equipment purchase agreement related to our battery technology and
energy
storage products with AES Energy Storage, LLC (“AES”), a subsidiary of The
AES Corporation. Under this agreement, a pilot project to
jointly develop an energy storage system with AES is expected to
be
completed by the second quarter of 2008. Successful completion
of this project is key to begin commercially marketing and selling
these
energy storage systems.
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On
January 9, 2007, we entered into a multi-year purchase and supply
agreement with Phoenix Motorcars, Inc. (“Phoenix”) for NanoSafe
nanoTitanate battery packs to be used in electric vehicles produced
by
Phoenix. Phoenix has placed firm purchase orders for $3,250,000
in NanoSafe nano lithium Titanate battery packs through September
30,
2007. Management believes that the projected orders for 2007 of
between $16 and $42 million for the remainder of 2007 may not be
achieved,
and that orders may fall below $16 million. We are currently
working with Phoenix to firm up orders through the remainder of
2007. In the third quarter, Phoenix notified us of their plan
to redesign the battery packs for their Generation II
vehicle. Based on their request, we continue to segregate and
hold the packs in a storage facility pending receipt of the new design
specifications. We anticipate performing the redesign work on a
time and materials basis. The agreement provides Phoenix with
limited exclusivity in the all-electric vehicle market during a three-year
period. In order to maintain exclusivity, Phoenix must purchase
at least $16 million in battery packs during 2007. Phoenix must
be successful in their business strategy and we must build and deliver
battery packs on a scale we have never before achieved, in order
to fully
benefit from this purchase
agreement.
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Spectrum and
Elanco must begin the testing and application processes necessary to
receive Federal Drug Administration approval of
our pharmaceutical candidates. Toward that end, we must
manufacture these products under pharmaceutical industry
guidelines to support such testing.
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We
have formed the AlSher Titania joint venture with Sherwin-Williams
to
develop and produce titanium dioxide pigment for use in paint and
coatings. The success of this joint venture and initial pilot
plant trials is integral to continuing development and the ultimate
commercialization of AHP.
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Although
it is not essential that all of these projects be successful in order to permit
substantial long-term revenue growth, we believe that full commercialization
of
several of our technologies will be necessary in order to expand our revenues
enough to create a likelihood of our becoming profitable in the long
term. We are optimistic with respect to our current key projects, as
well as others we are pursuing, but recognize that, with respect to each, there
are development, marketing, partnering and other risks to overcome.
Recent
Business Developments
Power
and Energy Group
In
January 2007, we entered into a multi-year purchase and supply agreement with
Phoenix for nano lithium Titanate battery packs to be used in electric
vehicles produced by Phoenix. Contemporaneously, Phoenix placed firm
purchase orders for 35 kilowatt hour (“KWh”) battery pack systems valued at
$1,040,000 and placed a blanket purchase order for up to 500 battery pack
systems to be delivered during 2007 (projected value between $16 and $42
million). The second release order valued at $2,210,000 was placed in
May 2007. Management believes that the projected orders for 2007 of
between $16 and $42 million for the remainder of 2007 may not be achieved and
that orders may fall below $16 million. We are currently working with
Phoenix to firm up orders through the remainder of 2007. For the three and nine
month periods ended September 30, 2007, revenue of $1,519,625 and $3,039,257,
respectively, has been recorded in connection with these
orders. In the third quarter, Phoenix notified us of their plan
to redesign the packs for their Generation II vehicle. Based on their
request we continue to segregate and hold the packs in a storage facility
pending receipt of the new design specifications. We anticipate
performing the redesign work on a time and materials basis.
Life
Sciences
In
September 2007, we entered into development services agreement with Elanco
Animal Health, a division of Eli Lilly and Company
(“Elanco”). Pursuant to the agreement, over a multi-year period, we
will develop a manufacturing process related to a test-stage active
pharmaceutical ingredient. This development work will include making
certain regulatory filings, installing related equipment, and providing related
services. Based on a previous agreement, Elanco has the exclusive
right to develop and market this pharmaceutical ingredient. Elanco
has agreed to fund substantially all of the development process, at a cost
of
approximately $2,500,000. The September development services
agreement supersedes and continues the work requested under purchase orders
received in the second quarter of 2007. Year to date through the end
of the third quarter, $598,320 has been billed under this
agreement.
Performance
Materials
In
April 2007, a new company, called
AlSher Titania LLC was formed. AlSher Titania represents a joint venture
with Sherwin-Williams, one of the world's leading manufacturers of paint and
durable coatings. Construction of the pigment processing pilot plant
in connection with the joint venture agreement is underway and completed
processing stages were tested in the third quarter. It is expected
that the plant will be fully commissioned in late 2007.
Liquidity
and Capital Resources
Current
and Expected Liquidity
Historically,
we have financed operations primarily through the issuance of equity securities
(common shares, convertible notes, stock options and warrants) and by the
issuance of debt. In order to finance our existing operations and
development plans, as well as to respond to any new business or acquisition
opportunity, we will be required to raise capital in the future. We
do not have any commitments with respect to future financing and may, or may
not, be able to obtain such financing on reasonable terms, or at
all. We have a single note payable in the original principal amount
of $3,000,000 that does not contain any restrictive covenants with respect
to
the issuance of additional debt or equity securities by Altair. The
first two payments of $600,000 of principal plus accrued interest were due
and
paid on February 8, 2006 and 2007. The current outstanding note
payable balance is $1,800,000. Future payments of principal and
interest are due annually on February 8, 2008 through 2010.
Our
cash
and short-term investments decreased by $12,465,232, from $27,220,357 at
December 31, 2006 to $14,755,125 at September 30, 2007, due primarily to net
cash used in operations (approximately $14,117,000) purchases of property and
equipment (approximately $2,959,000) and payment of notes payable
($600,000). This decrease was partially offset by the receipt of
proceeds in connection with the private placement of common shares purchased
by
AES in March 2007, receipt of cash in connection with the AlSher Titania joint
venture, and proceeds resulting from the exercise of stock options and
warrants.
During
the nine months ended September 30, 2007, our cash used in operations was
$14,116,612. The amount of cash we use in operations is partially
dependent on the amount and mix of revenues we generate. In the nine
months ended 2007, revenues were $7,576,934, which included $3,797,333 of
product sales. Although we expect quarterly revenues to increase
during the remainder of the year, and we expect product sales to become a larger
percentage of the sales mix, we cannot be certain that this will
occur. As revenues associated with product sales increase, a higher
level of inventory and long term notes receivable impact cashflows as
well.
Our
objective is to manage cash expenditures in a manner consistent with rapid
product development that leads to the generation of revenues in the shortest
possible time. We believe we have adequate cash resources, and
availability of additional capital if needed, to continue product development
until higher-margin revenues and positive cash flow can be
generated.
At
November 1, 2007, we had 70,457,477 common shares issued and
outstanding. As of that same date, there were outstanding warrants to
purchase up to 3,171,895 common shares and options to purchase up to 4,123,930
common shares.
Capital
Commitments
The
following table discloses aggregate information about our contractual
obligations and the periods in which payments are due as of September 30,
2007:
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Less
Than
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After
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|
Contractual
Obligations
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Total
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1
Year
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1-3
Years
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4-5
Years
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5
Years
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Notes
Payable
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$ |
1,800,000
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$ |
600,000
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$ |
1,200,000
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$ |
-
|
|
|
$ |
-
|
|
Interest
on notes payable
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252,000
|
|
|
|
126,000
|
|
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126,000
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|
|
-
|
|
|
|
-
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Contractual
Service Agreements
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1,688,634
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1,527,534
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161,100
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|
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-
|
|
|
|
-
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Facilities
and Property Leases
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817,500
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314,390
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311,860
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191,250
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-
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Unfulfilled
Purchase Orders
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3,225,588
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3,225,588
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|
|
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-
|
|
|
|
-
|
|
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|
-
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Total
Contractual Obligations
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$ |
7,783,722
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$ |
5,793,512
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$ |
1,798,960
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$ |
191,250
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$ |
-
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In
connection with the formation of the AlSher Titania joint venture, the Company
committed to complete its pigment processing pilot plant and expects to
commission the plant by late 2007. Total capital expenditures, labor
and development costs associated with this effort are expected to total
approximately $3.9 million. Through September 30, 2007, approximately $2.7
million of costs associated with the pigment processing pilot plant
have been incurred.
A
total
of approximately $4.8 million is anticipated to be spent on labor, equipment
and
building improvements and other implementation expenses related to preparations
to manufacture our pharmaceutical products. Of this amount,
approximately $800,000 is expected to be incurred during the quarter ending
December 31, 2007.
In
July
2007, we signed a new lease agreement for 30,000 square feet of space in the
Flagship Business Accelerator Building located at 3019 Enterprise Drive,
Anderson, Indiana. We plan to move from the current office and
laboratory space leased in the Flagship Enterprise Center Building, an aggregate
of 8,199 square feet, to the Accelerator Building by January
2008. Completion of the move is dependent upon the build-out of
office space in the new building, which may not be completed until January
2008. We expect to spend $220,000 on build-out and leasehold
improvements, net of the $110,000 credit to be received from the landlord
through the first quarter of 2008.
We
also
intend to purchase equipment for our Reno, Nevada facility for use in the
development and expansion of our current advanced battery materials production
capabilities. Through September 30, 2007, approximately $748,000 was
expended on production equipment, and we expect to spend approximately $500,000
during the quarter ending December 31, 2007.
Off-Balance
Sheet Arrangements
There
were no off-balance sheet arrangements at September 30, 2007.
Critical
Accounting Policies and Estimates
Management
based the following discussion and analysis of our financial condition and
results of operations on our unaudited condensed consolidated financial
statements. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our critical
accounting policies and estimates, including those related to inventory,
long-lived assets, share-based compensation, revenue recognition, overhead
allocation, minority interest, allowance for doubtful accounts and deferred
income taxes. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We
believe the following critical accounting policies affect the more significant
judgments and estimates used in the preparation of our consolidated financial
statements. These judgments and estimates affect the reported amounts of assets
and liabilities and the reported amounts of revenues and expenses during the
reporting periods. Changes to these judgments and estimates could adversely
affect our future results of operations and cash flows.
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Product
Inventories. The Company values its inventories at
the lower of cost (first-in, first-out method) or market. We
employ a full absorption procedure using standard cost techniques,
which
approximates actual cost. The standards are customarily
reviewed and adjusted annually.
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Long-Lived
Assets. Our long-lived assets consist principally of the
nanomaterials and titanium dioxide pigment assets, the intellectual
property (patents and patent applications) associated with them,
and a
building. Included in these long-lived assets are those that
relate to our research and development process. These assets are
initially evaluated for capitalization based on Statement of Financial
Accounting Standards No. 2, Accounting for Research and
Development Costs. If the assets have alternative future uses
(in research and development projects or otherwise), they are capitalized
when acquired or constructed; if they do not have alternative future
uses,
they are expensed as incurred. At September 30, 2007, the carrying
value of these assets was $13,523,485, or 39% of total
assets. We evaluate the carrying value of long-lived assets
when events or circumstances indicate that impairment may
exist. In our evaluation, we estimate the net undiscounted cash
flows expected to be generated by the assets, and recognize impairment
when such cash flows will be less than the carrying
values. Events or circumstances that could indicate the
existence of a possible impairment include obsolescence of the technology,
an absence of market demand for the product, and/or the partial or
complete lapse of technology rights
protection.
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Share-Based
Compensation. We have a stock incentive plan that provides for
the issuance of common stock options to employees and service
providers. We calculate compensation expense under SFAS 123R
using a Black-Scholes option pricing model. In so doing, we
estimate certain key assumptions used in the model. We believe
the estimates we use are appropriate and
reasonable.
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Revenue
Recognition. We recognize revenue when persuasive evidence of
an arrangement exists, delivery has occurred or service has been
performed, the fee is fixed and determinable, and collectibility
is
probable, in accordance with the Securities and Exchange Commission
“Staff Accounting Bulletin No. 104 – Revenue Recognition in Financial
Statements”. Historically, our revenues have been derived from
four sources: license fees, commercial collaborations, contract research
and development and product sales. License fees are recognized when
the agreement is signed, we have performed all material obligations
related to the particular milestone payment or other revenue component
and
the earnings process is complete. Revenue for product sales is
recognized upon delivery of the product, unless specific contractual
terms
dictate otherwise. Based on the specific terms and conditions
of each contract/grant, revenues are recognized on a time and materials
basis, a percentage of completion basis and/or a completed contract
basis. Revenue under contracts based on time and materials is
recognized at contractually billable rates as labor hours and expenses
are
incurred. Revenue under contracts based on a fixed fee
arrangement is recognized based on various performance measures,
such as
stipulated milestones. As these milestones are achieved, revenue is
recognized. From time to time, facts develop that may require us to
revise our estimated total costs or revenues expected. The
cumulative effect of revised estimates is recorded in the period
in which
the facts requiring revisions become known. The full amount of
anticipated losses on any type of contract is recognized in the period
in
which it becomes known. Based on specific customer bill and
hold agreements, revenue is recognized when the inventory is shipped
to a
third party storage warehouse, the inventory is segregated and marked
as sold, the customer takes the full rights of ownership and title to
the inventory upon shipment to the warehouse per the bill and hold
agreement. When contract terms include multiple components that
are considered separate units of accounting, the revenue is attributed
to
each component and revenue recognition may occur at different points
in
time for product shipment, installation, and service contracts based
on
substantial completion of the earnings
process.
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Accrued
Warranty. We provide a limited warranty for battery packs and
energy storage systems. A liability is recorded for estimated
warranty obligations at the date products are sold. Since these
are new products, the estimated cost of warranty coverage is based
on cell
and module life cycle testing and compared for reasonableness to
warranty
rates on competing battery products. As sufficient actual
historical data is collected on the new product, the estimated cost
of
warranty coverage will be adjusted
accordingly.
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Overhead
Allocation. Facilities overhead, which is comprised primarily
of occupancy and related expenses, is initially recorded in general
and
administrative expenses and then allocated monthly to research and
development expense and product inventories based on labor
costs. Facilities overhead allocated to research and
development projects may be chargeable when invoicing customers under
certain research and development
contracts.
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Minority
Interest – In April 2007, the Company and Sherwin-Williams
entered into an agreement to form AlSher Titania LLC, a Delaware
limited
liability company. AlSher Titania is a joint venture combining
certain technologies of the Company and Sherwin-Williams in order
to
develop and produce titanium dioxide pigment for use in paint and
coatings
and nano titanium dioxide materials for use in a variety of applications,
including those related to removing contaminants from air and
water. Pursuant to a Contribution Agreement dated April 24,
2007 among Altairnano, Inc, Sherwin-Williams and AlSher Titania,
Altairnano contributed to AlSher Titania an exclusive license to
use
Altairnano’s technology (including its hydrochloride pigment process) for
the production of titanium dioxide pigment and other titanium containing
materials (other than battery or nanoelectrode materials) and certain
pilot plants assets with a net book value of
$3,110,000. Altairnano received no consideration for the
license granted to AlSher Titania other than its ownership interest
in
AlSher Titania. Sherwin-Williams agreed to contribute to AlSher
Titania cash and a license agreement related to a technology for
the
manufacture of titanium dioxide using the digestion of ilmenite in
hydrochloric acid. As a condition to enter into the second
phase of the joint venture, we agreed to complete the pigment pilot
processing plant and related development activities by January
2008. The costs associated with this effort are expected to be
partially reimbursed by AlSher Titania. Altairnano contributes
any work in process and fixed assets associated with completion of
the
pigment pilot processing plant to the AlSher Titania joint
venture. For each reporting period, AlSher Titania is
consolidated with the Company’s subsidiaries because the Company has a
controlling interest in AlSher Titania and any inter-company transactions
are eliminated (refer to Note 1 – Basis of Preparation of Consolidated
Financial Statements). The minority shareholder’s interest in
the net assets and net income or loss of AlSher Titania are reported
as
minority interest in subsidiary on the condensed consolidated balance
sheet and as minority interest share in the condensed consolidated
statement of operations,
respectively.
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Allowance
for Doubtful Accounts. The allowance for doubtful accounts is
based on our assessment of the collectibility of specific customer
accounts and the aging of accounts receivable. We analyze historical
bad debts, the aging of customer accounts, customer concentrations,
customer credit-worthiness, current economic trends and changes in
our
customer payment patterns when evaluating the adequacy of the allowance
for doubtful accounts. From period to period, differences in
judgments or estimates utilized may result in material differences
in the
amount and timing of our bad debt
expenses.
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Deferred
Income Taxes. Income taxes are accounted for using the asset
and liability method. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and
liabilities and their respective tax bases and operating loss and
tax
credit carry-forwards. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income
in the years in which those temporary differences are expected to
be
recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the
period
that includes the enactment date. Future tax benefits are subject to
a valuation allowance when management is unable to conclude that
its
deferred income tax assets will more likely than not be realized
from the
results of operations. The Company has recorded a valuation
allowance to reflect the estimated amount of deferred income tax
assets
that may not be realized. The ultimate realization of deferred income
tax
assets is dependent upon generation of future taxable income during
the
periods in which those temporary differences become deductible. Management
considers projected future taxable income and tax planning strategies
in
making this assessment. Based on the historical taxable income and
projections for future taxable income over the periods in which the
deferred income tax assets become deductible, management believes
there is
insufficient basis for projecting that the Company will realize the
benefits of these deductible differences as of September 30, 2007.
Management has, therefore, established a full valuation allowance
against
its net deferred income tax assets as of September 30,
2007.
|
Results
of Operations
Three
Months Ended September 30, 2007 Compared to Three Months Ended September
30, 2006
The
net
loss for the third quarter ended September 30, 2007 totaled $6,130,210 ($.09
per
share) compared to a net loss of $4,054,686 ($.07 per share) in the third
quarter of 2006.
Total
revenues for the third quarter ended September 30, 2007 were
$3,370,134 compared to $749,898 for the third quarter of
2006.
Product
revenues increased by $1,841,390 from $22,940 in the third quarter of 2006
to
$1,864,330 in the third quarter of 2007. During the third quarter of
2007, we recorded approximately $1,714,700 of product revenues associated with
NanoSafe nano lithium Titanate batteries and prototype cells. There
were no comparable product revenues in the third quarter of
2006. Additionally, sales of our electrograde materials increased by
approximately $126,700 for the third quarter ending September 30, 2007 over
the
prior year quarter.
Revenues
from commercial collaborations increased by $641,362, from $339,116 in the
third quarter of 2006 to $980,478 in the third quarter of
2007. Revenues of approximately $353,000 were recorded in connection
with the AES development agreement signed in July 2007. Revenues of
approximately $295,000 were also recorded in connection with research and
development services performed under the new 2007 contract with Elanco Animal
Health.
Revenues
from contracts and grants increased by $137,484, from $387,842 in the
third quarter of 2006 to $525,326 in the third quarter of 2007.
Revenues of $118,033 were recorded in connection with the $2.5 million
Department of Energy grant in the third quarter of 2007. In the prior
year, revenues associated with this grant did not commence until September
2006. This increase and other increases due to the timing of new 2007
grants with PPG Aerospace and University of Reno, Nevada of $89,535 was
offset by $42,486 due to the completion of the $750,000 University of Nevada,
Las Vegas Research Foundation subcontract and by $27,598 due to the completion
of a subcontract with Rutgers University to provide testing services associated
with the National Science Foundation grant.
Cost
of
product sales increased by $2,055,492, from $28,237 in the third quarter of
2006
to $2,083,729 in the same quarter of 2007. This increase is primarily
driven by the changes in product sales discussed in the paragraph
above. Positive margins have not yet been achieved associated
with the sale of battery packs due to scaling issues, and a portion of the
revenues relating to the battery packs is dependent upon the receipt of Zero
Emission Credits (refer to Note 11 – Related Party
Transactions). Through September 30, 2007, no ZEV credits have been
sold by Phoenix Motorcars, Inc. As higher production volumes and cost
reduction efforts are achieved and ZEV credits are paid, the margin on battery
pack sales is expected to become positive.
Research
and development expenses increased by $1,659,593, from $2,763,566 in
the third quarter of 2006 to $4,423,159 in the same quarter of
2007. Labor and fringe costs increased by approximately
$584,000 due to the addition of 27 new employees. Excluding
labor, research and development costs increased in the following business
units: $697,000 net increase in Power and Energy Systems
primarily due to research performed in connection with developing current
battery products as well as development relating to potential new battery
markets (approximately $476,000), work performed in connection with the July
2007 AES agreement (approximately $265,000) and an increased level of
electrograde materials production, these increases were offset by approximately
$111,000 of decreases in research and development associated with non-billable
internal projects; $231,000 net increase in Performance Materials primarily
due
the start up and testing of the pigment pilot plant in the third quarter of
2007; $118,000 net increase in Life Sciences primarily due to work
performed under the 2007 Department of Energy subcontract with the University
of
California Santa Barbara (approximately $104,000) and research
costs associated with our pharmaceutical candidate (approximately $92,000),
offset by a decrease of $78,000 relating to other Life Sciences projects; and
a
$30,000 net increase in other research and development
expenses .
Sales
and
marketing expenses increased by $95,849, from $423,615 in the third quarter
of
2006 to $519,464 in the third quarter of 2007. This increase reflects
the cost of new battery market studies undertaken in the third quarter of 2007
as well as increased travel and other costs associated with attendance at trade
shows.
General
and administrative expenses increased by $1,097,680, from $1,288,191 in the
third quarter of 2006 to $2,385,871 in the same quarter of
2007. Labor and benefit costs increased by approximately $245,000 due
to 5 additional personnel required to support Company
growth. Employee benefits costs increased by approximately $488,000
primarily due to a higher level of employees in the third quarter of 2007
coupled with an increase in bonus accrual relating to achieving the targeted
objectives of the plan. Share based compensation, a non-cash expense,
increased by $352,000 due to a higher level of new employees eligible for and
receiving option grants and an overall higher level of employees who received
retention grants in January 2007. Other general and administrative expenses
also increased by approximately $13,000 in the third quarter of
2007.
Depreciation
and amortization increased by $101,899, from $405,072 in the third quarter
of 2006 to $506,970 in the same quarter of 2007. The increase in
depreciation reflects the addition of lab and production equipment since October
2006 of approximately $2,895,000 primarily relating to expansion of production
capabilities at the Indiana and Reno facilities and approximately $413,000
relating to execution of grant contracts.
Interest
income increased by $68,606, from $146,235 in the third quarter of 2006 to
$214,841 in the same quarter of 2007 due to an increase in cash available
for investment of approximately $5.5 million that was generated through the
sale
of common shares in December 2006, the private sale of stock to The AES
Corporation in March 2007, and the receipt of the initial contribution to the
AlSher Titania joint venture in May 2007 less operating
expenditures.
Minority
interest increased by $236,518
in the third quarter of 2007. This increase reflects Sherwin-Williams
minority interest share of the AlSher Titania joint venture’s loss for the
quarter ending September 30, 2007. AlSher Titania was not
formed until April 2007.
Nine
months ended September 30, 2007 Compared to Nine months
ended September 30, 2006
The
net
loss for the nine months ended September 30, 2007 totaled
$16,742,259 ($.24 per share) compared to a net loss of $12,403,769 ($.21
per share) in the same period of 2006.
Total
revenues for the nine months ended September 30, 2007 were
$7,576,934 compared to $2,352,022 for the same period of
2006. License fee revenue decreased by $364,720 in the nine months
ended September 30, 2007 as compared to the same period in 2006 due to a
milestone payment received in the third quarter of 2006 in connection with
the
Spectrum agreement. No additional milestones were achieved for the
same period in 2007.
Product
revenues increased by $3,763,735 from $33,598 for the nine months
ended September 30, 2006 to $3,797,333 in the same period of
2007. During the nine months ended September 30, 2007, we
recorded approximately $3,435,000 of product revenues associated with NanoSafe
nano lithium Titanate battery packs, prototype cells and
alumina. There were no comparable product revenues for the same
period of 2006. Additionally, sales of electrograde materials and
other TiO2 related products increased by approximately $329,000 for the
nine months ended September 30, 2007 over the same period in
2006.
Revenues
from commercial collaborations increased by $1,003,928, from $1,058,622 for
the
nine months ended September 30, 2006 to $2,062,550 for the same period of
2007. Revenues of approximately $728,000 were recorded in connection
with research and development services performed under the new 2007 contract
with Elanco Animal Health and revenues of approximately $353,000 were recorded
in connection with the AES development agreement signed in July
2007. Additional revenue of approximately $79,000 was recognized in
connection with Western Oil Sands primarily related to materials purchases
for the nine months ended September 30, 2007. These increases
were offset by a decrease in revenue of approximately $155,000 primarily
relating to the RenaZorb development revenues under the Spectrum contract
recorded in the third quarter of 2006. No development revenues
associated with the Spectrum contract have been recorded in 2007.
Revenues
from contracts and grants increased by $821,969, from $895,082 for the nine
months ended September 30, 2006 to $1,717,051 in the same period of
2007. Revenues recorded in connection with the $2.5 million
Department of Energy grant for the nine months ended September 30, 2007
increased over the same period in the prior year by approximately
$930,000. In the prior year, revenues associated with this grant were
not recorded until September 2006. This increase and other increases
due to the timing of new 2007 grants with PPG Aerospace and University of Reno,
Nevada of $123,000 was offset by a decrease of $159,000 primarily due to
the completion of a subcontract with Rutgers University to provide testing
services associated with the National Science Foundation grant and a decrease
of
$72,000 due to the completion of the $750,000 University of Nevada, Las Vegas
Research Foundation subcontract.
Cost
of
product sales increased by $4,455,514, from $30,953 for the nine months
ended September 30, 2006 to $4,486,467 in the same period of
2007. This increase is primarily driven by the changes in product
sales discussed above. Positive margins have not yet been achieved
associated with the sale of battery packs due to scaling issues, and a portion
of the revenues relating to the battery packs is dependent upon the receipt
of
Zero Emission Credits (refer to Note 11 – Related Party
Transactions). Through September 30, 2007, no ZEV credits have been
sold or paid to us by Phoenix Motorcars, Inc. As higher production
volumes and cost reduction efforts are achieved and ZEV credits are paid, the
margin on battery pack sales is expected to become positive.
Research
and development expenses increased by $3,742,138, from $6,917,218 for the
nine months ended September 30, 2006 to $10,659,356 in the same period of
2007. Labor and fringe costs increased by approximately $1,663,000
due to the addition of 27 new employees. Excluding labor, research
and development costs increased in the following business
units: $1,066,000 net increase in Power and Energy Systems primarily
due to research performed in connection with developing current battery products
as well as development relating to potential new battery markets (approximately
$1,035,000), work performed in connection with the July 2007 AES agreement
(approximately $265,000) and increased costs associated with the Department
of
Energy grant (approximately 270,000), these increases were offset by
approximately $504,000 of decreases in research and development associated
with
non-billable internal projects; $596,000 net increase in Performance Materials
primarily due the start up and testing of the pigment pilot plant in the third
quarter of 2007 (approximately $353,000) and increased costs associated with
the
Department of Energy Grant (approximately $338,000), offset by a net decrease
of
$95,000 associated with non-billable internal projects; and $419,000 net
increase in Life Sciences primarily due to development of our pharmaceutical
candidate (approximately $292,000) and costs incurred relating to the 2007
Department of Energy subcontract with the University of California Santa Barbara
(approximately $128,000).
General
and administrative expenses increased by $1,851,144, from $5,746,759 for the
nine months ended September 30, 2006 to $7,597,903 in the same period of
2007. Share based compensation, a non-cash expense, increased by
$1,146,000 due to a higher level of new employees eligible for and receiving
option grants and an overall higher level of employees who received retention
grants in January 2007. Labor, fringe benefit and recruiting costs
increased by approximately $795,000 due to 5 additional personnel required
to
support Company growth and the search for additional talent. Employee
benefits costs were $276,000 higher due to an increase in the bonus accrual
based on expectations of meeting the bonus targets. Travel costs have
also increased by approximately $183,000 due to increased headcount and trips
to
identify new supplier sources for raw battery material
components. Accounting fees increased by $159,000 primarily due to an
international tax project undertaken in 2007. These increases plus an
increase of $33,000 in other general and administrative expenses are offset
by a net decrease in expense of approximately $741,000 primarily due
to: the flood that occurred in the first quarter of 2006 ($401,000);
a decrease in legal costs that were incurred in 2006 relating to the lawsuits
that were settled in 2006 ($190,000); and a decrease in the level of patent
costs incurred in 2007 ($150,000).
Depreciation
and amortization increased by $326,829, from $1,085,190 for the nine months
ended September 30, 2006 to $1,412,019 in the same period of
2007. The increase in depreciation reflects the addition of lab and
production equipment since October 2006 of approximately $2,895,000 primarily
relating to expansion of production capabilities at the Indiana and Reno
facilities and approximately $413,000 relating to execution of grant
contracts.
Interest
income increased by $311,819, from $539,060 for the nine months
ended September 30, 2006 to $850,879 in the same period of 2007 due to an
increase in cash available for investment of approximately $5.5 million that
was
generated through the sale of common shares in December 2006, the private sale
of stock to The AES Corporation in March 2007, and the receipt of the initial
contribution to the AlSher joint venture in May 2007 less operating
expenditures.
Minority
interest increased by $394,198 for the nine months ended September 30,
2007. This increase reflects Sherwin-Williams minority interest share
of the AlSher Titania joint venture’s loss for the nine months ended September
30, 2007. AlSher Titania was not formed until April
2007.
Item
3. Quantitative
and Qualitative Disclosures about Market Risk
We
do not
have any derivative instruments, commodity instruments, or other financial
instruments for trading or speculative purposes, nor are we presently at
material risk for changes in interest rates on foreign currency exchange
rates.
Item
4. Controls
and Procedures
(a) Based
on the evaluation of our "disclosure controls and procedures" (as defined in
the
Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by
paragraph (b) of Rules 13a-15 or 15d-15, our chief executive officer and our
chief financial officer have concluded that, as of September 30, 2007, our
disclosure controls and procedures were effective in ensuring that
information required to be disclosed by the Company in reports that it files
under the Exchange Act is recorded, processed, summarized and reported within
the time periods required by governing rules and forms.
(b) There
have been no changes in our internal control over financial reporting identified
in connection with the evaluation required by paragraph (d) of Exchange Act
Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART
II – OTHER INFORMATION
Item
1A. Risk Factors
Material
Changes in Risk Factors
The
Risk
Factors set forth below do not reflect any material changes from the “Risk
Factors” identified in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 (the “Form 10-K”), except (i) that we have made immaterial
edits and updated references to financial data, and (ii) a Risk Factor
addressing our dependence upon commercial partners has been altered to read
as
follows:
The
commercialization of many of our technologies is dependent upon the efforts
of
commercial partners and other third parties over which we have no or little
control.
We
do not
have the expertise or resources to commercialize all potential applications
of
our nanomaterials and titanium dioxide pigment technology. For example, we
do
not have the resources necessary to complete the testing of, and obtain FDA
approval for, RenaZorb and other potential life sciences products or to
construct a commercial facility to use our titanium dioxide pigment production
technology. Other potential applications of our technology, such as those
related to our nano-structure LTO electrode materials, coating materials
and
dental materials, are likely to be developed in collaboration with third
parties, if at all. With respect to these and substantially all other
applications of our technology, the commercialization of a potential application
of our technology is dependent, in part, upon the expertise, resources and
efforts of our commercial partners. This presents certain risks, including
the
following:
|
•
|
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources,
technology
and expertise on reasonable terms or at all;
|
|
•
|
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other characteristics
necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus, unrelated to its
merits;
|
|
•
|
our
commercial partners may be in the early stages of development and
may not
have sufficient liquidity to invest in joint development projects,
expand
their businesses and purchase our products as expected or honor
contractual commitments;
|
|
•
|
our
commercial partners may terminate joint testing, development or
marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
•
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
•
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed
our
associated development and operating
costs.
|
As
a
result of the actions or omissions of our commercial partners, or our inability
to identify and enter into suitable arrangements with qualified commercial
partners, we may be unable to commercialize apparently viable products on
a
timely and cost-effective basis, or at all. Our business is not
dependent upon a single application of our technology; however, we will not
become profitable and be able to sustain operations in the long run if we
fail
to commercialize several of our potential products.
Risk
Factors
An
investment in our common shares and warrants involves significant risks. You
should carefully consider the risks described in this Report before making
an investment decision. Any of these risks could materially and adversely affect
our business, financial condition or results of operations. In such case, you
may lose all or part of your investment. Some factors in this section are
forward-looking statements.
We
may continue to experience significant losses from
operations.
We
have
experienced a loss in every fiscal year since our inception. Our
losses from operations were $17,681,415 in 2006 and $17,888,041 for the nine
months ended September 30, 2007. Even if we do generate operating
income in one or more quarters in the future, subsequent developments in our
industry, customer base, business or cost structure, or an event such as
significant litigation or a significant transaction, may cause us to again
experience operating losses. We may never become profitable for the
long-term, or even for any quarter.
Our
quarterly operating results have fluctuated significantly in the past and will
continue to fluctuate in the future, which could cause our stock price to
decline.
Our
quarterly operating results have fluctuated significantly in the past, and
we
believe that they will continue to fluctuate in the future, due to a number
of
factors, many of which are beyond our control. If in future periods our
operating results do not meet the expectations of investors or analysts who
choose to follow our company, our stock price may fall. Factors that may affect
our quarterly operating results include the following:
•
|
fluctuations
in the size and timing of customer orders from one quarter to the
next;
|
•
|
timing
of delivery of our services and products;
|
•
|
addition
of new customers or loss of existing customers;
|
•
|
our
ability to commercialize and obtain orders for products we are
developing;
|
•
|
costs
associated with developing our manufacturing
capabilities;
|
•
|
new
product announcements or introductions by our competitors or potential
competitors;
|
•
|
the
effect of variations in the market price of our common shares on
our
equity-based compensation expenses;
|
•
|
acquisitions
of businesses or customers;
|
•
|
technology
and intellectual property issues associated with our products;
and
|
•
|
general
economic trends, including changes in energy prices, or geopolitical
events such as war or incidents of
terrorism.
|
Our
revenues have historically been generated from low-margin contract research
services; if we cannot expand revenues from other products and services, our
business will fail.
Historically,
a significant portion of our revenues has come from contract research services
for businesses and government agencies. During the years ended December 31,
2006, 2005 and 2004, contract services revenues comprised 67%, 70%, and 99%,
respectively, of our operating revenues. Contract services revenue is low margin
and unlikely to grow at a rapid pace. Our business plan anticipates revenues
from product sales and licensing, both of which are higher margin than contract
services and have potential for rapid growth, increasing in coming years. If
we
are not successful in significantly expanding our revenues from higher margin
products and services, our revenue growth will be slow, and it is unlikely
that
we will achieve profitability.
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:
·
Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
|
·
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;
|
|
· Parties
to the
confidentiality and invention agreements may have such agreements
declared
unenforceable or, even if the agreements are enforceable, may breach
such
agreements;
|
|
· The
costs associated
with enforcing patents, confidentiality and invention agreements
or other
intellectual property rights may make aggressive enforcement cost
prohibitive;
|
|
· Even
if we enforce
our rights aggressively, injunctions, fines and other penalties may
be
insufficient to deter violations of our intellectual property rights;
and
|
|
· 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 shares 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 harm our ability to generate revenues and, as a result, our
business and operations.
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.
Because
our products are generally components of end products, the viability of many
or
our products is tied to the success of third parties' existing and potential
end
products.
Few
of
the existing or potential products being developed with our nanomaterials and
titanium dioxide pigment technology are designed for direct use by the ultimate
end user. Phrased differently, most of our products are components of other
products. For example, our nano-structured LTO battery materials and NanoSafe
batteries are designed for use in end-user products such as electric vehicles,
hybrid electric vehicles and other potential products. Other potential products
and processes we and our partners are developing using our technology, such
as
titanium dioxide pigments, life science materials, air and water treatment
products, and coatings, are similarly expected to be components of third-party
products. As a result, the market for our products is dependent upon third
parties creating or expanding markets for their end-user products that utilize
our products. If such end-user products are not developed, or the market for
such end-user products contracts or fails to develop, the market for our
component products would be expected to similarly contract or collapse. This
would limit our ability to generate revenues and would harm our business and
operations.
The
commercialization of many of our technologies is dependent upon the efforts
of
commercial partners and other third parties over which we have no or little
control.
We
do not
have the expertise or resources to commercialize all potential applications
of
our nanomaterials and titanium dioxide pigment technology. For example, we
do
not have the resources necessary to complete the testing of, and obtain FDA
approval for, RenaZorb and other potential life sciences products or to
construct a commercial facility to use our titanium dioxide pigment production
technology. Other potential applications of our technology, such as those
related to our nano-structure LTO electrode materials, coating materials and
dental materials, are likely to be developed in collaboration with third
parties, if at all. With respect to these and substantially all other
applications of our technology, the commercialization of a potential application
of our technology is dependent, in part, upon the expertise, resources and
efforts of our commercial partners. This presents certain risks, including
the
following:
|
•
|
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources, technology
and expertise on reasonable terms or at all;
|
|
•
|
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other characteristics necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus, unrelated to its
merits;
|
|
•
|
our
commercial partners may be in the early stages of development and
may not
have sufficient liquidity to invest in joint development projects,
expand
their businesses and purchase our products as expected or honor
contractual commitments;
|
|
•
|
our
commercial partners may terminate joint testing, development or marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
•
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
•
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed our
associated development and operating
costs.
|
As
a
result of the actions or omissions of our commercial partners, or our inability
to identify and enter into suitable arrangements with qualified commercial
partners, we may be unable to commercialize apparently viable products on a
timely and cost-effective basis, or at all. Our business is not
dependent upon a single application of our technology; however, we will not
become profitable and be able to sustain operations in the long run if we fail
to commercialize several of our potential products.
If
we acquire or invest in other companies, assets or technologies and we are
not
able to integrate them with our business, or we do not realize the anticipated
financial and strategic goals for any of these transactions, our financial
performance may be impaired.
As
part
of our growth strategy, we routinely consider acquiring or making investments
in
companies, assets or technologies that we believe are strategic to our business.
We do not have extensive experience in integrating new businesses or
technologies, and if we do succeed in acquiring or investing in a company or
technology, we will be exposed to a number of risks, including:
|
•
|
we
may find that the acquired company or technology does not further
our
business strategy, that we overpaid for the company or technology
or that
the economic conditions underlying our acquisition decision have
changed;
|
|
•
|
we
may have difficulty integrating the assets, technologies, operations
or
personnel of an acquired company, or retaining the key personnel
of the
acquired company;
|
|
•
|
our
ongoing business and management's attention may be disrupted or
diverted
by transition or integration issues and the complexity of managing
geographically or culturally diverse
enterprises;
|
|
•
|
we
may encounter difficulty entering and competing in new product
or
geographic markets or increased competition, including price competition
or intellectual property litigation;
and
|
|
•
|
we
may experience significant problems or liabilities associated with
product
quality, technology and legal contingencies relating to the acquired
business or technology, such as intellectual property or employment
matters.
|
In
addition, from time to time we may enter into negotiations for acquisitions
or
investments that are not ultimately consummated. These negotiations could result
in significant diversion of management time, as well as substantial
out-of-pocket costs. If we were to proceed with one or more significant
acquisitions or investments in which the consideration included cash, we could
be required to use a substantial portion of our available cash. If we issue
shares of capital stock or other rights to purchase capital stock, including
options and warrants, existing stockholders would be diluted. In addition,
acquisitions and investments may result in the incurrence of debt, large
one-time write-offs, such as acquired in-process research and development costs,
and restructuring charges.
We
intend to expand our operations and increase our expenditures in an effort
to
grow our business. If we are unable to achieve or manage significant growth
and
expansion, or if our business does not grow as we expect, our operating results
may suffer.
During
the past year, we have significantly increased our research and development
expenditures in an attempt to accelerate the commercialization of certain
products, particularly our nano-structured LTO electrode materials and NanoSafe
battery systems. Our business plan anticipates continued additional expenditure
on development, manufacturing and other growth initiatives. We may not achieve
significant growth despite such expenditures. If achieved, significant growth
would place increased demands on our management, accounting systems, network
infrastructure and systems of financial and internal controls. We may be unable
to expand associated resources and refine associated systems fast enough to
keep
pace with expansion, especially as we expand into multiple facilities at distant
locations. If we fail to ensure that our management, control and other systems
keep pace with growth, we may experience a decline in the effectiveness and
focus of our management team, problems with the timeliness and accuracy of
our
reporting, issues with costs and quality controls and other problems associated
with a failure to manage rapid growth, all of which would harm our results
of
operations.
Our
competitors have more resources than we do, which may give them a competitive
advantage.
We
have
limited financial personnel 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
will not generate substantial revenues from our life science products unless
proposed products receive FDA approval and achieve substantial market
penetration.
We
have
entered into development and license agreements with respect to RenaZorb, a
potential drug candidate for humans with kidney disease, and other life science
products, and expect to enter into additional licensing and/or supply agreements
in the future. Most of the potential life sciences applications of
our technologies are subject to regulation by the FDA and similar regulatory
bodies. In general, license agreements in the life sciences area call
for milestone payments as certain milestones related to the development of
the
products and the obtaining of regulatory approval are met; however, the receipt
by the licensor of substantial recurring revenues is generally tied to the
receipt of marketing approval from the FDA and the amount of revenue generated
from the sale of end products. There are substantial risks
associated with licensing arrangements, including the following:
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Further
testing of potential life science products using our technology
may
indicate that such products are less effective than existing products,
unsafe, have significant side effects or are otherwise not
viable;
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The
licensees may be unable to obtain FDA or other regulatory approval
for
technical, political or other reasons or, even if a licensee obtains
such
approval, it may obtain such approval much later than expected
or
projected; and
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•
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End
products for which FDA approval is obtained, if any, may fail to
obtain
significant market share for various reasons, including questions
about
efficacy, need, safety and side effects or because of poor marketing
by
the licensee.
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If
any of
the foregoing risks, or other risks associated with our life science products
were to occur, we would not receive substantial, recurring revenue from our
life
science division, which would adversely affect our overall business, operations
and financial condition.
As
manufacturing becomes a larger part of our operations, we will become exposed
to
accompanying risks and liabilities.
We
have
not produced any pigments, nanoparticles or other products using our
nanomaterials and titanium dioxide pigment technology and equipment on a
sustained commercial basis. In-house or outsourced manufacturing is
becoming an increasingly significant part of our business. If and as
manufacturing becomes a larger part of our business, we will become increasingly
subject to various risks associated with the manufacturing and supply of
products, including the following:
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If
we fail to supply products in accordance with contractual terms,
including
terms related to time of delivery and performance specifications,
we may
become liable for replacement, direct, special, consequential and
other
damages, even if manufacturing or delivery was
outsourced;
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Raw
materials used in the manufacturing process, labor and other key
inputs
may become scarce and expensive, causing our costs to exceed cost
projections and associated
revenues;
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Manufacturing
processes typically involve large machinery, fuels and chemicals,
any or
all of which may lead to accidents involving bodily harm, destruction
of
facilities and environmental contamination and associated liabilities;
and
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We
may have, and may be required to, make representations as to our
right to
supply and/or license intellectual property and to our compliance
with
laws. Such representations are usually supported by indemnification
provisions requiring us to defend our customers and otherwise make
them
whole if we license or supply products that infringe on third-party
technologies or violate government
regulations.
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Any
failure to adequately manage risks associated with the manufacture and supply
of
materials and products could lead to losses (or small gross profits) from that
segment of our business and/or significant liabilities, which would adversely
affect our business, operations and financial condition.
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 $3,000,000, at an interest rate of 7%, secured by the property
we acquired. The first two payments of $600,000 of principal plus
accrued interest were due and paid on February 8, 2006 and February 8, 2007.
Additional payments of $600,000 plus accrued interest are due annually on
February 8, 2008 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.
We
may not be able to raise sufficient capital to meet future
obligations.
As
of
September 30, 2007, we had approximately $14.8 million in cash, cash equivalents
and short-term investments. As we take additional steps to enhance
our commercialization and marketing efforts, or respond to acquisition
opportunities or potential adverse events, our use of working capital may
increase significantly. In any such event, absent a comparatively significant
increase in revenue in the immediate future, we will need to raise additional
capital in order to sustain our ongoing operations, continue unfinished testing
and additional development work and, if certain of our products are
commercialized, construct and operate facilities for the production of those
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:
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market
factors affecting the availability and cost of capital
generally;
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the
price, volatility and trading volume of our common
shares;
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our
financial results, particularly the amount of revenue we are generating
from operations;
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the
amount of our capital needs;
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•
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the
market's perception of companies in one or more of our lines of
business;
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the
economics of projects being pursued;
and
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the
market's perception of our ability to execute our business plan and
any
specific projects identified as uses of
proceeds.
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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.
Our
past and future operations may lead to substantial environmental
liability.
Virtually
any prior or future use of our nanomaterials and titanium dioxide pigment
technology is subject to federal, state and local environmental laws. In
addition, we are in the process of reclaiming mineral property that we leased
in
Tennessee. Under applicable environmental 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. If we incur any
significant environmental liabilities, our ability to execute our business
plan
and our financial condition would be harmed.
Certain
of our experts and directors reside in Canada and may be able to avoid civil
liability.
We
are a
Canadian corporation, and several 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 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 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.
Alan J. Gotcher, our Chief Executive Officer and President, Edward Dickinson,
our Chief Financial Officer, and Dr. Bruce Sabacky, our Chief Technology
Officer. We have key man insurance on the lives of Dr. Gotcher and Dr.
Sabacky. We do not have agreements requiring any of our key personnel
to remain with our company. The loss or unavailability of any or all
of these individuals would harm our ability to execute our business plan,
maintain important business relationships and complete certain product
development initiatives, which would harm our business.
We
may issue substantial amounts of additional shares without stockholder
approval.
Our
articles of incorporation authorize the issuance of an unlimited number of
common shares that may be issued without any action or approval by our
stockholders. In addition, we have various stock option plans that
have potential for diluting the ownership interests of our
stockholders. The issuance of any additional common shares would
further dilute the percentage ownership of our company held by existing
stockholders.
The
market price of our common shares is highly volatile and may increase or
decrease dramatically at any time.
The
market price of our common shares may be highly volatile. Our stock price may
change dramatically as the result of announcements of product developments,
new
products or innovations by us or our competitors, uncertainty regarding the
viability of the nanomaterials and titanium dioxide pigment technology or any
of
our product initiatives, 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 shares may be affected by various
factors not directly related to our business or future prospects, including
the
following:
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Intentional
manipulation of our stock price by existing or future shareholders
or a
reaction by investors to trends in our stock rather than the fundamentals
of our business;
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A
single acquisition or disposition, or several related acquisitions
or
dispositions, of a large number of our shares, including by short
sellers
covering their position;
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The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
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Positive
or negative statements or projections about our company or our industry,
by analysts, stock gurus and other persons;
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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; and
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Economic
and other external market factors, such as a general decline in market
prices due to poor economic indicators or investor
distrust.
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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 shares. 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 shares in
the foreseeable future.
We
are subject to various regulatory regimes, and may be adversely affected by
inquiries, investigations and allegations that we have not complied with
governing rules and laws.
In
light
of our status as a public company and our lines of business, we are subject
to a
variety of laws and regulatory regimes in addition to those applicable to all
businesses generally. For example, we are subject to the reporting
requirements applicable to Canadian and United States reporting issuers, such
as
the Sarbanes-Oxley Act of 2002, the rules of the NASDAQ Capital Market and
certain state and provincial securities laws. We are also subject to state
and
federal environmental, health and safety laws, and rules governing department
of
defense contracts. Such laws and rules change frequently and are
often complex. In connection with such laws, we are subject to periodic
audits, inquiries and investigations. Any such audits, inquiries and
investigations may divert considerable financial and human resources and
adversely affect the execution of our business plan. In addition,
through such audits, inquiries and investigations, we or a regulator have from
time to time determined, and may in the future determine, that we are out of
compliance with one or more governing rules or laws. Remedying such
non-compliance may divert additional financial and human resources. In
addition, in the future, we may be subject to a formal charge or determination
that we have materially violated a governing law, rule or regulation. Any
charge, and particularly any determination, that we had materially violated
a
governing law would likely have a material adverse effect on the market price
of
our stock, our ability to raise capital and recruit employees, and our ability
to execute our business plan.
For
example, on March 30, 2005, we received a letter of inquiry from the SEC
requesting information relating to a press release we issued on February 10,
2005, in which we announced developments in a rechargeable battery technology
that incorporates our lithium titanate battery materials. After providing the
requested information, we received a follow up letter of inquiry dated August
2,
2005 requesting additional information related to our battery programs, emails
of certain affiliates, certain transactions and recent earnings
calls. We provided the information to the SEC in a series of letters
sent during September and October 2005. We have not been contacted by the SEC
since providing all requested information in October 2005 or been notified
of
any ongoing activity or pending proceeding. The absence of any
additional letters of inquiry related to the matter for an approximately
21-month period suggests to us that the inquiry may be completed; however,
we
have received no notice from the SEC with respect to the status of the inquiry
and are uncertain as to its status. Based upon advice of counsel that the SEC
frequently does not apprise a company whether an inquiry has been terminated
or
is ongoing, we expect to remain uncertain in the foreseeable future. Our
response to the SEC inquiry diverted considerable financial and human resources,
which harmed our ability to execute our business plan for a time, and leaves
a
level of uncertainty going forward, which may harm our ability to enter into
business relationships, recruit qualified officers and employees and raise
capital.
Through
such audits, inquiries and investigations, we or a regulator may determine
that
we are out of compliance with one or more governing rules or laws.
Remedying such non-compliance diverts additional financial and human
resources. In addition, in the future, we may be subject to a formal
charge or determination that we have materially violated a governing law, rule
or regulation. Any charge, and particularly any determination, that we had
materially violated a governing law would harm our ability to enter into
business relationships, recruit qualified officers and employees and raise
capital.
Item
6. Exhibits
a) See
Exhibit Index attached hereto following the signature page.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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Altair
Nanotechnologies Inc.
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November
8, 2007
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By: /s/ Alan
J. Gotcher
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Date
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Alan
J. Gotcher, Chief Executive Officer
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November
8, 2007
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By: /s/ Edward
H. Dickinson
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Date
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Edward
H. Dickinson, Chief Financial
Officer
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Exhibit
No.
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Exhibit
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Incorporated
by Reference/ Filed Herewith
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3.1
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Articles
of Continuance
|
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Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on July
18, 2002, File No. 001-12497
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3.2
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Bylaws
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Incorporated
by reference to the Annual Report on Form 10-K for the year ended
December
31, 2004 filed with the SEC on March 9, 2005, File No.
001-12497
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10.1
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Amendment
dated August 17, 2007 to Altair Executive Employment Agreement between
the
Company and Alan Gotcher
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Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on
August 17, 2007, File No. 001-12497
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10.2
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|
Amendment
dated August 17, 2007 to Altair Executive Employment Agreement between
the
Company and Edward Dickinson
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on
August 17, 2007, File No. 001-12497
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10.3
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|
Amendment
dated August 17, 2007 to Altair Executive Employment Agreement between
the
Company and Bruce Sabacky
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Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on
August 17, 2007, File No. 001-12497
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10.4
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Development
Services Agreement executed on September 25, 2007 between the Company
and
Elanco Animal Health*
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Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on
September 27, 2007, File No. 001-12497
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31.1
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Section
302 Certification of Chief Executive Officer
|
|
Filed
herewith
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31.2
|
|
Section
302 Certification of Chief Financial Officer
|
|
Filed
herewith
|
32.1
|
|
Section
906 Certification of Chief Executive Officer
|
|
Filed
herewith
|
32.2
|
|
Section
906 Certification of Chief Financial Officer
|
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Filed
herewith
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*
Certain
portions of this exhibit have been omitted pursuant to Rule 24b-2 and are
subject to a confidential treatment request.