altair_10q-093009.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x |
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
September
30, 2009
|
|
|
o |
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO
_________________ |
ALTAIR
NANOTECHNOLOGIES
INC.
(Exact
name of registrant as specified in its charter)
Canada |
1-12497 |
33-1084375 |
(State or other
jurisdiction of
incorporation) |
(Commission File
No.) |
(IRS Employer
Identification No.) |
|
|
|
|
|
|
|
204
Edison Way
Reno,
Nevada 89502
|
|
|
(Address of
principal executive offices, including zip code) |
|
Registrant’s
telephone number, including area code: (775) 856-2500
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES x NO o.
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YES o NO o.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a smaller reporting
company. See the definitions of “accelerated filer”, “large
accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
Large
accelerated filer
|
o |
Accelerated
filer
|
x |
|
|
|
|
Non-accelerated
filer
|
o |
Smaller
reporting company
|
o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act): YES o NO x
As of November 3, 2009 the registrant
had 105,519,855 Common Shares outstanding.
PART
I - FINANCIAL INFORMATION
Item
1. Financial
Statements
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Expressed
in thousands of United States Dollars, except shares and per share
amounts)
(Unaudited)
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
23,939 |
|
|
$ |
28,088 |
|
Restricted
cash
|
|
|
1 |
|
|
|
- |
|
Investment
in available for sale securities
|
|
|
766 |
|
|
|
- |
|
Accounts
receivable, net
|
|
|
620 |
|
|
|
955 |
|
Product
inventories
|
|
|
3,715 |
|
|
|
98 |
|
Prepaid
expenses and other current assets
|
|
|
1,838 |
|
|
|
572 |
|
Total
current assets
|
|
|
30,879 |
|
|
|
29,713 |
|
|
|
|
|
|
|
|
|
|
Investment
in available for sale securities
|
|
|
3,277 |
|
|
|
3,174 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net held and used
|
|
|
10,729 |
|
|
|
11,637 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net held and not used
|
|
|
1,823 |
|
|
|
2,377 |
|
|
|
|
|
|
|
|
|
|
Patents,
net
|
|
|
572 |
|
|
|
636 |
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
500 |
|
|
|
534 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
47,780 |
|
|
$ |
48,071 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
$ |
1,625 |
|
|
$ |
749 |
|
Accrued
salaries and benefits
|
|
|
1,789 |
|
|
|
1,361 |
|
Accrued
warranty
|
|
|
33 |
|
|
|
36 |
|
Accrued
liabilities
|
|
|
763 |
|
|
|
765 |
|
Current
portion of long-term debt
|
|
|
925 |
|
|
|
736 |
|
Total
current liabilities
|
|
|
5,135 |
|
|
|
3,647 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current portion
|
|
|
41 |
|
|
|
608 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Common
stock, no par value, unlimited shares authorized;
|
|
|
|
|
|
|
|
|
105,519,855
and 93,143,271 shares issued and
|
|
|
|
|
|
|
|
|
outstanding
at September 30, 2009 and December 31, 2008
|
|
|
188,525 |
|
|
|
180,105 |
|
Additional
paid in capital
|
|
|
10,735 |
|
|
|
5,378 |
|
Accumulated
deficit
|
|
|
(156,987 |
) |
|
|
(140,892 |
) |
Accumulated
other comprehensive loss
|
|
|
(611 |
) |
|
|
(1,873 |
) |
Total
Altair Nanotechnologies, Inc’s stockholders’ equity
|
|
|
41,662 |
|
|
|
42,718 |
|
Noncontrolling
interest in subsidiary
|
|
|
942 |
|
|
|
1,098 |
|
Total
stockholders' equity
|
|
|
42,604 |
|
|
|
43,816 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
47,780 |
|
|
$ |
48,071 |
|
See notes
to the unaudited condensed consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed
in thousands of United States Dollars, except share and per share
amounts)
(Unaudited)
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
409 |
|
|
$ |
166 |
|
|
$ |
662 |
|
|
$ |
555 |
|
Less
sales returns
|
|
|
- |
|
|
|
- |
|
|
|
(183 |
) |
|
|
- |
|
License
fees
|
|
|
750 |
|
|
|
- |
|
|
|
750 |
|
|
|
- |
|
Commercial
collaborations
|
|
|
122 |
|
|
|
129 |
|
|
|
888 |
|
|
|
1,642 |
|
Contracts
and grants
|
|
|
386 |
|
|
|
1,507 |
|
|
|
449 |
|
|
|
2,577 |
|
Total
net revenues
|
|
|
1,667 |
|
|
|
1,802 |
|
|
|
2,566 |
|
|
|
4,774 |
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales - product
|
|
|
171 |
|
|
|
59 |
|
|
|
519 |
|
|
|
138 |
|
Cost
of sales - warranty and inventory reserves
|
|
|
68 |
|
|
|
- |
|
|
|
68 |
|
|
|
(2,865 |
) |
Research
and development
|
|
|
2,219 |
|
|
|
3,320 |
|
|
|
7,516 |
|
|
|
13,690 |
|
Sales
and marketing
|
|
|
761 |
|
|
|
661 |
|
|
|
1,969 |
|
|
|
2,096 |
|
Notes
receivable extinguishment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,722 |
|
Settlement
and release
|
|
|
- |
|
|
|
3,605 |
|
|
|
- |
|
|
|
3,605 |
|
General
and administrative
|
|
|
2,001 |
|
|
|
2,756 |
|
|
|
7,598 |
|
|
|
8,459 |
|
Depreciation
and amortization
|
|
|
686 |
|
|
|
724 |
|
|
|
2,093 |
|
|
|
1,937 |
|
Total
operating expenses
|
|
|
5,906 |
|
|
|
11,125 |
|
|
|
19,763 |
|
|
|
28,782 |
|
Loss
from operations
|
|
|
(4,239 |
) |
|
|
(9,323 |
) |
|
|
(17,197 |
) |
|
|
(24,008 |
) |
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(61 |
) |
|
|
(23 |
) |
|
|
(92 |
) |
|
|
(73 |
) |
Interest
income
|
|
|
38 |
|
|
|
180 |
|
|
|
157 |
|
|
|
810 |
|
Realized
gain on investment
|
|
|
868 |
|
|
|
- |
|
|
|
850 |
|
|
|
- |
|
Loss
on foreign exchange
|
|
|
- |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Total
other income, net
|
|
|
845 |
|
|
|
156 |
|
|
|
913 |
|
|
|
732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(3,394 |
) |
|
|
(9,167 |
) |
|
|
(16,284 |
) |
|
|
(23,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Noncontrolling
interests’ share
|
|
|
78 |
|
|
|
56 |
|
|
|
189 |
|
|
|
216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to Altair Nanotechnologies, Inc.
|
|
$ |
(3,316 |
) |
|
$ |
(9,111 |
) |
|
$ |
(16,095 |
) |
|
$ |
(23,060 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share - basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares - basic and diluted
|
|
|
105,089,234 |
|
|
|
84,635,878 |
|
|
|
98,521,157 |
|
|
|
84,448,743 |
|
See notes
to the unaudited condensed consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE
LOSS
(Expressed
in thousands of United States Dollars, except shares and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Altair
Nanotechnologies, Inc. Shareholders
|
|
|
Noncontrolling
Interest in Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
Interest
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
hensive
|
|
|
|
|
|
In
|
|
|
hensive
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Subsidiary
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 1, 2008
|
|
|
84,744,322 |
|
|
$ |
165,599 |
|
|
$ |
5,107 |
|
|
$ |
(125,773 |
) |
|
$ |
(1,584 |
) |
|
$ |
43,349 |
|
|
$ |
1,209 |
|
|
$ |
- |
|
|
$ |
1,209 |
|
|
$ |
44,558 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9,111 |
) |
|
|
- |
|
|
|
(9,111 |
) |
|
|
(56 |
) |
|
|
- |
|
|
|
(56 |
) |
|
|
(9,167 |
) |
Other
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
loss
net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(307 |
) |
|
|
(307 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(307 |
) |
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,418 |
) |
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
(9,474 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
68 |
|
|
|
440 |
|
|
|
- |
|
|
|
- |
|
|
|
508 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
508 |
|
Exercise
of stock options
|
|
|
10,000 |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
Exercise
of warrants
|
|
|
373,949 |
|
|
|
727 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
727 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
727 |
|
Capital
stock subscribed
|
|
|
5,882,353 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Issuance
of common stock
|
|
|
2,117,647 |
|
|
|
3,605 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,605 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,605 |
|
Balance,
September 30, 2008
|
|
|
93,128,271 |
|
|
$ |
180,011 |
|
|
$ |
5,547 |
|
|
$ |
(134,884 |
) |
|
$ |
(1,891 |
) |
|
$ |
48,783 |
|
|
$ |
1,153 |
|
|
$ |
- |
|
|
$ |
1,153 |
|
|
$ |
49,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Altair
Nanotechnologies, Inc. Shareholders
|
|
|
Noncontrolling
Interest in Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
Interest
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
hensive
|
|
|
|
|
|
|
In
|
|
|
hensive
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Subsidiary
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
July 1, 2009
|
|
|
105,519,855 |
|
|
$ |
188,437 |
|
|
$ |
10,479 |
|
|
$ |
(153,670 |
) |
|
$ |
(195 |
) |
|
$ |
45,051 |
|
|
$ |
987 |
|
|
$ |
- |
|
|
$ |
987 |
|
|
$ |
46,038 |
|
Investment
from non-controlling interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
|
|
- |
|
|
|
33 |
|
|
|
33 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,317 |
) |
|
|
- |
|
|
|
(3,317 |
) |
|
|
(78 |
) |
|
|
- |
|
|
|
(78 |
) |
|
|
(3,395 |
) |
Other
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
loss
net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(416 |
) |
|
|
(416 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(416 |
) |
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,733 |
) |
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
(3,811 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
88 |
|
|
|
256 |
|
|
|
- |
|
|
|
- |
|
|
|
344 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
344 |
|
Balance,
September 30, 2009
|
|
|
105,519,855 |
|
|
$ |
188,525 |
|
|
$ |
10,735 |
|
|
$ |
(156,987 |
) |
|
$ |
(611 |
) |
|
$ |
41,662 |
|
|
$ |
942 |
|
|
$ |
- |
|
|
$ |
942 |
|
|
$ |
42,604 |
|
See notes
to the unaudited condensed consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
LOSS
(Expressed
in thousands of United States Dollars, except shares and per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Altair
Nanotechnologies, Inc. Shareholders
|
|
|
Noncontrolling
Interest in Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
Interest
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
hensive
|
|
|
|
|
|
In
|
|
|
hensive
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Subsidiary
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,068,377 |
|
|
$ |
163,780 |
|
|
$ |
5,490 |
|
|
$ |
(111,824 |
) |
|
$ |
(485 |
) |
|
$ |
56,961 |
|
|
$ |
1,369 |
|
|
$ |
- |
|
|
$ |
1,369 |
|
|
$ |
58,330 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(23,060 |
) |
|
|
- |
|
|
|
(23,060 |
) |
|
|
(216 |
) |
|
|
- |
|
|
|
(216 |
) |
|
|
(23,276 |
) |
Other
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
loss
net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,406 |
) |
|
|
(1,406 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,406 |
) |
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,466 |
) |
|
|
|
|
|
|
|
|
|
|
(216 |
) |
|
|
(24,682 |
) |
Share-based
compensation
|
|
|
193,713 |
|
|
|
1,187 |
|
|
|
57 |
|
|
|
- |
|
|
|
- |
|
|
|
1,244 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,244 |
|
Exercise
of stock options
|
|
|
324,211 |
|
|
|
510 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
510 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
510 |
|
Exercise
of warrants
|
|
|
400,224 |
|
|
|
752 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
752 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
752 |
|
Recovery
of short swing profits |
|
|
- |
|
|
|
177 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
177 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
177 |
|
Capital
stock subscribed
|
|
|
5,882,353 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Issuance
of common stock
|
|
|
2,117,647 |
|
|
|
3,605 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,605 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,605 |
|
Issuance
of restricted stock |
|
|
141,746 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance,
September 30, 2008
|
|
|
93,128,271 |
|
|
$ |
180,011 |
|
|
$ |
5,547 |
|
|
$ |
(134,884 |
) |
|
$ |
(1,891 |
) |
|
$ |
48,783 |
|
|
$ |
1,153 |
|
|
$ |
- |
|
|
$ |
1,153 |
|
|
$ |
49,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Altair
Nanotechnologies, Inc. Shareholders
|
|
|
Noncontrolling
Interest in Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
Interest
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Accumulated
|
|
|
hensive
|
|
|
|
|
|
|
In
|
|
|
hensive
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Subsidiary
|
|
|
Gain
(Loss)
|
|
|
Subtotal
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,143,271 |
|
|
$ |
180,105 |
|
|
$ |
5,378 |
|
|
$ |
(140,892 |
) |
|
$ |
(1,873 |
) |
|
$ |
42,718 |
|
|
$ |
1,098 |
|
|
$ |
- |
|
|
$ |
1,098 |
|
|
$ |
43,816 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
from non-controlling interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
|
|
- |
|
|
|
33 |
|
|
|
33 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,095 |
) |
|
|
- |
|
|
|
(16,095 |
) |
|
|
(189 |
) |
|
|
- |
|
|
|
(189 |
) |
|
|
(16,284 |
) |
Other
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain
net of taxes of $0
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,262 |
|
|
|
1,262 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,262 |
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,833 |
) |
|
|
|
|
|
|
|
|
|
|
(189 |
) |
|
|
(15,022 |
) |
Share-based
compensation
|
|
|
- |
|
|
|
231 |
|
|
|
733 |
|
|
|
- |
|
|
|
- |
|
|
|
964 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
964 |
|
Issuance
of common stock, net of $1.2 million issuance costs and $4.6 million
warrant fair value costs
|
|
|
11,994,469 |
|
|
|
8,189 |
|
|
|
4,624 |
|
|
|
- |
|
|
|
- |
|
|
|
12,813 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,813 |
|
Issuance
of restricted stock
|
|
|
382,115 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance,
September 30, 2009
|
|
|
105,519,855 |
|
|
$ |
188,525 |
|
|
$ |
10,735 |
|
|
$ |
(156,987 |
) |
|
$ |
(611 |
) |
|
$ |
41,662 |
|
|
$ |
942 |
|
|
$ |
- |
|
|
$ |
942 |
|
|
$ |
42,604 |
|
See notes
to the unaudited condensed consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed
in thousands of United States Dollars)
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(16,284 |
) |
|
$ |
(23,276 |
) |
Adjustments
to reconcile net loss to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,093 |
|
|
|
1,937 |
|
Securities
received in payment of license fees
|
|
|
(750 |
) |
|
|
- |
|
Share-based
compensation
|
|
|
964 |
|
|
|
1,244 |
|
Loss
on disposal of fixed assets
|
|
|
10 |
|
|
|
96 |
|
Gain
on sale of available for sale securities
|
|
|
(868 |
) |
|
|
- |
|
Settlement
and release
|
|
|
- |
|
|
|
3,605 |
|
Accrued
interest on notes receivable
|
|
|
- |
|
|
|
(83 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(1 |
) |
|
|
- |
|
Accounts
receivable, net
|
|
|
335 |
|
|
|
(87 |
) |
Notes
receivable from related party
|
|
|
- |
|
|
|
1,722 |
|
Product
inventories
|
|
|
(3,580 |
) |
|
|
(98 |
) |
Prepaid
expenses and other current assets
|
|
|
(1,266 |
) |
|
|
393 |
|
Other
assets
|
|
|
34 |
|
|
|
(500 |
) |
Trade
accounts payable
|
|
|
875 |
|
|
|
(6,680 |
) |
Accrued
salaries and benefits
|
|
|
428 |
|
|
|
(329 |
) |
Accrued
warranty
|
|
|
(4 |
) |
|
|
(2,857 |
) |
Accrued
liabilities
|
|
|
(3 |
) |
|
|
(217 |
) |
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(18,017 |
) |
|
|
(25,130 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Sale
of available for sale securities
|
|
|
2,006 |
|
|
|
- |
|
Purchase
of available for sale securities
|
|
|
4 |
|
|
|
6 |
|
Purchase
of property and equipment
|
|
|
(612 |
) |
|
|
(2,130 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
1,398 |
|
|
|
(2,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued) |
|
See notes to the unaudited condensed
consolidated financial statements.
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed
in thousands of United States Dollars)
|
|
Nine
Months Ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
Issuance
of common stock shares for cash, net of issuance costs
|
|
$ |
12,813 |
|
|
$ |
- |
|
Proceeds
from exercise of stock options
|
|
|
- |
|
|
|
510 |
|
Proceeds
from exercise of warrants
|
|
|
- |
|
|
|
752 |
|
Proceeds
from recovery of short swing profits
|
|
|
- |
|
|
|
177 |
|
Proceeds
from notes payable
|
|
|
178 |
|
|
|
- |
|
Payment
of notes payable
|
|
|
(600 |
) |
|
|
(600 |
) |
Proceeds
from long-term debt
|
|
|
58 |
|
|
|
- |
|
Repayment
of long-term debt
|
|
|
(12 |
) |
|
|
- |
|
Contributions
from minority interest
|
|
|
33 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
12,470 |
|
|
|
839 |
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(4,149 |
) |
|
|
(26,415 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
28,088 |
|
|
|
50,146 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
23,939 |
|
|
$ |
23,731 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
89 |
|
|
$ |
126 |
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
None
|
|
|
None
|
|
Supplemental
schedule of non-cash investing and financing
activities:
|
For
the nine months ended September 30, 2009:
|
-
We received stock valued at $750,000 in payment of license
fees.
|
-
We realized $868,000 of gain from the sale of Spectrum
stock.
|
-
We issued 382,115 shares of restricted stock to directors having a fair
value of approximately $397,000 for which no cash will be
received.
|
-
We had an unrealized gain on available for sale securities of
$481,099
|
|
For
the nine months ended September 30, 2008:
|
-
We made property and equipment purchases of $21,798 which are included in
trade accounts payable at September 30, 2008.
|
-
We had an unrealized loss on available for sale securities of
$1,406,400.
|
-
We issued 143,079 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.
|
-
We received a subscription for 5,882,353 shares of common stock in
exchange for $10,000,000 which was received after the end of the current
reporting period.
|
|
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
1. Basis of Preparation of Consolidated Financial
Statements
These
unaudited interim condensed consolidated financial statements of Altair
Nanotechnologies Inc. and its subsidiaries (collectively, “Altair” “we” or the
“Company”) have been prepared in accordance with the rules and regulations of
the United States Securities and Exchange Commission (the
“Commission”). Such rules and regulations allow the omission of
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, so long as the statements are not
misleading. In the opinion of Company management, these consolidated
financial statements and accompanying notes contain all adjustments (consisting
of only normal recurring items) necessary to present fairly the financial
position and results of operations for the periods shown. These
unaudited interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
contained in our Annual Report on Form 10-K for the year ended December 31,
2008, as filed with the Commission on March 16, 2009.
The
results of operations for the nine-month period ended September 30, 2009 are not
necessarily indicative of the results to be expected for the full
year.
Note
2. Summary of Significant Accounting Policies
Cash, Cash Equivalents and Investment
in Available for Sale Securities (short-term) - Cash and cash equivalents
consist principally of bank deposits and institutional money market
funds. Short-term investments that are highly liquid have
insignificant interest rate risk and maturities of 90 days or less are
classified as cash and cash equivalents. Investments that do not meet
the definition of cash equivalents are classified as held-to-maturity or
available-for-sale.
Our cash
balances are maintained in bank accounts that are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to a maximum of US $250,000 and CN $100,000 on
non-interest bearing accounts. At September 30, 2009 and December 31,
2008 there were no cash deposits in excess of FDIC insurance
limits. Additionally, we had $2.0 million and $852,000 at September
30, 2009 and December 31, 2008, respectively, in a money market fund that was
and is insured at an unlimited amount through December 31,
2009. Funds from this account are swept out to the operating bank
accounts as funds are expended each period.
Our
$766,000 investment in available for sale securities consists of 113,809 Shares
of Spectrum Pharmaceuticals, Inc. common stock. This stock was
received in exchange for ownership assignment of all patent rights associated
with RenazorbTM and
RenalanTM compounds to
Spectrum. Spectrum must also pay us future milestone and royalty
payments as they develop revenues for these compounds.
Restricted Cash - In
February 2009, we opened a $450,000 certificate of deposit as collateral on our
forward currency contract related to a forecasted transaction that was to be
settled in Korean Won with an approximate value in US dollars of $2.2
million. The transaction was not completed and the collateral was
reduced in April 2009 to $1,000 in order to maintain an open credit line for
anticipated future transactions.
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 is as follows:
In
thousands of dollars
Beginning
Balance, January 1, 2009
|
|
$ |
83 |
|
Additions
charged to costs and expenses
|
|
|
193 |
|
Net
deductions (write-offs, net of collections)
|
|
|
(112 |
) |
Ending
Balance, September 30, 2009
|
|
$ |
164 |
|
Investment in Available for Sale
Securities (long-term) - Available for sale securities (long-term) includes publicly traded
equity investments that are classified as available for sale and recorded at
market using the specific identification method. Unrealized gains and
losses (except for other than temporary impairments) are recorded in other
comprehensive 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.
Accumulated Other Comprehensive Loss
- Accumulated other comprehensive loss consists entirely of unrealized
loss on the investment in available for sale securities. The
components of comprehensive loss for the nine-month periods ended September 30,
2009 and 2008 are as follows:
In
thousands of dollars
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Net
loss
|
|
$ |
16,284 |
|
|
$ |
23,276 |
|
Unrealized
(gain)/loss on investment in available for sale securities, net of
taxes of $0
|
|
|
(1,262 |
) |
|
|
1,407 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
15,022 |
|
|
|
24,683 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss attributable to noncontrolling interest
|
|
|
(189 |
) |
|
|
(216 |
) |
|
|
|
|
|
|
|
|
|
Comprehensive
loss attributable to Altair Nanotechnologies, Inc.
|
|
$ |
14,833 |
|
|
$ |
24,467 |
|
Long-Lived Assets - We
evaluate the carrying value of long-lived assets whenever events or changes in
business circumstances indicate that the carrying value of the assets may not be
recoverable. The carrying value of a long-lived asset is considered
impaired when the total projected undiscounted cash flows expected to be
generated by the asset are less than the carrying value. Our estimate
of the cash flows is based on the information available at the time including
the following: internal budgets; sales forecasts; customer trends;
anticipated production volumes; and market conditions over an estimate of the
remaining useful life of the asset which may range from 3 to 10 years for most
equipment and up to 23 years for our building and related building
improvements. If an impairment is indicated, the asset value is
written to its fair value based upon market prices, or if not available, upon
discounted cash flow value, at an appropriate discount determined by us to be
commensurate with the risk inherent in the business model. The
determination of both undiscounted and discounted cash flows requires us to make
significant estimates and consider the expected course of action at the balance
sheet date. Our assumptions about future sales and production volumes
require significant judgment because actual sales prices and volumes have
fluctuated significantly in the past and are expected to continue to do
so. Until the Company’s products reach commercialization, the demand
for our products is difficult to estimate. Subsequent changes in
estimated undiscounted and discounted cash flows arising from changes in
anticipated actions could impact the determination of whether an impairment
exists, the amount of the impairment charge recorded and whether the effects
could materially impact our consolidated financial statements. 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 or the assets used to produce it, a history of operating or cash flow
losses and/or the partial or complete lapse of technology rights
protection.
As a
result of management’s determination to focus on the Power and Energy segment of
the business and reduce resources committed to Performance Materials and Life
Sciences, in combination with the delays experienced in commercializing our
products, the following qualitative reviews were performed regarding our patents
and fixed assets in addition to an undiscounted cash flow analysis to determine
if our long-lived assets are impaired:
§
|
Our
Chief Technology Officer reviewed and confirmed that the capitalized
patents with a net book value of $572,000, relating to processing titanium
dioxide and pigment have not been impaired. These patents also
are the underlying basis for production of our nano-structured lithium
titanate spinel (“LTO”), which is utilized as the anode material in our
battery products in the Power and Energy segment. LTO is a
fundamental building block of our batteries; we do not see these patents’
value being impaired unless we are unable to commercialize our battery
products. We believe this outcome is
unlikely.
|
§
|
Detailed
review of the Performance Materials fixed assets with a net book value of
$676,000, was performed with operations management to understand the
purpose, use, and potential disposition of these fixed
assets. Based on this detailed review, it was determined that
the assets which consist primarily of production assets such as mills,
furnaces and laboratory equipment suited for general use in our business
would be re-purposed to the Power and Energy segment to support the
anticipated growth in sales volume within the next two
years. These assets are expected to have in-service lives at
least equal to their depreciation lives and with reasonable ongoing
maintenance are expected to continue functioning throughout that
period. If we are unable to commercialize our battery products,
the value of these assets could be impaired, but we have reason to believe
this outcome is unlikely.
|
§
|
Fixed
assets held by our joint venture with The Sherwin-Williams Company
(“Sherwin-Williams”), AlSher Titania LLC (“AlSher”) with a net book value
of $1,823,000, previously included in the Performance Materials segment,
were also evaluated. We are currently working with
Sherwin-Williams and AlSher to identify and qualify an interested third
party to purchase our interest in the AlSher joint
venture. AlSher is also actively seeking a partner or partners
to participate in the next phase of their project to scale up to a 5,000
ton annual capacity pigment processing plant. Based on
information to date and preliminary indications of interest by third
parties, it appears that the value of Altair’s interest in AlSher is
expected to be recoverable and is sufficient to cover the cost of our
interest in the AlSher fixed assets. We will re-evaluate our
determination if, after a reasonable period, we are unable to consummate a
transaction relating to our interest in AlSher, we may recognize an
impairment related to this asset
group.
|
§
|
Detailed
review of the Life Sciences fixed assets with a net book value of
$1,220,000, was performed with operations management to understand the
purpose, use, and potential disposition of these fixed
assets. The assets relating to this segment are primarily
building improvements that expand production and lab areas. It
was determined that these improvements do add to the value of the building
and the space will be required for the expansion of Power and
Energy operations based on anticipated growth in sales volume within the
next two years. Failure to commercialize our battery products
and a significant drop in real estate values could lead to impairment of
these assets. We believe that the occurrence of such events is
unlikely.
|
§
|
As
of September 30, 2009, we estimate that our future cash flows, on an
undiscounted basis, are greater than our $13.1 million investment in
long-lived nanomaterial gross assets, the AlSher Titania joint venture,
and our corporate facility. Our estimated future cash flows
include anticipated product sales, commercial collaborations, and
contracts and grant revenue, since our long-lived asset base, which is
primarily composed of production, laboratory and testing equipment is
utilized to fulfill contracts in all revenue
categories. Estimated future cash flows in connection with the
AlSher Titania assets were based on the anticipated sale of our ownership
interest in the joint venture.
|
Based on
our assessment, which represents no change from the prior year in our approach
to valuing long-lived assets, we believe that our long-lived assets are not
impaired.
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.
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 were derived from product
sales, commercial collaborations and contracts and grants. Revenue from 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 deliveries 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 revenue is recognized over
the related time period 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 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.
Derivatives and Hedging -
Derivatives are held for purposes other than trading. We
account for hedges of foreign currency exposures and certain forecasted
transactions as cash flow hedges. The fair value of the derivatives
is recorded in other current and noncurrent assets or liabilities in the
consolidated balance sheet. The effective portions of the changes in
the fair values of these derivatives are recorded in other comprehensive
income/(loss) and are reclassified to sales, cost of goods sold, or other income
in the period in which earnings are impacted by the hedged items or in the
period that the transaction no longer qualifies as a cash flow
hedge. The Company had no active hedges in place at September 30,
2009 or December 31, 2008.
Noncontrolling Interest - In
April 2007, Sherwin-Williams 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-Williams
in order to develop and produce titanium dioxide pigment for use in paint and
coatings and nano titanium dioxide materials for use in a variety of
applications, including those related to removing contaminants from air and
water. Pursuant to a Contribution Agreement dated April 24, 2007
among Sherwin-Williams, 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 $3.1 million. We received no
consideration for the license granted to AlSher other than our ownership
interest in AlSher. Sherwin-Williams contributed 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. 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 noncontrolling
shareholder’s interest in the net assets and net income or loss of AlSher are
reported as noncontrolling interest in subsidiary on the condensed consolidated
balance sheet and as noncontrolling interest share in the condensed consolidated
statement of operations, respectively.
Net Loss Per Common Share - Basic loss per share is
computed using the weighted average number of common shares outstanding during
the period. Diluted loss per share is computed using the weighted average
number of common and potentially dilutive shares outstanding during the
period. Potentially dilutive shares consist of the incremental common
shares issuable upon the exercise of stock options and warrants, as well as
unvested restricted stock. 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 or unvested restricted stock
were included in the computation of diluted loss per share as they were
anti-dilutive.
Recently
Adopted and Recently Issued Accounting Guidance
Adopted
On
September 30, 2009, the Company adopted changes issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards Codification TM
(Codification) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts;
instead the FASB will issue Accounting Standards Updates. Accounting Standards
Updates will not be authoritative in their own right as they will only serve to
update the Codification. These changes and the Codification itself do not change
GAAP. Other than the manner in which new accounting guidance is referenced, the
adoption of these changes had no impact on the Financial
Statements.
Fair
Value Accounting.
On
June 30, 2009, the Company adopted changes issued by the FASB to fair value
disclosures of financial instruments. These changes require a publicly traded
company to include disclosures about the fair value of its financial instruments
whenever it issues summarized financial information for interim reporting
periods. Such disclosures include the fair value of all financial instruments,
for which it is practicable to estimate that value, whether recognized or not
recognized in the statement of financial position; the related carrying amount
of these financial instruments; and the method(s) and significant assumptions
used to estimate the fair value. Other than the required disclosures, the
adoption of these changes had no impact on the Financial
Statements.
On
June 30, 2009, the Company adopted changes issued by the FASB to fair value
accounting. These changes provide additional guidance for estimating fair value
when the volume and level of activity for an asset or liability have
significantly decreased and includes guidance for identifying circumstances that
indicate a transaction is not orderly. This guidance is necessary to maintain
the overall objective of fair value measurements, which is that fair value is
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date under current market conditions. The adoption of these changes
had no impact on the Financial Statements.
On
June 30, 2009, the Company adopted changes issued by the FASB to the
recognition and presentation of other-than-temporary impairments. These changes
amend existing other-than-temporary impairment guidance for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities.
The adoption of these changes had no impact on the Financial
Statements.
On
January 1, 2009, the Company adopted changes issued by the FASB to fair
value accounting and reporting as it relates to nonfinancial assets and
nonfinancial liabilities that are not recognized or disclosed at fair value in
the financial statements on at least an annual basis. These changes define fair
value, establish a framework for measuring fair value in GAAP, and expand
disclosures about fair value measurements. This guidance applies to other GAAP
that require or permit fair value measurements and is to be applied
prospectively with limited exceptions. The adoption of these changes, as it
relates to nonfinancial assets and nonfinancial liabilities, had no impact on
the Financial Statements. These provisions will be applied at such time a fair
value measurement of a nonfinancial asset or nonfinancial liability is required,
which may result in a fair value that is materially different than would have
been calculated prior to the adoption of these changes.
Business
Combinations and Consolidation Accounting.
On
January 1, 2009, the Company adopted changes issued by the FASB on
April 1, 2009 to accounting for business combinations. These changes apply
to all assets acquired and liabilities assumed in a business combination that
arise from certain contingencies and requires (i) an acquirer to recognize
at fair value, at the acquisition date, an asset acquired or liability assumed
in a business combination that arises from a contingency if the acquisition-date
fair value of that asset or liability can be determined during the measurement
period otherwise the asset or liability should be recognized at the acquisition
date if certain defined criteria are met; (ii) contingent consideration
arrangements of an acquiree assumed by the acquirer in a business combination be
recognized initially at fair value; (iii) subsequent measurements of assets
and liabilities arising from contingencies be based on a systematic and rational
method depending on their nature and contingent consideration arrangements be
measured subsequently; and (iv) disclosures of the amounts and measurement
basis of such assets and liabilities and the nature of the contingencies. The
adoption of these changes had no impact on the financial
statements.
On
January 1, 2009, the Company adopted changes issued by the FASB to
consolidation accounting and reporting. These changes establish accounting and
reporting for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. This guidance defines a noncontrolling
interest, previously called a minority interest, as the portion of equity in a
subsidiary not attributable, directly or indirectly, to a parent. These changes
require, among other items, that a noncontrolling interest be included in the
consolidated statement of financial position within equity separate from the
parent’s equity; consolidated net income to be reported at amounts inclusive of
both the parent’s and noncontrolling interest’s shares and, separately, the
amounts of consolidated net income attributable to the parent and noncontrolling
interest all on the consolidated statement of operations; and if a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be measured at fair value and a gain or loss be recognized in net
income based on such fair value. Other than the change in presentation of
noncontrolling interests, the adoption of these changes had no impact on the
Financial Statements. The presentation and disclosure requirements of these
changes were applied retrospectively.
On
January 1, 2009, the Company adopted changes issued by the FASB to
accounting for business combinations. While retaining the fundamental
requirements of accounting for business combinations, including that the
purchase method be used for all business combinations and for an acquirer to be
identified for each business combination, these changes define the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control instead of the date that the consideration is transferred.
These changes require an acquirer in a business combination, including business
combinations achieved in stages (step acquisition), to recognize the assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree
at the acquisition date, measured at their fair values as of that date, with
limited exceptions. This guidance also requires the recognition of assets
acquired and liabilities assumed arising from certain contractual contingencies
as of the acquisition date, measured at their acquisition-date fair values.
Additionally, these changes require acquisition-related costs to be expensed in
the period in which the costs are incurred and the services are received instead
of including such costs as part of the acquisition price. The adoption of these
changes had no impact on the financial statements.
Other
On
June 30, 2009, the Company adopted changes issued by the FASB to accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued, otherwise known
as “subsequent events.” Specifically, these changes set forth the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The
adoption of these changes had no impact on the Financial Statements as
management already followed a similar approach prior to the adoption of this new
guidance.
On
January 1, 2009, the Company adopted changes issued by the FASB to
disclosures about derivative instruments and hedging activities. These changes
require enhanced disclosures about an entity’s derivative and hedging
activities, including (i) how and why an entity uses derivative
instruments, (ii) how derivative instruments and related hedged items are
accounted for, and (iii) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash
flows. Other than the required disclosures, the adoption of these changes had no
impact on the Financial Statements.
On
January 1, 2009, the Company adopted changes issued by the FASB to
accounting for intangible assets. These changes amend the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset in order to improve the consistency
between the useful life of a recognized intangible asset outside of a business
combination and the period of expected cash flows used to measure the fair value
of an intangible asset in a business combination. The adoption of these changes
had no impact on the Financial Statements.
On
January 1, 2009, the Company adopted changes issued by the FASB to the
calculation of earnings per share. These changes state that unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class
method for all periods presented. The adoption of these changes had no impact on
the financial statements.
Issued
In August
2009, the FASB issued changes to fair value accounting for liabilities. These
changes clarify existing guidance that in circumstances in which a quoted price
in an active market for the identical liability is not available, an entity is
required to measure fair value using either a valuation technique that uses a
quoted price of either a similar liability or a quoted price of an identical or
similar liability when traded as an asset, or another valuation technique that
is consistent with the principles of fair value measurements, such as an income
approach (e.g., present value technique). This guidance also states that both a
quoted price in an active market for the identical liability and a quoted price
for the identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. These changes become effective for the Company on October 1,
2009. Management has determined that the adoption of these changes will not have
an impact on the Financial Statements.
In June
2009, the FASB issued changes to the accounting for variable interest entities.
These changes require an enterprise to perform an analysis to determine whether
the enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity; to require ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity;
to eliminate the quantitative approach previously required for determining the
primary beneficiary of a variable interest entity; to add an additional
reconsideration event for determining whether an entity is a variable interest
entity when any changes in facts and circumstances occur such that holders of
the equity investment at risk, as a group, lose the power from voting rights or
similar rights of those investments to direct the activities of the entity that
most significantly impact the entity’s economic performance; and to require
enhanced disclosures that will provide users of financial statements with more
transparent information about an enterprise’s involvement in a variable interest
entity. These changes become effective for the Company on January 1, 2010.
Management has determined that the adoption of these changes will not have an
impact on the Financial Statements.
In June
2009, the FASB issued changes to the accounting for transfers of financial
assets. These changes remove the concept of a qualifying special-purpose entity
and remove the exception from the application of variable interest accounting to
variable interest entities that are qualifying special-purpose entities; limits
the circumstances in which a transferor derecognizes a portion or component of a
financial asset; defines a participating interest; requires a transferor to
recognize and initially measure at fair value all assets obtained and
liabilities incurred as a result of a transfer accounted for as a sale; and
requires enhanced disclosure; among others. These changes become effective for
the Company on January 1, 2010. Management has determined that the adoption
of these changes will not have an impact on the Financial
Statements.
Reclassifications - Certain
reclassifications have been made to prior period amounts to conform to
classifications adopted in the current period.
Note
3. Fair Value Measurements
Our
financial instruments are accounted for at fair value on a recurring
basis. Fair value is 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. A market or
observable inputs is the preferred source of values, followed by assumptions
based on hypothetical transactions in the absence of market inputs.
The
valuation techniques 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 fair value
hierarchy at September 30, 2009:
In
thousands of dollars
Assets
at fair value :
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Auction
rate corporate notes
|
|
$ |
3,277 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,277 |
|
Spectrum
Pharmaceuticals, Inc.
|
|
|
766 |
|
|
|
766 |
|
|
|
- |
|
|
|
- |
|
Investment
in available for sale securities
|
|
$ |
4,043 |
|
|
$ |
766 |
|
|
$ |
- |
|
|
$ |
3,277 |
|
The
following table summarizes the valuation of our assets by the fair value
hierarchy at December 31, 2008:
Assets
at fair value:
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Auction
rate corporate notes
|
|
$ |
2,816 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,816 |
|
Spectrum
Pharmaceuticals, Inc.
|
|
|
358 |
|
|
|
358 |
|
|
|
- |
|
|
|
- |
|
Investment
in available for sale securities
|
|
$ |
3,174 |
|
|
$ |
358 |
|
|
$ |
- |
|
|
$ |
2,816 |
|
The
Spectrum Pharmaceuticals shares listed above for the period ended September 30,
2009 were acquired from Spectrum on August 4, 2009 when we entered into an
amended agreement with Spectrum in which we licensed them the rights to
RenalanTM in addition to
RenaZorbTM. A
component of this agreement was the payment to us of an additional 113,809
shares of Spectrum common stock.
The
Spectrum Pharmaceuticals shares listed above for the period ended December 31,
2008 were received as partial payment of licensing fees when Spectrum entered
into a license agreement with us for RenaZorbTM
in January 2005 and in payment of the first milestone achieved in June
2006. The shares were sold during the quarter ended September 30,
2009.
The
activity relating to assets valued on a recurring basis utilizing Level 3 inputs
for the three months ended September 30, 2009 and September 30, 2008 is
summarized below:
In
thousands of dollars
Fair
Value Measurements Using Significant Unobservable Inputs (Level
3)
|
|
Auction
rate corporate notes
2009
|
|
|
Auction
rate corporate notes
2008
|
|
Beginning
Balance, July 1
|
|
$ |
3,013 |
|
|
$ |
3,126 |
|
Total
gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
Included
in other comprehensive income
|
|
|
266 |
|
|
|
(310 |
) |
Other
adjustments
|
|
|
(2 |
) |
|
|
- |
|
Ending
Balance, September 30
|
|
$ |
3,277 |
|
|
$ |
2,816 |
|
The
activity relating to assets valued on a recurring basis utilizing Level 3 inputs
for the nine months ended September 30, 2009 and September 30, 2008 is
summarized below:
In
thousands of dollars
Fair
Value Measurements Using Significant Unobservable Inputs (Level
3)
|
|
Auction
rate corporate notes
2009
|
|
|
Auction
rate corporate notes
2008
|
|
Beginning
Balance, January 1
|
|
$ |
2,816 |
|
|
$ |
3,912 |
|
Total
gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
Included
in other comprehensive income
|
|
|
465 |
|
|
|
(1,092 |
) |
Other
adjustments
|
|
|
(4 |
) |
|
|
(4 |
) |
Ending
Balance, September 30
|
|
$ |
3,277 |
|
|
$ |
2,816 |
|
The
amount of total gains or losses for the nine months ended September 30, 2009 and
September 30, 2008 respectively, included in other comprehensive income in
Stockholder’s Equity attributable to the change in unrealized losses relating to
assets still held at the reporting date was ($627,000) and ($1.1
million). A realized gain of $868,000 was recorded during the third
quarter associated with the sale of 240,000 shares of the Spectrum common stock
that we held.
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. Underlying
assumptions relating to the probability-weighted discounted cash flow analysis
were changed from September 30, 2008 to September 30, 2009. In 2008,
the Company believed the market would recover and the auction rate notes would
be liquidated prior to maturity based on a range of estimated time
periods. In 2009, the Company believes there is a greater likelihood
that the market will not recover and as such assumes the auction rate notes may
be held to maturity.
Note
4. Investment in Available for Sale Securities
Investment
in available for sale securities (long-term) includes 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 rate
relating to these investments was reset to a contractual rate of London
Interbank Offering Rate plus 50 basis points. The auction rate
markets have not yet recovered. As such, we evaluated these
investments at September 30, 2009 to determine if they were
impaired. 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 bonds that are the underlying
collateral, prices of similar instruments, our ability to hold the notes to
maturity, and a probability-weighted discounted cash flow
analysis. Based on this analysis, we estimate that at September 30,
2009 their fair value was $3.3 million, representing a cumulative unrealized
holding loss of approximately $627,000. 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 other than temporarily impaired at September 30,
2009.
At the
beginning of the quarter, investment in available for sale securities
(long-term) included 240,000 shares of Spectrum Pharmaceuticals, Inc.
(“Spectrum”) common stock. The shares were received as partial
payment of licensing fees when Spectrum entered into a license agreement for
RenaZorbTM in January 2005
and in payment of the first milestone achieved in June 2006. On
receipt, the shares were recorded at their market value of $1.1 million as
measured by their closing price on the NASDAQ Capital Market. On
September 11, 2009 we sold these shares for $2.0 million, recognizing a gain of
$868,000.
On August
4, 2009 we entered into an amended agreement with Spectrum where we assigned all
patent rights associated with RenalanTM and RenaZorbTM. As part of this
Agreement, we received 113,809 unregistered and restricted shares of Spectrum
common stock. On receipt these shares were recorded at their market
value of $750,000 as measured by their closing price on the NASDAQ Capital
Market as of July 1, 2009. This investment had a market value
of $766,000 as of September 30, 2009.
Note
5. Product Inventories
Product
inventories consist of the following:
In
thousands of dollars
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
2,919 |
|
|
$ |
98 |
|
Work
in process
|
|
|
641 |
|
|
|
- |
|
Finished
goods
|
|
|
155 |
|
|
|
- |
|
Total
product inventories
|
|
$ |
3,715 |
|
|
$ |
98 |
|
As
products reach the commercialization stage, the related inventory is
recorded. The costs associated with products undergoing research and
development are expensed as incurred. As of September 30, 2009 and
December 31, 2008, inventory consisted primarily of nano-structured lithium
titanate spinel, battery cells and battery modules in various stages of the
manufacturing process.
Note
6. Prepaid Expenses and Other Current Assets
Prepaid
expenses and other current assets consist of the following:
In
thousands of dollars
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Prepaid
inventory purchases
|
|
$ |
731 |
|
|
$ |
- |
|
Prepaid
insurance
|
|
|
430 |
|
|
|
283 |
|
Deposits
|
|
|
337 |
|
|
|
25 |
|
Other
prepaid expenses and current assets
|
|
|
340 |
|
|
|
264 |
|
Total
prepaid expenses and other current assets
|
|
$ |
1,838 |
|
|
$ |
572 |
|
Our
prepaid inventory purchases are associated with unfulfilled purchase orders of
$2.3 million placed during the quarter ended September 30,
2009. Other prepaid expenses and current assets consist primarily of
prepaid property taxes, insurance, service contracts, marketing expenses and
rent.
Note
7. Patents
Our
patents are associated with the nanomaterials and titanium dioxide pigment
technology. We are amortizing these assets on a straight-line basis
over their useful lives. The amortized patents’ balances as of
September 30, 2009 and December 31, 2008 were:
In
thousands of dollars
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
Patents
and patent applications
|
|
$ |
1,518 |
|
|
$ |
1,518 |
|
Less
accumulated amortization
|
|
|
(946 |
) |
|
|
(882 |
) |
Total
patents and patent applications
|
|
$ |
572 |
|
|
$ |
636 |
|
The
weighted average amortization period for patents is approximately 16.5
years. Amortization expense, which represents the amortization
relating to the identified amortizable patents, for the nine months ended
September 30, 2009 and September 30, 2008, was $42,000 in each
period. For each of the next five years, amortization expense
relating to patents is expected to be approximately $85,000 per
year.
Note
8. Note Payable and Capital Leases
The
current and long term amounts of the note payable and capital leases are as
follows:
In
thousands of dollars
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
Note
payable to BHP Minerals International, Inc.
|
|
$ |
600 |
|
|
$ |
1,200 |
|
Note
payable to AICCO, Inc.
|
|
|
310 |
|
|
|
132 |
|
Capital
leases
|
|
|
56 |
|
|
|
12 |
|
Subtotal
|
|
|
966 |
|
|
|
1,344 |
|
Less
current portion
|
|
|
(925 |
) |
|
|
(736 |
) |
Long-term
portion of notes payable and capital leases
|
|
$ |
41 |
|
|
$ |
608 |
|
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 million, 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 $567,000, 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. A final payment of
$600,000 plus accrued interest is due on February 8, 2010. The note
does not contain any restrictive covenants with respect to the issuance of
additional debt or equity securities by us nor does it contain or require
compliance with any financial debt covenants.
On August
6, 2009, we entered into a financing arrangement with AICCO, Inc, our insurance
provider to finance the annual cost of our insurance over ten
months. We issued a note to AICCO in the amount of $387,000, at an
interest rate of 5.2% per annum.
Note
9. Stock-Based Compensation
We have a
stock incentive plan, administered by the Board of Directors, which provides for
the granting of options and restricted shares to employees, officers, directors
and other service providers.
The total
compensation cost charged in connection with the stock incentive plan was $1.3
million and $1.2 million for the nine-months ended September 30, 2009 and 2008,
respectively. During the nine-months ended September 30, 2009,
689,065 options vested at a weighted average price of $2.96. During
the nine-months ended September 30, 2008, 624,640 options vested at a weighted
average price of $2.95. Cash received from stock option and warrant exercises
was $0 and $1.3 million during the nine months ended September 30, 2009 and
2008, respectively.
Compensation
expense of $1.3 million was recognized for the nine-months ended September 30,
2009, which is included in general and administrative expenses in the
accompanying Consolidated Statements of Operations. This expense
consisted of $301,000 related to the stock grant awards accrual of the “2009
Annual Incentive Bonus Plan”, amortized expense of stock options and restricted
stock of $734,000 and $230,000, respectively, the offset of which is additional
paid in capital of stockholders’ equity. For the nine-months ended
September 30, 2008, compensation expense of $1.2 million consisted of $237,000
related to the stock grant awards accrual of the “2008 Annual Incentive Bonus
Plan”, amortized stock options of $844,000 and restricted stock expense of
$159,000.
Stock
Options
The total
number of shares authorized for issuance under our 2005 stock incentive plan is
9 million shares. Prior stock option plans, which are now terminated,
authorized a total of 6.6 million shares, of which options for 5,745,500 were
granted and options for 261,500 are outstanding and unexercised at September 30,
2009. The total number of options relating to the 2005 stock
incentive plan that are outstanding and unexercised at September 30, 2009 is
4,700,709.
Total
options granted for the nine-month periods ended September 30, 2009 and 2008
were 1,553,000 and 1,937,667, respectively. The weighted average
grant date fair value of options granted during the nine months ended September
30, 2009 and September 30, 2008 was $1.17 and $2.01, respectively.
As of
September 30, 2009, there was $1.2 million 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 1 year as of
September 30, 2009.
Restricted
Stock
During
the nine-months ended September 30, 2009, the Board of Directors granted 382,115
shares of restricted stock under the plan with a weighted average fair value of
$1.04 per share. During the nine-months ended September 30, 2008, the
Board of Directors granted 143,079 shares of restricted stock under the plan
with a weighted average fair value of $2.11 per share.
As of
September 30, 2009 we had $501,000 of total unrecognized compensation expense
related to restricted stock which will be recognized over the weighted average
period of 1.9 years.
Warrants
For the
nine-months ended September 30, 2009, 6,596,958 warrants were issued in
connection with the May 28, 2009 common stock offering at a strike price of
$1.00 per share. The warrants are fully vested at time of issuance
and expire in seven years. All of these warrants are outstanding at
September 30, 2009.
Note
10. Related Party Transactions
On April
20, 2008, we executed an Amended and Restated Agreement to recover Short-Swing
Profits with Al Yousuf LLC, a United Arab Emirates limited liability company
(“Al Yousuf”). Section 16 of the Securities and Exchange Act of 1934
requires directors, officers and 10% beneficial owners of our stock to disgorge
any short-swing profits realized on a non-exempt purchase and sale of our
securities within any nine-month period. Consistent with the terms of
the Recovery Agreement, we received wire transfers (less wire transfer fees) in
the amount of $177,210 from Al Yousuf.
On
October 6, 2008, we entered into a Stock Purchase and Settlement Agreement dated
as of September 30, 2008 with Al Yousuf. Pursuant to the agreement, we agreed to
issue an aggregate of 8.0 million common shares to Al Yousuf. Of such shares,
5,882,353 shares were acquired on October 14, 2008 by Al Yousuf at a purchase
price of $1.70 per share, for an aggregate purchase price of $10 million. The
remaining 2,117,647 shares were issued upon execution of the agreement in
exchange for a release by Al Yousuf 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 Al Yousuf, pursuant to which Al
Yousuf 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.
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:
1.
|
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.
|
2.
|
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.
|
3.
|
The
forgiveness of the Phoenix notes payable, associated accrued interest, and
remaining accounts receivable
balance.
|
4.
|
The
reversal of the warranty accrual associated with the 47 recalled
batteries.
|
Additionally,
in January 2007, Phoenix issued 1.0 million shares of its common stock in
consideration for the six-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 shares received represented a 16.6% ownership
interest in Phoenix. The investment was recorded at $107,000 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 1.0 million
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 concluded that the investment is
other-than-temporarily-impaired. Consequently, an impairment loss on
the investment of $89,000 was recognized in December 2008. The
remaining investment was valued at $18,000. During the first quarter
of 2009 Phoenix suffered a significant adverse arbitration judgment that
prompted us to recognize further impairment of $18,000 which is deemed to be
other-than-temporarily impaired.
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 will work jointly with AES to develop a suite of energy storage
solutions for purchase by AES and potentially third parties. On
August 3, 2007, we received an initial $1,000,000 order, of which $500,000 was
prepaid, in connection with the AES Joint Development and Equipment Purchase
Agreement for a 500 kilowatt-hour energy storage product. This
product 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.
Note
11. Other Transactions
On May
28, 2009, we sold 11,994,469 common shares to institutional
investors. The sales were made at $1.17 per share with net proceeds
to the Company, after expenses of $12.8 million. Warrants with a
seven year expiration were also issued as a component of this offering to
purchase 6,596,958 shares of stock at a price of $1.00 per share.
Note
12. Business Segment Information
Management
views the Company as operating in two major business segments: Power
and Energy Group, and All Other operations.
The Power
and Energy Group develops, produces, and sells nano-structured lithium titanate
spinel, battery cells, battery packs, and provides related design and test
services. The All Others group consists of the remaining portions of
the previous Life Sciences and Performance Materials
groups. Management completed a thorough review of operations and
strategies and determined that it was in the best interests of the shareholders
for the Company to focus primarily on the Power and Energy Group. As
a result of this assessment resources devoted to the Performance Materials Group
and Life Sciences Group were considerably reduced and no new significant
development is being pursued in those areas by the Company.
The
accounting policies of these business segments are the same as described in Note
2 to the unaudited condensed consolidated financial
statements. Reportable segment data reconciled to the consolidated
financial statements as of the three- and nine-month periods ended September 30,
2009 and September 30, 2008 is as follows:
In
thousands of dollars
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
Loss/(Income)
|
|
|
and
|
|
|
|
|
Three Months Ended
|
|
Net Sales
|
|
|
From Operations
|
|
|
Amortization
|
|
|
Assets
|
|
September
30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group
|
|
$ |
775 |
|
|
$ |
1,549 |
|
|
$ |
324 |
|
|
$ |
10,240 |
|
All
Other
|
|
|
892 |
|
|
|
(491 |
) |
|
|
314 |
|
|
|
5,103 |
|
Corporate
|
|
|
- |
|
|
|
3,181 |
|
|
|
48 |
|
|
|
32,437 |
|
Consolidated
Total
|
|
$ |
1,667 |
|
|
$ |
4,239 |
|
|
$ |
686 |
|
|
$ |
47,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group
|
|
$ |
1,685 |
|
|
$ |
980 |
|
|
$ |
334 |
|
|
$ |
8,390 |
|
All
Other
|
|
|
117 |
|
|
|
1,111 |
|
|
|
354 |
|
|
|
6,317 |
|
Corporate
|
|
|
- |
|
|
|
7,232 |
|
|
|
36 |
|
|
|
40,097 |
|
Consolidated
Total
|
|
$ |
1,802 |
|
|
$ |
9,323 |
|
|
$ |
724 |
|
|
$ |
54,804 |
|
In
thousands of dollars
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
and
|
|
|
|
|
Nine Months Ended
|
|
Net Sales
|
|
|
From Operations
|
|
|
Amortization
|
|
|
Assets
|
|
September
30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group
|
|
$ |
1,658 |
|
|
$ |
5,949 |
|
|
$ |
994 |
|
|
$ |
10,240 |
|
All
Other
|
|
|
908 |
|
|
|
343 |
|
|
|
962 |
|
|
|
5,103 |
|
Corporate
|
|
|
- |
|
|
|
10,905 |
|
|
|
137 |
|
|
|
32,437 |
|
Consolidated
Total
|
|
$ |
2,566 |
|
|
$ |
17,197 |
|
|
$ |
2,093 |
|
|
$ |
47,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
and Energy Group
|
|
$ |
3,366 |
|
|
$ |
3,989 |
|
|
$ |
883 |
|
|
$ |
8,390 |
|
All
Other
|
|
|
1,408 |
|
|
|
2,835 |
|
|
|
945 |
|
|
|
6,317 |
|
Corporate
|
|
|
- |
|
|
|
17,184 |
|
|
|
109 |
|
|
|
40,097 |
|
Consolidated
Total
|
|
$ |
4,774 |
|
|
$ |
24,008 |
|
|
$ |
1,937 |
|
|
$ |
54,804 |
|
In the
table above, corporate expense in the Loss from Operations column includes
overall company support costs as follows: corporate research and
development expenses: sales and marketing expenses; general and administrative
expenses; and depreciation and amortization of the Reno headquarters building
improvements.
Corporate
assets consist primarily of cash, short term investments, and long-lived
assets. Since none of the business units has reached break-even, cash
funding is provided at the corporate level to the business units. The
long-lived assets primarily consist of the corporate headquarters building,
building improvements, and land. As such, these assets are reported
at the all other level and are not allocated to the other business
segment.
Substantially
all of our assets are held within the United States.
For the
nine months ended September 30, 2009, we had sales to four major customers, each
of which accounted for 10% or more of revenues. Total sales to these customers
for the nine months ended September 30, 2009 and the balance of their accounts
receivable at September 30, 2009 were as follows:
In
thousands of dollars
|
|
Sales
|
|
|
Accounts
Receivable and
|
|
|
|
Nine
Months Ended
|
|
|
Notes
Receivable at
|
|
Customer
|
|
September
30, 2009
|
|
|
September
30, 2009
|
|
Power and Energy Group:
|
|
|
|
|
|
|
BAE
Systems Science & Technology Inc
|
|
$ |
482 |
|
|
$ |
- |
|
BAE
Systems Marine Limited
|
|
$ |
263 |
|
|
$ |
- |
|
Office
of Naval Research
|
|
$ |
378 |
|
|
$ |
378 |
|
All Other:
|
|
|
|
|
|
|
|
|
Spectrum
Pharmaceuticals, Inc.
|
|
$ |
750 |
|
|
$ |
1 |
|
For the
nine months ended September 30, 2008, we had sales to three major customers,
each of which accounted for 10% or more of revenues. Total sales to these
customers for the nine months ended September 30, 2008 and the balance of their
accounts receivable at September 30, 2008 were as follows:
In
thousands of dollars
|
|
Sales
|
|
|
Accounts
Receivable and
|
|
|
|
Nine
Months Ended
|
|
|
Notes
Receivable at
|
|
Customer
|
|
September
30, 2008
|
|
|
September
30, 2008
|
|
Power and Energy Group:
|
|
|
|
|
|
|
Office
of Naval Research
|
|
$ |
2,143 |
|
|
$ |
1,143 |
|
AES
|
|
$ |
500 |
|
|
$ |
- |
|
All Other:
|
|
|
|
|
|
|
|
|
Elanco
Animal Health/Eli Lilly
|
|
$ |
623 |
|
|
$ |
- |
|
Sales for
the nine-month periods ended September 30, 2009 and 2008 by geographic area were
as follows:
In
thousands of dollars
|
|
Sales
|
|
|
Sales
|
|
|
|
Nine
Months Ended
|
|
|
Nine
Months Ended
|
|
Geographic
information (a):
|
|
September
30, 2009
|
|
|
September
30, 2008
|
|
United
States
|
|
$ |
2,194 |
|
|
$ |
4,375 |
|
Canada
|
|
|
- |
|
|
|
248 |
|
Other
foreign countries
|
|
|
372 |
|
|
|
151 |
|
Total
|
|
$ |
2,566 |
|
|
$ |
4,774 |
|
|
|
|
|
|
|
|
|
|
(a)
Revenues are attributed to countries based on location of
customer.
|
|
Note
13. Subsequent Events
The
Company evaluated subsequent events for potential recognition and/or disclosure
through November 9, 2009, the date the consolidated financial statements were
issued. No significant subsequent events occurred.
Item
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q (this “Report”) contains various forward-looking
statements. Such statements can be identified by the use of the forward-looking
words "anticipate," "estimate," "project," "likely," "believe," "intend,"
"expect," or similar words. These statements discuss future
expectations, contain projections regarding future developments, operations, or
financial conditions, or state other forward-looking
information. When considering such forward-looking statements, you
should keep in mind the risk factors noted in Part II – Other Information, “Item
1A. Risk Factors” and other cautionary statements throughout this Report and our
other filings with the Securities and Exchange Commission. You should
also keep in mind that all forward-looking statements are based on management’s
existing beliefs about present and future events outside of management’s control
and on assumptions that may prove to be incorrect. If one or more
risks identified in this Report or any other applicable filings materializes, or
any other underlying assumptions prove incorrect, our actual results may vary
materially from those anticipated, estimated, projected, or
intended.
Unless
the context requires otherwise, all references to “Altair,” “we,” “Altair
Nanotechnologies Inc.,” or the “Company” in this Report refer to Altair
Nanotechnologies Inc. and all of its 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®, ALTI-ESSTM, TiNano® and
Nanocheck®. Any other trademarks and service marks used in this
Report are the property of their respective holders.
Overview
The
following discussion summarizes the material changes in our financial condition
between December 31, 2008 and September 30, 2009 and the material changes in our
results of operations and financial condition between the three-month and
nine-month periods ended September 30, 2009 and September 30,
2008. This discussion should be read in conjunction with Management’s
Discussion and Analysis of Financial Condition and Results of Operations
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
We are a
Canadian corporation, with principal assets and operations in the United States,
whose primary business is developing and commercializing nanomaterial
technologies. We are organized into two divisions, a Power and Energy Group, and
all other operations, which consists of the remaining portions of the previous
Life Sciences and Performance Materials groups combined with corporate
support. Management completed a thorough review of operations and
strategies during 2008 and determined to focus primarily on the Power and Energy
Group. As a result of this assessment, resources devoted to the
Performance Materials Group and Life Sciences Group were significantly reduced,
and no new development is being pursued in those areas.
Our
research, development, production and marketing efforts are currently directed
toward one primary market, the Power and Energy Storage market, with efforts in
other areas being directed at supporting existing initiatives rather than
developing any new products. We are still, however, engaged in the
following ongoing development and production efforts:
Power and
Energy Group
·
|
The
design, development, and production of our nano-lithium titanate battery
cells, batteries, and battery packs as well as related design and test
services.
|
·
|
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.
|
All Other
Operations
·
|
We
are currently working with Sherwin-Williams and AlSher to identify and
qualify an interested third party to purchase our interest in the AlSher
joint venture.
|
·
|
Support
on a consulting basis to Spectrum in their development of RenaZorbTM and
RenalanTM, which
are designed to be useful in the treatment of chronic kidney disease,
hyperphosphatemia, and high phosphate levels in blood, associated with end
stage renal disease.
|
Although
contract research services, which are recorded in our Consolidated Statement of
Operations under the Commercial Collaborations and the Contracts and Grants
revenue lines, remain a high percentage of the revenue earned and revenue from
product sales has been less than 20% of total year-to-date revenue, management
is committed to broadening our product mix to include the sale of higher margin
lithium ion batteries and packs, particularly in stationary power,
transportation and military applications. Revenues associated with
research and development performed under our contracts with commercial customers
(Commercial Collaborations) and contracts/grants with our government funded
customers (Contract and Grants) were historically recorded in all of our
segments, Power and Energy Group, Performance Materials, and Life Sciences based
on the product focus of the research. Historically, the business
conducted in the Performance Materials segment relied heavily on commercial
collaboration contracts and grants that did not generate meaningful profit
margins. The path to commercialize Performance Materials overall and
particularly in certain segments required significant amounts of upfront
investment with no clear path to commercialization. The length of
time to commercialize is also lengthy for the Life Sciences segment
products. As a small company with limited resources, management
performed an analysis to determine how to best focus those resources on
generating revenue and achieving break-even within the shortest amount of
time. In evaluating the prospects of products within each segment,
management utilized the number of years to convert opportunities to revenue as a
key indicator with one to two years representing an acceptable time
frame. A one to two year time frame was considered a realistic
objective given the length of the sales cycle in the various markets and how far
along we are in each market area in our sales efforts. The analysis
performed indicated that a shift to focusing primarily on the Power and Energy
Group would be in the best interest of shareholders as the products within this
segment had demonstrated performance and competitive advantages, as well as a
shorter cycle to commercialization. This focus will also continue to
include contract research services, as well as grants that are targeted to
develop our battery technology and ultimately lead to
commercialization. Compared to other battery technologies, our
batteries provide rapid high power charge and discharge capability,
significantly longer cycle and calendar life, a wide operating temperature range
(-40oC to
+55oC),
increased operational safety and environmental cleanliness, and the industry’s
highest roundtrip efficiency. These are performance attributes highly
sought after in the stationary power and transportation markets for rechargeable
batteries. We are also progressing in the government testing process
on several of our military energy related projects which must be successfully
completed before commercial volumes can be sold into the military. We
completed a very successful demonstration project of a large 2MW battery system
with The AES Corporation in 2008 and this success has also provided impetus to
our stationary power sales efforts. One of the 1MW batteries included
in the 2MW system built for AES has subsequently been connected to the electric
grid near Philadelphia and is currently providing commercial frequency
regulation services to the regional transmission organization, PJM
Interconnection, for AES.
The
current financial markets and general economic environment, although still weak,
appear to be improving from the lows of 2008 and early 2009. New
credit availability is still severely constrained, and companies that would be
candidates to purchase our products are only now beginning to cautiously
consider new purchases. We are currently seeing an increase in the
volume of requests for quotes.
General
Outlook
We have
generated net losses in each fiscal year since incorporation, and the third
quarter of 2009 was no different. Revenues from product sales,
commercial collaborations and contracts and grants decreased significantly in
the first nine months of 2009 to $2.6 million compared to $4.8 million in the
same period in 2008. Operating expenses also declined significantly,
though, from $28.8 million for the nine months ended September 30, 2008, to
$19.8 million for the same period of 2009, continuing this trend as
well. The revenue decrease was due almost entirely to the lower
dollar value of government grants being worked in 2009 compared to
2008. We also experienced delays in customer commitments in the
stationary power frequency regulation market. The operating expense
decline was primarily the result of decreases in Research and Development
expenses due to the completion of a number of grants as well as the shift in
Company focus away from Life Sciences and Performance Materials. Our
gross profit margins on customer contracts for research and development work are
very low, leading us to shift our focus 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 the
first nine months of 2009, 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 additional test and production
equipment.
Recent Business Developments
and Status Updates
Power
and Energy Group
As a
result of the American Recovery and Reinvestment Act of 2009, the Federal
Government has earmarked $2 billion for near-term alternate energy projects to
construct the manufacturing capability in the U.S. for producing advanced
batteries for the automotive market. Another $4.5 billion has been
earmarked for electric grid modernization projects. Although our
primary focus is not on the automotive market we do provide battery cells and
systems to several EV bus manufacturers, and so we submitted a request for a
$37.8 million grant to expand our nano-structured lithium titanate spinel
manufacturing capability in Reno, NV and our battery assembly operations in
Anderson, IN. We were not one of the companies selected by the
Department of Energy to receive one of these grants. Grant recipients
for the $4.5 billion were announced in late October 2009, and these grants were
awarded to system integrators that provide a full service solution to electric
grid modernization. While we were not eligible to directly receive any grants,
we have been working with a number of companies that did submit grant
applications. We are hopeful that one or more of the companies that
were awarded a grant will use our batteries as a portion of their
solution.
In August
2009 we entered into a contract with Proterra LLC to provide them with battery
modules for their manufacture of six buses for a number of different end
customers. These batteries will be delivered between September 2009
and early first quarter 2010. We continue to work closely with
Proterra and anticipate that as their business grows we will remain one of their
important suppliers. We generated $121,000 of revenue from Proterra
in the quarter ending September 30, 2009 and anticipate additional revenues in
the future.
In
September 2008, we accepted a purchase order from DesignLine International USA
(DLI) for the delivery of four complete battery module sets. These
hybrid electric vehicle (HEV) battery packs were to be used in demonstration
buses for three city transit customers, and one for a modular testing
program. The DLI HEV bus operates in an electric-only mode for
as much as 30 percent of its range and provides a 100 percent improvement in
fuel economy over a diesel bus, with fuel savings of up to 6,000 gallons per
year. Due to a number of problems related to components outside
of the battery cells and a disagreement on payment terms, this program is
currently on hold and no additional work is being done with this customer until
the open issues are resolved.
In
September 2008, we received an order from BAE Systems for $349,000 to develop 32
batteries in support of the US Army’s artillery upgrade
program. These batteries were delivered and accepted by the customer
on March 31, 2009. We expect these batteries to successfully pass the
remaining portion of the Army’s test program and be ready for deployment by the
end of 2009. At that point sales will depend on congressional budgeting for the
Army. We are also in advanced negotiations with BAE Systems Marine Limited and
the UK Ministry of Defense (MoD) to develop a battery system for use in a
British naval application. We have successfully completed phase 1a of
the project and are awaiting finalization of the contract for phase 1b which we
anticipate starting during the first quarter of 2010. Successful
completion of this initial work is necessary before potential production orders
from the MoD might be considered. We generated no revenue from BAE
Systems in the quarter ending September 30, 2009 and anticipate revenue with
them beginning sometime in 2010.
In August
2007, we received an initial $1.0 million order in connection with the AES Joint
Development and Equipment Purchase Agreement for a 500 kilowatt-hour energy
storage product. In accordance with this purchase order, two
one-megawatt stationary battery packs (energy equivalent for each pack based on
anticipated operational time is 250 kilowatt-hours of energy) were completed
according to the delivery schedule in December 2007. A testing
program was developed and validated by KEMA, Inc., an independent agency and
executed by AES personnel and subcontractors. KEMA’s testing
completed during the second quarter of 2008 showed the battery system
successfully met the program’s specifications. The demonstration also
suggests that the technology could be used for several other utility
applications. Of these two one-megawatt battery packs, one has been
relocated to Pennsylvania and hooked into the commercial electric grid managed
by PJM providing ongoing ancillary services. We understand that the
second unit is targeted for the New York ISO (Independent System Operator)
market and similarly connected to the electric grid in that
area. As a result of the impartial successful test results
reported by KEMA and the commercial demonstration of the unit connected to the
PJM grid, we have made inroads into other potential customers with opportunities
that we expect to develop by mid 2010.
All
Other Areas
In August
2008, the September 2007 Development Services Agreement which existed between us
and Elanco Animal Health, a division of Eli Lilly and Company ("Elanco"), and
related license agreements, were terminated. Because all rights
granted to Elanco under the original agreements reverted to us with the
termination of those agreements, we explored licensing this technology and
product to other interested parties. On August 5, 2009 we assigned
all patent rights related to animal and human products, including RenazorbTM and
RenalanTM compounds, to
Spectrum Pharmaceuticals Inc. In return we received Spectrum
restricted common stock, with a fair value of $750,000 which we recognized as
royalty revenue during the quarter ended September 30, 2009 and a right to
future royalties and milestone payments upon completion of certain specified
events.
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
have been positive, we have curtailed full operations at this
time. AlSher is working to identify and qualify an interested third
party to purchase our interest in the AlSher joint venture and have engaged
5iTech to assist us in that effort. The next phase of the development
effort will include the construction of a 5,000 ton annual capacity processing
plant. During this third quarter an interested party was identified
and advanced discussions on the sale of our interests in AlSher are
progressing.
Some time
ago we were notified by the Department of Defense of a $1.75 million grant award
to pursue development of a nano-sensor project with Western Michigan
University. The contract for this award was finalized on September 3,
2009 and work commenced in the third quarter. This project and
similar activities will continue into the foreseeable future as long as they are
able to make a positive contribution to our financial position; however, they
are not the focus area of the Company.
Liquidity
and Capital Resources
Current
and Expected Liquidity
Historically,
we have financed operations primarily through the issuance of equity securities
(common shares, convertible notes, stock options and warrants) and by the
issuance of debt. In May 2009 we closed a $14 million common stock
financing. We believe that this additional funding will provide us
the working capital needed until order volume picks up. If order
volume fails to increase as anticipated, based on forecasted revenues for
current contracts and those in the final negotiation stages, at our 2009 average
net cash burn rate of $1.9 million per month, capital for approximately 12
months is available excluding any new business as of September 30,
2009. Since most of our inventory build-up purchases were paid for in
the third quarter, our anticipated cash burn rate is expected to return to, or
fall below the average of $1.9 million per month. Under this
scenario, if no customer orders are received by late 2009, other measures to
preserve cash on hand until order volume begins to increase would include: 1)
reducing production levels and purchases of raw materials; 2) deferring
discretionary expenditures such as capital purchases, internal research costs,
training, and routine equipment and building maintenance; 3) defer filling or
eliminating non-critical positions through attrition; and 4) as a final resort,
reductions in workforce. As we project forward for the next 24
months, if sales volume growth is slow and steady we would need to raise capital
for capacity expansion in mid to late 2010. On the other hand, if
volume growth is relatively fast as the global economy starts to improve, we
will need to raise additional capacity expansion capital earlier in order to
fund the purchase of raw materials for the orders.
We
evaluate our capital needs and the availability of capital on an ongoing basis
and, consistent with past practice, expect to seek to raise capital when and on
such terms as we deem appropriate based upon our assessment of our current
liquidity, capital needs and the availability of capital. Given that
we are not yet in a positive cash flow or earnings position, the options
available to us are fewer than to a positive cash flow company and generally do
not include bank financing. We do not have any commitments from any
party to provide required capital and may, or may not, be able to obtain such
capital on reasonable terms. To raise capital in the future, we
expect to issue equity securities and/or convertible debt
securities. In support of this belief we filed a new shelf
registrations statement with the SEC for $150 million on September 18, 2009
which was declared effective on October 26, 2009.
We have a
single note payable in the original principal amount of $3 million that does not
contain any restrictive covenants with respect to the issuance of additional
debt or equity securities by Altair. The note is secured by a first
lien on our building and does not contain or require compliance with any
financial debt covenants. 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 total outstanding note payable balance is
$600,000. The final payment of principal and interest is due on
February 8, 2010.
On August
6, 2009, we entered into a financing arrangement with AICCO, Inc, our insurance
provider, where we finance the annual cost of our insurance over ten
months. We issued to AICCO a note in the amount of $387,000, at an
interest rate of 5.2%.
Our cash
and short-term investments decreased by $4.2 million, from $28.1 million at
December 31, 2008 to $23.9 million at September 30, 2009. Net cash used in
operating activities for the nine months ended September 30, 2009 totaled $18.1
million compared to $25.1 million for the nine months ended September 30,
2008. The significant decrease in cash used in operating activities
for the nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008 primarily reflects reduction of accounts payable of
approximately $5.5 million relating to significant one-time or annual payments
made in the first quarter of 2008, which included: $2.4 million of commission
and expenses paid to the placement agent in connection with our sale of common
shares in November 2007; $1.8 million paid in connection with the 2007 bonus
plan; and $1.3 million of raw materials purchases made in 2007 in anticipation
of receipt of the next sales order from Phoenix under the 2007 purchase
agreement were paid in the first quarter of 2008. Cash expended on
research and development activities decreased by approximately $6.2 million in
the first nine months of 2009 primarily attributable to the completion of
customer contracts and grants in 2008 (AES Energy Storage LLC, Elanco Animal
Health, and The Department of Energy) and the realignment of resources relating
to the shift in focus from the Performance Materials and Life Sciences segments
to the Power and Energy Group. Additionally, no bonus payments were
made in the first quarter of 2009, as the bonus targets for 2008 were not
achieved.
Investing
activities for the nine months ended September 30, 2009 reflect the purchase of
property and equipment of $612,000 compared to property and equipment purchases
of $2.1 million made for the nine months ended September 30,
2008. No significant capital expenditures are anticipated
through December 2009 based on current production
volumes. Additionally, 240,000 shares of Spectrum common stock held
by the Company were sold for $2.0 million in 2009 compared to no sales in
2008.
The cash
provided by financing activities of $12.5 million for the nine months ended
September 30, 2009 primarily reflects the $12.8 million common stock financing
in May, net of issuance costs, and a payment of the note payable on our
building. In 2008, the cash provided by financing activities of
$839,000 included proceeds from the exercise of stock options, warrants and
recovery of short swing profits totaling $1.4 million offset by a $600,000
payment of notes payable on our building.
As we
moved into the second half of 2009 we started building up our inventory in
anticipation of sales later in the year and early 2010. Depending on
the time lag between the initial inventory buildup and the actual sales our cash
balance will be negatively impacted. As of September 30, 2009, we
have unfulfilled inventory purchase orders of $3.5 million and do not anticipate
placing substantial additional orders unless order volume
increases. Liquidity will be a consideration in our final
determination of production volumes.
During
2008 we went through a rigorous process of re-evaluating our overall Company
strategy and determining what approach would most likely result in the creation
of the greatest shareholder value. During the course of that
reassessment, we examined the anticipated overall size of the different markets
that we were engaged in, our level of expertise, the existing competitors,
opportunities and resources required in order for Altairnano to be a competitive
participant in each market. We determined that in the Life Sciences
arena our products would require another two to six years of testing before any
of them could get through the regulatory approval process and become
commercially viable products that could generate revenue for us. In
the Performance Materials arena, we concluded that there were no clear paths to
commercialization for the various products we were developing, nor was the size
of those potential markets known. In the power and energy storage
market, we determined that there were potential large market opportunities in
the stationary power and renewables integration market segments and that
customers in those market segments were facing real problems today that our
batteries could solve. Consequently, from a liquidity and capital
resources perspective we determined that continuing to pursue the Life Sciences
and Performance Materials markets would consume a substantial amount of capital
over the next four plus years with a very uncertain expectation of revenues that
could be generated from this activity. This situation would have a
negative impact on shareholder value and as a result, we curtailed our efforts
in these areas. In the Power and Energy Group arena, however, we
believe that the revenue opportunity for the resources consumed is much greater
and nearer in term. We recognize that use of rechargeable batteries
in stationary power and renewables integration is an emerging market and that
the market is competitive with a limited number of potential customers whose
cash flow and research budgets may significantly affect our near term business
prospects. Nevertheless, given the competitive strength of our batteries
relative to the needs of the market, we believe that we have an opportunity to
become an early leader in a potentially large market.
Our
objective is to manage cash expenditures in a manner consistent with rapid
product development that leads to the generation of revenues in the shortest
possible time. The shift in focus to the Power and Energy Group and
reduction in resources committed to our other business units has allowed us to
re-direct funding to our battery development and commercialization activities,
which are anticipated to be higher margin with a shorter cycle to
commercialization than our performance materials and pharmaceutical
candidates. We do not believe that this shift in focus will have a
material effect on our sources of cash. Our cash outflow in the Life
Sciences and Performance Materials markets was considerably greater than our
cash inflow. We expect the focus on the Power and Energy Group to
allow us to present a more consistent story to the market in future fund-raising
efforts. Delay in commercialization of our product sales efforts
beyond 2009 would, however, likely have a negative effect on our ability to
raise capital and lead to an increase in the cost of capital.
At
November 3, 2009, we had 105,519,855 common shares issued and
outstanding. As of that same date, there were outstanding warrants to
purchase up to 7,028,440 common shares and options to purchase up to 4,926,584
common shares.
Capital Commitments
The following table discloses aggregate information
about our contractual obligations and the periods in which payments are due as
of September 30, 2009:
In
thousands of dollars
|
|
|
|
|
Less
Than
|
|
|
|
|
|
|
|
|
After
|
|
Contractual
Obligations
|
|
Total
|
|
|
1
Year
|
|
|
1-3
Years
|
|
|
4-5
Years
|
|
|
5
Years
|
|
Notes
Payable
|
|
$ |
957 |
|
|
$ |
957 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Interest
on Notes Payable
|
|
|
42 |
|
|
|
42 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Contractual
Service Agreements
|
|
|
479 |
|
|
|
269 |
|
|
|
210 |
|
|
|
- |
|
|
|
- |
|
Facilities
and Property Leases
|
|
|
930 |
|
|
|
369 |
|
|
|
561 |
|
|
|
- |
|
|
|
- |
|
Unfulfilled
Purchase Orders (a)
|
|
|
4,486 |
|
|
|
4,486 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
Contractual Obligations
|
|
$ |
6,894 |
|
|
$ |
6,123 |
|
|
$ |
771 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
(a)
|
Includes unfulfilled inventory purchase orders as
of September 30, 2009 of $3.2
million.
|
Beginning in the second quarter of 2008, we revised our
capital acquisition policy to lease capital acquisitions that meet our business
case criteria. Since the Company is not yet in a cash flow positive
state, we have had limited opportunity to implement this change in
policy.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements at
September 30, 2009.
Critical Accounting Policies and
Estimates
Management based the 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.
·
|
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. If the assets have
alternative future uses (in research and development projects or
otherwise), they are capitalized when acquired or constructed; if they do
not have alternative future uses, they are expensed as
incurred. At September 30, 2009, the carrying value of these
assets was $13.1 million, or 27% 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. (see
Note 2 for Long-Lived Assets for discussion of evaluations
performed)
|
·
|
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 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 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. Historically, 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, and 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. Our practice is
to accept product returns only in limited circumstances on an exception
basis and do not expect future sales
returns.
|
·
|
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, are initially recorded in general and
administrative expenses and then allocated monthly to research and
development expense based on labor costs. Fringe benefits
consisting of payroll taxes and various employee benefits, are initially
recorded in general and administrative expenses and then allocated out to
all cost centers based on where the employees are charging their
time. 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 quarterly. 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 September 30, 2009. Management has, therefore, established a full
valuation allowance against its net deferred income tax assets as of
September 30, 2009. 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.
|
·
|
Valuation
Allowance – Long-Term Investments. We currently have $3.9
million in auction rate securities that are classified as Investments in
Available for Sale Securities. Until the market for these
securities collapsed in late 2007 they were very liquid and treated the
same as Cash and Equivalent Securities. Since the market
collapse, however, we have had to use a Level 3 measurement to determine
their fair value and the resulting impairment associated with these
securities. Level 1 analysis is unavailable because there is no
longer an actively traded market for these securities. Level 2
analysis is also unavailable because there are no other significant
observable inputs upon which an analysis could be
based. Consequently, we have assessed the fair value of these
securities using a probability-weighted discounted cash flow
analysis. In this model, we weighted two separate sets of
scenarios: 1) three scenarios that consider future recovery of the market;
and 2) two scenarios that assume the notes will be held to
maturity. These scenarios consider the length of time that we
believe will be required in order for the security to be
liquidated. Given the current strength of the book runner, the
strong ratings of the underlying bond collateral, and the small number of
defaults that have occurred with companies comprising the collateral
notes, we believe that the two auction rate securities we have will
ultimately be redeemed at their face value. Under each of the
scenarios, we calculated a total cash flow using assumed contractual rates
for each period until the anticipated liquidation date. We
assumed constant weighted average contractual rates over these
periods. We then applied a discount rate to each scenario
commensurate with the level of risk associated with these securities to
compute a Net Present Value. These five scenarios were then
weighted to arrive at a total probability adjusted Net Present Value of
all scenarios which equates to fair
value.
|
·
|
Environmental
Liabilities. At this time we do not anticipate any material
environmental liabilities associated with our operations. To
the best of our knowledge we are in compliance with all applicable
environmental health and safety regulations and requirements from all
applicable regulatory agencies. We are currently investigating
the handling of our battery products at their end of life, but given the
lack of hazardous materials used in their manufacture we are not expecting
any potential environmental
liabilities.
|
Results of
Operations
Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008
In
thousands of dollars
|
|
Power
and Energy Group
|
|
|
All
Other
|
|
|
Corporate
|
|
|
Consolidated
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
268 |
|
|
$ |
114 |
|
|
$ |
141 |
|
|
$ |
52 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
409 |
|
|
$ |
166 |
|
Less
sales returns
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
License
fees
|
|
|
- |
|
|
|
- |
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
750 |
|
|
|
- |
|
Commercial
collaborations
|
|
|
121 |
|
|
|
53 |
|
|
|
1 |
|
|
|
76 |
|
|
|
- |
|
|
|
- |
|
|
|
122 |
|
|
|
129 |
|
Contracts
and grants
|
|
|
386 |
|
|
|
1,518 |
|
|
|
- |
|
|
|
(11 |
) |
|
|
- |
|
|
|
- |
|
|
|
386 |
|
|
|
1,507 |
|
Total
revenues
|
|
|
775 |
|
|
|
1,685 |
|
|
|
892 |
|
|
|
117 |
|
|
|
- |
|
|
|
- |
|
|
|
1,667 |
|
|
|
1,802 |
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales - product
|
|
|
163 |
|
|
|
42 |
|
|
|
8 |
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
171 |
|
|
|
59 |
|
Cost
of sales - warranty and inventory reserve
|
|
|
68 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68 |
|
|
|
- |
|
Research
and development
|
|
|
1,754 |
|
|
|
2,225 |
|
|
|
24 |
|
|
|
840 |
|
|
|
441 |
|
|
|
255 |
|
|
|
2,219 |
|
|
|
3,320 |
|
Sales
and marketing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
761 |
|
|
|
661 |
|
|
|
761 |
|
|
|
661 |
|
Settlement
and release
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,605 |
|
|
|
- |
|
|
|
3,605 |
|
General
and administrative
|
|
|
15 |
|
|
|
64 |
|
|
|
55 |
|
|
|
17 |
|
|
|
1,931 |
|
|
|
2,675 |
|
|
|
2,001 |
|
|
|
2,756 |
|
Depreciation
and amortization
|
|
|
324 |
|
|
|
334 |
|
|
|
314 |
|
|
|
354 |
|
|
|
48 |
|
|
|
36 |
|
|
|
686 |
|
|
|
724 |
|
Total
operating expenses
|
|
|
2,324 |
|
|
|
2,665 |
|
|
|
401 |
|
|
|
1,228 |
|
|
|
3,181 |
|
|
|
7,232 |
|
|
|
5,906 |
|
|
|
11,125 |
|
(Loss)/Income
from operations
|
|
|
(1,549 |
) |
|
|
(980 |
) |
|
|
491 |
|
|
|
(1,111 |
) |
|
|
(3,181 |
) |
|
|
(7,232 |
) |
|
|
(4,239 |
) |
|
|
(9,323 |
) |
Other
(expense) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(60 |
) |
|
|
(23 |
) |
|
|
(61 |
) |
|
|
(23 |
) |
Interest
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
38 |
|
|
|
180 |
|
|
|
38 |
|
|
|
180 |
|
Realized
gain on investment
|
|
|
- |
|
|
|
- |
|
|
|
868 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
868 |
|
|
|
- |
|
Loss
on foreign exchange
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(1 |
) |
Total
other income, net
|
|
|
(1 |
) |
|
|
- |
|
|
|
868 |
|
|
|
- |
|
|
|
(22 |
) |
|
|
156 |
|
|
|
845 |
|
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,550 |
) |
|
|
(980 |
) |
|
|
1,359 |
|
|
|
(1,111 |
) |
|
|
(3,203 |
) |
|
|
(7,076 |
) |
|
|
(3,394 |
) |
|
|
(9,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Noncontrolling
interests' share
|
|
|
- |
|
|
|
- |
|
|
|
78 |
|
|
|
56 |
|
|
|
- |
|
|
|
- |
|
|
|
78 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)/Income
|
|
$ |
(1,550 |
) |
|
$ |
(980 |
) |
|
$ |
1,437 |
|
|
$ |
(1,055 |
) |
|
$ |
(3,203 |
) |
|
$ |
(7,076 |
) |
|
$ |
(3,316 |
) |
|
$ |
(9,111 |
) |
Net
Loss
The net
loss attributable to Altair Nanotechnologies, Inc. for the quarter ended
September 30, 2009 totaled $3.3 million ($0.03 per share) compared to a net loss
of $9.1 million ($0.11 per share) in the third quarter of 2008.
Power and
Energy Group net loss for the quarter ended September 30, 2009 was $1.6 million
compared to a net loss of $980,000 in the same quarter of 2008. This
decrease is primarily due to the reduction of $1.1 million in revenue relating
to the Office of Naval Research phase I grant. Billing under the
phase II grant began late in Q2 2009.
All Other
operations for the quarter ended September 30, 2009 swung to a profit of
$1,437,000 compared to a net loss of $1,056,000 in the same quarter of
2008. This improvement is attributable to license fee revenue of
$750,000 during Q3 2009, a reduction in Research and Development costs of
$816,000 and from an $868,000 realized gain from the sale of stock.
The net
loss for corporate during the quarter ended September 30, 2009 was $3.2 million
compared to a net loss of $7.1 million in the same quarter of
2008. This decrease is primarily related to a settlement agreement
with Al Yousuf LLC in Q3 2008 and higher administrative employee costs and legal
patent costs in Q3 2008.
Revenues
Total
revenues for the quarter ended September 30, 2009 were $1,667,000 compared to
$1,802,000 for the same period of 2008. License fees increased by
$750,000 and contracts and grants decreased by $1,121,000.
Power and
Energy Group net revenue for the quarter ended September 30, 2009 was $775,000
compared to $1,685,000 for the same period of 2008. This decrease is
primarily due to the reduction of $1.1 million in revenue relating to the Office
of Naval Research phase I grant. Billing under the phase II grant
began late in Q2 2009.
Net
revenue of All Other operations for the quarter ended September 30, 2009 were
$892,000 compared to $117,000 for the same period of 2008. This
increase is attributable to one-time license fee revenue from Spectrum
Pharmaceuticals.
Operating
Expenses
Product
cost of sales increased in the third quarter of 2009 as we modestly ramped up
power module revenue in the Power and Energy Group. It is important
to note that our gross margins in any quarter are not indicative of future gross
margins. At this early stage of development, our product mix, volume,
per-unit pricing and cost structure may change from quarter to quarter, and our
margins may expand or contract depending upon the mix and timing of orders in
future quarters.
Total
research and development expense decreased by $1.1 million, from $3.3 million in
the third quarter of 2008 to $2.2 million in the same quarter of
2009. Power and Energy Group expense decreased $470,000 from 2008 to
2009 due to a lower overall cost structure and due to completion of certain
research grants in 2008. Research and development costs for All Other
operations decreased $816,000 million attributable to a shift in focus and
realignment of resources from Life Sciences and Performance Materials to the
Power and Energy Group. The Corporate segment research and
development expenses primarily reflect the personnel and operating expenses
associated with our science and technology group which supports the Company’s
overall research and development efforts. The Corporate segment
research and development expenses increased $186,000 from 2008 to
2009.
Settlement
and release expense of $3.6 million in 2008 resulted from a settlement agreement
with Al Yousuf LLC related to claims associated with their November 2007
investment in the Company.
General
and administrative expense decreased by $755,000 from $2.8 million in the third
quarter of 2008 to $2 million in the same quarter of 2009. This
decrease was primarily due to $700,000 in reduced employee costs, $400,000 in
reduced legal costs netted with the one-time $300,000 cost of implementing a new
ERP software system.
Other
Income and Expense
Realized
gain on investment of $868,000 in the third quarter of 2009 is a result of the
sale of 240,000 shares of Spectrum common stock at a higher market price than
recorded on our books when the stock was originally received as payment from
Spectrum for the achievement of certain contract milestones.
Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
In
thousands of dollars
|
|
Power
and Energy Group
|
|
|
All
Other
|
|
|
Corporate
|
|
|
Consolidated
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$ |
435 |
|
|
$ |
444 |
|
|
$ |
227 |
|
|
$ |
111 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
662 |
|
|
$ |
555 |
|
Less
sales returns
|
|
|
(113 |
) |
|
|
- |
|
|
|
(70 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(183 |
) |
|
|
- |
|
License
fees
|
|
|
- |
|
|
|
- |
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
750 |
|
|
|
- |
|
Commercial
collaborations
|
|
|
887 |
|
|
|
577 |
|
|
|
1 |
|
|
|
1,065 |
|
|
|
- |
|
|
|
- |
|
|
|
888 |
|
|
|
1,642 |
|
Contracts
and grants
|
|
|
449 |
|
|
|
2,345 |
|
|
|
- |
|
|
|
232 |
|
|
|
- |
|
|
|
- |
|
|
|
449 |
|
|
|
2,577 |
|
Total
revenues
|
|
|
1,658 |
|
|
|
3,366 |
|
|
|
908 |
|
|
|
1,408 |
|
|
|
- |
|
|
|
- |
|
|
|
2,566 |
|
|
|
4,774 |
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales - product
|
|
|
491 |
|
|
|
102 |
|
|
|
28 |
|
|
|
36 |
|
|
|
- |
|
|
|
- |
|
|
|
519 |
|
|
|
138 |
|
Cost
of sales - warranty and inventory reserve
|
|
|
68 |
|
|
|
(2,865 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68 |
|
|
|
(2,865 |
) |
Research
and development
|
|
|
5,929 |
|
|
|
9,022 |
|
|
|
184 |
|
|
|
3,192 |
|
|
|
1,403 |
|
|
|
1,476 |
|
|
|
7,516 |
|
|
|
13,690 |
|
Sales
and marketing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,969 |
|
|
|
2,096 |
|
|
|
1,969 |
|
|
|
2,096 |
|
Notes
Receivable Extinguishment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,722 |
|
|
|
- |
|
|
|
1,722 |
|
Settlement
and release
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,605 |
|
|
|
|
|
|
|
3,605 |
|
General
and administrative
|
|
|
125 |
|
|
|
213 |
|
|
|
77 |
|
|
|
70 |
|
|
|
7,396 |
|
|
|
8,176 |
|
|
|
7,598 |
|
|
|
8,459 |
|
Depreciation
and amortization
|
|
|
994 |
|
|
|
883 |
|
|
|
962 |
|
|
|
945 |
|
|
|
137 |
|
|
|
109 |
|
|
|
2,093 |
|
|
|
1,937 |
|
Total
operating expenses
|
|
|
7,607 |
|
|
|
7,355 |
|
|
|
1,251 |
|
|
|
4,243 |
|
|
|
10,905 |
|
|
|
17,184 |
|
|
|
19,763 |
|
|
|
28,782 |
|
Loss
from operations
|
|
|
(5,949 |
) |
|
|
(3,989 |
) |
|
|
(343 |
) |
|
|
(2,835 |
) |
|
|
(10,905 |
) |
|
|
(17,184 |
) |
|
|
(17,197 |
) |
|
|
(24,008 |
) |
Other
(expense) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(88 |
) |
|
|
(73 |
) |
|
|
(92 |
) |
|
|
(73 |
) |
Interest
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
157 |
|
|
|
810 |
|
|
|
157 |
|
|
|
810 |
|
Realized
loss on investment
|
|
|
- |
|
|
|
- |
|
|
|
868 |
|
|
|
- |
|
|
|
(18 |
) |
|
|
- |
|
|
|
850 |
|
|
|
- |
|
Loss
on foreign exchange
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Total
other income, net
|
|
|
(4 |
) |
|
|
- |
|
|
|
868 |
|
|
|
- |
|
|
|
49 |
|
|
|
732 |
|
|
|
913 |
|
|
|
732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(5,953 |
) |
|
|
(3,989 |
) |
|
|
525 |
|
|
|
(2,835 |
) |
|
|
(10,856 |
) |
|
|
(16,452 |
) |
|
|
(16,284 |
) |
|
|
(23,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Noncontrolling
interests' share
|
|
|
- |
|
|
|
- |
|
|
|
189 |
|
|
|
216 |
|
|
|
- |
|
|
|
- |
|
|
|
189 |
|
|
|
216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)/Income
|
|
$ |
(5,953 |
) |
|
$ |
(3,989 |
) |
|
$ |
714 |
|
|
$ |
(2,619 |
) |
|
$ |
(10,856 |
) |
|
$ |
(16,452 |
) |
|
$ |
(16,095 |
) |
|
$ |
(23,060 |
) |
Net
Loss
The net
loss attributable to Altair Nanotechnologies, Inc. for the nine months ended
September 30, 2009 totaled $16.1 million ($0.16 per share) compared to a net
loss of $23.1 million ($0.27 per share) in the same period of 2008.
Power and
Energy Group net loss for the nine months ended September 30, 2009 totaled $6.0
million compared to $4.0 million in the same period of 2008. This
loss increase is primarily due to the reserve reversal relating to a letter
agreement effective July 2008 with Phoenix, whereby the 2007 Purchase and Supply
Agreement was terminated and all outstanding issues with respect to the warranty
associated with the 47 battery packs sold in 2007 were resolved. This
created a $2.9 million warranty credit in the third quarter of
2008.
All Other
operations swung to a profit for the nine months ended September 30, 2009 of
$714,000 compared to a loss of $2.6 million in 2008. This change was
primarily due to reduction of research and development costs in this segment
with a shift in focus and realignment of resources from Life Sciences and
Performance Materials to the battery production arena.
The net
loss of corporate for the nine months ended September 30, 2009 was $10.9 million
compared to a net loss of $16.5 million in the same period of
2008. This decrease in net loss is partially due to the notes
receivable extinguishment in 2008 due to a letter agreement effective July 2008
with Phoenix, whereby all accounts receivable and notes receivable relating to
the 2007 Purchase and Supply Agreement were cancelled. This decrease
in net loss is also due to settlement and release expense of $3.6 million in
2008 resulting from a settlement agreement with Al Yousuf LLC related to claims
associated with their November 2007 investment in the Company
Revenues
Total
revenues for the nine months ended September 30, 2009 were $2.6 million compared
to $4.8 million for the same period of 2008. This revenue reduction
was primarily from the completion of certain contracts and grants with
government agencies and the termination of a joint collaboration with Eli Lilly
in 2008.
Power and
Energy Group revenue for the nine months ended September 30, 2009 was $1.7
million compared to $3.4 million in the same period of 2008. This
decrease is primarily due to the reduction of $1.1 million in revenue relating
to the Office of Naval Research phase I grant. Billing under the
phase II grant began late in Q2 2009.
Revenue
of All Other operations for the nine months ended September 30, 2009 was
$909,000 compared to $1.4 million in the same period of 2008. This
decrease is attributable to the termination of a commercial collaboration in
July 2008 with Eli Lilly.
Operating
Expenses
Product
cost of sales were unusually high in 2009 and unusually low in
2008. Costs in 2009 of $491,000 included certain manufacturing
ramp-up costs associated with bringing our manufacturing capacity up to meet
expected customer demand in Q4 2009 and in 2010. Product cost of
sales in 2008 were unusually low relative to product sales as certain
discontinued battery cells sold in 2008 had already been written off to cost of
sales in 2007.
Warranty
and inventory reserve expense totaled $68,000 for the nine months ended
September 30, 2009 compared to a warranty reserve reversal of $2.9 million in
the same period of 2008. The reserve reversal in 2008 is primarily
due to an agreement effective July 2008 with Phoenix Motorcars, whereby the 2007
Purchase and Supply Agreement was terminated and all outstanding issues with
respect to the warranty associated with the 47 battery packs sold in 2007 were
resolved.
Total
research and development expense decreased by $6.2 million, from $13.7 million
in the nine months ended September 30, 2008 to $7.5 million in the same period
of 2009. Power and Energy Group expense decreased $3.1 million
associated with the completion of grant and commercial collaborations work in
2008, primarily with the Office of Naval Research and AES. Research
and development costs for All Other operations decreased $3.0 million
attributable to a shift in focus and realignment of resources from Life Sciences
and Performance Materials to the battery production arena. The
Corporate segment research and development expenses primarily reflect the
personnel and operating expenses associated with our science and technology
group which supports the Company’s overall research and development
efforts. These costs decreased by 5% from 2008 to 2009.
Notes
receivable extinguishment expense of $1.7 million in the nine months ending
September 30, 2008 relates to an agreement effective July 2008 with Phoenix
Motorcars, whereby all accounts receivable and notes receivable relating to the
2007 Purchase and Supply Agreement were cancelled.
Settlement
and release expense of $3.6 million in 2008 resulted from a settlement agreement
with Al Yousuf LLC related to claims associated with their November 2007
investment in the Company.
Other
Income and Expense
Interest
income decreased by $653,000, from $810,000 for the nine months ended September
30, 2008 to $157,000 for the same period of 2009. A higher average
level of daily cash on hand during 2008 than in 2009 and lower interest rates in
2009 drove this reduction.
Realized
gain on investment of $868,000 in the third quarter of 2009 is from the sale of
240,000 shares of Spectrum common stock at a higher market price than recorded
on our books when the stock was originally received as payment from Spectrum for
the achievement of certain contract milestones.
Item
3. Quantitative and
Qualitative Disclosures about Market Risk
We do not
have any derivative instruments, commodity instruments, or other financial
instruments for trading or speculative purposes, nor are we presently at
material risk for changes in interest rates on foreign currency exchange
rates. Although we do not speculate on the currency markets, we will
on occasion enter into currency hedging contracts to minimize our risk
associated with currency rate fluctuations when purchasing from a foreign
supplier in a foreign currency. During the first quarter of 2009, we
entered into one such contract which has since been unwound at no cost or gain
to us.
Item
4. Controls and
Procedures
(a) Based on their evaluation
as of September 30, 2009, which is the end of the period covered by this
Quarterly Report on Form 10-Q, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective,
based upon an evaluation of those controls and procedures required by paragraph
(b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act.
(b) There have been no
changes in our internal controls over financial reporting identified in
connection with the evaluation required by paragraph (d) of Exchange Act Rules
13a-15 or 15d-15 that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART
II – OTHER INFORMATION
Item
1A. Risk
Factors
Material Changes in Risk
Factors
The
Risk Factors set forth below do not reflect any material changes from the “Risk
Factors” identified in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, except as follows:
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We
have added the following risk factor to more clearly articulate risks to
our company arising from the economic slowdown and government
initiatives:
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Our
government grants and contracts are subject to termination or delays by the
government.
The
government grants and contracts entered into by the Company are subject to
termination or delay of funding at the election of the government. A
substantial portion of our current revenue is derived from government grants and
contracts. As a result, any termination of such agreements would
significantly reduce revenue and the capital to sustain operations and
research.
Adverse
economic conditions and government initiatives could reduce, delay or harm
demand for our products.
Although
they appear to be recovering, the current financial markets and general economic
environment are still very weak with the ability of companies to borrow money
difficult. Our products are targeted primarily at large power
producers, the U.S. and British military, military contractors and, to a lesser
extent, bus and automobile manufacturers. Due to declining revenues
and concerns about liquidity, companies and branches of the military in our
target market have reduced, delayed or eliminated many research and development
initiatives, including those related to energy storage. This
reduction or delay in development spending is harming our development and
production efforts and will continue to harm such efforts until development
spending increases to prior levels.
In
addition, certain of our customers or potential customers who have the liquidity
to fund development projects have deferred orders in anticipation of qualifying
for funds dispensed in accordance with the American Recovery and Reinvestment
Act of 2009. We are likely to experience reduced product demand
until companies seeking funding under these energy initiatives within the
American Recovery and Reinvestment Act of 2009 receive funding and/or learn that
they will not receive funding.
We have
altered the following risk factor regarding our relationship with Spectrum
Pharmaceuticals, Inc. to reflect changes arising from our recent agreement with
Spectrum:
We
will not generate substantial milestone and royalty revenues
from life science products unless proposed products receive FDA
approval and achieve substantial market penetration.
We have
assigned ownership of RenazorbTM and
RenalanTM, to Spectrum
Pharmaceuticals. These are potential drug candidates for humans and
animals respectively with kidney disease. These potential life
science applications are subject to regulation by the FDA and similar regulatory
bodies. Our agreement with Spectrum calls for milestone payments as certain
milestones related to the development of the products and the obtaining of
regulatory approval are met. The agreement also calls for the payment
of royalties to us, however, our receipt of such royalties is subject to the
receipt by Spectrum of substantial recurring revenues which are 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 this agreement, including the following:
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Further
testing of potential life science products using this 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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Spectrum
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 has been significantly delayed in testing on RenazorbTM;
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
Spectrum.
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If any of
the foregoing risks, or other risks associated with these products were to
occur, we would not receive substantial, recurring revenue from this agreement
with Spectrum, which would adversely affect our overall business, operations and
financial condition.
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We
have made immaterial edits and updated the financial and other data
referenced in the risk factors as of a recent practicable
date.
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Risk Factors
An investment in our common shares 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 $30.1 million in 2008, and $17.2 million for the nine months
ended September 30, 2009. 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.
Adverse
economic conditions and government initiatives could reduce or delay the demand
for our products.
Although
they appear to be recovering, the current financial markets and general economic
environment are still very weak with the ability of companies to borrow money
difficult. Our products are targeted primarily at large power
producers, the U.S. and British military, military contractors and, to a lesser
extent, bus and automobile manufacturers. Due to declining revenues
and concerns about liquidity, companies and branches of the military in our
target market have reduced, delayed or eliminated many research and development
initiatives, including those related to energy storage. This
reduction or delay in development spending is harming our development and
productions efforts and will continue to harm such efforts until development
spending increases to prior levels.
In
addition, certain of our customers or potential customers who have the liquidity
to fund development projects have deferred orders in anticipation of qualifying
for funds dispensed in accordance with the American Recovery and Reinvestment
Act of 2009. We are likely to experience reduced product demand
until companies seeking funding under these energy initiatives within the
American Recovery and Reinvestment Act of 2009 receive funding and/or learn that
they will not receive funding.
We
depend upon several sole-source third-party suppliers.
We rely
on certain suppliers as the sole-source of certain services, raw materials and
other components of our products. We do not have long-term supply or
service agreements with a number of these suppliers. As a result, the
providers of such services and components could terminate or alter the terms of
service or supply with little or no advance notice. If our
arrangements with any sole-source supplier were terminated or such a supplier
failed to provide essential services or deliver essential components on a timely
basis or introduced unacceptable price increases, our production schedule would
be delayed, possibly by as long as nine months. Any such delay in our
production schedule would result in delayed product delivery and may also result
in additional production costs, customer losses and litigation.
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. 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 stationary power, military and transportation
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 current 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 milestone and royalty revenues
from life science products unless proposed products receive FDA
approval and achieve substantial market penetration.
We have
assigned ownership of RenazorbTM and
RenalanTM, to Spectrum
Pharmaceuticals. These are potential drug candidates for humans and
animals respectively with kidney disease. These potential life
science applications are subject to regulation by the FDA and similar regulatory
bodies. Our agreement with Spectrum calls for milestone payments as certain
milestones related to the development of the products and the obtaining of
regulatory approval are met. The agreement also calls for the payment
of royalties to us, however, our receipt of such royalties is subject to the
receipt by Spectrum of substantial recurring revenues which are 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 this agreement, including the following:
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Further
testing of potential life science products using this 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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Spectrum
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 has been significantly delayed in testing on RenazorbTM
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
Spectrum.
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If any of
the foregoing risks, or other risks associated with these products were to
occur, we would not receive substantial, recurring revenue from this agreement
with Spectrum, 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-Williams 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.
As
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
September 30, 2009, we had approximately $23.9 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 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 two of our directors and our Canadian legal counsel
are residents of Canada. A third and fourth director are residents 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;
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·
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the
interest of the market in our business sector, without regard to our
financial condition, results of operations or business
prospects;
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·
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positive
or negative statements or projections about our company or our industry,
by analysts, stock gurus and other
persons;
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·
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the
adoption of governmental regulations or government grant programs and
similar developments in the United States or abroad that may enhance or
detract from our ability to offer our products and services or affect our
cost structure; and
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·
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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.
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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
throughout 2009, the minimum bid price for our common shares has fallen below
$1.00 on a number of occasions. As a matter of practice, NASDAQ
generally gives a company a notice of non-compliance if its common shares trade
below $1.00 for 30 consecutive trading days. After receiving the notice, the
company is required to file a Form 8k announcing the NASDAQ action and then has
180 days to come into compliance if it meets the other requirements for listing
on the NASDAQ. The Company generally demonstrates compliance if its
stock then trades above $1.00 per share for 10 consecutive trading days. NASDAQ
temporarily suspended its minimum bid price requirements until July 2009 in
light of recent declines in the value of equity securities overall but has since
reinstated the requirement. 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 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.
Our
government grants and contracts are subject to termination or delays by the
government.
The
government grants and contracts entered into by the Company are subject to
termination or delay of funding at the election of the government. A
substantial portion of our revenue is derived from government grants and
contracts. As a result, any termination of such agreements would
significantly reduce revenue and the capital to sustain operations and
research.
Item
6. Exhibits
a) See
Exhibit Index attached hereto following the signature page.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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Altair
Nanotechnologies Inc.
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November
9, 2009
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By: /s/ Terry
M. Copeland
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Date
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Terry
M. Copeland,
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President
and Chief Executive Officer
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November
9, 2009
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By: /s/ John
Fallini
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Date
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John
Fallini,
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Chief
Financial Officer and Secretary
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Exhibit
No.
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Exhibit
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Incorporated
by Reference/ Filed Herewith
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3.1
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Articles
of Continuance
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Incorporated
by reference to the Current Report on Form 8-K filed with the SEC on July
18, 2002, File No. 001-12497
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3.2
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Bylaws
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Incorporated
by reference to the Annual Report on Form 10-K for the year ended December
31, 2004 filed with the SEC on March 9, 2005, File No.
001-12497
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31.1
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Section
302 Certification of Chief Executive Officer
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Filed
herewith
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31.2
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Section
302 Certification of Chief Financial Officer
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Filed
herewith
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32.1
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Section
906 Certification of Chief Executive Officer
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Filed
herewith
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32.2
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Section
906 Certification of Chief Financial Officer
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Filed
herewith
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