alti_10k-123108.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X]
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
2008
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[_]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM _________ TO
___________
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ALTAIR
NANOTECHNOLOGIES INC.
(Exact
name of registrant as specified in its charter)
Canada
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1-12497
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33-1084375
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(State
or other jurisdiction of incorporation)
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(Commission
File No.)
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(IRS
Employer Identification
No.)
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204
Edison Way
(Address
of principal executive offices, including zip code)
Registrant's
telephone number, including area code: (775) 856-2500
Securities
registered pursuant to Section 12(b) of the Act:
Common Shares, no par value
(Title
of Class)
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NASDAQ Capital Market
(Name
of each exchange on which
registered)
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. YES [_] NO [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. YES [_] NO
[X]
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [_]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Report or any amendment to this
Report. [_]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of “accelerated filer”, “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check
one):
[_]
Large Accelerated Filer
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[X]
Accelerated Filer
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[_]
Non-accelerated Filer
(Do
not check if a smaller reporting company)
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[_]
Smaller reporting Company
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act): YES [ ] NO [X]
The
aggregate market value of the common shares held by non-affiliates of the
Registrant on June 30, 2008, based upon the closing stock price of the common
shares on the NASDAQ Capital Market of $1.70 per share on June 30, 2008, was
approximately $121,269,755. Common Shares held by each officer and
director and by each other person who may be deemed to be an affiliate of the
Registrant have been excluded.
As of
March 10, 2009, the Registrant had 95,153,271 common shares
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Registrant’s Proxy Statement on Schedule 14A for the Registrant’s 2009
Annual Meeting of Shareholders are incorporated by reference in Part III as
specified.
INDEX TO FORM
10-K
PART
I
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1
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Item
1.
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Business
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1
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Item
1A.
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Risk
Factors
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19
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Item
1B.
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Unresolved
Staff Comments
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28
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Item
2.
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Description
of Property
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28
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Item
3.
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Legal
Proceedings
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29
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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29
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PART
II
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30
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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30
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Item
6.
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Selected
Financial Data
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32
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
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32
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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42
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Item
8.
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Financial
Statements and Supplementary Data.
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42
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
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43
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Item
9A.
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Controls
and Procedures
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43
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Item
9B.
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Other
Information
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44
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PART
III
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44
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Item
10.
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Directors
and Executive Officers of the Registrant
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44
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Item
11.
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Executive
Compensation
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44
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters………
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44
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Item
13.
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Certain
Relationships and Related Transactions
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44
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Item
14.
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Principal
Accountant Fees and Services
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45
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PART
IV
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45
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Item
15.
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Exhibits,
Financial Statement Schedules and Reports on Form 8–K
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45
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PART
I
This
Annual Report on Form 10-K for the year ended December 31, 2008 (this “Report”)
contains “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that
involve risks and uncertainties. Purchasers of any of the common
shares, no par value, (the “common shares”) of Altair Nanotechnologies Inc. are
cautioned that our actual results will differ (and may differ significantly)
from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include those factors
discussed herein under “Item 1A. Risk Factors” and elsewhere in this Report
generally. The reader is also encouraged to review other filings made
by us with the Securities and Exchange Commission (the “SEC”) describing other
factors that may affect future results of the Company.
Unless
the context requires otherwise, all references to “Altair,” “we,” “Altair
Nanotechnologies Inc.,” or the “Company” in this Report refer to Altair
Nanotechnologies Inc. and all of its consolidated
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 (“MRS”), and Fine Gold
Recovery Systems, Inc., a Nevada corporation (“Fine Gold”) which was dissolved
on December 30, 2008. AlSher Titania LLC, a Delaware limited
liability company, is 70% owned by Altairnano, Inc. We have
registered or are in the process of registering the following trademarks: Altair
Nanotechnologies Inc.®, Altair Nanomaterials, Inc.®, Altairnano®, TiNano®,
Nanocheck® and RenaZorb®. Any other trademarks and service marks used
in this Report are the property of their respective holders.
Item
1. Business
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. For nearly all of 2008, we were
organized into three divisions; a Power and Energy Group (formally known as the
Advanced Materials and Power Systems Division), a Performance Materials
Division, and a Life Sciences Division. Our research, development,
production and marketing efforts have been directed toward three primary market
applications that utilize our proprietary technologies:
o
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The
design, development, and production of our nano lithium titanate 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 nano lithium titanate
batteries.
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·
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Performance
Materials Division
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o
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Through
AlSher Titania, the development and production of 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.
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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 application, such as
advanced performance coatings, air and water purification systems, and
nano-sensor applications.
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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 human patients undergoing kidney
dialysis.
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o
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The
development of a manufacturing process related to a test-stage active
pharmaceutical ingredient, designed to be useful in the treatment of
companion animals.
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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. Although contract services revenue comprised a
significant portion of our total revenues in recent years accounting for 87%,
55%, and 67%, respectively in 2008, 2007, and 2006, we do not expect this to
continue. Near the end of 2008, we made the decision to focus on Power and
Energy products as we believe that area contains the most promise for the
Company. In the summary of our business below, we describe our
various research products in connection with our description of the business
segment to which each relates.
Our
Proprietary Nanomaterials and Pigment Process
Most
of our existing products, potential products and contract research services are
built upon our proprietary nanomaterials and titanium dioxide pigment
technology. We acquired the basis for this technology from BHP
Minerals International, Inc. in 1999 and, over the past nine years, have
continued to expand and refine various applications of the
technology. Today, we use the technology in order to produce various
finely-sized powders for diverse applications, including pharmaceuticals,
titanium dioxide pigment, and high performance rechargeable
batteries. Although the existing and potential applications are
varied, each is directly or indirectly built upon the ingenuity of our
management, research and development staff, engineering team and our proprietary
nanomaterials technology.
This
nanomaterials technology enables our production of conventional titanium dioxide
pigment products that are finely sized powders consisting of titanium
dioxide crystals. These
powders are generally 170-300 nanometers in size. This technology is also
capable of producing other metal and mixed metal oxide
nanomaterials. These are specialty products with a size range of 10
to 100 nanometers (approximately one tenth the size of conventional titanium
dioxide pigment). The primary products currently being produced in
the processing plant are lithium titanate spinel and lanthanum based
materials.
Using
this technology, we are in various stages of research, development and marketing
of numerous products and potential products. We also use this
technology to provide contract research services on select projects where we can
utilize our resources to develop intellectual property and/or new products and
technology.
Power
and Energy Group
Primary
Products
Nano lithium titanate batteries and electrode
materials
We are
developing, marketing, producing and selling our proprietary rechargeable
lithium ion battery, which we refer to as our nano lithium titanate
batteries. We are also continuing to explore the license, manufacture
and sale of our proprietary lithium titanate spinel (“LTO”) electrode materials
for use in batteries being developed by other companies.
As
explained in greater detail below, the principal features used to compare
rechargeable batteries include charge and discharge rates, energy density,
cycle life, and calendar life. In laboratory and field tests, our
nano lithium titanate batteries have high rates of charge and discharge, long
cycle life, extended calendar life and a broad operating temperature range, all
of which far exceed those of rechargeable batteries currently being used for
target applications. We believe that, with these strengths our nano
lithium titanate batteries are superior alternatives for rechargeable battery
uses that require power, durability and exposure to the
elements. These include electric utility
services, uninterruptible power supplies, hybrid electric and full
electric vehicles.
Key Business Developments in
Power and Energy
AES
Relationship. In July 2007, we entered into a multi-year
development and equipment purchase agreement with AES Energy Storage, LLC
(“AES”), a subsidiary of global power leader The AES Corporation. The
AES Corporation is one of the world’s largest power companies, with operations
in 28 countries on five continents. The AES Corporation generation
and distribution facilities have the capacity to serve 100 million people
worldwide. Under the terms of the agreement, we are working jointly
with AES to develop a suite of energy storage solutions for AES and the broader
market in general. In May of 2008, AES successfully completed the
first major test of a 2 megawatt battery system that we manufactured for
AES. The test consisted of AES connecting the battery to the
electrical grid at a substation in Indiana and then performing a number of
stringent tests to determine if it was capable of providing the services
required. These tests were designed and overseen by KEMA, an
independent outside agency, and demonstrated that the battery performed well in
every respect, meeting or exceeding all expectations. Since then one
of the 1MW units has been moved to Pennsylvania and connected into the
electrical grid managed by PJM providing commercial, revenue generating services
for AES. We are working with AES to apply these products and systems
at other strategic points within the electrical grid to more efficiently deal
with real-time fluctuations in electricity supply and demand. We
believe that the quick response time, extended life, and power profile of our
batteries and energy storage products are well suited to improving the
electrical grid stability with lower environmental impact than traditional
generation solutions.
Military
Relationships. In January 2008, we entered into a development
agreement with the Office of Naval Research for $2,490,000. This is a
cost reimbursement agreement whereby we will develop a proof of concept battery
system consisting of two 50-80 kilowatt hour batteries. Successful
completion of this development work is required to qualify for further military
grants with the Office of Naval Research (“ONR”). All testing
associated with ONR Phase I was successfully completed in November
2008. We anticipate entering into Phase II in the first quarter of
2009, and the U.S. Congress appropriated funds for Phase III in the fall of
2008. During 2008 we also entered into various
development agreements with the U.S. Army (“ARDEC”) and the United Kingdom’s
Ministry of Defense for different battery systems to be used in field artillery
units and other naval applications respectively. All development and
testing results to date have met or exceeded customer expectations and we
anticipate a continuation of these programs into 2009.
Phoenix Relationship. In January 2007, we entered into a
multi-year purchase and supply agreement with Phoenix Motorcars, Inc., succeeded
by Phoenix MC, Inc. (“Phoenix”), for lithium titanate battery packs to be used
in electric vehicles produced by Phoenix. Although expectations for
business expansion were high, these expectations were never
realized. Our relationship with Phoenix was marked by a number
difficulties, and in July 2008, we terminated our purchase and supply agreement
by mutual agreement.
Target
Markets
According to information supplied by JMP
Securities in January 2007, the market for
power storage devices is approximately $55 billion
($31 billion lead acid, $9 billion alkaline, $8 billion lithium ion, and
$7 billion all other). Lithium ion and advanced technology
rechargeable batteries are expected to gradually increase their share of the
world rechargeable battery market. New developments indicate that
high power batteries of this type will ultimately be developed for application
as replacements for lead acid batteries and Nickel Metal Hydride, or NiMH,
batteries in automobiles, electric vehicles, and hybrid electric vehicles where
direct electrical energy for starting and passing will assist the gasoline
engines. Also, the development of power storage systems for
stationary power, electric utility grid services and wind, fuel cell and solar
generation systems will require enhanced battery
capabilities. According to “Upcoming Advances in the Hybrid Vehicle
Market” Japan’s Nomura Research Institute in February 2007, the global market
for hybrid vehicles will more than triple to 2.19 million units a year by 2012.
They envision the US leading the demand with 1.68 million units followed by
Japan at 460,000 and Europe at 52,000 units in 2012.
Our
lithium-titanate technology provides a fundamental building block for a new
generation of lithium ion rechargeable batteries. Currently, our
primary markets are in the electric utility grid services and electric vehicle
sector. As discussed above, we have an active development and supply
relationship with AES in the electric utility grid market. We have
also provided electrode materials, cells, batteries and battery packs to, and
had early stage discussions with, various established automobile companies and
cell manufacturers that are evaluating our technology for use in hybrid electric
vehicles and plug-in electric vehicles. These discussions could lead
to commercial relationships characterized by a revenue stream consisting of one
or more of development funding, materials manufacturing and
royalties.
In the
transportation and military sectors requiring power-dependent battery systems
and stationary power applications, we are focusing our marketing and development
efforts on markets presently dominated by Nickel Cadmium, or NiCd, and NiMH
batteries. We are well-positioned to leverage the unique performance attributes
associated with the our lithium ion battery systems when applied to specific
customer applications within these markets, in which rapid charging/discharging,
long cycle life, high round-trip efficiencies, broad operating temperature and
safety are considered necessary requirements.
The
integration of renewable energy sources, such as solar and wind, coupled with
rising global energy demand is placing unprecedented challenges on the stability
and reliability of electricity grid systems, both domestically and abroad.
Energy storage technologies are being examined closely to understand the role
they can play in helping transform electricity grids into more reliable, secure,
and efficient networks capable of responding to the massive changes in energy
demand and energy policy anticipated over the next several decades.
There are
two categories of energy storage currently being examined for utility
applications, bulk energy storage and distributed energy storage. Pumped
hydroelectric and compressed air energy storage (“CAES”) technologies are
considered bulk energy storage technologies. These systems are considered
potentially practical for sustained requirements ranging from between 100 MW to
several thousand MW. Demonstration of these technologies dates back as early as
1929 with the application of a 31 MW pumped hydroelectric power
plant.
Distributed
energy storage encompasses an emerging breed of batteries and energy storage
systems suitable for smaller applications deployed near load centers,
transmission system points of reinforcement, or renewable generation sources.
Flow batteries, sodium sulfur (NaS) and sodium nickel chloride (NaNiCl)
batteries are established, commercial technologies serving the distributed
energy storage market. These systems are designed for charge/discharge durations
up to eight hours a day.
Most
recently, alternative energy storage devices including flywheels and
lithium-based batteries, such as those manufactured by Altair, are being applied
to frequency regulation, a service provided by vertically-integrated utility
companies, independent service operators, and merchant operators, which manages
second-by-second fluctuations between electricity generation and demand. For
these systems, energy storage is measured in minutes.
Solar and
wind power generation by nature are intermittent sources of
energy. The adoption of these renewable energy generation systems, is
likely to increase the need for effective, efficient, clean energy storage
technologies to provide frequency regulation services and maintaining the
reliability and stability of the associated electricity grid
systems.
Key
Features
Rechargeable batteries are made from various materials,
each of which has certain characteristics or tendencies, depending upon how the
products are configured. Some of the key concepts used when comparing
rechargeable batteries include the following:
·
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Power: A battery’s power rating is its
ability to deliver current while maintaining its
voltage.
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·
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Discharge: Discharge refers to the
dissipation of a battery’s stored energy as a result of intended transfer
of that energy (either gradually or in one or more large bursts) or as a
result of the unintended leakage of that energy. This latter
type of leakage is referred to as “self discharge” and is a natural
tendency of all batteries at a rate that is proportional to
temperature. A “deep discharge”
refers to the discharge of substantially all of the stored energy in a
battery between recharges. In general, deep discharges reduce
the cycle life of batteries.
|
·
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Energy density: A battery’s
energy density is normally described as watt-hours/kilogram or
watt-hours/liter and refers to the available energy per unit weight or per
unit volume. A battery with high energy density will deliver
more energy per unit weight or volume than a battery with lower energy
density.
|
·
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Cycle life: The ability of a
rechargeable battery to store energy tends to diminish as a result of
repeated charge/discharge cycles. A battery’s “cycle life” is
the number of times it can be charged and discharged without a significant
reduction in its energy storage
capacity.
|
·
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Calendar
life: A battery’s calendar life relates to the period of time
that a battery will preserve its capability to deliver a significant
portion of its original energy storage
capacity.
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·
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Recharge
time: Recharge time is the amount of time it takes to replenish
a battery’s energy.
|
Other important factors include the cost,
safety, environmental
friendliness and extreme temperature
performance of a battery. Although being on the positive side of each
of the characteristics is desirable in all rechargeable batteries, the
importance of these various characteristics depends primarily upon the
anticipated use of a battery. For example, high power, which is
important in a hand-held cordless power tool is not very important in a battery designed to power a
cell phone because a cell phone needs very little power; however, high specific
energy density may be important in a cell phone battery because consumers desire
to be able to use a cell phone for a long time between recharges and want to
carry as little weight and volume as possible.
The
principal advance we have made is in the optimization of nano-structured LTO
electrode materials that replace graphite electrode materials used in the negative electrode of current lithium ion cells. When used with
a positive electrode from a common lithium
ion cell, very high charge and discharge rates are possible. Our
current cells are capable of recharge times of 10 minutes to 90%, or more, of
initial battery capacity and 10 minute discharges with 90%, or more, capacity
utilization.
Our
nano-structured LTO is non-reactive with the electrolytes used in common lithium ion systems. This greatly
reduces the negative (anode) electrode resistance, and thus, passage of lithium
ions to the electrode surface is enabled. Since the material is
nano-structured, the surface area available to lithium ions is greatly enhanced
– by up to 100 times – over graphite based systems. The material
allows for a greatly facilitated, thus rapid, access to the active sites
necessary for cell function. In addition, the small size of the
nanoparticles dramatically reduces the distance from the surface to inner active
sites, further reducing resistance to high rate operation. These characteristics permit our cells to
deliver more power and recharge much faster than other types of rechargeable
cells described in the subsection entitled “Competition” below.
Our
nano-structured LTO is termed a zero strain material, meaning that the material
essentially does not change shape upon the entry and exit of a lithium ion into
and from the particle. Since most other anode materials suffer from
this mechanical stress and strain, these other materials are subject to more
rapid physical degradation. This leads
to significantly shorter calendar and cycle life than with our LTO anodes.
In January 2007, we completed 25,000 deep charge/discharge cycles of our
innovative cells. Even after 25,000 cycles, the cells still retained
over 80% of their original charge capacity. This represents a significant
improvement over conventional, commercially available rechargeable battery
technologies such as conventional lithium ion, NiMH and NiCD. These other
commercially available rechargeable batteries typically retain that level of
charge capacity only through approximately 1,000 to 3,000 deep charge/discharge
cycles. Nano-structured
LTO offers a near-term promise of lithium
nano-titanate batteries with rapid charge and discharge capability and longer
cycle life than either currently available NiMH or lithium ion
batteries. These results support the feasibility of a power lithium
nano-titanate battery pack half the size of those currently being tested for
hybrid electric vehicle applications.
Our
nano-structured LTO also represents a breakthrough in low- and high-temperature
performance. Nearly 90% of room temperature charge retention is
realized at -30°C from
Altair’s nano-structured LTO cells. In contrast, common lithium ion technology possesses virtually no
charging capabilities at this low temperature, and the other rechargeable
battery types described in the subsection entitled
“Competition” below take 10 to 20 times longer to charge at this low
temperature.
We also
believe that relative safety is one of the strengths of our nano-structured
LTO. Any battery cell or large battery unit constructed from lithium ion
cell technology must take into account safety considerations, the most important
of which is thermal runaway. Thermal runaway occurs when the temperature
of a given cell within the battery exceeds the point where chemical reactions
between electrode and electrolyte become self-sustaining. This temperature
is often referred to as the critical temperature. Critical temperature for
lithium ion battery cells using conventional graphite anodes is around 130° C, a direct result of
chemical reaction between the graphite and the electrolyte. With our
lithium titanate anode in place of graphite and an appropriate cathode material,
that critical temperature is near 250° C, an increase in safety
margin of approximately 120° C. The batteries
we and our partners are developing for high power applications often consist of
dozens or even thousands of battery cells working together as part of a single
modular battery unit. When a large number of batteries cells are
aggregated into a single battery unit, the likelihood of, and risks associated
with, thermal runaway increase. In this context, we believe that the
additional temperature margin our individual battery cells can experience before
reaching the critical temperature makes our battery cells better suited than
competing lithium ion batteries for the high-power applications we are
targeting. The current generation of
batteries made with our nano-structured LTO exhibit lower energy density at room
temperatures than conventional lithium ion systems. Our batteries
made with our nano-structured LTO have energy densities, watt-hours per kilogram
that are better than lead acid, NiCd and NiMH batteries and approximately 50-70%
of conventional lithium ion batteries. The disadvantage is significantly less as the operating
temperature moves away from room temperature, particularly to colder
environments. When the end use of the battery requires constant
performance across a wide range of temperatures, such as the need for a hybrid
automobile to function comparably in both winter and summer, our LTO cells may
be the preferred design.
Proprietary
Rights
We have
been awarded 10 U.S. and 29 international patents protecting this technology
including: 1) Method for producing catalyst structures, 2) Method for producing
mixed metal oxides and metal oxide compounds, 3) Processing for making lithium
titanate, and 4) Method for making nano-sized and sub-micron-sized
lithium-transition metal oxides. The U.S. patents expire beginning in
2020.
We have
filed 13 U.S. patent applications directed to a variety of inventions related to
aspects of our electrochemical cells: “Nano-Materials – New
Opportunities for Lithium Ion Batteries”; “Methods for Improving Lithium-Ion
Battery Safety”; “Method for Preparing a Lithium-Ion Cell”; “Method for
Preparing a Lithium-Ion Battery”; and, “Method for Synthesizing Nano-Sized
Lithium Titanate Spinel.”
Competition
Advanced Lithium Ion
Batteries. We are not aware of any commercially available
products that have similar performance attributes as our nano-structured LTO and
our nano lithium titanate batteries and battery packs. A competitor
company has recently announced an advanced Li-Ion battery. This
battery appears to have some advantages over other types of common Li-Ion
batteries particularly with respect to energy density, but appears to lack
certain other features, such as cycle life and performance at temperature
extremes, that distinguish our batteries from the competition. In
addition, we believe, many large companies, such as automobile manufacturers,
are attempting to develop lithium ion batteries that are suitable for high-power
applications such as hybrid electric vehicles and plug-in hybrid electric
vehicles. Many of these companies have significant human and
financial resources, a well-known brand name, existing distribution channels and
other advantages over us. Were such companies to develop a product
technology with features that are similar or superior to those of our nano
lithium titanate batteries, that company would have a significant competitive
advantage.
Existing
Technologies. Lead acid, NiCd and NiMH batteries presently dominate our
target markets. Lead acid batteries are used everyday by anyone who
drives an automobile or operates an electric-powered wheel chair, scooter or
golf cart. They are also the battery-of-choice for uninterruptible
power supplies. Lead acid batteries are inexpensive, relatively
simple to manufacture, possess a relatively low self discharge rate and are
based on a mature, reliable technology. The modern sealed versions
also need little or no maintenance. However, lead acid batteries are
quite heavy, giving them very poor weight to energy and power ratios, which limit practical use to stationary and
transportation applications. They also suffer from long recharge
times, relatively low energy capacities and cannot be stored for long periods in
a discharge state without service-life failure. In addition, they
possess a very limited deep discharge cycle
life, and thermal runaway can occur with
improper charging. The highly toxic metal, lead, and highly corrosive
sulfuric acid used as the electrolyte in lead acid batteries render them
environmentally unfriendly.
NiCd
batteries are inexpensive and fairly rugged, have
the longest cycle life of currently available rechargeable battery types,
work best on deep discharge cycles and accept recharge at moderately fast
rates; however, charging rates must be reduced by a factor of 5 to 10 at
temperatures below 0°C (32͊°F) and above 30°C
(86°F). NiCd batteries suffer
from relatively low energy density and relatively high self-discharge rates
necessitating re-charge after moderate periods of storage. More
seriously, NiCd batteries are exceedingly
environmentally unfriendly. The metal cadmium is toxic and can cause
several acute and chronic health effects in humans, including
cancer. As a result, NiCd usage is being severely restricted and/or
phased-out altogether by some countries.
The metal
hydride used in NiMH technology is a direct replacement for cadmium in NiCd
batteries. Thus, NiMH batteries
share and improve upon the
attributes of NiCd batteries, yet introduce
problems of their own. On the
positive side, NiMH batteries improve upon
the energy capacity and power capabilities
of NiCd (for the same size cell) by 30% to 40%. Since they contain only mild toxins, NiMH batteries are more environmentally friendly than
both lead acid and NiCd
batteries. Like NiCd
batteries, NiMH batteries can be
charged in about 3 hours. Charging rates must be reduced by a factor
of 5 to 10 at temperatures below 0°C (32°F) and above 40°C
(104°F). NiMH batteries suffer
from poor deep cycle ability, possessing a recharge capability on the order of
200 to 300 cycles. While NiMH batteries are capable of high power discharge,
dedicated usage in high current applications limits cycle life even
further. Shelf life is poor - on the order of three
years. As noted above, NiCd batteries possess high self-discharge
rates, but this problem is exacerbated by up to 50% in NiMH
systems. NiMH batteries are
intolerant to elevated temperature and, as a result, performance and capacity
degrade sharply above room temperature. The most serious issue with
NiMH involves safety accompanying recharge. The temperature and
internal pressure of a NiMH battery cell
rises sharply as the cell nears 100% state of charge, necessitating the
inclusion of complex cell monitoring electronics and sophisticated charging
algorithms in order to prevent thermal runaway. While NiMH technology
is gaining prominence within the electric vehicle (EV) market and dominates the hybrid electric vehicle market,
this gain is placing pressures on the limited supply of nickel, potentially
rendering the technology economically infeasible for these applications as the
demand continues to rise.
Of all of
the available metals for use as a basis for practical batteries, lithium is the
most reactive and least dense, allowing for batteries with high specific
energy. Conventional lithium ion
batteries exhibit voltages of about 3.6V as compared to about 1.2V for
NiCd and NiMH and 2.0V for lead acid. Ohm’s law defines the
relationship between power P, voltage V and current I. This
relationship is described by the formula: P=IV. Power is also defined
as the time rate of energy transfer; thus higher voltages typically lead to
larger power and / or energy densities. Lithium ion batteries are stable, charge somewhat rapidly (in hours), exhibit low
self-discharge, and require very little
maintenance. Except as explained below, the safety, cycle life,
calendar life, environmental impact and power of lithium ion batteries is
comparable to those of NiMH and NiCd batteries.
Conventional, graphite-based, lithium ion batteries are
the batteries of choice in small electronics, such as cell phones and
portable computers, where high energy and light weight are
important. These same attributes are desired for electric vehicle,
hybrid electric vehicle, power tool and uninterruptible power supply
markets. However, these applications are principally high power
demand applications and/or pose other demands on usage, such as extremes of
temperature, need for short recharge times, high proportional (to stored energy)
current rates and even longer extended lifetimes. Because of safety concerns related principally to the
presence of graphite, conventional graphite-based lithium ion batteries
sufficiently large for such power uses may raise safety concerns. In
addition, current lithium ion technology is capable of about 1,000 to
3,000 cycles and has a life of about 3 years, whereas the vehicles in which they
are used may have lifetimes as long as 10 to 15 years and require
much larger cycle life. Conventional
lithium ion batteries also do not function well at extremely hot or cold
temperatures.
The
Performance Materials Division
We have
named the portion of the nanomaterials and titanium dioxide pigment technology
that was developed to produce high quality titanium dioxide pigment the Altair
Hydrochloride Pigment process, or
AHP. This package of technologies includes four US patents, trade
secrets and know-how developed over ten years of research and
development. The technology represents a comprehensive process to
extract heavy minerals such as titanium from raw materials, produce a high
quality titanium dioxide pigment and minimize environmental impact.
In April
2007, a new company, 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 100
ton pigment processing pilot plant in connection with the joint venture
agreement was completed, and the plant was commissioned in February
2008. Testing under the pilot program commenced, and although results
to date have been positive, we have suspended full operations at this
time. Considerable data has been generated and compiled into an
engineering data package. Included is a process analysis and
recommendation on next steps. Based on review of this package, its
impact on financial projections, and input from our partner, we will consider in
2009 whether to undertake a more detailed engineering cost study relating to the
potential scale up to a significantly larger demonstration plant. At
this time, neither Altair nor Sherwin-Williams has expressed a willingness to
finance the construction of the development scale plant that would be required
as the next major milestone. AlSher is actively seeking a partner or
partners to participate in this next phase. Several companies with
raw materials resources have indicated interest in the technology, but none has
been willing to make any commitment up to now. Without additional
capital, it is unlikely that AlSher will be able to independently fund this
effort.
In
January 2004, we entered into a license agreement with Western Oil Sands, Inc.,
or Western Oil, with respect to its possible use of the AHP for the production
of titanium dioxide pigment and pigment-related products at the Athabasca Oil
Sands Project in Alberta, Canada, and elsewhere. Upon execution of the
agreement, we granted Western an exclusive, conditional license to use the AHP
on heavy minerals derived from oil sands in Alberta, Canada. The
agreement also contemplated a three-phase, five-year program pursuant to which
the parties would work together to further evaluate, develop and commercialize
the AHP. In the first phase of the program, which was extended
through December 2006, we, along with Western Oil, evaluated the AHP to confirm
that the AHP will produce pigment from oil sands and to complete a
characterization study.
During
December 2006, Western Oil requested an additional extension of phase one to
allow them to perform additional characterization of the feedstock source prior
to committing to phase two of the license agreement scope of work. In
light of the broad exclusive license granted to Western Oil in the initial
agreement, we declined to extend the terms of the license in order to preserve
our flexibility in other potential licensing arrangements that may not involve
an exclusive license for Western Oil. Nonetheless, we continued to
work with Western Oil, under a paid contract through December 31, 2007, to
assist them in various development activities associated with production of a
pigment feed source at a pilot plant located in our building. In the
fourth quarter of 2007, Western Oil agreed to relocate its pilot plant from our
building as of the end of March 2008 to one of its facilities. This
relocation was completed in May 2008.
Proprietary
Rights
We have
been awarded four U.S. and 15 international patents protecting this technology
including: 1) Processing titaniferous ore to titanium dioxide pigment, 2)
Processing aqueous titanium chloride solutions to ultrafine titanium dioxide, 3)
Processing aqueous titanium solutions to titanium dioxide pigment and 4) Method
For Producing Mixed Metal Oxides and Metal Oxide Compounds. The U.S.
patents expire in 2020 and 2021. Two new patent applications have
also been filed recently.
Competition
Existing
pigment production technologies are owned and guarded by the top tier producers
that developed the technologies. Such producers typically do not
grant licenses to competitors. As a result, companies seeking to enter into the
pigment production business generally are required to use alternative
technologies. Companies assessing the viability of our process to
manufacture pigment from their resource are also evaluating alternatives,
including producing mineral concentrates for sale to pigment producers and
producing a high value synthetic rutile to be sold to pigment producers as feed
stock. They may elect to commercialize either of these alternatives instead of
producing pigment by the AHP. We believe there are no competing new
technologies to produce titanium dioxide pigment.
Advanced
Performance Coatings
We have
developed thermal spray grade nanomaterial powders that can be applied as a
coating on the surface of metals by standard thermal spray
techniques. Our nanomaterials coatings possess enhanced toughness and
increased hardness while retaining a flexible coating layer. These
features contribute to superior abrasive wear resistance over the conventional
coating of similar materials. The nanomaterial coatings also
demonstrate improved porosity over standard thermal spray powders making them
more resistant to corrosive attack. We believe these performance improvements
will enable longer periods between maintenance, repairs and examinations of
these critical components, therefore improving the economics of the industrial
application. Such nanomaterial based thermal spray products could be
used in a variety of harsh environment applications such as aerospace propulsion
systems, gas turbines, medical applications, heavy machinery in all industries,
boilers for power plants, waste incinerators, and the oil and gas
industry.
We
believe the market for each such product may be 2-5 tons annually in the near
term with possible growth to as much as 20-30 tons per product annually in the
future. In light of the limited size of the potential market, we do
not expect these performance coatings to be a material source of revenue in the
long term. Exclusive rights to this technology were granted to AlSher
under our existing agreement.
In
July 2007, we signed an agreement with PPG Industries, Inc. (“PPG”), as a
sub-contractor to their United States Air Force Research Labs
grant. Under the terms of this grant, we worked jointly with PPG to
develop a nanometal oxide material and dispersion concentrates to create a
primer to be utilized in aerospace applications. The total value of
the agreement was $290,000 over an 18 month term. During 2008, we
recognized approximately $26,440 of revenue from sales related to this initial
work. Based on the limited revenue potential from this opportunity we
have shifted our resources away from further development in this
area.
Proprietary
Rights
Our
thermal spray grade powders are protected by U.S. Patent titled, “Processing
aqueous titanium chloride solutions to ultrafine titanium dioxide,” which
expires in 2020. We have also been issued a U.S. Patent titled
“Process for making nano-sized zirconia” which expires on November 2,
2021.
We have
filed several patent applications directed to metal oxides, including:
“Nano-Structured
Iron Oxide”; “Nano-Structured Indium-Doped Iron Oxide”; and, “Method for Low
Temperature Production of Nano-Structured Iron Oxide Coatings.”
We have
filed a patent application entitled, “TEFLON Replacements and Related Production
Methods.
Nanosensors
Research Program
Since
September 2003, pursuant to a teaming/research agreement with
Western Michigan University funded by the Department of Energy, we
have been engaged in the development of a technology used in the detection of
chemical, biological and radiological agents. We generated
approximately $15,000 and $482,000 in revenues through December 2006 and 2005,
respectively, as part of this program. In August 2006, $981,000 of
the $2.5 million Department of Energy research grant received by Altair and its
partners was allocated to the continuation of this program. Of this
amount, we recognized approximately $897,000 of revenues over the life of this
program of which $500,000 was earned by and paid to Western Michigan University
under a subcontract. Late in 2008, we were awarded a $1.83 million Army research
Office (“ARO”) grant to continue the nanosensor program. We are currently
awaiting formalization of the associated contract in order to begin the actual
work with our partner, Western Michigan University, which will receive about
half of the grant funds as a subcontractor to Altair. The scope of
work associated with this grant further builds upon the accomplishments and
progress made under the prior grants and will focus on a second-generation hand
held device currently being developed using a new as well as a previously
developed library of sensing molecules for identification of a multiplicity of
agents.
In
mid-2008, we completed work with the University of Nevada, Reno to act as a
subcontractor under a $1,095,000 grant awarded by the Department of Energy to
develop nanosensors for the detection of chemical, biological and radiological
agents. This subcontract provided for total payments to Altair of
$250,000 through May 2008. Through this project, the viability of
lanthanide particles and complexes for the detection of nerve agents was
demonstrated.
Life
Sciences
RenaZorb®
Products
RenaZorb is a highly active,
lanthanum-based nanomaterial with low intestinal solubility and excellent
in-vitro phosphate binding. Animal testing of RenaZorb has been
conducted in dogs, cats and rats; however, no human tests have yet been
conducted. Based upon our initial laboratory and animal testing, we
believe that RenaZorb may offer the following advantages over competing
products:
·
|
Lower
dosage requirements because of better phosphate binding per gram of drug
compared with existing or currently proposed
drugs;
|
·
|
Fewer
and less severe side effects because of less gassing and lower dosage;
and
|
·
|
Better
patient compliance because of fewer and smaller
tablets.
|
In all
animal testing conducted on RenaZorb, which to date included three separate
testing protocols, no adverse side effects were reported. In all
testing, RenaZorb was administered to the animals by mixing the drug with the
food they eat. In no case was there any reduction in the amount of
food the animals consumed when RenaZorb was mixed with the food. The
drug appears to be tasteless.
Target
Markets
Our
pharmaceutical product RenaZorb was developed to treat elevated phosphate levels
in human patients with chronic kidney disease specifically in patients with
stage five, end-stage renal disease. According to the National Kidney
Foundation web page referenced on March 7, 2008, there are 20 million adults
with chronic kidney disease of which 500,000 are in stage five. In
November 2007 the Cardiovascular and Renal Drugs Advisory Committee of the
Federal Drug Administration (“FDA”) recommended that phosphate binders be used
to treat hyper-phosphatemia in stage four kidney patients. According
to the Medline Plus web page supported by the U.S. National Library of Medicine
and the National Institutes of Health referenced on March 7, 2008, an additional
400,000 patients with significant kidney function loss are classified as being
at stage four.
Research, Testing and
Development
In
January 2005, we signed a license agreement with Spectrum Pharmaceuticals, Inc.,
which grants Spectrum exclusive worldwide rights to develop, market and sell
RenaZorb. Upon signing the license agreement, Spectrum issued to us
100,000 restricted shares of their common stock, purchased 38,314 restricted
shares of our common stock at the then current market value of $2.61 per share,
and also paid us $100,000 in connection with the license
agreement. In June 2006, Spectrum issued to us 100,000 restricted
shares of their common stock at the then current market value of $3.88 per share
in connection with the first milestone payment due upon demonstration of
satisfactory lanthanum serum levels. An additional 40,000 shares were
also issued in payment of research and development services provided by us in
2006. Additional payments by Spectrum are contingent upon the
achievement of various milestones in the testing, regulatory approval and sale
of RenaZorb. Although work continues to refine and test RenaZorb, no
milestones were achieved in 2008.
Additional,
contingent consideration under the license agreement may include the
following:
·
|
purchases
of a specified dollar amount of common shares of the Company at a premium
above market price upon the reaching of various milestones representing
progress in the testing and obtaining of regulatory approval for
RenaZorb;
|
·
|
milestone
payments upon obtaining approval from the FDA and similar regulatory
agencies in Europe and Japan to market
RenaZorb;
|
·
|
milestone
payments as certain annual net sales targets are
reached;
|
·
|
royalty
payments based upon a percentage of net revenue from sales of RenaZorb in
each country (subject to adjustment for combined products and in other
circumstances) as long as patents applicable to that country remain valid;
and
|
·
|
technology
usage payments thereafter until generic competition
emerges.
|
RenaZorb
must undergo animal and human testing and receive approval from the FDA in the
U.S. and similar regulatory bodies in other parts of the world before it can be
approved for marketing. Pre-clinical testing to determine safety and
toxicity will take one to two years and is required before Spectrum can submit
an investigational new drug application to the FDA. Human testing
typically takes 1 to 2 years and, if merited by the results of human testing,
the process of seeking U.S. regulatory approval typically takes between 3 and 5
years; however, timing for FDA and other regulatory approval of drug candidates
is unpredictable. Spectrum, with technical assistance from Altair, is
responsible for the clinical testing and other activities necessary to obtain
regulatory approval of RenaZorb. Spectrum has begun the process of
information and data collection and presentation required to file an
investigational new drug application with the FDA, which is the first stage of
seeking regulatory approval.
Proprietary
Rights
We have
applied for patent protection for the manufacture of RenaZorb and a wide range
of similar compounds for the application as an orally administered phosphate
binder for patients suffering from end stage renal disease. These patent
applications are “Rare earth metal compounds, methods of making and methods of
using the same,” “Devices for removing phosphate from biological fluids,”
“Processes for making rare earth metal oxycarbonates” and “Rare-earth metal
composites for treating hyperphosphatemia and related methods.”
Competition
Existing
phosphate binders include Tums antacid, which contains calcium carbonate, as
well as aluminum hydroxide-based products such as Gaviscon manufactured by Glaxo
Smith Kline, both of which are available over the counter. Renagel
manufactured by Genzyme and Phoslo, manufactured by Fresenius Medical Care, are
available only by prescription. In addition, Fosrenol, another lanthanum based
active pharmaceutical agent developed by Shire Pharmaceuticals of the UK, is
available only by prescription.
While
over-the-counter phosphate binders are relatively inexpensive, they have several
disadvantages. In high doses, calcium carbonate-containing phosphate binders
such as Tums may cause increased blood pressure and increased risk of
cardiovascular disease and are generally not recommended for long-term use by
dialysis patients. With prolonged use, aluminum hydroxide-based phosphate
binders, such as Gaviscon, may cause toxic neurological effects and are
generally avoided by physicians. Aluminum dementia has been widely
reported in kidney dialysis patients using these products.
In
October 2007, the FDA granted Genzyme marketing approval for Renvala for
dialysis patients. Renvala is Genzyme’s next generation version of
Renagel but has lower incidents of gastrointestinal adverse
effects.
Phoslo is
a calcium acetate phosphate binder that produced approximately $40 million in
revenues in 2006. In October 2006, Nabi Biopharmaceuticals sold
Phoslo, an oral drug used by dialysis patients to reduce phosphorus absorption,
in a deal worth $150 million to Fresenius Medical Care. In January
2007, Fresenius submitted an application to extend use of Phoslo to stage four
chronic kidney disease patients.
Fosrenol
was introduced in the United States in January 2005 and, according to a Shire
Pharmaceutical Group news release dated February 21, 2008, has increased its
average share of the total US phosphate binding market to 8.6 % in
2007. Also according to a Shires Interim 2008 report, “Forensol has
been launched in 29 countries and global sales totaled $78.6 million for the six
months to June 30, 2008.” This is compared to $47.3 million in the
first six months of 2007. Similarly, US sales of Fosrenol were up
37.5% in the first six months of 2008 compared to the same period in
2007. Fosrenol is marketed as large chewable tablets with a proposed
dosage of 1.5 to 3.0 grams active drug per day.
RenaZorb,
which is nanotechnology based, is expected to be developed in a tablet dosage
form with a projected dosage of 0.6 to 3.0 grams API per
day. Although we have done no human testing on RenaZorb, we believe
RenaZorb has the potential for fewer side effects, lower cost and better patient
compliance. We base these possible advantages upon in vitro testing
conducted by Altair in which RenaZorb was compared to lanthanum carbonate
tetrahydrate, the API in Fosrenol. Our in vitro testing showed that
RenaZorb binds 30% more phosphate per gram of drug than LCTH, therefore
requiring a lower dose. Lower dose often correlates well with a
reduction of observed side effects in chemically related compounds. No adverse
side effects were reported in all animal testing conducted on RenaZorb, which to
date included three separate testing protocols. In all testing,
RenaZorb was administered to the animals by mixing the drug with the food they
eat. In no case was there any reduction in the amount of food the
animals consumed when RenaZorb was mixed with the food. The drug
appears to be tasteless.
Renalan
Renalan
is a highly active, lanthanum-based nanomaterial with low intestinal solubility
and excellent in-vitro phosphate binding. Animal testing of Renalan
has been conducted in dogs, cats and rats. Based upon our initial
laboratory and animal testing, we believe that Renalan may offer the following
benefits:
·
|
Specifically
targeted to address chronic kidney disease in companion
animals
|
·
|
Palatable
with normal food intake regime
|
·
|
Can
be administered in powder form which can be mixed with the pet’s
food.
|
Target
Markets
Renalan
was developed to treat elevated phosphate levels in animals with chronic kidney
disease. According to information published in the Textbook of Veterinary
Internal Medicine by Stephen J. Ettinger, DVM and Edward C. Feldman, DVM, the
dog chronic kidney disease population is variously estimated at between 0.5% and
7% of population, resulting in a worldwide chronic kidney disease population of
between 0.75 million and 10.5 million dogs. The textbook estimates that the cat
chronic kidney disease population is estimated at between 1.6% and 20% of total
population, resulting in a worldwide chronic kidney disease population of
between 2.8 million and 35 million cats. Using the rest of the data in their
textbook and average life expectancy curves yields a worldwide cat chronic
kidney disease population of approximately 4.2 million and a dog chronic kidney
disease population of about 1.2 million.
Research, Development and
Licensing
In May
2006, we entered into a collaborative research, license and commercialization
agreement with the Elanco Animal Health Division of Eli Lilly and Company
(“Elanco”). Under the terms of the agreement, Elanco had exclusive
rights to develop animal health products using our nanotechnology-based
products. In September 2008, this Agreement was jointly terminated
when Elanco curtailed their R&D expenditures. Upon termination
all rights granted to Elanco reverted back to Altair. At the present
time Altair is exploring interest from other parties to continue in this
development work.
The
active pharmaceutical ingredient in Renalan must undergo animal testing and
receive approval from the FDA in the U.S. and similar regulatory bodies in other
parts of the world before it can be approved for marketing as a
drug. The FDA approval process for companion animal use is expected
to take two to three years to complete; however timing for FDA and other
regulatory approval of drug candidates is unpredictable.
Proprietary
Rights
We have
filed one U.S. patent application for this product entitled “Compositions and
methods for treating hyperphosphatemia in domestic
animals.” Additionally, Renalan is a compound very similar to
RenaZorb and is protected by the patent applications discussed under “RenaZorb”
above.
Competition
In late
2005, Vetoquinol, a French animal health company, released Epakitin in the US.
Vetoquinol positions Epakitin as a chitosan-based phosphate binder and uremic
reducer for chronic kidney disease in dogs and cats. The product has not been on
the market long enough to determine its market strength or
effectiveness.
In
October 2006, Bayer HealthCare submitted and application to the European Food
Safety Authority (“EFSA”) for a new food additive for adult cats to restrict
internal phosphorus absorption. In October 2007, EFSA released a
positive opinion on the safety and efficacy of Lantharenol as a feed additive
for cats to restrict the absorption of phosphorus. Bayer launched
Lantharenol in September 2008.
Other
Nanomaterials Research
In
September 2006, the Nanomaterials characterization program was funded by
$311,000 of the $2.5 million Department of Energy grant. This
research was conducted in collaboration with the University of California, Santa
Barbara and was completed in May 2008. The research focused on
interaction mechanisms between cells and nanoparticles, with the goal of
understanding how specific chemical and physical properties of these
nanoparticles influence that interaction. The research with UCSB examined a
range of microbes that have environmental or societal importance. The
results of this research are expected to provide the basis for both 1)
predicting potential negative impacts of specific nanoparticle characteristics
on the environment and human health and 2) developing novel antimicrobial agents
and surface treatments that could defeat antibiotic-resistant strains of harmful
microbes. At this time, two publications documenting final results
are in progress.
In August
2008 we entered into a contract with the Environmental Protection Agency to
collaborate in researching the safety and potential health hazards of working
with nanoparticles in the manufacturing process. This is a new area
of development with very little data. Altair is committed to
producing both products that are safe for their ultimate consumers, and also for
the people involved in their manufacture.
Research
and Development Expenses
Total
research and development expenses were $16,908,447, $15,443,703 and $10,077,231,
for the years ended December 31, 2008, 2007 and 2006, respectively, while
research and development costs funded by customers were
$4,969,361, $5,050,202 and $2,897,859, for the years ended December 31,
2008, 2007 and 2006, respectively.
Dependence
on Significant Customers
During
the year ended December 31, 2008, we recorded revenues from three major
customers, who accounted for 44%, 9% and 11% of revenues as
follows: Office of Naval Research revenues of $2,493,489 and the AES
Corporation revenues of $505,750 in the Power and Energy Group; and Eli
Lilly/Elanco revenues of $622,804 in the Life Sciences
Division.
Government
Regulation
Most of
our current and proposed activities are subject to a number of federal, state,
and local laws and regulations concerning machine and chemical safety and
environmental protection. Such laws include, without limitation, the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
and the Comprehensive Environmental Response Compensation Liability
Act. We are also subject to laws governing the packaging and shipment
of some of our products, including our nano lithium titanate
batteries. Such laws require that we take steps to, among other
things, maintain air and water quality standards, protect threatened, endangered
and other species of wildlife and vegetation, preserve certain cultural
resources, reclaim processing sites and package potentially flammable materials
in appropriate ways and pass stringent UN mandated testing standards before
shipping our battery products.
Compliance with federal, state, or
local laws or regulations represents a small part of our present
budget. If we fail to comply with any such laws or regulations,
however, a government entity may levy a fine on us or require us to take costly
measures to ensure compliance. Any such fine or expenditure may
adversely affect our development.
We are committed to complying with and,
to our knowledge, are in compliance with, all governmental
regulations. We cannot predict the extent to which future legislation
and regulation could cause us to incur additional operating expenses, capital
expenditures, and/or restrictions and delays in the development of our products
and properties.
Environmental Regulation and
Liability
Any
proposed processing operation at our main operating facility in Reno, Nevada or
any other property we use will be subject to federal, state, and local
environmental laws. In addition, our cleanup efforts on the Tennessee
mineral property have been, and will continue to be, subject to such
environmental laws. Under such laws, we may be jointly and severally
liable with prior property owners for the treatment, cleanup, remediation,
and/or removal of substances discovered at any other property used by us; to the
extent the substances are deemed by the federal and/or state government to be
toxic or hazardous. Courts or government agencies may impose
liability for, among other things, the improper release, discharge, storage,
use, disposal, or transportation of hazardous substances. We use
hazardous substances in our testing and operations and, although we employ
reasonable practicable safeguards to prevent any liability under applicable laws
relating to hazardous substances, companies engaged in materials production are
inherently subject to substantial risk that environmental remediation will be
required.
Financial
Information about Segments and Foreign Sales
Information
with respect to assets, net sales, loss from operations and depreciation and
amortization for the performance materials, power and energy group, and life
sciences segments is presented in Note 18, Business Segment Information, of
Notes to Consolidated Financial Statements in Part IV.
Information
with respect to foreign and domestic sales and related information is also
presented in Note 18, Business Segment Information, of Notes to Consolidated
Financial Statements in Part IV.
Subsidiaries
Altair
Nanotechnologies Inc. was incorporated under the laws of the province of
Ontario, Canada in April 1973 under the name Diversified Mines Limited, which
was subsequently changed to Tex-U.S. Oil & Gas Inc. in February 1981, then
to Orex Resources Ltd. in November 1986, then to Carlin Gold Company Inc. in
July 1988, then to Altair International Gold Inc. in March 1994, then to Altair
International Inc. in November 1996 and then to Altair Nanotechnologies Inc. in
July 2002. In July 2002, Altair Nanotechnologies Inc. redomesticated
from the Ontario Business Corporations Act to Canada’s federal corporate
statute, the Canada Business Corporations Act.
Altair US
Holdings, Inc. was incorporated by Altair in December 2003 for the purpose of
facilitating a corporate restructuring and consolidation of all U.S.
subsidiaries under a U.S. holding company. At the completion of the
corporate restructuring, Fine Gold, MRS, and Altairnano, Inc. (f/k/a Altair
Nanomaterials, Inc.) were direct wholly-owned subsidiaries of Altair US
Holdings, Inc., while Tennessee Valley Titanium, Inc. previously a wholly-owned
subsidiary of MRS, has been dissolved.
Altair
acquired Fine Gold in April 1994. Fine Gold has earned no operating
revenues to date. Fine Gold acquired the intellectual property associated with
the now defunct Altair jig, a fine particle separation device for use in
minerals processing, in 1996. Fine Gold was formally dissolved on
December 30, 2008.
Mineral Recovery Systems, Inc., or MRS,
was incorporated in April, 1987 and was formerly known as Carlin Gold
Company. MRS previously has been involved in the exploration for
minerals on unpatented mining claims in Nevada, Oregon and California and the
holding of mineral leases in Tennessee. Other than a single mineral
lease related to the remediation site in Tennessee, MRS does not continue to
hold any properties or leases.
Altair
Nanomaterials, Inc. was incorporated in 1998 as a wholly-owned subsidiary of MRS
and holds all of our interest in our nanomaterials and titanium dioxide pigment
technology and related assets. Altair Nanomaterials Inc. was
subsequently renamed Altairnano, Inc. on July 6, 2006.
AlSher
Titania LLC was incorporated in April 2007 as a joint venture company which is
70% owned by Altairnano, Inc. This company was formed to combine
certain technologies of Altairnano, Inc. with the Sherwin-Williams Company in
order to develop, market, and produce titanium dioxide pigment for use in a
variety of applications.
Corporate
History
Altair Nanotechnologies Inc. was
incorporated under the laws of the Province of Ontario, Canada in April 1973 for
the purpose of acquiring and exploring mineral properties. It was
redomesticated in July 2002 from the Business Corporations Act (Ontario) to the
Canada Business Corporations Act, a change that causes Altair to be governed by
Canada's federal corporate statute. The change reduced the
requirement for resident Canadian directors from 50% to 25% of the board of
directors, which gives us greater flexibility in selecting qualified nominees to
our board.
During
the period from inception through 1994, we acquired and explored multiple
mineral properties. In each case, sub-economic mineralization was
encountered and the exploration was abandoned.
Beginning
in 1996, we entered into leases for mineral property near Camden, Tennessee and
owned the rights to the Altair jig. However, we have terminated our
leases on all of the Tennessee mineral properties and are limiting our
expenditures on our centrifugal jig to patent maintenance
expenses. Since we see no future opportunities in this area we are
currently in the process of disposing of these jigs and patents.
In
November 1999, we acquired all the rights of BHP Minerals International, Inc.,
or BHP, in the nanomaterials and titanium dioxide pigment technologies and the
nanomaterials and titanium dioxide pigment assets from BHP. We are employing the
nanomaterials and titanium dioxide pigment technology as a platform for the sale
of contract services, intellectual property licenses and for the production and
sale of metal oxide nanoparticles in various applications.
We have
experienced an operating loss in every year of operation. In the
fiscal year ended December 31, 2008, we experienced a net loss of
$29,068,165.
Employees
Our
business is currently managed by Dr. Terry Copeland, President and Chief
Executive Officer, Mr. John Fallini, Chief Financial Officer, Dr. Bruce Sabacky,
Chief Technology Officer, Mr. Steven Balogh, Vice President – Human Resources,
Mr. Dan Voelker, Vice President Operations, and Mr. C. Robert Pedraza, Vice
President – Corporate Strategy and Business Development. Dr. Alan J.
Gotcher was the President and Chief Executive Officer of the Company until
February 27, 2008. We have 92 additional regular
employees. As of December 31, 2008, we have employment agreements
with Messrs. Copeland, Fallini, Balogh, Pedraza, Sabacky and
Voelker.
During
2009, we may hire additional employees, primarily in operations and
engineering. Such additional hiring, if it occurs, will be dependent
upon business volume growth.
Available
Information
We file
annual, quarterly and current reports and other information with the SEC. These
materials can be inspected and copied at the SEC’s Public Reference Room at 100
F Street, N.E., Washington, D.C. 20549. Copies of these materials may also be
obtained by mail at prescribed rates from the SEC’s Public Reference Room at the
above address. Information about the Public Reference Room can be obtained by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of the
SEC’s Internet site is www.sec.gov.
We make
available, free of charge on our Internet website located at www.altairnano.com
behind the “Investors” tab under “SEC Filings,” our most recent Annual Report on
Form 10-K, our most recent Quarterly Report on Form 10-Q, any current reports on
Form 8-K filed since our most recent Annual Report on Form 10-K and any
amendments to such reports as soon as reasonably practicable following the
electronic filing of such report with the SEC. In addition, we
provide electronic or paper copies of our filings free of charge upon
request.
Enforceability
of Civil Liabilities Against Foreign Persons
We are a
Canadian corporation, and three of our directors and our Canadian legal counsel
are residents of Canada. A fourth director is a resident of Dubai. 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 or Dubai 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.
Forward-Looking
Statements
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 Item 1A and other cautionary
statements throughout this Report and our other filings with the SEC. 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.
Item
1A. Risk Factors
An
investment in our common shares and related derivative securities 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 net loss in every fiscal year since our inception. Our losses from
operations were $30,126,010 in 2008, $33,067,474 in 2007 and $17,681,415 in
2006. Even if we do generate operating income in one or more quarters in the
future, subsequent developments in the economy, 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.
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:
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fluctuations
in the size and timing of customer orders from one quarter to the
next;
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timing
of delivery of our services and
products;
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additions
of new customers or losses of existing
customers;
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positive
or negative business or financial developments announced by our key
customers;
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our
ability to commercialize and obtain orders for products we are
developing;
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costs
associated with developing our manufacturing
capabilities;
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new
product announcements or introductions by our competitors or potential
competitors;
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the
effect of variations in the market price of our common shares on our
equity-based compensation expenses;
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technology
and intellectual property issues associated with our products;
and
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general
political, social, geopolitical and economic trends and
events.
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A
majority of our revenue has historically been generated from low-margin contract
research and development services; if we cannot expand revenues from other
products and services, our business will fail.
Historically,
a majority of our revenue has come from contract research and development
services for businesses and government agencies. During the years ended December
31, 2008, 2007 and 2006, contract service revenues comprised 87%, 55% and 67%
respectively, of our operating revenues. Contract services revenue is low
margin, or has negative margins, and is unlikely to grow at a rapid pace. Our
business plan anticipates revenues from product sales and licensing, both of
which have potential for higher margins than contract services and have
potential for rapid growth, increasing in coming years. If we are not successful
in significantly expanding our revenues, or if we are forced to accept low or
negative margins in order to achieve revenue growth, we may fail to reach
profitability in the future.
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 technology, as critical to our success. We have received various
patents, and filed other patent applications, for various applications and
aspects of our nanomaterials 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:
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Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
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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;
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Parties
to the confidentiality and invention agreements may have such agreements
declared unenforceable or, even if the agreements are enforceable, may
breach such agreements;
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The
costs associated with enforcing patents, confidentiality and invention
agreements or other intellectual property rights may make aggressive
enforcement cost prohibitive;
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Even
if we enforce our rights aggressively, injunctions, fines and other
penalties may be insufficient to deter violations of our intellectual
property rights; and
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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.
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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.
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, 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:
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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;
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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 to,
and/or may abandon, a development project for reasons, including reasons,
such as a shift in corporate focus, unrelated to its
merits;
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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;
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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;
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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
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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.
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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.
Interest
in our nano-structured LTO battery materials and batteries is affected by energy
supply and pricing, political events, popular consciousness and other factors
over which we have no control.
Currently,
our marketing and development efforts for our batteries and battery materials
are focused primarily on transportation, military and stationary power
applications. In the transportation and military markets, batteries
containing our nano-structured LTO materials are designed to replace or
supplement gasoline and diesel engines. In the stationary power
applications, our batteries are designed to conserve and regulate the stable
supply of electricity, including from renewable sources. The interest
of our potential customers and business partners in our products and services is
affected by a number of factors beyond our control, including:
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economic
conditions and capital financing and liquidity
constraints;
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short-term
and long-term trends in the supply and price of gasoline, diesel, coal and
other fuels;
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the
anticipated or actual granting or elimination by governments of tax and
other financial incentives favoring electric or hybrid electric vehicles
and renewable energy production;
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the
anticipated or actual funding, or elimination of funding for, programs
that support renewable energy programs, electric grid improvements,
certain military electric vehicle initiatives and related
programs;
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changes
in public and investor interest, for financial and/or environmental
reasons, in supporting or adopting alternatives to gasoline and diesel for
transportation and other purposes;
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the
overall economic environment and the availability of credit to assist
customers in purchasing our large battery
systems;
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the
expansion or contraction of private and public research and development
budgets as a result of global and U.S. economic trends;
and
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the
speed of incorporation of renewable energy generating sources into the
electric grid.
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Our
nano-structured LTO battery materials and battery business is currently
dependent upon a few customers and potential customers, which presents various
risks.
Our
nano-structure LTO battery materials and battery business has historically been
dependent upon a few customers, including the U.S. government, affiliates of AES
Corporation and smaller companies developing electric or hybrid electric cars
and buses. In addition, most of these customers are development
partners, who are subsidizing the research and development of products for which
they may be the sole, or one of a few, potential purchasers. As a
result of the small number of potential customers and partners, our existing
customers and partners may have significant leverage on pricing terms,
exclusivity terms and other economic and noneconomic terms. This may
harm our attempts to sell products at prices that reflect desired gross
margins. In addition, the decision by a single customer to abandon
use or development of a product, or budget cutbacks and other events harming the
ability of a single customer to continue to purchase products or continue
development, may significantly harm both our financial results and the
development track of one or more 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 conducting diligence on, evaluating,
purchasing or 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:
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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;
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we
may have difficulty integrating the assets, technologies, operations or
personnel of an acquired company, or retaining the key personnel of the
acquired company;
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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;
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we
may encounter difficulty entering and competing in new product or
geographic markets or increased competition, including price competition
or intellectual property litigation;
and
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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.
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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. To the extent 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 several years, we have increased our research and development
expenditures in an attempt to accelerate the commercialization of certain
products, particularly our nano-structured LTO electrode materials and battery
systems. Our business plan anticipates continued expenditure on development,
manufacturing and other growth initiatives. We may fail to 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 timely or accurate 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, and may be supported by more
prominent partners, 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. In
addition, certain of our early stage competitors may be partnered with,
associated with or supported by larger business or financial
partners. This may increase their ability to raise capital, attract
media attention, develop products and attract customers despite their short
operating history and small size. Because of their size, resources,
reputation and history (or that of their business and financial partners)
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 may enter into
similar agreements with respect the other products. 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 it obtains such
approval, may not obtain such approval on a timely basis; in this regard,
we note that Spectrum Pharmaceuticals, Inc., the license of RenaZorb, has
been significantly delayed in testing on RenaZorb;
and
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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.
We
and Sherwin-Williams may be unable to find a new investor to participate in
AlSher, and consequently terminate the joint venture disposing of its remaining
assets.
We are
currently working with Sherwin-Williams to identify an interested third party to
invest in AlSher and undertake the next phase in the proposed development of our
titanium dioxide pigment manufacturing process, which is the construction of an
approximately 5,000 ton per year demonstration plant. Neither Sherwin
nor Altair has indicated a willingness to fund this next phase of
development. Should the parties be unable to find an acceptable third
party investor, the AlSher joint venture will in all likelihood be terminated
and its remaining assets written off or sold. If this joint venture
is terminated, it is unlikely that we will realize any material revenue from its
titanium dioxide pigment production process.
If
manufacturing becomes a larger part of our operations, we will become exposed to
accompanying risks and liabilities.
We have
not produced any products using our nanomaterials and titanium dioxide pigment
technology and equipment on a sustained commercial basis. In-house or outsourced
manufacturing is expected to become an increasingly significant part of our
business over the next few years. As a result, we expect to 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
be required to repair or replace defective products and may become liable
for 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;
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As
our manufacturing operations expand, we expect that a significant portion
of our manufacturing will be done overseas, either by third-party
contractors or in a plant owned by the company. Any
manufacturing done overseas presents risks associated with quality
control, currency exchange rates, foreign laws and customs, timing and
loss risks associated with overseas transportation and potential adverse
changes in the political, legal and social environment in the host county;
and
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We
may have made, 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 harm our
business, operations and financial condition.
We
may not be able to raise sufficient capital to meet future
obligations.
As of
December 31, 2008, we had approximately $28.1 million in cash and cash
equivalents. As we take additional steps to enhance our
commercialization and marketing efforts, or respond to acquisition and joint
venture opportunities or potential adverse events, our use of working capital
may increase. In any such event, absent a comparatively significant increase in
revenue, 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,
including recent increases or decreases in major stock market indexes, the
stability of the banking and investment banking systems and general
economic stability or instability;
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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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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. If we are unable to obtain
sufficient capital in the long run, we may be forced to curtail or discontinue
operations.
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 or Dubai and may be able to avoid
civil liability.
We are a
Canadian corporation, and three of our directors and our Canadian legal counsel
are residents of Canada. A fourth director is a resident of Dubai. 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 or Dubai 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 our
executive management team and certain key scientists and engineers. We do not
have key man insurance on any of these individuals. Nor do we have agreements
requiring any of our key personnel to remain with our company. The
loss or unavailability of any or all of these individuals could 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 is 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 our 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.
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;
|
·
|
the
interest of the market in our business sector, without regard to our
financial condition, results of operations or business
prospects;
|
·
|
positive
or negative statements or projections about our company or our industry,
by analysts, stock gurus and other
persons;
|
·
|
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
|
·
|
economic
and other external market factors, such as a general decline in market
prices due to poor economic conditions, investor distrust or a financial
crisis.
|
We
may be delisted from the NASDAQ Capital Market if the price of our common shares
does not remain above $1.00 per share.
Under
NASDAQ rules, a stock listed on NASDAQ Capital Market must maintain a minimum
bid price of at least $1.00 per share. During late 2008 and early
2009, the minimum bid price for our common shares has fallen below $1.00 on
several occasions. As a matter of practice, NASDAQ generally gives a
company a notice of delisting if its common shares trades below $1.00 for 30
consecutive trading days. After receiving the notice, the company will generally
be delisted if the trading price for its common stock has
not exceeded $1.00 for 10 consecutive days within 90 days
of the date of the notice. NASDAQ has temporarily suspended its
minimum bid price requirements until April 2009 in light of recent declines in
the value of equity securities overall. NASDAQ is not, however,
required to extend this rule suspension or give a company any grace period and
may delist a company's stock immediately after violation of an applicable
rule. Accordingly, if the price of our common shares trades below
$1.00 for a sustained period of time, or if NASDAQ decides to delist our common
shares based upon a one-time violation of the bid-price rule or any other rule,
we may be delisted from the NASDAQ Capital Market.
Following
any such delisting, our common shares would likely be eligible for quotation on
the OTC Bulletin Board or other quotation service. Nonetheless, even if our
common shares are quoted on an alternative quotation service, the fact of being
delisted from the NASDAQ Capital Market will likely harm the price and trading
volume for our common shares. Once delisted, our common shares would not be
eligible for relisting until, among other things, our common shares traded at or
above $4.00 per share.
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.
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. We may also be subject to lawsuits as a result of
alleged violation of the securities laws or governing corporate laws. Any
charge or allegation, 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
1B. Unresolved Staff Comments
None
Item
2. Description of Property
Our corporate headquarters is located
at 204 Edison Way, Reno, Nevada 89502 in a building we purchased in August
2002. Our nanomaterials and titanium dioxide pigment assets are
located in this building, which contains approximately 100,000 square feet of
production, laboratory, testing and office space. We have pledged our
corporate headquarters and associated land to secure a promissory note we issued
to BHP Minerals International, Inc. in the amount of $3,000,000, at an interest
rate of 7%. The balance on the note following our February 8, 2009
payment is $600,000. A final payment of $600,000 plus accrued
interest is due on February 8, 2010.
In July
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 space is used for the
production of prototype batteries and battery cells. The lease is for
an initial term of 5 years with a single one-year renewal term. On
March 1, 2008, we signed an addendum to this lease that increased the space
leased by 40,000 square feet and set forth corresponding adjustments in our
rent. Total rent to be paid over the 5 year term including real
estate taxes is $1,267,297. In addition to the Flagship lease, we
rent another 2,210 square feet of space at 1305 W. 29th Street,
Anderson, Indiana, on a month to month basis.
We also
maintain a registered office at 360 Bay Street, Suite 500, Toronto,
Ontario M5H 2V6. We do not lease any space for, or conduct any
operations out of, the Toronto, Ontario registered office.
We have
terminated the mineral leases on all but the primary lease for our Tennessee
mineral property that is subject to remediation. Remediation work on
the properties has been completed and reviewed by the applicable regulatory
authorities. Final inspections and full release is expected to occur
in the first half of 2009. Future remediation costs are not expected
to be significant.
Item
3. Legal Proceedings
We are
not a party to any pending or threatened litigation, the outcome of which could
be expected to have a material adverse effect upon our financial condition, our
results of operations or cash flows.
Item
4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote
of security holders during the fourth quarter of the 2008 fiscal year.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Market
Price
Our
common shares are traded on the NASDAQ Capital Market under the symbol
"ALTI." The following table sets forth, during the periods indicated,
the high and low sales prices for our common shares, as reported on our
principal trading market at the time.
Fiscal
Year Ended December 31, 2007
|
Low
|
|
High
|
1st
Quarter
|
$2.48
|
|
$4.10
|
2nd
Quarter
|
$2.92
|
|
$3.75
|
3rd
Quarter
|
$2.80
|
|
$4.09
|
4th
Quarter
|
$3.23
|
|
$5.45
|
|
|
|
|
Fiscal
Year Ended December 31, 2008
|
Low
|
|
High
|
1st
Quarter
|
$1.97
|
|
$4.81
|
2nd
Quarter
|
$1.63
|
|
$2.73
|
3rd
Quarter
|
$1.45
|
|
$2.94
|
4th
Quarter
|
$0.75
|
|
$2.40
|
The last
sale price of our common shares, as reported on the NASDAQ Capital Market on
March 10, 2009, was $0.68 per share.
Outstanding
Shares and Number of Shareholders
As of
March 10, 2009, the number of common shares outstanding was 93,153,271 held by
approximately 431 holders of record. In addition, as of the same
date, we have reserved 4,176,416 common shares for issuance upon exercise of
options that have been, or may be, granted under our employee stock option plans
and 431,482 common shares for issuance upon exercise of outstanding
warrants.
Dividends
We have never declared or paid cash
dividends on our common shares. Moreover, we currently intend to
retain any future earnings for use in our business and, therefore, do not
anticipate paying any dividends on our common shares in the foreseeable
future.
Securities
Authorized for Issuance under Equity Compensation Plans
We have
stock option plans administered by the Compensation Committee of our Board of
Directors that provide for the granting of options to employees, officers,
directors and other service providers of the Company. Security
holders have approved all option plans. The following table sets
forth certain information with respect to compensation plans under which equity
securities are authorized for issuance at December 31, 2008:
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
Plan
Category
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
3,956,507
|
$3.028
|
5,420,419
|
Equity
compensation plans not approved by security holders
|
None
|
N/A
|
None
|
Total
|
3,956,507
|
$3.028
|
5,420,419
|
Recent
Sales of Unregistered Securities
Except as
previously reported, we did not sell any securities in transactions that were
not registered under the Securities Act in the quarter ended December 31,
2008.
Transfer
Agent and Registrar
The Transfer Agent and Registrar for
our common shares is Equity Transfer Services, Inc., 200 University Ave, Suite
400, Toronto, Ontario, M5H 4H2.
Dividends paid on our common shares
which are owned by non-residents of Canada (for purposes of the Income Tax Act (Canada)(the
“Tax Act”)(a “Non-Resident”) will be subject to Canadian withholding tax
generally at the rate of 25%. However, Article X of the Canada
-United States Income Tax Convention (1980), as amended, (the “Treaty”)
generally limits the rate of withholding tax on dividends paid to United States
residents to 15%. The Treaty further limits the rate of withholding
tax to 5% if the beneficial owner of the dividends is a U.S. company that owns
at least 10% of the voting shares of the Company.
A capital gain realized on the
disposition of our common shares by a Non-Resident will generally not be subject
to tax under the Tax Act provided the shares are not “taxable Canadian property”
of the Non-Resident. In general, our common shares will not be
taxable Canadian property of a Non-Resident at a particular time provided that:
(i) such shares are listed on a “designated stock exchange” (which currently
includes NASDAQ) for the purposes of the Tax Act at the time of disposition; and
(ii) at no time during the 60 month period immediately preceding the disposition
of such shares were 25% or more of the issued shares of any class or series of
the our capital stock owned by the Non-Resident, by persons with whom the
Non-Resident did not deal at arm’s length, or by the Non-Resident together with
such persons.
This summary is of a general nature
only and is not intended to be, nor shall be construed to be, legal or tax
advice to any particular Non-Resident. Accordingly, Non-Resident
holders of our common shares are urged to consult their own tax advisors for
advice with regard to their particular circumstances
Item
6. Selected Financial Data
The following table sets forth selected
consolidated financial information with respect to the Company and its
subsidiaries for the periods indicated. The data is derived from
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). The selected
financial data should be read in conjunction with the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the consolidated financial statements and accompanying notes
included herein. All amounts are stated in U.S. dollars.
For
the Year Ended December 31,
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
5,726,310 |
|
|
$ |
9,108,483 |
|
|
$ |
4,323,960 |
|
|
$ |
2,806,535 |
|
|
$ |
1,151,892 |
|
Operating
expenses
|
|
$ |
(35,852,320 |
) |
|
$ |
(42,175,957 |
) |
|
$ |
(22,005,375 |
) |
|
$ |
(13,288,388 |
) |
|
$ |
(8,056,847 |
) |
Interest
expense
|
|
$ |
(97,091 |
) |
|
$ |
(134,254 |
) |
|
$ |
(171,500 |
) |
|
$ |
(207,189 |
) |
|
$ |
(194,180 |
) |
Interest
income
|
|
$ |
981,891 |
|
|
$ |
1,101,682 |
|
|
$ |
654,182 |
|
|
$ |
750,306 |
|
|
$ |
96,229 |
|
(Loss)
Gain on foreign exchange
|
|
$ |
(9,820 |
) |
|
$ |
(1,292 |
) |
|
$ |
(1,550 |
) |
|
$ |
1,524 |
|
|
$ |
626 |
|
Realized
loss on investment
|
|
$ |
(88,701 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Loss
from continuing operations before minority interests’
share
|
|
$ |
(29,339,731 |
) |
|
$ |
(32,101,338 |
) |
|
$ |
(17,200,283 |
) |
|
$ |
(9,937,212 |
) |
|
$ |
(7,002,280 |
) |
Minority
interests’ share
|
|
$ |
271,566 |
|
|
$ |
630,717 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Net
Loss
|
|
$ |
(29,068,165 |
) |
|
$ |
(31,470,621 |
) |
|
$ |
(17,200,283 |
) |
|
$ |
(9,937,212 |
) |
|
$ |
(7,002,280 |
) |
Basic
and diluted net loss percommon share
|
|
$ |
(0.34 |
) |
|
$ |
(0.45 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.14 |
) |
Cash
dividends declared per common share
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital
|
|
$ |
26,066,847 |
|
|
$ |
39,573,052 |
|
|
$ |
25,928,376 |
|
|
$ |
21,482,766 |
|
|
$ |
7,663,264 |
|
Total
assets
|
|
$ |
48,071,036 |
|
|
$ |
73,858,635 |
|
|
$ |
43,120,573 |
|
|
$ |
33,464,016 |
|
|
$ |
15,547,021 |
|
Current
liabilities
|
|
$ |
(
3,646,646 |
) |
|
$ |
(14,328,781 |
) |
|
$ |
(3,499,862 |
) |
|
$ |
(2,427,543 |
) |
|
$ |
(376,773 |
) |
Long-term
obligations
|
|
$ |
(608,299 |
) |
|
$ |
(1,200,000 |
) |
|
$ |
(1,800,000 |
) |
|
$ |
(2,400,000 |
) |
|
$ |
(2,880,311 |
) |
Minority
Interest in Subsidiary
|
|
$ |
(1,097,717 |
) |
|
$ |
(1,369,283 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Net
shareholders' equity
|
|
$ |
(42,718,374 |
) |
|
$ |
(56,960,571 |
) |
|
$ |
(37,820,711 |
) |
|
$ |
(28,636,473 |
) |
|
$ |
(12,289,937 |
) |
Item
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The
following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.
Overview
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. For nearly all of 2008, we were organized
into three divisions, a Power and Energy Group (formally known as the Advanced
Materials and Power Systems Division), a Performance Materials Division, and a
Life Sciences Division. Our research, development, production and
marketing efforts are currently directed toward three primary market
applications that utilize our proprietary technologies:
o
|
The
design, development, and production of our nano lithium titanate battery
cells, batteries, and battery packs as well as related design and test
services.
|
o
|
The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion batteries
called nano lithium titanate
batteries.
|
·
|
Performance
Materials Division
|
o
|
Through
AlSher Titania, the development and production of 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.
|
o
|
The
testing, development, marketing and/or licensing of
nano-structured ceramic powders for use in various application, such as
advanced performance coatings, air and water purification systems, and
nano-sensor applications.
|
o
|
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.
|
o
|
The
development of a manufacturing process related to a test-stage active
pharmaceutical ingredient, which is designed to be useful in the treatment
of companion animals.
|
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. Although contract services revenue comprised a
significant portion of our total revenues in recent years accounting for 87%,
55%, and 67%, respectively in 2008, 2007 and 2006, we do not expect
this to continue. Near the end of 2008, we made the decision to focus on
Power and Energy products as we believe that area contains the most promise for
the Company. In the summary of our business below, we describe our
various research products in connection with our description of the business
segment to which each relates.
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
to further develop battery electrode materials, nanosensors, and nanomaterials
characterization, (2) participate in a joint venture combining the technologies
of the partners in order to develop and produce titanium dioxide pigment for use
in a variety of applications, (3) develop a suite of energy storage solutions
for the stationary power market (4) develop battery backup power systems for
Naval applications and (5) develop power and energy systems for other military
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 made product sales consisting principally
of battery packs and nano 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 application licensee
in obtaining regulatory approval for the drugs, or other products, and the
success of our marketing efforts with respect to both product sales and
technology licenses. In 2008, our development partner for a
pharmaceutical candidate for the animal treatment market, Elanco Animal Health,
made the decision to terminate spending on that program and our Service
Agreement with Elanco was subsequently terminated. We continue to
pursue another partner for the development of that product.
General
Outlook
We have
generated net losses in each fiscal year since
incorporation. Revenues from product sales, commercial collaborations
and contracts and grants decreased significantly in 2008, as did operating
expenses. The revenue decrease was due almost entirely to the reduced level of
product sales in the automotive sector as a result of the difficulties
encountered by Phoenix MC in launching their electric vehicle. The
operating expense decrease was primarily the result of several one-time events
related to the November 2007 financing and the Phoenix MC battery
replacement. Our gross profit margins on customer contracts for
research and development work are very low, and as a result we have shifted our
focus to move away from these opportunities. Our current focus is on the
development of products and technologies in energy storage that we anticipate
will eventually bring a substantial amount of higher-margin revenues from
licensing, manufacturing, product sales and other sources. We expect our nano
lithium titanate batteries and battery materials to be a source of such
higher-margin revenues. Consequently, during 2008, we continued to
expand the scope of our Power and Energy Group by (1) hiring additional staff
and increasing temporary personnel to handle the conversion from a prototype to
a commercial product, (2) adding additional sales and marketing personnel to
focus on this market, and (3) acquiring test and production
equipment.
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:
·
|
In
May 2008, we successfully completed the trial of a 2 megawatt battery
system with AES Energy Storage, LLC, a subsidiary of global power leader
The AES Corporation. Under the terms of the Agreement, KEMA (an
independent third party) designed and oversaw the system testing and then
prepared a final report assessing the battery system’s
performance. The system performed well and according to KEMA
the battery system “successfully demonstrated the potential of using the
new battery technology for utility applications. There were no
inherent design limitations identified in its application within the
designed 1-MW power handling range.” Based on the success of
this trial we are continuing to develop our relationship with AES and have
generated a substantial amount of interest in the product from other
entities.
|
·
|
In
July 2008, we terminated our contractual relationship with Phoenix to
provide them with lithium titanate battery packs and resolved all
outstanding issues with them. The transportation market in
general for lithium ion batteries has been slower to develop than we
initially anticipated. As a consequence, we have shifted more
of our focus to stationary power and military applications that are
evolving more rapidly.
|
·
|
Our
efforts with the U.S. military and the British Ministry of Defense (“MoD”)
continue to move forward positively on a number of different
projects. Initial testing phases on each project with the U.S.
Army, U.S. Navy and MoD have all progressed impressively and ongoing
government funding for 2009 is in
place.
|
·
|
Spectrum
must begin the testing and application processes necessary to receive FDA
approval of RenaZorb and related products. Spectrum is currently
doing an in-vivo competitive study to determine the efficacy of the
alternate high surface area product they requested from us compared to
Fosrenol. This will take approximately two months to
complete. Then, if RenaZorb performs well against Fosrenol,
Spectrum has indicated that it will begin the pre-clinical work which
originally was expected to take about one year to
complete. Consequently, we now do not expect the application to
be filed until mid 2010.
|
·
|
We
previously had formed the AlSher Titania joint venture with The
Sherwin-Williams Company to develop and produce titanium dioxide pigment
for use in paint and coatings. During 2008, the 100 ton per
annum pilot plant was commissioned and operated producing pigment material
for evaluation and to provide engineering data to complete a cost study
relating to the anticipated scale up to a 5,000 ton per annum
demonstration plant. Engineering data was produced and
delivered to The Sherwin-Williams Company in the first week of January
2009. At this time, neither Sherwin-Williams nor Altair is
willing to commit the resources necessary to build the 5,000 ton per annum
demonstration plant. AlSher continues to look for a third party
interested in this technology.
|
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 remain 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 be
overcome.
Liquidity
and Capital Resources
Current
and Expected Liquidity
Our cash
and short-term investments decreased from $50,146,117 at December 31, 2007 to
$28,088,454 at December 31, 2008. In September 2008, we entered into
a Stock Purchase and Settlement Agreement with Al Yousuf LLC in which Al Yousuf
purchased 5,882,353 common shares for $10,000,000 and received another 2,117,647
common shares in settlement for all potential claims resulting from its 2007
investment of $40 million. Exercises of stock options and warrants
and other cash inflows, including the Al Yousuf stock purchase, increased
cash by $11,001,101. These increases were offset by cash used to fund
operations of $30,051,289 and to purchase fixed assets of approximately
$3,007,474.
During
the 12 months ended December 31, 2008, our cash used in operations was
$30,051,289. This amount included $5,438,409 of significant one-time
or annual payments in the first quarter of 2008 as
follows: $2,384,299 of commission and expenses were paid to the
placement agent in connection with our sale of common shares for an aggregate
purchase price of $40,000,000 to Al Yousuf, LLC in November 2007, $1,754,110 was
paid in connection with the 2007 bonus plan and $1,300,000 of raw materials
purchases made in 2007 in anticipation of receipt of the next sales order from
Phoenix under the 2007 purchase agreement.
We intend
to use these funds for working capital, ongoing retirement of long-term debt,
capital expenditures, research and development activities and the potential
acquisition of other technologies. Net cash used in operations was
$30,051,289 in 2008, and we expect to decrease funding of operations by
approximately $5.9 million to approximately $24.2 million in 2009, net of
anticipated revenues, based upon budgeted revenue growth and expansion of our
production capabilities in 2009 and the non-recurrence of several large one-time
costs in 2008. Over the long term, we anticipate substantially
increasing revenues by entering into new contracts and increasing product sales
in the stationary power market. However, this increase in revenues
will be dependent on our ability to transition our stationary power products
from prototypes into commercial grade products. During 2008, we
continued making significant expenditures for our battery initiative, added
staff and equipment for the manufacture of nanoparticle products and increased
our sales and marketing efforts. In 2009, we intend to increase
spending on our battery initiatives continuing the enhancement of our products
and their conversion into commercial grade products. We estimate that
our current cash and short-term investments balance is sufficient to support our
operations through the end of 2009 based on budgeted cash flow
projections.
Historically, we have financed
operations primarily through the issuance of equity securities (common shares,
convertible debentures, stock options and warrants) and by the issuance of
debt. Depending upon the growth rate of our battery revenues, we will
most likely need to raise additional capital to fund this growth during the
second half of 2009. 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 four payments of $600,000 of principal plus
accrued interest were due and paid on February 8, 2006, 2007, 2008 and
2009. The final payment of principal and interest is due on February
8, 2010.
Capital
Commitments and Expenditures
The
following table discloses aggregate information about our contractual
obligations and the periods in which payments are due as of December 31,
2008:
|
|
|
|
|
Less
Than
|
|
|
|
|
|
|
|
|
After
|
|
Contractual
Obligations
|
|
Total
|
|
|
1
Year
|
|
|
1-3
Years
|
|
|
4-5
Years
|
|
|
5
Years
|
|
Notes
Payable
|
|
$ |
1,332,133 |
|
|
$ |
732,133 |
|
|
$ |
600,000 |
|
|
$ |
- |
|
|
$ |
- |
|
Interest
on Notes Payable
|
|
|
126,000 |
|
|
|
84,000 |
|
|
|
42,000 |
|
|
|
- |
|
|
|
- |
|
Contractual
Service Agreements
|
|
|
1,526,707 |
|
|
|
1,526,707 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Facilities
and Property Operating Leases
|
|
|
1,012,614 |
|
|
|
277,608 |
|
|
|
586,254 |
|
|
|
148,752 |
|
|
|
- |
|
Property
and Capital Leases
|
|
|
79,078 |
|
|
|
70,779 |
|
|
|
8,299 |
|
|
|
- |
|
|
|
- |
|
Unfulfilled
Purchase Orders
|
|
|
534,299 |
|
|
|
534,299 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
Contractual Obligations
|
|
$ |
4,610,831 |
|
|
$ |
3,225,526 |
|
|
$ |
1,236,553 |
|
|
$ |
148,752 |
|
|
$ |
- |
|
In
connection with the formation of the AlSher Titania joint venture, under the
first stage we committed to complete our pigment processing pilot plant and
commissioned the plant by the end of February 2008. Total capital
expenditures, labor and development costs associated with this effort were
approximately $3.9 million. Considerable data has been
generated and compiled into an engineering data package analysis and
recommendation on next steps. Based on review of this package, its
impact on financial projections, and input from our partner, we will consider in
early 2009 whether to undertake a more detailed engineering cost study relating
to the potential scale up to a significantly larger demonstration
plant. At this time, neither Altair nor Sherwin-Williams has
expressed a willingness to finance the construction of the development scale
plant that would be required as the next major milestone. AlSher is
actively seeking a partner or partners to participate in this next
phase. Several companies with raw materials resources have indicated
interest in the technology, but none has been willing to make any commitment up
to now. Without additional capital, it is unlikely that AlSher will
be able to independently fund this effort.
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. On March 1, 2008, we signed an addendum to this
lease that increased the space leased by 40,000 square feet. The move
from the former office and laboratory space leased in the Flagship Enterprise
Center Building to the Accelerator Building was completed by late February
2008. We have spent approximately $343,000 on build-out and leasehold
improvements during 2008.
We
purchased equipment for our Reno, Nevada facility for use in the development and
expansion of our current advanced battery materials production
capabilities. Through December 31, 2008, approximately $1.7 million
was expended on production equipment.
Depending
upon the speed of our revenue growth in 2009, we plan to spend approximately
$24.7 million on production and tooling equipment associated with our Power and
Energy Systems Group capacity expansion.
In 2008,
after becoming aware of a module configuration problem in the first-generation
Phoenix battery packs manufactured in 2007, we agreed to replace 47 of the packs
by means of a credit against re-designed second-generation battery packs and
related engineering services and recorded a warranty liability of $2,856,902 in
the December 31, 2007 financial statements. In July, 2008 Phoenix
agreed to take back the original 47 battery packs and to install an additional
safety feature with them in the vehicles they planned to
manufacture. In return, we forgave the $1.7 million in notes owed us
by Phoenix, reversed the warranty liability and settled all outstanding claims
between Phoenix and Altair. We do not anticipate further development
or product sales with Phoenix in 2009.
Critical
Accounting Policies and Estimates
Management
based the following discussion and analysis of our financial condition and
results of operations on our consolidated financial statements. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our critical accounting policies and estimates,
including those related to long-lived assets, share-based compensation, revenue
recognition, overhead allocation, allowance for doubtful accounts, inventory,
and deferred income tax. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We
believe the following critical accounting policies affect the more significant
judgments and estimates used in the preparation of our consolidated financial
statements. These judgments and estimates affect the reported amounts of assets
and liabilities and the reported amounts of revenues and expenses during the
reporting periods. Changes to these judgments and estimates could adversely
affect the Company’s future results of operations and cash flows.
·
|
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 (“SFAS”) 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 December 31, 2008, the carrying
value of these assets was $14,649,822, or 30% 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.
|
·
|
Share-Based
Compensation. We have a stock incentive plan that provides for
the issuance of stock options, restricted stock and other awards to
employees and service providers. We calculate compensation
expense under SFAS 123R using a Black-Scholes Merton option pricing
model. In so doing, we estimate certain key assumptions used in
the model. We believe the estimates we use, which are presented
in Note 11 of Notes to the Consolidated Financial Statements, are
appropriate and reasonable.
|
·
|
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 collectability is
probable. During 2008, our revenues were derived from three sources:
product sales, commercial collaborations, and contract research and
development. 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. Payments received in advance relating
to 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. The liability
for estimated warranty obligations may also be adjusted based on specific
warranty issues identified.
|
·
|
Overhead
Allocation. Facilities overheads, which are comprised primarily
of occupancy and related expenses, and fringe benefit expenses, are
initially recorded in general and administrative expenses and then
allocated monthly to research and development expense based on labor
costs. Facilities overheads and fringe benefits allocated to
research and development projects may be chargeable when invoicing
customers under certain research and development
contracts.
|
·
|
Allowance
for Doubtful Accounts. The allowance for doubtful accounts is
based on our assessment of the collectability 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.
|
·
|
Inventory. The
Company values its inventories generally at the lower of cost (first-in,
first-out method) or market. We employ a full absorption
procedure using standard cost techniques. The standards are
customarily reviewed and adjusted annually. Overhead rates are
recorded to inventory based on normal capacity. Any idle
facility costs or excessive spoilage are recorded as current period
charges.
|
·
|
Deferred
Income Tax. 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. We have 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 it more likely than not
that the Company will not realize benefits of these deductible differences
as of December 31, 2008. Management has, therefore, established a
full valuation allowance against its net deferred income tax assets as of
December 31, 2008. Due to the significant increase in common
shares issued and outstanding from 2005 through 2008, Section 382 of the
Internal Revenue Code may provide significant limitations on the
utilization of our net operating loss carry forwards. As a
result of these limitations, a portion of these loss and credit carryovers
may expire without being utilized.
|
Results
of Operations
Fiscal
Year 2008 vs. 2007
Revenues
decreased by $3,382,173 from $9,108,483 in 2007 to $5,726,310 in 2008, while
operating expenses decreased by $6,323,637, from $42,175,957 in 2007 to
$35,852,320 in 2008. As a result, our loss from operations decreased
by $2,941,464, from $33,067,474 in 2007 to $30,126,010 in 2008.
Product
sales decreased from $4,058,281 in 2007 to $756,949 in 2008. The
volume of battery packs sold to Phoenix dropped from 50 in 2007 to zero in 2008
resulting in a $3,047,687 decrease in product sales. The sales cycle
associated with sales of our stationary power batteries for use in providing
ancillary services over the grid has turned out to be longer than originally
anticipated resulting in the slower ramp-up of revenue from that
source.
Commercial
collaborations revenues decreased $902,579, from $2,909,650 in 2007 to
$2,007,072 in 2008. This decrease is primarily due to the
discontinuance of the Western Oil Sands project in May 2008.
Contract
and grant revenues increased from $2,140,552 in 2007 to $2,962,289 in 2008,
principally in connection with a new grant received in January 2008 from the
Office of Naval Research. This increase was offset by decreased
revenues from several other grants as the grants concluded during the second and
third quarters of 2008.
Cost of
sales - product decreased by $4,981,380, from $5,163,987 in 2007 to
$182,607 in 2008. This decrease is driven by the decrease in
battery pack sales and other 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 we expect that situation to
continue well into 2009. As higher production volumes and cost
reduction efforts are achieved, the margin on battery pack sales is expected to
become positive.
Cost of
sales - warranty and inventory reserves decreased by $9,708,180 in 2008,
from $6,843,343 in 2007 to a credit of $2,864,837 in 2008. 2007
costs were high due to several one-time events including $3,927,353 for the
write-off of all inventory balances on hand at December 31, 2007 of $2,529,938
relating to battery cells and modules, and $1,397,415 for cells ordered in 2007
for delivery in 2008. An additional decrease in reserves by
$2,864,837 resulted from a letter of agreement effective July 2008 with Phoenix,
whereby the 2007 purchase and supply agreement was terminated and the parties
resolved all outstanding issues with respect to the warranty associated with the
47 battery packs sold in 2007.
Research
and development expense increased by $1,464,744, from $15,443,703 in 2007 to
$16,908,447 in 2008. Research and development payroll costs increased
by $1,529,661 including fringe benefits expenses due to an increase in headcount
of 27 from the start of 2007 through April of 2008, however, headcount has
decreased by 21 from April 2008 through the conclusion of December 2008 to align
personnel with required resources. Temporary labor costs decreased by
$79,391 primarily due to the decrease in battery pack production and
construction/testing of the pigment pilot plant. Excluding labor,
research and development expenses in the Power and Energy Systems Group
increased by $1,390,349 primarily due to: 1) materials relating to 2008 customer
purchase orders and development agreements and 2) engineering and other research
and development activities. Excluding labor, research and development
expenses decreased by $961,633 in the Performance Materials Division primarily
due to $304,374 as the Department of Energy Grant concluded in December 2007,
$330,198 due to the relocation of Western Oil Sands to another facility in May
2008, and $389,589 from 2007 construction and testing of the pigment pilot
plant. The remaining increase relates to other internal research and
development.
Interest
income decreased by $119,791 from $1,101,682 in 2007 to $981,891 in
2008. On average, a higher average level of cash during 2008 than in
2007 was more than offset by lower interest rates in 2008 than in
2007.
Fiscal
Year 2007 vs. 2006
Revenues
increased by $4,784,523, from $4,323,960 in 2006 to $9,108,483 in 2007, while
operating expenses increased by $20,170,582, from $22,005,375 in 2006 to
$42,175,957 in 2007. As a result, our loss from operations increased
by $15,067,474, from $17,681,415 in 2006 to $33,067,474 in 2007.
Product
sales increased from $961,380 in 2006 to $4,058,281 in 2007. The
volume of battery packs sold to Phoenix grew from 11 in 2006 to 50 in 2007
resulting in a $2,293,329 increase in product sales. The remaining
increase of $803,572 reflects a higher level of sales volume for prototype
battery cells, battery modules, nano lithium titanate, and other nanomaterial
products.
License
fees decreased by $464,720 from 2006 to 2007. In 2006, license fees
of $464,720 associated with the Spectrum Pharmaceutical and Elanco Animal Health
contracts was recorded. In 2007, no additional milestones were
achieved under these contracts.
Commercial
collaborations revenues increased from $1,420,151 in 2006 to $2,909,650 in 2007
primarily due to $1,662,033 of increased billings associated with new contacts
signed in 2007 with AES, the second phase of Elanco Animal Health development
contract, and PPG. This increase was offset by $172,534 of
non-recurring collaborations that were finalized in 2006.
Contract
and grant revenues increased from $1,477,709 in 2006 to $2,140,552 in 2007,
principally as a result of billings of $649,725 under the $2.5 million
Department of Energy Earmark relating to the momentum gained in the project that
was originally effective in September 2006, billings of $121,916 under our
subcontract with PPG signed in July 2007 and billings of $140,731 under the
University of Reno Nanosensors subcontract effective in January
2007. This increase was partially offset by a reduction in revenues
of $249,528 primarily relating to the subcontract with the University of Nevada,
Las Vegas Research Foundation and the National Science Foundation grant that
were coming to completion in 2007.
Cost of
sales - product increased by $4,129,556, from $1,034,431 in 2006 to $12,007,330
in 2007. This increase was driven by the increase in battery
pack sales and other changes in product sales discussed
above. Positive margins associated with the sale of battery packs
were not achieved due to scaling issues, and a portion of the revenues relating
to the battery packs was dependent upon the receipt of Zero Emission
Credits. Through December 31, 2007, no ZEV credits were sold by
Phoenix Motorcars, Inc.
Cost of
sales – warranty and inventory reserves increased by $6,843,343 in 2007, as
there was no warranty expense for 2006. $3,927,353 of this
increase relates to a write-off of all inventory balances on hand at December
31, 2007 of $2,529,938 relating to battery cells and modules, and a $1,397,415
write-off of cells ordered in 2007 for delivery in 2008. The
remaining increase of $2,915,990 relates to warranty reserves of $59,088 and
$2,856,902 recorded based upon 2007 battery product sales to AES and Phoenix,
respectively. The write off of inventory associated with the Phoenix
battery packs and the warranty recorded in connection with Phoenix resulted from
our decision to replace 47 of the Phoenix packs manufactured in 2007 under
warranty provisions.
Research
and development, or R&D, expense increased by $5,366,472, from $10,077,231
in 2006 to $15,443,703 in 2007. Research and development payroll
costs increased by $2,602,663 including fringe benefits expenses due to an
increase in headcount of 24. Temporary labor costs also increased by
$572,597 primarily due to the growth in battery pack production and
construction/testing of the pigment pilot plant. Excluding labor,
research and development expenses in the Power and Energy Systems Group
increased by $1,474,013 primarily due to the AES development agreement signed in
2007 and an increased focus on developing potential new battery
products. Excluding labor, research and development expenses in the
Life Sciences Division increased by $394,160 primarily due to work billed to us
under our subcontract with the University of California Santa Barbara relating
to the Department of Energy grant and signing of the second phase of the
development contract with Elanco Animal Health in 2007. Excluding
labor, research and development expenses increased by $298,758 in the
Performance Materials Division primarily due to the construction and testing of
the pigment pilot plant (increase of $353,947), increased spending
on existing and new billable contracts (increase of $209,260), offset
by non-recurring collaborations and subcontracts completed in 2006 (decrease of
$264,449). The remaining increase relates to other internal research
and development.
General
and administrative expenses increased by $3,275,069, from $7,495,180 in 2006 to
$10,770,249 in 2007. Stock based compensation expense, a non-cash
item, increased by $1,876,880 due to a higher level of new employees eligible
for and receiving option grants, as well as an overall higher level of employees
who received retention grants in January 2007; payroll costs including fringe
expense increased by $669,130 due to expansion of the executive team as well as
other related increases in recruiting, relocation, and travel of $511,219;
fringe benefit expenses allocable to all general and administrative personnel
increased by $479,949 primarily due to a higher level of bonus earned in 2007;
and accounting fees increased by $227,824 primarily due to tax reviews and
re-filing of tax returns undertaken in 2007 in response to new accounting
pronouncements. These increases were partially offset by $401,484 of
expenses associated with a flood at our headquarters in Reno, Nevada in January
2006 and a decrease of $88,449 in other general and administrative
expenses.
Interest
income increased by $447,500, from $654,182 in 2006 to $1,101,682 in
2007. On average a higher level of cash was available for
investment in 2007, $16 million in 2007 versus $10 million in 2006.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk.
None.
Item
8. Financial Statements and Supplementary
Data.
Supplementary
Data
The
following Supplementary Financial Information for the fiscal quarters ended
March 31, June 30, September 30 and December 31 in each of the years 2008 and
2007 was derived from our unaudited quarterly consolidated financial statements
filed by us with the SEC in our Quarterly Reports on Form 10-Q with
respect to such periods (except for 4th quarter data).
Supplementary
Financial Information by Quarter, 2008 and 2007
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
|
March
31
|
|
|
June
30
|
|
|
September
30
|
|
|
December
31
|
|
Year
Ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,069,337 |
|
|
$ |
1,902,659 |
|
|
$ |
1,801,615 |
|
|
$ |
952,699 |
|
Operating
Expenses
|
|
$ |
9,818,532 |
|
|
$ |
7,838,878 |
|
|
$ |
11,124,480 |
|
|
$ |
7,070,430 |
|
Net
Loss
|
|
$ |
(8,288,436 |
) |
|
$ |
(5,660,322 |
) |
|
$ |
(9,110,966 |
) |
|
$ |
(6,008,441 |
) |
Loss
per Common Share: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,140,932 |
|
|
$ |
3,065,868 |
|
|
$ |
3,370,134 |
|
|
$ |
1,531,549 |
|
Operating
Expenses
|
|
$ |
6,630,398 |
|
|
$ |
8,915,384 |
|
|
$ |
9,619,193 |
|
|
$ |
16,710,982 |
|
Net
Loss
|
|
$ |
(5,181,467 |
) |
|
$ |
(5,430,583 |
) |
|
$ |
(6,130,210 |
) |
|
$ |
(14,728,362 |
) |
Loss
per Common Share: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Loss
per common share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly loss per common share
amounts does not necessarily equal the total for the year.
|
|
Financial
Statements
The
financial statements required by this Item appear on pages F-4 through F-30 of
this Report.
Item
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Item
9A. Controls and Procedures
Disclosure Controls and
Procedures. Under the supervision and with the participation
of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December
31, 2008. Based upon this evaluation, our chief executive
officer and our chief financial officer have concluded that, as of December 31,
2008, 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.
Internal Control Over
Financial Reporting. Our management is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) under the Securities Exchange Act of 1934, as
amended. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes those
written policies and procedures that:
|
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of
America;
|
|
·
|
provide
reasonable assurance that our receipts and expenditures are being made
only in accordance with authorization of our management;
and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on our consolidated financial
statements.
|
Internal
control over financial reporting includes the controls themselves, monitoring
and internal auditing practices and actions taken to correct deficiencies as
identified.
Our
management assessed the effectiveness our internal control over financial
reporting as of December 31, 2008. Our management’s assessment was
based on criteria for effective internal control over financial reporting
described in “Internal Control – Integrated Framework” issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Our
management’s assessment included an evaluation of the design of our internal
control over financial reporting and testing of the operational effectiveness of
our internal control over financial reporting. Our management
reviewed the results of its assessment with the Audit Committee of our Board of
Directors. Based on this assessment, our management determined that,
as of December 31, 2008, we maintained effective internal control over financial
reporting.
Perry-Smith
LLP, independent registered public accounting firm, who audited and reported on
our consolidated financial statements included in this report, has issued an
attestation report on management’s assessment of internal control over financial
reporting. This attestation report appears on pages F-2 and F-3 of
this report.
Changes In Internal Control
Over Financial Reporting. There were no significant changes
(including corrective actions with regard to significant deficiencies or
material weaknesses) in our internal controls over financial reporting that
occurred during the fourth quarter of fiscal 2008 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
Item
9B. Other Information
None.
PART
III
Item
10. Directors and Executive Officers of the
Registrant
The
information required by this Item is incorporated by reference to the section
entitled “Election of Directors” in the Company’s definitive proxy statement to
be filed with the SEC.
Item
11. Executive Compensation
The
information required by this Item is incorporated by reference to the section
entitled “Executive Compensation” in the Company’s definitive proxy statement to
be filed with the SEC.
Item
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The
information required by this Item is incorporated by reference to the section
entitled “Security Ownership of Certain Beneficial Owners and Management” in the
Company’s definitive proxy statement to be filed with the SEC.
Item
13. Certain Relationships and Related Transactions
The
information required by this Item is incorporated by reference to the section
entitled “Certain Relationships and Related Transactions” in the Company’s
definitive proxy statement to be filed with the SEC.
Item
14. Principal Accountant Fees and Services
The
information required by this Item is incorporated by reference to the section
entitled “Principal Accounting Fees and Services” in the Company’s definitive
proxy statement to be filed with the SEC.
PART
IV
Item
15. Exhibits, Financial Statement Schedules and Reports on Form
8–K
(a) Documents
Filed
1. Financial
Statements. The following Consolidated Financial Statements of
the Company and Auditors’ Report are filed as part of this Annual Report on Form
10-K:
·
|
Report
of Independent Registered Public Accounting
Firm
|
·
|
Report
of Independent Registered Public Accounting Firm on Internal Control over
Financial Reporting
|
·
|
Consolidated
Balance Sheets, December 31, 2008 and
2007
|
·
|
Consolidated
Statements of Operations for Each of the Three Years in the Period Ended
December 31, 2008
|
·
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive Loss for Each of the
Three Years in the Period Ended December 31,
2008
|
·
|
Consolidated
Statements of Cash Flows for Each of the Three Years in the Period Ended
December 31, 2008
|
·
|
Notes
to Consolidated Financial
Statements
|
2. Financial Statement
Schedule. Not applicable.
Exhibit List.
See the
Exhibit Index following the signature page hereof.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) 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, on March 16, 2009.
|
ALTAIR
NANOTECHNOLOGIES INC. |
|
|
|
|
|
|
By:
|
/s/ Terry
Copeland |
|
|
|
Terry
Copeland, |
|
|
|
President
and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
Date:
March 16, 2009 |
|
POWER
OF ATTORNEY AND ADDITIONAL SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons in the capacities and on the dates indicated have signed this
Report. Each person whose signature to this Report appears below
hereby constitutes and appoints Terry Copeland and John Fallini, and each of
them, as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Report, and any and all
instruments or documents filed as part of or in connection with this Form Report
or the amendments thereto and each of the undersigned does hereby ratify and
confirm all that said attorney-in-fact and agent, or his substitutes, shall do
or cause to be done by virtue hereof.
Signature
|
|
Title
|
|
Date
|
/s/ Terry Copeland
Terry
Copeland
|
|
President
and Chief Executive Officer (Principal Executive Officer)
|
|
March
16, 2009
|
|
|
|
|
|
/s/ John Fallini
John
Fallini
|
|
Chief
Financial Officer and Corporate Secretary (Principal Financial and
Accounting Officer)
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Terry Copeland
Terry
Copeland
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Michel
Bazinet
Michel
Bazinet
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Jon N. Bengtson
Jon
N. Bengtson
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ George E.
Hartman
George
E. Hartman
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Robert F.
Hemphill, Jr.
Robert
F. Hemphill, Jr.
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Pierre Lortie
Pierre
Lortie
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Robert G. van Schoonenberg
Robert
G. van Schoonenberg
|
|
Director
|
|
March
16, 2009
|
|
|
|
|
|
/s/ Eqbal Al Yousuf
Eqbal
Al Yousuf
|
|
Director
|
|
March
16, 2009
|
Exhibit
Index
Exhibit
No.
|
|
Description
|
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page #)
|
|
|
|
|
|
3.1
|
|
Articles
of Continuance
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on July
18, 2002.**
|
|
|
|
|
|
3.2
|
|
Bylaws
|
|
Incorporated
by reference to the Amendment No. 1 to Annual Report on Form 10-K/A filed
with the SEC on March 10, 2005. **
|
|
|
|
|
|
4.1
|
|
Form
of Common Stock Certificate
|
|
Incorporated
by reference to Registration Statement on Form 10–SB filed with the SEC on
November 25, 1996. **
|
|
|
|
|
|
4.2
|
|
Amended
and Restated Shareholder Rights Plan dated
October 15, 1999, with Equity Transfer
Services, Inc.
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on November 19, 1999. **
|
|
|
|
|
|
10.1
|
|
Altair
International Inc. Stock Option Plan (1996)
|
|
Incorporated
by reference to the Company's Registration Statement on Form S-8, File No.
333-33481 filed with the SEC on July 11, 1997.
|
|
|
|
|
|
10.2
|
|
1998
Altair International Inc. Stock Option Plan
|
|
Incorporated
by reference to the Company’s Definitive Proxy Statement on Form 14A filed
with the SEC on May 12, 1998. **
|
|
|
|
|
|
10.3
|
|
Altair
Nanotechnologies Inc. 2005 Stock Incentive Plan (Amended and
Restated)
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.4
|
|
Standard
Form of Stock Option Agreement under 2005 Stock Incentive
Plan
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.5
|
|
Standard
Form of Restricted Stock Agreement under 2005 Stock Incentive
Plan
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.6
|
|
Installment
Note dated August 8, 2002 (re Edison Way property) in favor of BHP
Minerals International, Inc.
|
|
Incorporated
by reference to the Company’s Amendment No. 1 to Registration Statement on
Form S-2, File No. 333-102592, filed with the SEC on February 7,
2003.
|
|
|
|
|
|
10.7
|
|
Trust
Deed dated August 8, 2002 (re Edison Way property) with BHP Minerals
International, Inc.
|
|
Incorporated
by reference to the Company’s Amendment No. 1 to Registration Statement on
Form S-2, File No. 333-102592, filed with the SEC on February 7,
2003.
|
|
|
|
|
|
10.8
|
|
Flagship
Business Accelerator Tenant Lease dated July 1, 2007 with the Flagship
Enterprise Center, Inc.
|
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q
filed with the SEC August 9, 2007.
**
|
Exhibit
No.
|
|
Description
|
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page #)
|
|
|
|
|
|
10.9
|
|
Amendment
to the Flagship Business Accelerator Tenant Lease dated March 1, 2008 with
the Flagship Enterprise Center, Inc.
|
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q filed with the
SEC on May 8, 2008.**
|
|
|
|
|
|
10.10
|
|
License
Agreement dated January 28, 2005 with Spectrum Pharmaceuticals,
Inc.*
|
|
Incorporated
by reference from the Company’s Current Report on Form 8-K filed with the
SEC on February 4, 2005.**
|
|
|
|
|
|
10.11
|
|
Purchase
and Supply Agreement dated January 8, 2007 with Phoenix Motorcars,
Inc.*
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on January 12, 2007. **
|
|
|
|
|
|
10.12
|
|
Letter
agreement dated July 20, 2008 with Phoenix Motorcars, Inc.
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on July 24, 2008. **
|
|
|
|
|
|
10.13
|
|
Department
of Energy Grant Agreement dated September 9, 2006 with the U.S. Department
of Energy
|
|
Incorporated
by reference to the Annual Report on Form 10-K filed with the SEC on March
13, 2007.**
|
|
|
|
|
|
10.14
|
|
Subcontract
dated March 6, 2007 with U.N.L.V.
|
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q
filed with the SEC May 10, 2007. **
|
|
|
|
|
|
10.15
|
|
Contribution
Agreement dated April 24, 2007 with the Sherwin-Williams Company and
AlSher Titania*
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on April
30, 2007. **
|
|
|
|
|
|
10.16
|
|
License
Agreement dated April 24, 2007 with the Sherwin-Williams Company and
AlSher Titania
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on April
30, 2007. **
|
|
|
|
|
|
10.17
|
|
Development
Services Agreement executed on September 25, 2007 between the Company and
Elanco Animal Health*
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on
September 27, 2007, File No. 001-12497
|
|
|
|
|
|
10.18
|
|
Letter
agreement dated April 21, 2006 with JP Morgan Securities,
Inc.
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on November 30, 2007.**
|
|
|
|
|
|
10.19
|
|
Letter
agreement dated September 24, 2007 with JPMorgan Securities,
Inc.
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on November 30, 2007.**
|
|
|
|
|
|
10.20
|
|
Subcontract
dated January 29, 2008 with the Office of Naval Research
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
Exhibit
No.
|
|
Description
|
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page #)
|
|
|
|
|
|
10.21
|
|
Service
Agreement dated February 11, 2008 with Melpar BVBP
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.22
|
|
Mandate
& Contractorship Agreement dated February 11, 2008 with Rik
Dobbelaere
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.23
|
|
Employment
Agreement dated December 17, 2006 with Alan J. Gotcher,
Ph.D.
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on February 21, 2006.**
|
|
|
|
|
|
10.24
|
|
Amendment
dated August 17, 2007 to Altair Executive Employment Agreement between the
Company and Alan Gotcher
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on
August 17, 2007, File No. 001-12497
|
|
|
|
|
|
10.25
|
|
Separation
Agreement and Release of All Claims dated April 18, 2008 with Alan
Gotcher**
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on April 27, 2008.**
|
|
|
|
|
|
10.26
|
|
Employment
Agreement dated December 17, 2006 with Edward Dickinson
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on February 21, 2006. **
|
|
|
|
|
|
10.27
|
|
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
|
|
|
|
|
|
10.28
|
|
Employment
Agreement dated December 7, 2007 with Bruce Sabacky
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on December 7, 2007.**
|
|
|
|
|
|
10.29
|
|
Amendment
dated August 17, 2007 to Altair Executive Employment Agreement between the
Company and Bruce Sabacky
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on
August 17, 2007, File No. 001-12497
|
|
|
|
|
|
10.30
|
|
Employment
Agreement dated June 26, 2008 with Terry Copeland
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on July 1, 2008.**
|
|
|
|
|
|
10.31
|
|
Employment
Agreement dated March 10, 2008 with Jeffrey A. McKinney
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13, 2007.**
|
|
|
|
|
|
10.32
|
|
Separation
Agreement and Release of All Claims dated September 5, 2008 with Jeffrey
McKinney
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on September 5, 2008.**
|
|
|
|
|
|
10.33
|
|
Employment
Agreement dated March 10, 2008 with Stephen Balogh
|
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on March 13,
2007.**
|
Exhibit
No.
|
|
Description
|
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page #)
|
|
|
|
|
|
10.34
|
|
Employment
Agreement dated April 7, 2008 with John Fallini
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on April 9, 2008.**
|
|
|
|
|
|
10.35
|
|
Employment
Agreement dated June 16, 2008 with C. Robert Pedraza
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on June 20, 2008.**
|
|
|
|
|
|
10.36
|
|
Employment
Agreement dated November 24, 2008 with Dan Voelker
|
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on
November 24, 2008, File No. 001-12497**
|
|
|
|
|
|
10.37
|
|
2007
Annual Executive Incentive Bonus Plan*
|
|
Incorporated
by reference to the Annual Report on Form 10-K filed with the SEC on March
13, 2007. **
|
|
|
|
|
|
10.38
|
|
2008
Annual Incentive Bonus Plan*
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on July 2, 2008.**
|
|
|
|
|
|
10.39
|
|
Registration
Rights Agreement dated November 29, 2007 with Al Yousuf
LLC
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on November 30, 2007.**
|
|
|
|
|
|
10.40
|
|
Stock
Purchase and Settlement Agreement with Al Yousuf, LLC dated October 6,
2008
|
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed
with the SEC on October 6, 2008.**
|
|
|
|
|
|
21
|
|
List
of Subsidiaries
|
|
Incorporated
by reference from Item 1 of this report.
|
|
|
|
|
|
23.1
|
|
Consent
of Perry-Smith LLP
|
|
Filed
herewith.
|
|
|
|
|
|
24
|
|
Powers
of Attorney
|
|
Included
in the Signature Page hereof.
|
|
|
|
|
|
31.1
|
|
Rule
13-14(a)/15d-14a Certification of Chief Executive Officer
|
|
Filed
herewith
|
|
|
|
|
|
31.2
|
|
Rule
13-14(a)/15d-15a Certification of Chief Financial Officer
|
|
Filed
herewith
|
|
|
|
|
|
32.1
|
|
Section
1350 Certification of Chief Executive Officer
|
|
Filed
herewith
|
|
|
|
|
|
32.2
|
|
Section
1350 Certification of Chief Financial Officer
|
|
Filed
herewith
|
*Portions
of this Exhibit have been omitted pursuant to Rule 24b-2, are filed
separately with the SEC and are subject to a confidential treatment
request.
**
SEC File No.
1-12497.
|
Altair Nanotechnologies
Inc.
and
Subsidiaries
Consolidated
Financial Statements as of December 31, 2008 and 2007 and for Each of the
Three Years in the Period Ended December 31, 2008 and Reports of the
Independent Registered Public Accounting Firm
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
Page
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
|
F-2
|
|
|
FINANCIAL
STATEMENTS:
|
|
|
|
Consolidated
Balance Sheets, December 31, 2008 and 2007
|
F-4
|
|
|
Consolidated
Statements of Operations for Each of the Three Years in the Period Ended
December 31, 2008
|
F-5 |
|
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss for Each of the
Three Years in the Period Ended December 31, 2008
|
F-6
|
|
|
Consolidated
Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 2008
|
F-7
|
|
|
Notes
to Consolidated Financial Statements
|
F-9
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Shareholders and Board of Directors
Altair
Nanotechnologies, Inc. and Subsidiaries
We have
audited the consolidated balance sheets of Altair Nanotechnologies, Inc. and
subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related
consolidated statements of operations, changes in stockholders' equity and
comprehensive loss and cash flows for each of the three years in the period
ended December 31, 2008. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2008 and 2007, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 2008, in conformity with U.S. generally accepted accounting
principles.
We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United
States), Altair Nanotechnologies, Inc. and subsidiaries' internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 10, 2009 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial
reporting.
Sacramento,
California
March 10,
2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
The
Shareholders and Board of Directors
Altair
Nanotechnologies, Inc. and Subsidiaries
We have
audited Altair Nanotechnologies, Inc. and subsidiaries' (the "Company") internal
control over financial reporting as of December 31, 2008, based on criteria
established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the "COSO criteria"). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
Company's internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of
America. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
(Continued)
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on the COSO
criteria.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, changes in stockholders' equity and comprehensive loss and cash
flows for each of the three years in the period ended December 31, 2008 and our
report dated March 10, 2009 expressed an unqualified opinion.
Sacramento,
California
March 10,
2009
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(Expressed
in United States Dollars)
|
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
28,088,454 |
|
|
$ |
50,146,117 |
|
Accounts
receivable, net
|
|
|
954,881 |
|
|
|
1,317,819 |
|
Notes
receivable from related party, current portion
|
|
|
- |
|
|
|
1,638,510 |
|
Product
inventories
|
|
|
98,112 |
|
|
|
- |
|
Prepaid
expenses and other current assets
|
|
|
572,046 |
|
|
|
799,387 |
|
Total
current assets
|
|
|
29,713,494 |
|
|
|
53,901,833 |
|
|
|
|
|
|
|
|
|
|
Investment
in available for sale securities
|
|
|
3,173,703 |
|
|
|
4,564,814 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net held and used
|
|
|
11,636,732 |
|
|
|
14,548,837 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net held and not used
|
|
|
2,377,472 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Patents,
net
|
|
|
635,618 |
|
|
|
720,433 |
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
534,018 |
|
|
|
122,718 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
48,071,036 |
|
|
$ |
73,858,635 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
$ |
749,063 |
|
|
$ |
7,814,037 |
|
Accrued
salaries and benefits
|
|
|
1,360,828 |
|
|
|
2,239,110 |
|
Accrued
warranty
|
|
|
36,470 |
|
|
|
2,915,990 |
|
Accrued
liabilities
|
|
|
764,545 |
|
|
|
759,664 |
|
Current
portion of long-term debt
|
|
|
735,740 |
|
|
|
600,000 |
|
Total
current liabilities
|
|
|
3,646,646 |
|
|
|
14,328,781 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current portion
|
|
|
608,299 |
|
|
|
1,200,000 |
|
|
|
|
|
|
|
|
|
|
Minority
interest in subsidiary
|
|
|
1,097,717 |
|
|
|
1,369,283 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
5,352,662 |
|
|
|
16,898,064 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Common
stock, no par value, unlimited shares authorized;
93,143,271 and
84,068,377 shares issued and outstanding
at
December 31, 2008 and December 31, 2007
|
|
|
180,105,301 |
|
|
|
163,780,176 |
|
Additional
paid in capital
|
|
|
5,377,647 |
|
|
|
5,489,604 |
|
Accumulated
deficit
|
|
|
(140,891,974 |
) |
|
|
(111,823,809 |
) |
Accumulated
other comprehensive loss
|
|
|
(1,872,600 |
) |
|
|
(485,400 |
) |
|
|
|
|
|
|
|
|
|
Total
Stockholders' equity
|
|
|
42,718,374 |
|
|
|
56,960,571 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
48,071,036 |
|
|
$ |
73,858,635 |
|
See notes
to the consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
(Expressed
in United States Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
756,949 |
|
|
$ |
4,058,281 |
|
|
$ |
961,380 |
|
License
fees
|
|
|
- |
|
|
|
- |
|
|
|
464,720 |
|
Commercial
collaborations
|
|
|
2,007,072 |
|
|
|
2,909,650 |
|
|
|
1,420,151 |
|
Contracts
and grants
|
|
|
2,962,289 |
|
|
|
2,140,552 |
|
|
|
1,477,709 |
|
Total
revenues
|
|
|
5,726,310 |
|
|
|
9,108,483 |
|
|
|
4,323,960 |
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales – product
|
|
|
182,607 |
|
|
|
5,163,987 |
|
|
|
1,034,431 |
|
Cost
of sales – warranty and inventory reserves
|
|
|
(2,864,837 |
) |
|
|
6,843,343 |
|
|
|
- |
|
Research
and development
|
|
|
16,908,447 |
|
|
|
15,443,703 |
|
|
|
10,077,231 |
|
Sales
and marketing
|
|
|
2,950,371 |
|
|
|
2,000,799 |
|
|
|
1,878,783 |
|
Notes
receivable extinguishment
|
|
|
1,721,919 |
|
|
|
- |
|
|
|
- |
|
Settlement
and release
|
|
|
3,605,294 |
|
|
|
- |
|
|
|
- |
|
General
and administrative
|
|
|
10,589,816 |
|
|
|
10,770,249 |
|
|
|
7,495,180 |
|
Depreciation
and amortization
|
|
|
2,758,703 |
|
|
|
1,953,876 |
|
|
|
1,519,750 |
|
Total
operating expenses
|
|
|
35,852,320 |
|
|
|
42,175,957 |
|
|
|
22,005,375 |
|
Loss
from Operations
|
|
|
(30,126,010 |
) |
|
|
(33,067,474 |
) |
|
|
(17,681,415 |
) |
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(97,091 |
) |
|
|
(134,254 |
) |
|
|
(171,500 |
) |
Interest
income
|
|
|
981,891 |
|
|
|
1,101,682 |
|
|
|
654,182 |
|
Loss
on foreign exchange
|
|
|
(9,820 |
) |
|
|
(1,292 |
) |
|
|
(1,550 |
) |
Total
other income, net
|
|
|
874,980 |
|
|
|
966,136 |
|
|
|
481,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
of Investment
|
|
|
(88,701 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before minority interests’ share
|
|
|
(29,339,731 |
) |
|
|
(32,101,338 |
) |
|
|
(17,200,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Minority
interests’ share
|
|
|
271,566 |
|
|
|
630,717 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(29,068,165 |
) |
|
$ |
(31,470,621 |
) |
|
$ |
(17,200,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share - Basic and diluted
|
|
$ |
(0.34 |
) |
|
$ |
(0.45 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares - Basic and diluted
|
|
|
85,903,712 |
|
|
|
71,008,505 |
|
|
|
59,709,487 |
|
See notes
to the consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
|
|
(Expressed
in United States Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Compen-
|
|
|
Compre-
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
sation
|
|
|
hensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Expense
|
|
|
Gain
(Loss)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2005
|
|
|
59,316,519 |
|
|
$ |
92,126,714 |
|
|
$ |
- |
|
|
$ |
(63,152,905 |
) |
|
$ |
(165,336 |
) |
|
$ |
(172,000 |
) |
|
$ |
28,636,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,200,283 |
) |
|
|
- |
|
|
|
- |
|
|
|
(17,200,283 |
) |
Other
comprehensive income, net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
353,800 |
|
|
|
353,800 |
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,846,483 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
281,514 |
|
|
|
2,002,220 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,283,734 |
|
Exercise
of stock options
|
|
|
189,449 |
|
|
|
347,653 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
347,653 |
|
Exercise
of warrants
|
|
|
236,168 |
|
|
|
455,670 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
455,670 |
|
Issuance
of restricted stock
|
|
|
77,875 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Elimination of deferred
compensation expense (upon adoption of new accounting standard)
|
|
|
- |
|
|
|
(165,336 |
) |
|
|
- |
|
|
|
- |
|
|
|
165,336 |
|
|
|
- |
|
|
|
- |
|
Common
stock issued, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issuance
costs of $2,056,336
|
|
|
9,259,259 |
|
|
|
22,943,664 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,943,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
69,079,270 |
|
|
|
115,989,879 |
|
|
|
2,002,220 |
|
|
|
(80,353,188 |
) |
|
|
- |
|
|
|
181,800 |
|
|
|
37,820,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(31,470,621 |
) |
|
|
- |
|
|
|
- |
|
|
|
(31,470,621 |
) |
Other
comprehensive income, net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(667,200 |
) |
|
|
(667,200 |
) |
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,137,821 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
397,767 |
|
|
|
3,487,384 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,885,151 |
|
Exercise
of stock options
|
|
|
280,914 |
|
|
|
625,603 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
625,603 |
|
Exercise
of warrants
|
|
|
2,314,189 |
|
|
|
6,248,314 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,248,314 |
|
Issuance
of restricted stock
|
|
|
69,909 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Common
stock issued, net of issuance costs of $2,504,558
|
|
|
12,324,095 |
|
|
|
40,518,612 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
40,518,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
84,068,377 |
|
|
|
163,780,176 |
|
|
|
5,489,604 |
|
|
|
(111,823,809 |
) |
|
|
- |
|
|
|
(485,400 |
) |
|
|
56,960,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(29,068,165 |
) |
|
|
- |
|
|
|
- |
|
|
|
(29,068,165 |
) |
Other
comprehensive income, net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,387,200 |
) |
|
|
(1,387,200 |
) |
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,455,365 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
1,262,769 |
|
|
|
(111,957 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,150,812 |
|
Exercise
of stock options
|
|
|
339,211 |
|
|
|
527,738 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
527,738 |
|
Exercise
of warrants
|
|
|
400,224 |
|
|
|
752,114 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
752,114 |
|
Issuance
of restricted stock
|
|
|
141,746 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Recovery
of short swing profits
|
|
|
- |
|
|
|
177,210 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
177,210 |
|
Common
stock issued, net of issuance costs of $0
|
|
|
8,193,713 |
|
|
|
13,605,294 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,605,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
93,143,271 |
|
|
$ |
180,105,301 |
|
|
$ |
5,377,647 |
|
|
$ |
(140,891,974 |
) |
|
$ |
- |
|
|
$ |
(1,872,600 |
) |
|
$ |
42,718,374 |
|
See notes
to the consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Expressed
in United States Dollars)
|
|
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(29,068,165 |
) |
|
$ |
(31,470,621 |
) |
|
$ |
(17,200,283 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,758,703 |
|
|
|
1,953,876 |
|
|
|
1,519,750 |
|
Minority
interest in operations
|
|
|
(271,566 |
) |
|
|
(630,717 |
) |
|
|
- |
|
Securities
received in payment of license fees
|
|
|
- |
|
|
|
(13,580 |
) |
|
|
(529,620 |
) |
Share-based
compensation
|
|
|
1,150,812 |
|
|
|
3,885,151 |
|
|
|
2,283,734 |
|
Loss
on disposal of fixed assets
|
|
|
382,018 |
|
|
|
- |
|
|
|
107,276 |
|
Settlement
and release
|
|
|
3,605,294 |
|
|
|
- |
|
|
|
- |
|
Impairment
of investment
|
|
|
88,701 |
|
|
|
- |
|
|
|
- |
|
Accrued
interest on notes receivable
|
|
|
(83,409 |
) |
|
|
(89,435 |
) |
|
|
- |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
362,938 |
|
|
|
(187,994 |
) |
|
|
(527,657 |
) |
Accounts
receivable from related party, net
|
|
|
- |
|
|
|
495,000 |
|
|
|
(495,000 |
) |
Notes
receivable from related party, net
|
|
|
1,721,919 |
|
|
|
(1,219,075 |
) |
|
|
(330,000 |
) |
Product
inventories
|
|
|
(98,112 |
) |
|
|
230,887 |
|
|
|
(169,666 |
) |
Prepaid
expenses and other current assets
|
|
|
227,341 |
|
|
|
(385,997 |
) |
|
|
(159,323 |
) |
Other
assets
|
|
|
- |
|
|
|
(101,457 |
) |
|
|
49,939 |
|
Trade
accounts payable
|
|
|
(7,074,861 |
) |
|
|
5,097,665 |
|
|
|
664,890 |
|
Accrued
salaries and benefits
|
|
|
(878,282 |
) |
|
|
1,398,891 |
|
|
|
130,870 |
|
Accrued
warranty
|
|
|
(2,879,520 |
) |
|
|
2,915,990 |
|
|
|
- |
|
Accrued
liabilities
|
|
|
4,900 |
|
|
|
233,048 |
|
|
|
217,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(30,051,289 |
) |
|
|
(17,888,368 |
) |
|
|
(14,437,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of available for sale securities
|
|
|
- |
|
|
|
33,675,001 |
|
|
|
30,150,000 |
|
Purchase
of available for sale securities
|
|
|
- |
|
|
|
(23,049,840 |
) |
|
|
(23,924,710 |
) |
Interest
on available for sale securities
|
|
|
3,911 |
|
|
|
3,928 |
|
|
|
23,264 |
|
Purchase
of property and equipment
|
|
|
(3,046,386 |
) |
|
|
(4,066,388 |
) |
|
|
(4,542,921 |
) |
Proceeds
from sale of assets
|
|
|
35,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by investing activities
|
|
|
(3,007,475 |
) |
|
|
6,562,701 |
|
|
|
1,705,633 |
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Expressed
in United States Dollars)
|
|
|
|
|
|
Year
Ended December 31,
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of common shares for cash, net of issuance
costs
|
|
$ |
10,000,000 |
|
|
$ |
40,518,612 |
|
|
$ |
22,943,663 |
|
Proceeds
from exercise of stock options
|
|
|
527,738 |
|
|
|
625,603 |
|
|
|
347,653 |
|
Proceeds
from exercise of warrants
|
|
|
752,114 |
|
|
|
6,248,314 |
|
|
|
455,670 |
|
Proceeds
from recovery of short swing profits
|
|
|
177,210 |
|
|
|
- |
|
|
|
- |
|
Proceeds
from notes payable
|
|
|
345,599 |
|
|
|
- |
|
|
|
- |
|
Payment
of notes payable
|
|
|
(813,466 |
) |
|
|
(600,000 |
) |
|
|
(600,000 |
) |
Proceeds
from long-term debt
|
|
|
12,385 |
|
|
|
- |
|
|
|
- |
|
Repayment
of long-term debt
|
|
|
(479 |
) |
|
|
- |
|
|
|
- |
|
Minority
interest
|
|
|
- |
|
|
|
2,000,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
11,001,101 |
|
|
|
48,792,530 |
|
|
|
23,146,986 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(22,057,663 |
) |
|
|
37,466,863 |
|
|
|
10,414,836 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
50,146,117 |
|
|
|
12,679,254 |
|
|
|
2,264,418 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
28,088,454 |
|
|
$ |
50,146,117 |
|
|
$ |
12,679,254 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
132,553 |
|
|
$ |
168,000 |
|
|
$ |
105,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
None
|
|
|
None
|
|
|
None
|
Supplemental
schedule of non-cash investing and financing activities:
|
|
|
|
For
the year ended December 31, 2008:
|
|
|
-
We made property and equipment purchases of $9,887 which are included in
trade accounts payable at December 31, 2008.
|
-
We had an unrealized loss on available for sale securities of
$1,387,200.
|
-
We issued 141,746 shares of restricted stock to employees and directors
having a fair value of approximately $303,000 for which no cash will be
received.
|
-
We issued 2,117,647 shares of stock as a settlement and release of all
known claims to Al Yousuf, LLC having a fair value of $3,605,294 for which
no cash will be received.
|
|
|
|
|
For
the year ended December 31, 2007:
|
|
|
|
-
We received 1,000,000 shares of common stock valued at $106,518 in
connection with the Phoenix Motorcar, Inc. January 2007 purchase
agreement. The investment was recorded with an offset to
deferred revenue.
|
|
-
We issued 69,909 shares of restricted stock to employees and directors
having a fair value of approximately $236,538 for which no cash will be
received.
|
|
- We
made property and equipment purchases of $1,183,235 which are included in
trade accounts payable at December 31, 2007.
|
|
- We
had an unrealized loss on available for sale securities of
$667,200.
|
|
|
|
|
|
|
|
|
|
For
the year ended December 31, 2006:
|
|
|
|
|
-
We issued 77,875 shares of restricted stock to employees and directors
having a fair value of approximately $281,000 for which no cash will be
received.
|
|
-
We made property and equipment purchases of $59,252 which are included in
trade accounts payable at December 31, 2006.
|
|
-
We had an unrealized gain on available for sale securities of
$353,800.
|
|
|
|
|
|
|
See
notes to the consolidated financial statements.
|
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006
(Expressed
in United States Dollars)
1.
|
DESCRIPTION
OF BUSINESS AND BASIS OF
PRESENTATION
|
Description of
Business — We are a Canadian company, with principal assets and
operations in the United States of America, whose primary business is developing
and commercializing nanomaterial and titanium dioxide pigment
technologies. 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 primary facilities are
located in Reno, Nevada, of approximately 100,000 square feet, and in Anderson,
Indiana, of approximately 70,000 square feet.
Principles of
Consolidation — The consolidated financial statements include the
accounts of Altair Nanotechnologies Inc. and our subsidiaries which include (1)
Altair US Holdings, Inc., (2) Mineral Recovery Systems, Inc. (“MRS”), (3) Fine
Gold Recovery Systems, Inc. (“FGRS”) dissolved on December 30, 2008, and (4)
Altairnano, Inc. (“ANI”), (collectively referred to as the “Company”), all of
which are 100% owned and (5) AlSher Titania LLC, which is 70% owned by ANI. All
of the subsidiaries are incorporated in the United States of America.
Inter-company transactions and balances have been eliminated in
consolidation.
Basis of
Presentation — The accompanying consolidated financial statements have
been prepared on a going concern basis which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
shown in the consolidated financial statements for the years ended December 31,
2008, 2007 and 2006, we incurred net losses of $29,068,165, $31,470,621, and
$17,200,283, respectively. At December 31, 2008 and 2007, we had
stockholders’ equity of $42,718,374 and $56,960,571, respectively.
The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern. Our continuation as a going concern is dependent
upon our ability to generate sufficient cash flow to meet our obligations on a
timely basis, to obtain additional financing or refinancing as may be required,
to develop commercially viable products and processes, and ultimately to
establish profitable operations. We have financed operations through
operating revenues and through the issuance of equity securities (common shares,
convertible debentures, stock options and warrants), and debt (term notes).
Until we are able to generate positive operating cash flows, additional funds
will be required to support operations. We believe that current working capital,
cash receipts from anticipated sales and funding through anticipated option and
warrant exercises will be sufficient to enable us to continue as a going concern
through 2009.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Use of Estimates
— The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires that we make estimates and assumptions that affect the reported amounts
of assets and liabilities, and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash
and Cash Equivalents — Cash
and cash equivalents consist principally of bank deposits and institutional
money market funds. Short-term investments that are highly liquid and
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”) and Canada Deposit Insurance Corporation (“CDIC”)
up to a maximum of US $250,000 and CN $100,000, respectively, per
depositor. At December 31, 2007, we had cash deposits of
approximately $8.7 million in excess of FDIC insurance limits and none as of
December 31, 2008.
Investment in
Available for Sale Securities (long-term) —
Available for sale securities (long-term) includes publicly-traded
equity investments which are classified as available for sale and recorded at
market value 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.
Accounts
Receivable — Accounts receivable consists of amounts due from customers
for services and product sales, net of an allowance for losses. We
determine the allowance for doubtful accounts by reviewing each customer account
and specifically identifying any potential for loss. The allowance
for doubtful accounts at December 31, 2008 was $82,825. As of
December 31, 2007 management determined that all amounts due were fully
collectible accordingly; no allowance was recorded. The allowance for
doubtful accounts at December 31, 2006 was $62,185. Actual losses
related to collection of accounts receivable for the years ended December 31,
2008, 2007 and 2006 were insignificant.
Inventory
– We value
our inventories generally at the lower of cost (first-in, first-out method) or
market. We employ a full absorption procedure using standard cost
techniques. The standards are customarily reviewed and adjusted
annually. Overhead rates are recorded to inventory based on normal
capacity. Any idle facility costs or excessive spoilage are recorded
as current period charges.
Property, Plant
and Equipment — Property, plant and equipment held and used are stated at
cost less accumulated depreciation. Depreciation is recorded using the
straight-line method over the following useful lives:
Furniture
and office equipment
|
|
3–7
years
|
Vehicles
|
|
5
years
|
Nanoparticle
production equipment
|
|
5–10
years
|
Building
and improvements
|
|
30
years
|
We have
property, plant and equipment that is held and not used stated at cost less
accumulated depreciation. Depreciation is recorded using the
straight-line method over the useful lives established for property, plant and
equipment held and used.
Patents —
Patents related to the nanoparticle production technology are carried at
cost and amortized on a straight-line basis over their estimated useful lives,
which range from 14 to 17 years.
Notes Receivable
— Notes receivable consists of amounts due from customers for services
and product sales, net of an allowance on notes receivable. We
determine an allowance on notes receivable based on a review of the customer’s
financial status performed on a bi-annual basis. Notes receivable
are also reviewed to determine if discounts are required to be booked for
notes that are not issued at prevailing market rates. At December 31,
2008 and 2007, no allowance or discounts were required to be
recorded. Interest income is calculated and recognized according to
the contractual terms of the notes receivable. In the event an
allowance on notes receivable is required or the note is in default, the accrual
of interest income will be discontinued. The accrual of interest
income resumes if the customer’s financial status indicates that collection is
likely or the default is cured.
Research and
Development Expenditures — The costs of materials, equipment, or
facilities that are acquired or constructed for a particular research and
development project and that have no alternative future uses (in other research
and development projects or otherwise) are expensed as research and development
costs at the time the costs are incurred. Research and development
expenditures related to materials and equipment or facilities that are acquired
or constructed for research and development activities and that have alternative
future uses (in research and development projects or otherwise) are capitalized
when acquired or constructed. Research and development expenditures, which
include the cost of materials consumed in research and development activities,
salaries, wages and other costs of personnel engaged in research and
development, costs of services performed by others for research and development
on our behalf and indirect costs are expensed as research and development costs
when incurred.
Foreign Currency Translation — Asset and
liability accounts, which are originally recorded in the appropriate local
currencies, are translated into U.S. dollars at year-end exchange rates. Revenue
and expense accounts are translated at the average exchange rates for the
period. Transaction gains and losses are included in the accompanying
consolidated statements of operations. Substantially all of our assets are
located in the United States of America.
Stock-Based
Compensation — As of January 1, 2006, we adopted the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 123 (R), Accounting for Stock-Based
Compensation. Under the provisions of SFAS 123 (R), we are required to
measure the cost of services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. That
cost is recognized over the period during which services are provided in
exchange for the award, known as the requisite service period (usually the
vesting period).
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.
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 collectability is probable. Our revenues
are derived from license fees, product sales, commercial collaborations and
contracts and grants. 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. Payments received in advance relating to the future
performance of services or delivery of products is 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. The liability for estimated warranty obligations may
also be adjusted based on specific warranty issues identified.
Minority Interest
— In April 2007, The Sherwin-Williams Company (“Sherwin”) entered into an
agreement with us to form AlSher Titania LLC, a Delaware limited liability
company (“AlSher”). AlSher is a joint venture combining certain
technologies of ours 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 Sherwin, AlSher, and us, we contributed to
AlSher an exclusive license to use our technology (including our hydrochloride
pigment process) for the production of titanium dioxide pigment and other
titanium containing materials (other than battery or nanoelectrode materials)
and certain pilot plant assets with a net book value of
$3,110,000. We received no consideration for the license granted to
AlSher other than our 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 100 ton pigment
pilot processing plant was commissioned in February 2008 and the costs
associated with this effort were partially reimbursed by AlSher. We
contribute 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 our subsidiaries because we
have 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.
Overhead
Allocation — Facilities overhead, which is comprised primarily of
occupancy and related expenses, and fringe benefit expenses are initially
recorded in general and administrative expenses and then allocated to research
and development and product inventories based on relative labor
costs.
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, as discussed in Notes 11 and
12, were included in the computation of diluted loss per share as they were
anti-dilutive. Stock options and warrants to purchase a total of
4,637,989, 5,307,913, and 6,534,747 common shares were excluded from the
calculations of diluted loss per share for the years ended December 31, 2008,
2007 and 2006, respectively.
Accumulated Other
Comprehensive (Loss)/Gain — Accumulated other
comprehensive (loss)/gain consists entirely of unrealized (loss)/gain on the
investment in available for sale securities. The components of
comprehensive loss for the years ended December 31, 2008, 2007 and 2006 are as
follows:
|
|
Year
Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Net
loss
|
|
$ |
(29,068,165 |
) |
|
$ |
(31,470,621 |
) |
|
$ |
(17,200,283 |
) |
Unrealized
(loss) gain on investment in
available for sale securities, net of taxes of $0
|
|
|
(1,387,200 |
) |
|
|
(667,200 |
) |
|
|
353,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$ |
(30,455,365 |
) |
|
$ |
(32,137,821 |
) |
|
$ |
(16,846,483 |
) |
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 on the basis 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.
Fair Value of
Financial Instruments — Our financial instruments such as cash and cash
equivalents and long-term debt, when valued using market interest rates, would
not be materially different from the amounts presented in the consolidated
financial statements.
Recent Accounting
Pronouncements — In April 2008, the FASB issued Financial Staff Position
(“FSP”) No. FAS 142-3, Determination of the Useful Life of Intangible
Assets. FSP No FAS 142-3 amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142. “Goodwill and Other
Intangible Assets.” The intent of the position is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
No. 142 and the period of expected cash flows used to measure the fair value of
the asset under SFAS No. 141R, and other U.S. generally accepted accounting
principles. The provisions of FSP No. FAS 142-3 are effective for
fiscal years beginning after December 15, 2008. FSP No. FAS 142-3 is
effective for our fiscal year beginning January 1, 2009. We do not
anticipate FSP No. FAS 142-3 will have a material impact on
our consolidated financial statements upon adoption.
In December 2007, the FASB
issued SFAS No. 141 (revised 2007), “Business Combinations”
(SFAS No. 141(R)). Under SFAS No. 141(R), an entity is
required to recognize the assets acquired, liabilities assumed, contractual
contingencies, and contingent consideration at their fair value on the
acquisition date. It further requires that acquisition-related costs be
recognized separately from the acquisition and expensed as incurred,
restructuring costs generally be expensed in periods subsequent to the
acquisition date, and changes in accounting for deferred tax asset valuation
allowances and acquired income
tax uncertainties after the measurement period impact income tax expense. In
addition, acquired in-process research and development (IPR&D) is
capitalized as an intangible asset and amortized over its estimated useful life.
The adoption of SFAS No. 141(R) will change our accounting treatment
for business combinations on a prospective basis beginning in the first quarter
of fiscal year 2009.
In
December 2007, the U.S. Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin 110 (SAB 110) to amend the SEC’s views
discussed in Staff Accounting Bulletin 107 (SAB 107) regarding
the use of the simplified method in developing an estimate of expected life of
share options in accordance with SFAS No. 123(R). SAB 110 is
effective for us beginning in the first quarter of fiscal year
2008. Since we have never utilized the simplified method in
developing an estimate of expected live of share options, the adoption of SAB
110 will not impact our consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS
No. 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This
Statement also changes the way the consolidated income statement is
presented. It requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the
noncontrolling interest. It also requires disclosure, on the face of
the consolidated statement income, of the amounts of the consolidated net income
attributable to the parent and to the noncontrolling interest. SFAS
No. 160 will be effective for our Company on January 1, 2009. We do
not believe the adoption of SFAS No. 160 for our consolidated
noncontrolling interest, effective January 1, 2009, will have a material
impact on our consolidated financial statements.
In June
2007, the FASB ratified EITF Issue No. 07-3, “Accounting for Nonrefundable
Advance Payments for Goods or Services to Be Used in Future Research and
Development Activities” (EITF 07-3). EITF 07-3 requires non-refundable
advance payments for goods and services to be used in future research and
development (R&D) activities to be recorded as assets and the payments to be
expensed when the R&D activities are performed. EITF 07-3 applies
prospectively for new contractual arrangements entered into beginning in the
first quarter of fiscal year 2008. Prior to adoption, we recognized these
non-refundable advance payments in excess of $5,000 as assets and expensed
amounts less than $5,000 upon payment. The adoption of EITF 07-3 is not
expected to have a significant impact on our consolidated financial
statements.
In April
2007, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”), which will become effective for
the first fiscal year that begins after November 15, 2007. This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured
at fair value. Any unrealized gains and losses associated with the
instruments or other balances for which the fair value option has been elected
are reported in earnings at each subsequent reporting date. We did
not elect the fair value option for any of our financial assets or
liabilities.
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements."
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value and expands disclosure requirements about fair value measurements. SFAS
No. 157 was effective for our Company on January 1, 2008. However, in
February 2008, the FASB released FASB Staff Position (FSP FAS 157-2 —
Effective Date of FASB Statement No. 157), which delayed the effective date
of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The adoption of SFAS
No. 157 for our financial assets and liabilities did not have a material
impact on our consolidated financial statements. We do not believe the adoption
of SFAS No. 157 for our non-financial assets and liabilities, effective
January 1, 2009, will have a material impact on our consolidated financial
statements. Refer to Note 4 – Fair Value Measurements Investment
in Available For Sale Securities.
Reclassifications
— Certain reclassifications have been made to prior period amounts to
conform to classifications adopted in the current year.
3.
|
INVESTMENT
IN AVAILABLE FOR SALE
SECURITIES
|
Investments
in available for sale securities (long-term) consists of auction rate corporate
notes and investments in common stock as discussed below.
The
auction rate corporate notes are long-term instruments with expiration dates
through 2017. Through the third quarter of 2007, the interest was
settled and the rate reset every 7 to 28 days and historically these investments
were classified as short-term investments. However, in the fourth
quarter of 2007 due to a change in the liquidity of the auction rate market,
sell orders have exceeded bid orders in that market, and the interest relating
to these investments was reset to a contractual rate of London Interbank
Offering Rate plus 50 basis points, which is not a market rate. Based
on this change in the liquidity, these investments were evaluated to determine
if there was impairment at December 31, 2008. Our evaluation included
consultation with our investment advisors, assessment of the strength of the
financial institution paying the interest on these investments, ratings of the
underlying collateral, and a probability-weighted discounted cash flow
analysis. Based on this analysis, we estimate that at December 31,
2008 their fair value was $2,816,103, representing a cumulative unrealized
holding loss of approximately $1,092,000. 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 impaired at December 31, 2008.
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, we currently intend
to hold them indefinitely. The shares were received as payment of
licensing and product improvement fees in connection with a license agreement
for RenaZorb. Upon receipt, the shares were recorded at their market
value as measured by their closing price on the NASDAQ Capital Market, resulting
in a recorded basis of $1,138,200. At December 31, 2008, their fair
value was approximately $357,600 representing an unrealized holding loss of
approximately $780,600. We evaluated this investment to determine if
there is an other than temporary impairment at December 31, 2008. Our
evaluation took into consideration published investment analysis, status of drug
candidates in development, analysts’ recommendations, insider trading activity,
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 December 31, 2008.
4.
|
FAIR
VALUE MEASUREMENTS
|
On
October 10, 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not
Active. The FSP clarifies the application of FASB Statement
No. 157, Fair Value Measurements, in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not
active. The FSP is effective immediately, and includes prior period
financial statements that have not yet been issued, and therefore the company
was subject to the provision of the FSP effective September 30,
2008. The implementation of FSP FAS 157-3 did not affect the
Company’s fair value measurement as of December 31, 2008.
Effective
January 1, 2008, we adopted SFAS 157, Fair Value Measurements, for
all financial instruments accounted for at fair value on a recurring
basis. SFAS 157 establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the SFAS 157
framework requires fair value to be determined based on the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. SFAS 157 establishes
market or observable inputs as the preferred source of values, followed by
assumptions based on hypothetical transactions in the absence of market
inputs.
The
valuation techniques required by SFAS 157 are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect our market assumptions.
These two types of inputs create the following fair value
hierarchy:
|
Level 1
-
|
Quoted
prices for identical instruments in active
markets.
|
|
Level 2
-
|
Quoted
prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant
value drivers are observable.
|
|
Level 3
-
|
Significant
inputs to the valuation model are
unobservable.
|
The
following table summarizes the valuation of our assets by the SFAS 157 fair
value hierarchy at December 31, 2008:
|
Assets
at fair value:
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Auction
rate corporate notes
|
|
$ |
2,816,103 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,816,103 |
|
|
Spectrum
Pharmaceuticals, Inc.
|
|
|
357,600 |
|
|
|
357,600 |
|
|
|
- |
|
|
|
- |
|
|
Investment
in available for sale securities
|
|
$ |
3,173,703 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,173,703 |
|
Financial
instruments that trade in less liquid markets with limited pricing information,
generally include both observable and unobservable inputs. In
instances where observable data is unavailable, we consider the assumptions that
market participants would use in valuing the asset. Such investments
are categorized in Level 3 as the inputs generally are not
observable. Our evaluation included consultation with our investment
advisors, assessment of the strength of the financial institution paying the
interest on these investments, ratings of the underlying collateral, and a
probability-weighted discounted cash flow analysis.
Product
Inventories consisted of the following at December 31, 2008 and
2007:
|
|
2008
|
|
|
2007
|
|
Raw
materials
|
|
$ |
98,112 |
|
|
$ |
- |
|
Work
in process
|
|
|
- |
|
|
|
- |
|
Finished
goods
|
|
|
- |
|
|
|
- |
|
Demonstration
units
|
|
|
- |
|
|
|
- |
|
Total
product inventories
|
|
$ |
98,112 |
|
|
$ |
- |
|
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 December 31, 2008, raw
materials inventory relates to lithium titanate spinel (LTO).
Due to
uncertainties regarding salability of our inventory resulting from our decision
to replace 47 of the Phoenix battery packs manufactured in 2007 due to a
potential module configuration problem and the related proposal to utilize a new
prototype battery for future production, all inventory on hand at December 31
2007 targeted for the future manufacture of Phoenix battery packs of $2,529,939
was charged to cost of sales in the consolidated statement of
operations.
6.
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property,
plant and equipment used in operations consisted of the following as of December
31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Machinery
and equipment
|
|
$ |
11,062,069 |
|
|
$ |
14,265,125 |
|
Building
and improvements
|
|
|
5,083,363 |
|
|
|
3,926,754 |
|
Furniture,
office equipment & other
|
|
|
838,258 |
|
|
|
560,215 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
16,983,690 |
|
|
|
18,752,094 |
|
Less
accumulated depreciation
|
|
|
(5,346,958 |
) |
|
|
(4,203,257 |
) |
Total
property and equipment
|
|
$ |
11,636,732 |
|
|
$ |
14,548,837 |
|
Property,
plant and equipment not used in operations consisted of the following as of
December 31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Machinery
and equipment
|
|
$ |
3,385,082 |
|
|
$ |
- |
|
Building
and improvements
|
|
|
- |
|
|
|
- |
|
Furniture,
office equipment & other
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,385,082 |
|
|
|
- |
|
Less
accumulated depreciation
|
|
|
(1,007,610 |
) |
|
|
- |
|
Total
property and equipment
|
|
$ |
2,377,472 |
|
|
$ |
- |
|
Depreciation
expense for the years ended December 31, 2008, 2007, and 2006 totaled
$2,673,888, $1,869,061, and $1,434,935, respectively.
Patents
consisted of the following at December 31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Patents
and patent applications
|
|
$ |
1,517,736 |
|
|
$ |
1,517,736 |
|
Less
accumulated amortization
|
|
|
(882,118 |
) |
|
|
(797,303 |
) |
Total
patents and patent applications
|
|
$ |
635,618 |
|
|
$ |
720,433 |
|
All
patents are being amortized on a straight-line basis over their useful lives
with a weighted average amortization period of approximately 16.5 years.
Amortization expense was $84,815, for each of the years ended December 31, 2008,
2007 and 2006, respectively. For each of the next five years,
amortization expense relating to intangibles is expected to be approximately
$85,000 per year.
Accrued
warranty consisted of the following at December 31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Beginning
Balance – January
|
|
$ |
2,915,990 |
|
|
$ |
- |
|
Additions
|
|
|
- |
|
|
|
2,915,990 |
|
Release
of obligation
|
|
|
(2,279,520 |
) |
|
|
- |
|
Ending
Balance – December
|
|
$ |
36,470 |
|
|
$ |
2,915,990 |
|
We
provided a limited warranty for battery products sold under the January 2007
purchase and supply agreement with Phoenix and the July 2007 AES development
agreement. The balance of $2,915,990 reflects a one-time adjustment
of $2,856,902 to record the provision for warranty claims resulting from our
decision to replace 47 of the Phoenix battery packs manufactured in 2007 due to
a potential module configuration problem that could result in
overheating. The remaining balance of $36,470 reflects the warranty
recorded in connection with the AES prototype battery pack purchase in
2007. Based on an agreement reached between Phoenix and Altair in
July 2008 (refer to Note 17. Related Party Transactions), the Phoenix warranty
liability was reversed.
Accrued
liabilities consisted of the following at December 31, 2008 and
2007:
|
|
2008
|
|
|
2007
|
|
Accrued
interest
|
|
$ |
77,000 |
|
|
$ |
115,500 |
|
Accrued
use tax
|
|
|
10,525 |
|
|
|
48,630 |
|
Accrued
property tax
|
|
|
44,075 |
|
|
|
40,220 |
|
Accrued
mineral lease payments
|
|
|
67,172 |
|
|
|
66,022 |
|
Accrued
reclamation costs
|
|
|
7,810 |
|
|
|
11,166 |
|
Accrued
straight line rent
|
|
|
71,511 |
|
|
|
61,998 |
|
Deferred
revenue
|
|
|
365,052 |
|
|
|
413,270 |
|
Accrued
fee
|
|
|
121,400 |
|
|
|
- |
|
Other
|
|
|
- |
|
|
|
2,838 |
|
|
|
$ |
764,545 |
|
|
$ |
759,644 |
|
Notes
payable consisted of the following at December 31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Note
payable to BHP Minerals International, Inc.
|
|
$ |
1,200,000 |
|
|
$ |
1,800,000 |
|
Note
payable to AICCO, Inc.
|
|
|
132,133 |
|
|
|
- |
|
Capital
lease to Dell Financial Services
|
|
|
11,906 |
|
|
|
- |
|
Less
current portion
|
|
|
(735,740 |
) |
|
|
(600,000 |
) |
Long-term
portion of notes payable
|
|
$ |
608,299 |
|
|
$ |
1,200,000 |
|
On August
8, 2002, we entered into a purchase and sale agreement with BHP Minerals
International, Inc. (“BHP”), wherein we purchased the land, building and
fixtures in Reno, Nevada where our titanium processing assets are located. In
connection with this transaction, BHP also agreed to terminate our obligation to
pay royalties associated with the sale or use of the titanium processing
technology. In return, 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. Interest did not
begin to accrue until August 8, 2005. As a result, we imputed interest and
reduced the face amount of the note payable by $566,763, which was then
amortized to interest expense from inception of the note through August 8, 2005.
Payments are due in February of each year beginning in 2006. All
payments have been made through February 8, 2009. An additional
payment of $600,000 plus accrued interest is due on February 8,
2010.
11.
|
STOCK
BASED COMPENSATION
|
At
December 31, 2008, 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
ours. This Plan is described in more detail below. The
compensation cost that has been charged against income for this Plan was
$1,150,812, $3,885,151, and $2,283,734 for the years ended 2008, 2007 and 2006,
respectively. Of this amount, $167,735, $821,545 and $433,763 was
recognized in connection with restricted stock and options granted to
non-employees for the years ended 2008, 2007 and 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, under which we may not make future
grants, authorized a total of 6,600,000 shares, of which options for 5,745,500
were granted and options for 590,900 are outstanding and unexercised at December
31, 2008. Options granted under the plans generally are granted with an exercise
price equal to the market value of a common share at the date of grant, have
five- or ten-year terms and typically vest over periods ranging from immediately
to three years from the date of grant. The estimated fair value of
equity-based awards, less expected forfeitures, is amortized over the awards’
vesting period utilizing the graded vesting method. Under this
method, unvested amounts begin amortizing at the beginning of the month in which
the options are granted.
In
calculating compensation recorded related to stock option grants for the years
ended December 31, 2008 and 2007, the fair value of each stock option is
estimated on the date of grant using the Black-Scholes-Merton option-pricing
model and the following weighted average assumptions:
|
2008
|
|
2007
|
Dividend
yield
|
None
|
|
None
|
Expected
volatility
|
76%
|
|
85%
|
Risk-free
interest rate
|
3.00%
|
|
4.60%
|
Expected
life (years)
|
4.92
|
|
4.85
|
The
computation of expected volatility used in the Black-Scholes Merton
option-pricing model is based on the historical volatility of our share
price. The expected term is estimated based on a review of historical
and future expectations of employee exercise behavior.
A summary
of option activity under our equity-based compensation plans as of December 31,
2008, and changes during the year then ended is presented below:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
(Years)
|
|
|
Value
|
|
|
Outstanding
at January 1, 2008
|
|
|
4,166,207 |
|
|
$ |
2.81 |
|
|
|
7.0 |
|
|
$ |
6,024,389 |
|
|
Granted
|
|
|
2,131,917 |
|
|
|
3.04 |
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(339,211 |
) |
|
|
1.56 |
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(2,002,406 |
) |
|
|
2.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2008
|
|
|
3,956,507 |
|
|
$ |
3.03 |
|
|
|
7.4 |
|
|
$ |
10,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2008
|
|
|
1,905,605 |
|
|
$ |
3.14 |
|
|
|
5.8 |
|
|
$ |
900 |
|
Shares
issued to non-employees reflected in the table above include 646,000 shares
outstanding at January 1, 2008, 136,667 shares granted, and 75,000 shares
exercised during the year ended December 31, 2008, resulting in 707,667 shares
outstanding of which 508,166 shares were exercisable as of December 31,
2008.
The
weighted-average grant-date fair value of options granted during 2008, 2007 and
2006 was $1.89, $2.05 and $2.29, respectively. The total intrinsic
value of options exercised during the years ended December 31, 2008, 2007, and
2006 was $407,562, $510,745, and $314,010, respectively.
A summary
of the status of non-vested shares at December 31, 2008 and changes during the
year then ended, is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
Non-vested
shares at January 1, 2008
|
|
|
1,568,720 |
|
|
$ |
2.96 |
|
Granted
|
|
|
2,131,917 |
|
|
|
3.04 |
|
Vested
|
|
|
(707,598 |
) |
|
|
3.04 |
|
Forfeited/Expired
|
|
|
(942,137 |
) |
|
|
3.18 |
|
|
|
|
|
|
|
|
|
|
Non-vested
shares at December 31, 2008
|
|
|
2,050,902 |
|
|
$ |
2.92 |
|
Non-vested
shares relating to non-employees reflected in the table above include 155,666
shares outstanding at January 1, 2008, 136,667 shares granted and 92,832 shares
exercised during the year ended December 31, 2008, resulting in 199,501
non-vested shares outstanding at December 31, 2008.
As of
December 31, 2008, there was $869,455 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 one
year. The total fair value of options vested during the year ended
December 31, 2008 was $1,478,479.
Cash
received from warrant and stock option exercises for the years ended December
31, 2008, 2007, and 2006 was $1,279,852, $6,873,917, and $803,323,
respectively.
Restricted
Stock
Our stock
incentive plan provides for the granting of other incentive awards in addition
to stock options. During the year ended December 31, 2008, the Board
of Directors approved grants of 143,079 shares of restricted stock under the
plan with a weighted average fair value of $2.11 per
share. Restricted shares have the same voting and
dividend rights as our unrestricted common shares, vest over a two-year period
and are subject to the employee’s continued service. Compensation
cost for restricted stock is recognized in the financial statements on a pro
rata basis over the vesting period.
A summary
of the changes in restricted stock outstanding during the year ended December
31, 2008 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
Date
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
Non-vested
shares at January 1, 2008
|
|
|
87,857 |
|
|
$ |
3.07 |
|
Granted
|
|
|
143,079 |
|
|
|
2.11 |
|
Vested
|
|
|
(65,296 |
) |
|
|
2.93 |
|
Forfeited/Expired
|
|
|
(1,333 |
) |
|
|
2.27 |
|
|
|
|
|
|
|
|
|
|
Non-vested
shares at December 31, 2008
|
|
|
164,307 |
|
|
$ |
2.27 |
|
Non-vested
shares relating to non-employees reflected in the table above include 71,524
shares outstanding at January 1, 2008, 143,079 shares granted and 50,296 shares
vested during the year ended December 31, 2008, resulting in 164,307 non-vested
shares outstanding at December 31, 2008.
As of
December 31, 2008, we had $373,266 of total unrecognized compensation expense,
net of estimated forfeitures, related to restricted stock which will be
recognized over the weighted average period of 1.7 years.
Warrants —
Warrant activity for the years ended December 31, 2008, 2007, and 2006 is
summarized as follows:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
Outstanding
at beginning of year
|
|
|
1,141,706 |
|
|
$ |
3.26 |
|
|
|
3,256,525 |
|
|
$ |
2.84 |
|
|
|
1,518,556 |
|
|
$ |
3.17 |
|
Issued
|
|
|
- |
|
|
|
- |
|
|
|
296,407 |
|
|
|
3.29 |
|
|
|
2,546,301 |
|
|
|
2.76 |
|
Expired
|
|
|
(60,000 |
) |
|
|
2.50 |
|
|
|
(97,037 |
) |
|
|
2.58 |
|
|
|
572,164 |
) |
|
|
3.63 |
|
Exercised
|
|
|
(400,224 |
) |
|
|
1.88 |
|
|
|
(2,314,189 |
) |
|
|
2.70 |
|
|
|
236,168 |
) |
|
|
1.93 |
|
Outstanding
at end of year
|
|
|
681,482 |
|
|
$ |
4.15 |
|
|
|
1,141,706 |
|
|
$ |
3.26 |
|
|
|
3,256,525 |
|
|
$ |
2.84 |
|
Currently
exercisable
|
|
|
681,482 |
|
|
$ |
4.15 |
|
|
|
1,141,706 |
|
|
$ |
3.26 |
|
|
|
3,256,525 |
|
|
$ |
2.84 |
|
The
following table summarizes information about warrants outstanding at December
31, 2008:
|
|
|
Warrants
Outstanding and Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
Range
of
|
|
|
|
|
|
Contractual
|
|
|
Exercise
|
|
Exercise
Prices
|
|
|
Warrants
|
|
|
Life
(Years)
|
|
|
Price
|
|
$ |
2.50
to $3.49
|
|
|
|
231,482 |
|
|
|
3.0 |
|
|
$ |
3.38 |
|
$ |
3.50
to $5.265 |
|
|
|
450,000 |
|
|
|
1.2 |
|
|
|
4.54 |
|
|
|
|
|
|
681,482 |
|
|
|
1.8 |
|
|
$ |
4.15 |
|
Except as
noted below, the warrants were issued in conjunction with debt and equity
offerings. The warrants expire on various dates ranging from February
2009 to December 2011.
Warrants Issued in Payment
of Services
The cost
associated with warrants issued as payment for outside services is estimated on
the date of issuance using the Black-Scholes-Merton option-pricing
model.
For the
year ending December 31, 2007, 200,000 warrants were issued in connection with
the Joint Development and Equipment Purchase Agreement with AES Energy Storage,
LLC and the related Warrant Issuance Agreement signed on July 20,
2007. Pursuant to this agreement, an initial warrant to purchase
200,000 common shares of ours at $3.64 per share was issued. Since
the Initial Warrant did not become exercisable until December 31, 2007, the fair
value of the warrants was estimated at the issuance date and adjusted using
variable accounting until the final vesting date
occurred. Based on the following assumptions at the vesting
date of expected life of 1.83 years, volatility of 43.7 %, annual rate of
quarterly dividends of $0 and the risk free interest rate of 3.5 %, a total of
$261,000 was recorded in stock compensation expense. All of these
warrants are outstanding at December 31, 2008.
For the
year ending December 31, 2006, 231,482 warrants were issued in connection with
the December 18, 2006 common share offering at a strike price of 125% of the
stock price on the issuance date, as a result, no intrinsic value existed at the
issuance date. The following assumptions were used to value the
warrant cost of $275,464, recorded as common stock issuance
cost: expected life of 2.57 years, volatility of 79%, annual rate of
quarterly dividends of $0 and risk free interest rate of 5.01%. All
of these warrants are outstanding at December 31, 2008.
For the
year ending December 31, 2005, 250,000 warrants were issued in connection with
the February 14, 2005 common stock offering at a strike price of approximately
106% of the stock price on the issuance date, as a result, no intrinsic value
existed at the issuance date. The following assumptions were used to
value the warrant cost of $639,459, recorded as common stock issuance
cost: expected life of 1.72 years, volatility of 107%, annual rate of
quarterly dividends of $0 and risk free interest rate of 3.07%. All
of these warrants are outstanding at December 31, 2007.
On
October 6, 2008, we entered into a Stock Purchase and Settlement Agreement with
Al Yousuf, LLC of which 2,117,647 shares of common stock were issued at a fair
value of $1.70 that were agreed upon as part of arms length negotiations, and
were recorded as settlement expense in Operating Expense for the twelve months
ended December 31, 2008. Additionally, 5,882,353 shares were acquired
at a purchase price of $1.70 per share for an aggregate purchase price of
$10,000,000 (refer to Note 17).
On
October 14, 2008, we expanded our Board of Directors to an aggregate of eight
directors and appointed Eqbal Al Yousuf to fill the vacancy. Mr. Al
Yousuf was also appointed to the Board’s Compensation Nominating and Governance
Committee.
On
November 29, 2007 we entered into a Purchase Agreement with Al Yousuf, LLC, a
United Arab Emirates limited liability company (“Investor”) relating to the
purchase by the Investor of 11,428,572 common shares (the “Shares”) of ours at a
purchase price of $3.50 per share, for an aggregate purchase price of
$40,000,000. The purchase closed in two stages, with a closing of
10,000,000 in shares on November 29, 2007 and a closing for the remaining shares
on December 10, 2007. Total commission and expenses of $2,373,618 were
paid to the placement agent in connection with this transaction. We
also executed a Registration Rights Agreement with the Investor pursuant to
which we are required to cause a registration statement registering the re-sale
of the Shares to be effective on the two-year anniversary of closing, to the
extent the Shares are not at such time eligible for resale without restriction
under Rule 144 under the Securities Act. The Investor also has the
right to demand a one-time underwritten registration of the Shares at any time
during a six-year period beginning at the expiration of the initial two-year
lockup period. The Registration Rights Agreement includes customary
provisions related to indemnification of Investor and continued effectiveness of
the registration statement.
In March
2007, The AES Corporation (“AES”) privately purchased 895,523 unregistered
common shares of ours 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. We 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.
On
December 18, 2006, we sold 9,259,259 common shares to institutional
investors. The sales were made at $2.70 per share with net proceeds
to us, after expenses, of $22,943,664. Warrants with a one
year expiration were also issued as a component of this offering to purchase
2,314,819 shares of stock at a price of $2.70 per share. The
placement agent also received a warrant to purchase 231,482 shares of our common
shares at $3.38 per share. The warrant has a five-year
term. Using a Black-Scholes-Merton pricing model, we estimated that
the warrant has a value of $275,464; this amount was recorded as common stock
issuance costs.
Operating Leases
— We lease certain premises for office space and other corporate
purposes. Operating lease commitments at December 31, 2008
were:
Year
ending December 31:
2009
|
|
$ |
277,608 |
|
2010
|
|
|
288,750 |
|
2011
|
|
|
297,504 |
|
2012
|
|
|
148,752 |
|
Thereafter
|
|
|
- |
|
Total
|
|
$ |
1,012,614 |
|
Lease
expense for the years ended December 31, 2008, 2007, and 2006 totaled $262,936,
$167,071, and $116,146, respectively.
Future
minimum payments on capitalized leases are as follows:
2009
|
|
$ |
5,151 |
|
2010
|
|
|
5,151 |
|
2011
|
|
|
4,407 |
|
|
|
|
14,709 |
|
Less
amount representing interest
|
|
|
(2,802 |
) |
Present
value of net minimum lease payments
|
|
|
11,907 |
|
Less
current maturity
|
|
|
(3,607 |
) |
Present
value of net minimum leases included in long-term debt
|
|
$ |
8,300 |
|
Losses
before income taxes include (losses) profits relating to non-U.S. operations of
($3,099,000), $6,260,000 and ($259,000) in the years ended December 31, 2008,
2007 and 2006, respectively.
Because
of the net operating losses and a valuation allowance on deferred tax assets,
there was no provision for income taxes recorded in the accompanying
consolidated financial statements for each of the three years ended December 31,
2008, 2007, and 2006.
A
reconciliation of the federal statutory income tax rate (35%) and our effective
income tax rates is as follows:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Federal
statutory income taxes (benefit)
|
|
$ |
(10,173,858 |
) |
|
$ |
(10,958,655 |
) |
|
$ |
(6,020,099 |
) |
|
Expiration
of net operating loss carryforwards
|
|
|
517,290 |
|
|
|
367,600 |
|
|
|
96,350 |
|
|
Other,
net
|
|
|
29,071 |
|
|
|
(95,137 |
) |
|
|
259,940 |
|
|
True
up to prior tax returns
|
|
|
(3,481,321 |
) |
|
|
1,558,238 |
|
|
|
(1,771,202 |
) |
|
Exercise
of incentive stock options
|
|
|
389,712 |
|
|
|
1,098,378 |
|
|
|
483,092 |
|
|
Valuation
allowance
|
|
|
12,719,106 |
|
|
|
8,029,576 |
|
|
|
6,951,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
The
components of the deferred tax assets consisted of the following as of December
31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$ |
40,730,229 |
|
|
$ |
25,150,494 |
|
Basis
difference in intangible assets
|
|
|
999,299 |
|
|
|
1,079,580 |
|
Accruals
|
|
|
618,595 |
|
|
|
3,713,872 |
|
Tax
credits
|
|
|
464,884 |
|
|
|
715,207 |
|
Other,
net
|
|
|
585,282 |
|
|
|
133,673 |
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
43,398,399 |
|
|
|
30,792,826 |
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Basis
difference in property, plant, and equipment
|
|
|
(909,083 |
) |
|
|
(394,091 |
) |
|
|
|
|
|
|
|
|
|
Total
deferred tax liabilities
|
|
|
(909,083 |
) |
|
|
(394,091 |
) |
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(42,489,316 |
) |
|
|
(30,398,735 |
) |
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$ |
- |
|
|
$ |
- |
|
As a
result of certain realization requirements of SFAS 123(R), the table of deferred
tax assets shown above does not include certain deferred tax assets at December
31, 2008 and 2007 that arose directly from tax deductions related to equity
compensation in excess of compensation recognized for financial reporting.
Equity will be increased by approximately $27,000 if and when such
deferred tax assets are ultimately realized. We use tax law ordering for
purposes of determining when excess tax benefits have been
realized.
Our
operating loss carry-forwards include losses generated in the United States and
in Canada. The net operating loss carry-forwards total approximately
$118,100,000 as of December 31, 2008 and will expire at various dates as
follows:
2009
- 2012
|
$8,900,000
|
2013
- 2017
|
700,000
|
2018
- 2022
|
12,900,000
|
2023
- 2028
|
95,600,000
|
Due to
the significant increase in common stock issued and outstanding from 2005
through 2007, Section 382 of the Internal Revenue Code may provide significant
limitations on the utilization of net operating loss
carry-forwards. As a result of these limitations, a portion of these
loss and credit carryovers may expire without being utilized.
We are
subject to taxation in the U.S., Canada and various states. We record
liabilities for income tax contingencies based on our best estimate of the
underlying exposures. We have not been audited by any jurisdiction since
our inception in 1998. We are open for audit by the U.S. Internal Revenue
Service, the Canada Revenue Agency and U.S. state tax jurisdictions from our
inception in 1998 to 2007.
16.
|
COMMITMENTS
AND CONTINGENCIES
|
Contingencies — We are
subject to claims in the normal course of business. Management, after
consultation with legal counsel, believes that liabilities, if any, resulting
from such claims will not materially effect our financial position or results of
operations.
Litigation —
We are currently not aware of any investigations, claims, or lawsuits
that we believe could have a material adverse effect on our consolidated
financial position or on our consolidated results of operations.
17.
|
RELATED
PARTY TRANSACTIONS
|
In
January 2007, we entered into a multi-year purchase and supply agreement with
Phoenix Motorcars, Inc., succeeded by Phoenix MC, Inc. (“Phoenix”) for lithium
titanate battery pack systems. Pursuant to two letter agreements with
Phoenix effective in July 2008, the 2007 purchase and supply agreement was
cancelled. Both parties also agreed that all representations, warranties,
covenants and obligations arising under the 2007 agreement were terminated and
further that each party holds the other party harmless from any and all claims,
liabilities, charges, demands, grievances, and causes of action of any kind or
nature. These new agreements resulted in:
|
●
|
Altair
agreed to ship 47 Generation 1 prototype batteries back to Phoenix for
exclusive use in Phoenix demonstration vehicles. The batteries are
provided to Phoenix “as is” without explicit or implied
warranties.
|
|
|
A
commitment on the part of Phoenix to provide Altair with ten percent of
the monetized value of any California Air Resources Board ZEV credits for
each vehicle for which it receives them.
|
|
|
The
forgiveness of the Phoenix notes payable associated accrued interest and
remaining accounts receivable balance.
|
|
|
The
reversal of the warranty accrual associated with the 47 recalled
batteries.
|
Additionally
in January 2007, 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 did not make the minimum
battery pack purchases required to retain their exclusivity in
2007. The common stock received represented a 16.6% ownership
interest in Phoenix. The investment was recorded at $106,518 with the
offset to deferred revenue, which was recognized on a straight-line basis until
our agreement was terminated in July 2008.
In March
2008, Phoenix Motorcars, Inc. completed a merger, wherein the surviving
corporation, Phoenix MC, Inc. became a wholly owned subsidiary of All Electric,
LLC (“AELLC”). On March 19, 2008, Phoenix MC, Inc. announced receipt
of their next round of funding provided by Al Yousuf, LLC and The AES
Corporation. These changes resulted in conversion of our 1,000,000
common share investment in Phoenix Motorcars, Inc. to ownership of 2,000 units
in AELLC and diluted our ownership percentage in Phoenix to 1.56%. At
December 31, 2008, there was no deferred revenue relating to the unamortized
investment. We have concluded the investment is
other-than-temporarily-impaired. A realized loss of the investment of
$88,701 was recognized in December 2008. The remaining investment is
valued at $17,817.
On July
20, 2007, we entered into a multi-year Joint Development and Equipment Purchase
Agreement with AES Energy Storage, LLC (“AES”), a subsidiary of global power
leader The AES Corporation. A member of the executive management team
of AES also serves on our board of directors. Under the terms of the
agreement we worked 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 was designed and manufactured at our Indiana facilities, and was
completed in December 2007. The final installment of $500,000 was
billed in June 2008 upon substantial completion of the testing of the prototype
packs, of which payment was received in July 2008.
On April
20, 2008, we executed an Amended and Restated Agreement to recover Short-Swing
Profits with Al Yousuf LLC. Section 16 of the Securities and Exchange
Act of 1934 requires directors, officers and 10% beneficial owners of ours to
disgorge any short-swing profits realized on a non-exempt purchase and sale of
our securities within any six-month period. Consistent with the terms
of the Recovery Agreement, we received payment in the amount of
$177,210.
On
October 6, 2008, we entered into a Stock Purchase and Settlement Agreement dated
as of September 30, 2008 with Al Yousuf, LLC, a United Arab Emirates limited
liability company (the "Investor"). Pursuant to the agreement, we agreed to
issue an aggregate of 8,000,000 common shares to the Investor. Of such shares,
5,882,353 shares were acquired on October 14, 2008 by the Investor at a purchase
price of $1.70 per share, for an aggregate purchase price of $10,000,000. The
remaining 2,117,647 shares were issued upon execution of the agreement in
exchange for a release by the Investor of all potential claims arising from
design concerns related to battery packs delivered to Phoenix Motorcars, Inc. in
2007, our related offer of a warranty replacement and inventory write-off, and
any other known claims existing as of the date of the Agreement. Under the
Purchase Agreement dated November 29, 2007 between us and the Investor, pursuant
to which the Investor purchased $40 million in common shares, we made certain
representations and warranties related to our inventory, warranty reserve and
similar matters that were affected by the write-off of battery inventories and
warranty offer announced in March 2008. (Also refer to Note
13).
18.
|
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, nano lithium titanate, battery cells, 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 consolidated financial statements. Reportable segment data
reconciled to the consolidated financial statements as of and for the fiscal
years ended December 31, 2008, 2007, and 2006 is as follows:
|
|
|
|
|
|
Loss/(Gain)
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
and
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
Operations
|
|
|
Amortization
|
|
|
Assets
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
870,995 |
|
|
$ |
2,187,399 |
|
|
$ |
524,789 |
|
|
$ |
4,207,485 |
|
|
Power
and Energy Group
|
|
|
4,075,123 |
|
|
|
7,651,027 |
|
|
|
1,281,074 |
|
|
|
8,071,777 |
|
|
Life
Sciences
|
|
|
780,192 |
|
|
|
589,310 |
|
|
|
103,100 |
|
|
|
1,714,035 |
|
|
Corporate
|
|
|
- |
|
|
|
19,698,274 |
|
|
|
849,740 |
|
|
|
34,135,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
5,726,310 |
|
|
$ |
30,126,010 |
|
|
$ |
2,758,703 |
|
|
$ |
48,071,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
2,527,369 |
|
|
$ |
2,786,661 |
|
|
$ |
933,419 |
|
|
$ |
6,055,345 |
|
|
Power
and Energy Group
|
|
|
5,282,149 |
|
|
|
17,295,099 |
|
|
|
856,808 |
|
|
|
8,267,611 |
|
|
Life
Sciences
|
|
|
1,298,965 |
|
|
|
(192,311 |
) |
|
|
30,435 |
|
|
|
1,879,994 |
|
|
Corporate
|
|
|
- |
|
|
|
13,178,025 |
|
|
|
133,214 |
|
|
|
57,655,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
9,108,483 |
|
|
$ |
33,067,474 |
|
|
$ |
1,953,876 |
|
|
$ |
73,858,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Materials
|
|
$ |
2,195,470 |
|
|
$ |
2,052,596 |
|
|
$ |
1,083,207 |
|
|
$ |
7,546,096 |
|
|
Power
and Energy Group
|
|
|
1,513,650 |
|
|
|
5,324,403 |
|
|
|
305,743 |
|
|
|
3,651,917 |
|
|
Life
Sciences
|
|
|
614,840 |
|
|
|
(117,724 |
) |
|
|
11,691 |
|
|
|
1,473,793 |
|
|
Corporate
|
|
|
- |
|
|
|
10,422,140 |
|
|
|
119,109 |
|
|
|
30,448,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total
|
|
$ |
4,323,960 |
|
|
$ |
17,681,415 |
|
|
$ |
1,519,750 |
|
|
$ |
43,120,573 |
|
In the
table above, corporate and other expense in the Loss From Operations column
includes such expenses as business consulting, general legal expense, accounting
and audit, general insurance expense, stock-based compensation expense,
shareholder information expense, investor relations, and general office
expense.
For the
year ended December 31, 2008, we had sales to two major customers, each of which
accounted for 10% or more of revenues. Total sales to these customers for the
year ended December 31, 2008 and the balance of their accounts receivable at
December 31, 2008 were as follows:
|
|
|
|
|
|
Accounts
Receivable and
|
|
|
|
|
Sales
- Year Ended
|
|
|
Notes
Receivable at
|
|
|
Customer
|
|
December
31, 2008
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Power and Energy
Group:
|
|
|
|
|
|
|
|
|
|
Office
of Naval Research
|
|
$ |
2,493,489 |
|
|
|
$ |
300,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Sciences
Division:
|
|
|
|
|
|
|
|
|
|
|
|
Elanco
Animal Health/Eli Lilly
|
|
$ |
622,804 |
|
|
|
$ |
- |
|
|
For the
year ended December 31, 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 year ended December 31, 2007 and the balance of their accounts receivable at
December 31, 2007 were as follows:
|
|
|
|
|
|
Accounts
Receivable and
|
|
|
|
|
Sales
- Year Ended
|
|
|
Notes
Receivable at
|
|
|
Customer
|
|
December
31, 2007
|
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
Division: |
|
|
|
|
|
|
|
|
|
Western
Oil Sands
|
|
$ |
1,198,525 |
|
|
|
$ |
203,929 |
|
|
|
Department
of Energy
|
|
$ |
499,773 |
|
|
|
$ |
8,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power and Energy
Group:
|
|
|
|
|
|
|
|
|
|
|
|
Department
of Energy
|
|
$ |
706,865 |
|
|
|
$ |
19,454 |
|
|
|
Phoenix
Motorcars, Inc.
|
|
$ |
3,047,687 |
|
|
|
$ |
1,638,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Sciences
Division:
|
|
|
|
|
|
|
|
|
|
|
|
Department
of Energy
|
|
$ |
204,801 |
|
|
|
$ |
26,866 |
|
|
|
Elanco
Animal Health/Eli Lilly
|
|
$ |
1,088,829 |
|
|
|
$ |
361,200 |
|
|
For the
year ended December 31, 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 year ended December 31, 2006 and the balance of their accounts
receivable at December 31, 2006 were as follows:
|
|
|
|
|
|
|
Accounts
Receivable and
|
|
|
|
|
Sales
- Year Ended
|
|
|
Notes
Receivable at
|
|
|
Customer
|
|
December
31, 2006
|
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
Division:
|
|
|
|
|
|
|
|
|
|
Western
Oil Sands
|
|
$ |
1,111,697 |
|
|
|
$ |
313,415 |
|
|
|
UNLV
Research Foundation
|
|
$ |
416,687 |
|
|
|
$ |
28,369 |
|
|
|
Department
of Energy
|
|
$ |
398,533 |
|
|
|
$ |
284,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power and Energy
Group:
|
|
|
|
|
|
|
|
|
|
|
|
Phoenix
Motorcars, Inc.
|
|
$ |
825,000 |
|
|
|
$ |
495,000 |
|
|
|
Department
of Energy
|
|
$ |
347,904 |
|
|
|
$ |
270,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Sciences
Division:
|
|
|
|
|
|
|
|
|
|
|
|
Spectrum
Pharmaceuticals, Inc.
|
|
$ |
514,840 |
|
|
|
$ |
- |
|
|
Revenues
for the years ended December 31, 2008, 2007 and 2006 by geographic area were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
information (a):
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
United
States
|
|
$ |
5,261,497 |
|
|
$ |
7,274,960 |
|
|
$ |
3,101,481 |
|
|
Canada
|
|
|
245,193 |
|
|
|
1,240,671 |
|
|
|
1,114,869 |
|
|
Other
foreign countries
|
|
|
219,620 |
|
|
|
592,852 |
|
|
|
107,610 |
|
|
Total
|
|
$ |
5,726,310 |
|
|
$ |
9,108,483 |
|
|
$ |
4,323,960 |
|
(a) Revenues are attributed to countries based on location of
customer.
F-30