Canada
(State
or other jurisdiction
of
incorporation)
|
1-12497
(Commission
File No.)
|
33-1084375
(IRS
Employer
Identification
No.)
|
Large
accelerated filer [ ]
|
Accelerated
filer [X]
|
Non-accelerated
filer [ ]
|
PART
I - FINANCIAL INFORMATION
|
|||
Item
1. Financial Statements
|
|||
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||
(Expressed
in United States Dollars)
|
|||
(Unaudited)
|
September
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
2,107,074
|
$
|
2,264,418
|
|||
Investment
in available for sale securities
|
7,713,606
|
20,789,656
|
|||||
Accounts
receivable
|
712,462
|
602,168
|
|||||
Product
inventories
|
407,104
|
-
|
|||||
Prepaid
expenses and other current assets
|
457,775
|
254,067
|
|||||
Total
current assets
|
11,398,021
|
23,910,309
|
|||||
Investment
in Available for Sale Securities
|
1,235,872
|
423,000
|
|||||
Property,
Plant and Equipment, net
|
10,177,754
|
8,169,445
|
|||||
Patents,
net
|
826,451
|
890,062
|
|||||
Other
Assets
|
21,261
|
71,200
|
|||||
Total
Assets
|
$
|
23,659,359
|
$
|
33,464,016
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Trade
accounts payable
|
$
|
1,298,631
|
$
|
808,905
|
|||
Accrued
salaries and benefits
|
1,025,274
|
709,349
|
|||||
Accrued
liabilities
|
486,491
|
309,289
|
|||||
Note
payable, current portion
|
600,000
|
600,000
|
|||||
Total
current liabilities
|
3,410,396
|
2,427,543
|
|||||
Note
Payable, Long-Term Portion
|
1,800,000
|
2,400,000
|
|||||
Stockholders'
Equity
|
|||||||
Common
stock, no par value, unlimited shares authorized;
|
|||||||
59,647,386
and 59,316,519 shares issued and
|
|||||||
outstanding
at September 30, 2006 and December 31, 2005
|
92,694,818
|
92,126,714
|
|||||
Additional
paid in capital
|
1,191,419
|
-
|
|||||
Accumulated
deficit
|
(75,556,674
|
)
|
(63,152,905
|
)
|
|||
Deferred
compensation expense
|
-
|
(165,336
|
)
|
||||
Accumulated
other comprehensive income
|
119,400
|
(172,000
|
)
|
||||
Total
Stockholders' Equity
|
18,448,963
|
28,636,473
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
23,659,359
|
$
|
33,464,016
|
|||
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||
(Expressed
in United States Dollars)
|
|||||||
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
|||||||||||||
License
fees
|
$
|
-
|
$
|
-
|
$
|
364,720
|
$
|
695,000
|
|||||
Product
sales
|
22,940
|
8,494
|
33,598
|
74,087
|
|||||||||
Commercial
collaborations
|
339,116
|
327,479
|
1,058,622
|
584,520
|
|||||||||
Contracts
and grants
|
387,842
|
249,432
|
895,082
|
762,259
|
|||||||||
Total
revenues
|
749,898
|
585,405
|
2,352,022
|
2,115,866
|
|||||||||
Operating
Expenses
|
|||||||||||||
Cost
of product sales
|
28,237
|
1,427
|
30,953
|
17,434
|
|||||||||
Research
and development
|
2,763,566
|
1,290,354
|
6,917,218
|
2,816,031
|
|||||||||
Sales
and marketing
|
423,615
|
238,151
|
1,384,787
|
1,159,259
|
|||||||||
General
and administrative
|
1,288,191
|
1,146,528
|
5,746,759
|
4,067,661
|
|||||||||
Depreciation
and amortization
|
405,072
|
263,105
|
1,085,190
|
759,190
|
|||||||||
Total
operating expenses
|
4,908,681
|
2,939,565
|
15,164,907
|
8,819,575
|
|||||||||
Loss
from Operations
|
(4,158,783
|
)
|
(2,354,160
|
)
|
(12,812,885
|
)
|
(6,703,709
|
)
|
|||||
Other
Income (Expense)
|
|||||||||||||
Interest
expense
|
(42,000
|
)
|
(52,397
|
)
|
(129,500
|
)
|
(154,689
|
)
|
|||||
Interest
income
|
146,235
|
227,503
|
539,060
|
515,162
|
|||||||||
Gain
(loss) on foreign exchange
|
(138
|
)
|
2,228
|
(444
|
)
|
1,373
|
|||||||
Total
other income, net
|
104,097
|
177,334
|
409,116
|
361,846
|
|||||||||
Net
Loss
|
$
|
(4,054,686
|
)
|
$
|
(2,176,826
|
)
|
$
|
(12,403,769
|
)
|
$
|
(6,341,863
|
)
|
|
Loss
per common share - basic and diluted
|
$
|
(0.07
|
)
|
$
|
(0.04
|
)
|
$
|
(0.21
|
)
|
$
|
(0.11
|
)
|
|
Weighted
average shares - basic and diluted
|
59,461,244
|
58,940,760
|
59,325,488
|
57,338,796
|
|||||||||
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
|
|||||||
(Expressed
in United States Dollars)
|
|||||||
(Unaudited)
|
Accumulated
|
||||||||||||||||||||||
Deferred
|
Other
|
|||||||||||||||||||||
Additional
|
Compen-
|
Compre-
|
||||||||||||||||||||
Common
Stock
|
Paid
In
|
Accumulated
|
sation
|
hensive
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Expense
|
Gain
(Loss)
|
Total
|
||||||||||||||||
BALANCE,
JANUARY 1, 2006
|
59,316,519
|
$
|
92,126,714
|
$
|
-
|
$
|
(63,152,905
|
)
|
$
|
(165,336
|
)
|
$
|
(172,000
|
)
|
$
|
28,636,473
|
||||||
Comprehensive
loss:
|
||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
(12,403,769
|
)
|
-
|
-
|
(12,403,769
|
)
|
|||||||||||||
Other
comprehensive income
|
||||||||||||||||||||||
net
of taxes of $0
|
-
|
-
|
-
|
-
|
-
|
291,400
|
291,400
|
|||||||||||||||
Comprehensive
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(12,112,369
|
)
|
||||||||||||||
Share-based
compensation
|
-
|
226,085
|
1,191,419
|
-
|
-
|
-
|
1,417,504
|
|||||||||||||||
Exercise
of stock options
|
186,324
|
340,685
|
-
|
-
|
-
|
-
|
340,685
|
|||||||||||||||
Exercise
of warrants
|
66,668
|
166,670
|
166,670
|
|||||||||||||||||||
Issuance
of restricted stock
|
77,875
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Elimination
of deferred
|
||||||||||||||||||||||
compensation
expense
|
-
|
(165,336
|
)
|
-
|
-
|
165,336
|
-
|
-
|
||||||||||||||
BALANCE,
SEPTEMBER 30, 2006
|
59,647,386
|
$
|
92,694,818
|
$
|
1,191,419
|
$
|
(75,556,674
|
)
|
$
|
-
|
$
|
119,400
|
$
|
18,448,963
|
||||||||
See
notes to the unaudited
condensed consolidated
financial statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
(Expressed
in United States Dollars)
|
|||||||
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Cash
flows from operating activities:
|
|||||||||||||
Net
loss
|
$
|
(4,054,686
|
)
|
$
|
(2,176,826
|
)
|
$
|
(12,403,769
|
)
|
$
|
(6,341,863
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||||||||
used
in operating activities:
|
|||||||||||||
Depreciation
and amortization
|
405,072
|
263,105
|
1,085,190
|
759,190
|
|||||||||
Variable
accounting on stock options
|
-
|
(44,249
|
)
|
-
|
433,115
|
||||||||
Securities
received in payment of license fees
|
(8,148
|
)
|
-
|
(521,472
|
)
|
(595,000
|
)
|
||||||
Amortization
of discount on note payable
|
-
|
17,397
|
-
|
119,689
|
|||||||||
Share-based
compensation
|
410,157
|
46,861
|
1,417,504
|
50
,932
|
|||||||||
Loss
on disposal of fixed assets
|
-
|
-
|
21,098
|
-
|
|||||||||
Changes
in operating assets and liabilities:
|
|||||||||||||
Accounts
receivable, net
|
(238,018
|
)
|
(133,914
|
)
|
(110,294
|
)
|
(14,692
|
)
|
|||||
Product
inventories
|
(407,104
|
)
|
(407,104
|
)
|
|||||||||
Prepaid
expenses and other current assets
|
(65,699
|
)
|
(281,660
|
)
|
(203,708
|
)
|
(193,603
|
)
|
|||||
Other
assets
|
-
|
(52,000
|
)
|
49,939
|
(57,000
|
)
|
|||||||
Trade
accounts payable
|
(84,720
|
)
|
(84,441
|
)
|
395,162
|
591,617
|
|||||||
Accrued
salaries and benefits
|
104,430
|
(35,927
|
)
|
315,925
|
115,535
|
||||||||
Accrued
liabilities
|
18,522
|
(42,834
|
)
|
177,202
|
125,854
|
||||||||
Net
cash used in operating activities
|
(3,920,194
|
)
|
(2,524,488
|
)
|
(10,184,327
|
)
|
(5,006,226
|
)
|
|||||
Cash
flows from investing activities:
|
|||||||||||||
Sale
of available for sale securities
|
15,250,000
|
-
|
26,050,000
|
-
|
|||||||||
Purchase
of available for sale securities
|
(10,198,763
|
)
|
(15,728,213
|
)
|
(12,973,949
|
)
|
(15,728,213
|
)
|
|||||
Purchase
of property and equipment
|
(1,068,023
|
)
|
(360,871
|
)
|
(2,956,423
|
)
|
(880,509
|
)
|
|||||
Net
cash provided by (used in) investing activities
|
3,983,214
|
(16,089,084
|
)
|
10,119,628
|
(16,608,722
|
)
|
|||||||
(continued)
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||
(Expressed
in United States Dollars)
|
|||||||||
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Cash
flows from financing activities:
|
|||||||||||||
Issuance
of common shares for cash, net of
|
|||||||||||||
issuance
costs
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
19,329,800
|
|||||
Proceeds
from exercise of stock options
|
199,013
|
37,100
|
340,685
|
1,777,290
|
|||||||||
Proceeds
from exercise of warrants
|
166,670
|
40,963
|
166,670
|
4,300,635
|
|||||||||
Payment
of notes payable
|
-
|
-
|
(600,000
|
)
|
-
|
||||||||
Net
cash (used in) provided by financing activities
|
365,683
|
78,063
|
(92,645
|
)
|
25,407,725
|
||||||||
Net
(decrease) increase in cash and cash equivalents
|
428,703
|
18,535,509
|
(157,344
|
)
|
3,792,777
|
||||||||
Cash
and cash equivalents, beginning of period
|
1,678,372
|
29,686,129
|
2,264,418
|
7,357,843
|
|||||||||
Cash
and cash equivalents, end of period
|
$
|
2,107,074
|
$
|
11,150,620
|
$
|
2,107,074
|
$
|
11,150,620
|
|||||
Supplemental
disclosures:
|
|||||||||||||
Cash
paid for interest
|
None
|
None
|
$
|
105,000
|
None
|
||||||||
Cash
paid for income taxes
|
None
|
None
|
None
|
None
|
|||||||||
Supplemental
schedule of non-cash investing and financing
activities:
|
|||||||||||||
For
the three months ended September 30, 2006:
|
|||||||||||||
-
We made property and equipment purchases of $95,000 which are included
in
trade accounts payable at September 30, 2006.
|
|||||||||||||
-
We had an unrealized gain on available for sale securities of
$321,600.
|
|||||||||||||
For
the three months ended September 30, 2005:
|
|||||||||||||
-
We issued 30,000 of shares of restricted stock to employees having
a fair
value of approximately $86,000 for which no cash
will be received.
|
|||||||||||||
-
We had an unrealized gain on available for sale securities of
$76,000.
|
|||||||||||||
For
the nine months ended September 30, 2006:
|
|||||||||||||
-
We issued 56,875 shares of restricted stock to employees having a
fair
value of approximately $180,000 for which no cash will be received.
|
|||||||||||||
-
We made property and equipment purchases of $94,564 which are included
in
trade accounts payable at September 30, 2006.
|
|||||||||||||
-
We had an unrealized gain on available for sale securities of
$291,400.
|
|||||||||||||
For
the nine months ended September 30, 2005:
|
|||||||||||||
-
We issued 90,000 of shares of restricted stock to employees having
a fair
value of approximately $257,000 for which no cash
will be received.
|
|||||||||||||
-
We had an unrealized loss on available for sale securities of
$99,000.
|
|||||||||||||
|
|||||||||||||
See
notes to the unaudited condensed consolidated financial
statements.
|
(concluded) |
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30, 2006
|
September
30, 2006
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
loss
|
$
|
4,054,686
|
$
|
2,176,826
|
$
|
12,403,769
|
$
|
6,341,863
|
|||||
Unrealized
(gain) loss on investment in available
|
|||||||||||||
for
sale securities, net of taxes of $0
|
(321,600
|
)
|
(76,000
|
)
|
(291,400
|
)
|
99,000
|
||||||
Comprehensive
loss
|
$
|
3,733,086
|
$
|
2,100,826
|
$
|
12,112,369
|
$
|
6,440,863
|
September
30, 2006
|
December
31, 2005
|
||||||
Work
in Process
|
$
|
349,939
|
$
|
-
|
|||
Demonstration
Units
|
57,165
|
-
|
|||||
Total
Product Inventories
|
$
|
407,104
|
$
|
-
|
September
30, 2006
|
December
31, 2005
|
||||||
Note
payable to BHP Minerals
|
|||||||
International,
Inc.
|
$
|
2,400,000
|
$
|
3,000,000
|
|||
Less
current portion
|
(600,000
|
)
|
(600,000
|
)
|
|||
Long-term
portion of notes payable
|
$
|
1,800,000
|
$
|
2,400,000
|
September
30,
2006
|
December
31,
2005
|
||||||
Patents
|
$
|
1,517,736
|
$
|
1,517,736
|
|||
Less
accumulated amortization
|
(691,285
|
)
|
(627,674
|
)
|
|||
Total
Patents
|
$
|
826,451
|
$
|
890,062
|
Three
Months
|
Nine
Months
|
||||||
Ended
|
Ended
|
||||||
September
30, 2006
|
September
30, 2006
|
||||||
Dividend
yield
|
None
|
None
|
|||||
Expected
volatility
|
90%
|
|
95%
|
|
|||
Risk-free
interest rate
|
5.1%
|
|
4.8%
|
|
|||
Expected
term (years)
|
4.56
|
4.62
|
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||
Shares
|
Price
|
Term
(Years)
|
Value
|
||||||||||
Outstanding
at January 1, 2006
|
2,533,200
|
$
|
2.69
|
4.8
|
$
|
810,650
|
|||||||
Granted
|
1,279,631
|
3.32
|
|||||||||||
Exercised
|
(186,324
|
)
|
1.72
|
||||||||||
Forfeited/Expired
|
(152,613
|
)
|
3.28
|
||||||||||
Outstanding
at September 30, 2006
|
3,473,894
|
$
|
3.06
|
6.1
|
$
|
3,660,799
|
|||||||
Exercisable
at September 30, 2006
|
2,441,227
|
$
|
3.12
|
5.0
|
$
|
2,714,792
|
Weighted
|
|||||||
Average
|
|||||||
Grant
Date
|
|||||||
Shares
|
Fair
Value
|
||||||
Non-vested
shares at January 1, 2006
|
793,875
|
$
|
1.87
|
||||
Granted
|
1,279,631
|
3.32
|
|||||
Vested
|
(967,589
|
)
|
3.12
|
||||
Forfeited/Expired
|
(73,250
|
)
|
3.62
|
||||
Non-vested
shares at September 30, 2006
|
1,032,667
|
$
|
2.91
|
Weighted
|
|||||||
Average
|
|||||||
Grant
Date
|
|||||||
Shares
|
Fair
Value
|
||||||
Non-vested
shares at January 1, 2006
|
132,500
|
$
|
2.82
|
||||
Granted
|
56,875
|
3.17
|
|||||
Vested
|
(52,000
|
)
|
2.87
|
||||
Forfeited/Expired
|
(15,000
|
)
|
2.88
|
||||
Non-vested
shares at September 30, 2006
|
122,375
|
$
|
2.95
|
Three
Months
|
Nine
Months
|
||||||
Ended
|
Ended
|
||||||
September
30, 2005
|
September
30, 2005
|
||||||
Net
loss as reported
|
$
|
(2,176,826
|
)
|
$
|
(6,341,863
|
)
|
|
Add
(Deduct): stock-based employee compensation expense included
in
|
|||||||
reported
net loss, net of income taxes of $0
|
44,249
|
(433,115
|
)
|
||||
Add:
total stock-based employee compensation expense determined
|
|||||||
under
fair value based method for all awards, net of income taxes of
$0
|
218,260
|
832,714
|
|||||
Pro
forma net loss
|
$
|
(1,914,317
|
)
|
$
|
(5,942,264
|
)
|
|
Loss
per common share (basic and diluted):
|
|||||||
As
reported
|
$
|
(0.04
|
)
|
$
|
(0.11
|
)
|
|
Pro
forma
|
$
|
(0.03
|
)
|
$
|
(0.10
|
)
|
Three
Months
|
Nine
Months
|
||||||
Ended
|
Ended
|
||||||
September
30, 2005
|
September
30, 2005
|
||||||
Dividend
yield
|
None
|
None
|
|||||
Expected
volatility
|
98%
|
|
105%
|
|
|||
Risk-free
interest rate
|
4.08%
|
|
3.89%
|
|
|||
Expected
term (years)
|
2.83
|
2.83
|
(Income)
|
Depreciation
|
||||||||||||
Loss
From
|
and
|
||||||||||||
Three
Months Ended
|
Revenues
|
Operations
|
Amortization
|
Assets
|
|||||||||
September
30, 2006:
|
|||||||||||||
Performance
Materials
|
$
|
506,857
|
$
|
1,284,568
|
$
|
281,764
|
$
|
6,262,198
|
|||||
AMPS
|
238,810
|
1,300,836
|
90,038
|
3,242,991
|
|||||||||
Life
Sciences
|
4,232
|
163,674
|
2,669
|
1,375,828
|
|||||||||
Corporate
and Other
|
-
|
1,409,704
|
30,601
|
12,778,342
|
|||||||||
Consolidated
Total
|
$
|
749,898
|
$
|
4,158,783
|
$
|
405,072
|
$
|
23,659,359
|
|||||
September
30, 2005:
|
|||||||||||||
Performance
Materials
|
$
|
516,470
|
$
|
651,995
|
$
|
237,746
|
$
|
5,645,287
|
|||||
AMPS
|
65,045
|
308,280
|
-
|
-
|
|||||||||
Life
Sciences
|
3,890
|
316,460
|
446
|
538,396
|
|||||||||
Corporate
and Other
|
-
|
1,077,425
|
24,913
|
29,766,942
|
|||||||||
Consolidated
Total
|
$
|
585,405
|
$
|
2,354,160
|
$
|
263,105
|
$
|
35,950,625
|
|||||
(Income)
|
Depreciation
|
||||||||||||
Loss
From
|
and
|
||||||||||||
Nine
Months Ended
|
Revenues
|
Operations
|
Amortization
|
Assets
|
|||||||||
September
30, 2006:
|
|||||||||||||
Performance
Materials
|
$
|
1,408,648
|
$
|
3,159,215
|
$
|
795,722
|
$
|
6,262,198
|
|||||
AMPS
|
428,535
|
3,582,422
|
194,434
|
3,242,991
|
|||||||||
Life
Sciences
|
514,840
|
(147,355
|
)
|
7,374
|
1,375,828
|
||||||||
Corporate
and Other
|
-
|
6,218,602
|
87,660
|
12,778,342
|
|||||||||
Consolidated
Total
|
$
|
2,352,022
|
$
|
12,812,885
|
$
|
1,085,190
|
$
|
23,659,359
|
|||||
September
30, 2005:
|
|||||||||||||
Performance
Materials
|
$
|
1,292,717
|
$
|
1,801,441
|
$
|
690,034
|
$
|
5,645,287
|
|||||
AMPS
|
98,378
|
508,751
|
-
|
-
|
|||||||||
Life
Sciences
|
724,771
|
(124,123
|
)
|
825
|
538,396
|
||||||||
Corporate
and Other
|
-
|
4,517,640
|
68,332
|
29,766,942
|
|||||||||
Consolidated
Total
|
$
|
2,115,866
|
$
|
6,703,709
|
$
|
759,190
|
$
|
35,950,625
|
Revenues
- 3 Months Ended
|
Accounts
Receivable at
|
||||||
Customer
|
September
30, 2006
|
September
30, 2006
|
|||||
Performance
Materials Division:
|
|||||||
Western
Oil Sands
|
$
|
298,730
|
$
|
190,305
|
|||
UNLV
Research Foundation
|
$
|
74,152
|
$
|
52,266
|
|||
Department
of Energy
|
$
|
97,819
|
$
|
84,025
|
|||
AMPS
Division:
|
|||||||
National
Science Foundation
|
$
|
51,184
|
$
|
111,146
|
|||
Department
of Energy
|
$
|
152,438
|
$
|
136,575
|
Revenues
- 3 Months Ended
|
Accounts
Receivable at
|
||||||
Customer
|
September
30, 2005
|
September
30, 2005
|
|||||
Performance
Materials Division:
|
|||||||
Western
Michigan University
|
$
|
100,595
|
$
|
68,289
|
|||
Western
Oil Sands
|
$
|
262,846
|
$
|
272,162
|
|||
UNLV
Research Foundation
|
$
|
83,792
|
$
|
58,335
|
|||
AMPS
Division:
|
|||||||
National
Science Foundation
|
$
|
65,045
|
$
|
-
|
Revenues
- 9 Months Ended
|
Accounts
Receivable at
|
||||||
Customer
|
September
30, 2006
|
September
30, 2006
|
|||||
Performance
Materials Division:
|
|||||||
Western
Oil Sands
|
$
|
819,117
|
$
|
190,305
|
|||
UNLV
Research Foundation
|
$
|
377,406
|
$
|
52,266
|
|||
Department
of Energy
|
$
|
97,819
|
$
|
84,025
|
|||
AMPS
Division:
|
|||||||
National
Science Foundation
|
$
|
198,125
|
$
|
111,146
|
|||
Department
of Energy
|
$
|
152,438
|
$
|
136,575
|
|||
Life
Sciences Division:
|
|||||||
Spectrum
Pharmaceuticals, Inc.
|
$
|
514,840
|
$
|
1,232
|
Revenues
- 9 Months Ended
|
Accounts
Receivable at
|
||||||
Customer
|
September
30, 2005
|
September
30, 2005
|
|||||
Performance
Materials Division:
|
|||||||
Western
Michigan University
|
$
|
349,034
|
$
|
68,289
|
|||
Western
Oil Sands
|
$
|
428,080
|
$
|
272,162
|
|||
UNLV
Research Foundation
|
$
|
314,847
|
$
|
58,335
|
|||
Life
Sciences Division:
|
|||||||
Spectrum
Pharmaceuticals, Inc.
|
$
|
724,271
|
$
|
28,881
|
Revenues
-
|
Revenues
-
|
||||||
3
Months Ended
|
3
Months Ended
|
||||||
Geographic
information (a):
|
September
30, 2006
|
September
30, 2005
|
|||||
United
States
|
$
|
428,228
|
$
|
310,352
|
|||
Canada
|
298,730
|
274,164
|
|||||
Other
foreign countries
|
22,940
|
889
|
|||||
Total
|
$
|
749,898
|
$
|
585,405
|
Revenues
-
|
Revenues
-
|
||||||
9
Months Ended
|
9
Months Ended
|
||||||
Geographic
information (a):
|
September
30, 2006
|
September
30, 2005
|
|||||
United
States
|
$
|
1,457,421
|
$
|
1,673,756
|
|||
Canada
|
821,781
|
440,580
|
|||||
Other
foreign countries
|
72,820
|
1,530
|
|||||
Total
|
$
|
2,352,022
|
$
|
2,115,866
|
|||
(a)
Revenues are attributed to countries based on location of
customer.
|
·
|
Advanced
Materials
|
o
|
The
marketing and licensing of titanium dioxide pigment production
technology.
|
o
|
The
marketing and production of nano-structured ceramic powders for thermal
spray applications.
|
o
|
The
development of nano-structured ceramic powders for nano-sensor
applications.
|
·
|
Air
and Water Treatment
|
o
|
The
development, production and sale of photocatalytic materials for
air and
water cleansing.
|
o
|
The
marketing of
Nanocheck products for phosphate binding to prevent or reduce algae
growth
in recreational and industrial
water.
|
·
|
Alternative
Energy
|
o
|
The
development, production and sale for testing purposes of nano-structured
lithium titanate spinel, lithium cobaltate and lithium manganate
spinel
materials for high performance lithium ion batteries.
|
o
|
The
design, development, and production of power nano-Titanate battery
cells,
batteries, and battery packs as well as related design and test services.
|
o
|
The
development of materials for photovoltaics and transparent electrodes
for
hydrogen generation and fuel cells.
|
·
|
Lanthanum
based Pharmaceutical Products
|
o
|
The
co-development of RenaZorb, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in patients undergoing kidney
dialysis.
|
o
|
The
testing of Renalan, a development-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in animals suffering from chronic renal disease.
|
·
|
Chemical
Delivery Products
|
o
|
The
research and development of TiNano Spheres, which are rigid, hollow,
porous, high surface area ceramic micro structures that are derived
from
Altair’s proprietary process technology for the delivery of chemicals,
drugs and biocides.
|
·
|
Biocompatible
Materials
|
o
|
The
research and development of nanomaterials for use in various products
for
dental implants, dental fillings and dental products, as well as
biocompatible coatings on implants.
|
·
|
We
must continue the development work on our advanced battery materials
and
battery systems, produce sufficient quantities of batteries and battery
cells for test purposes, obtain satisfactory test results and successfully
market the materials and systems. Toward that end, we have hired
additional employees, have constructed test and production facilities
and
are purchasing equipment. Our intent is to initially market our battery
materials and battery systems to the automotive, stationary power
and
military specialty battery industries where we must be able to demonstrate
to prospective customers that our battery materials and battery systems
offer significant advantages over existing
technologies.
|
·
|
Spectrum
must successfully complete the testing and application processes
necessary
to receive FDA approval of our RenaZorb product. Following the settlement
in early June 2006 regarding certain contractual matters, Spectrum
appears
to have re-focused on the product development process and the project
is
progressing as anticipated.
|
·
|
The
initial phase of work for the Western Oil Sands license agreement
has been
expanded and will run through December 31, 2006. We must successfully
complete the initial phase, and Western Oil Sands must decide to
proceed
with phase 2 work for this project to continue to move toward
commercialization.
|
Less
Than
|
After
|
|||||||||||||||
Contractual
Obligations
|
Total
|
1
Year
|
1-3
Years
|
4-5
Years
|
5
Years
|
|||||||||||
Notes
Payable
|
$
|
2,400,000
|
$
|
600,000
|
$
|
1,200,000
|
$
|
600,000
|
$
|
-
|
||||||
Interest
on Notes Payable
|
420,000
|
168,000
|
210,000
|
42,000
|
-
|
|||||||||||
Contractual
Service Agreements
|
1,091,983
|
1,087,483
|
4,500
|
-
|
-
|
|||||||||||
Facilities
and Property Leases
|
388,575
|
208,402
|
156,866
|
23,306
|
-
|
|||||||||||
Unfulfilled
Purchase Orders
|
1,424,791
|
1,424,791
|
-
|
-
|
-
|
|||||||||||
Total
Contractual Obligations
|
$
|
5,725,349
|
$
|
3,488,676
|
$
|
1,571,366
|
$
|
665,307
|
$
|
-
|
·
|
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. 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, 2006, the carrying value of these assets was $10,660,989,
or
45% of total assets. We evaluate the carrying value of long-lived
assets
when events or circumstances indicate that an impairment may exist.
In our
evaluation, we estimate the net undiscounted cash flows expected
to be
generated by the assets, and recognize impairment when such cash
flows
will be less than the carrying values. Events or circumstances that
could
indicate the existence of a possible impairment include obsolescence
of
the technology, an absence of market demand for the product, and/or
the
partial or complete lapse of technology rights protection.
|
·
|
Share-Based
Compensation. We have a stock incentive plan which provides for the
issuance of stock options, restricted stock and other awards to employees
and service providers. We calculate compensation expense under SFAS
123R
using a Black-Scholes option pricing model. In so doing, we estimate
certain key assumptions used in the model. We believe the estimates
we
use, which are presented in Note 6 of Notes to the Unaudited Condensed
Consolidated Financial Statements, are appropriate and reasonable.
|
·
|
Revenue
Recognition. We
recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred or service has been performed, the fee is fixed
and
determinable, and collectibility is probable. Historically, our
revenues have been derived from four sources: license fees, commercial
collaborations, contract research and development and product sales.
License fees are recognized when the agreement is signed, we have
performed all material obligations related to the particular milestone
payment or other revenue component and the earnings process is complete.
Revenue for product sales is recognized at the time the purchaser
has
accepted delivery of the product. 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.
|
·
|
Overhead
Allocation. Facilities overhead, which is comprised primarily of
occupancy
and related expenses, is initially recorded in general and administrative
expenses and then allocated monthly to research and development expense
based on labor costs. Facilities overhead 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 collectibility of specific customer accounts and
the
aging of accounts receivable. We analyze historical bad debts, the
aging of customer accounts, customer concentrations, customer
credit-worthiness, current economic trends and changes in our customer
payment patterns when evaluating the adequacy of the allowance for
doubtful accounts. From period to period, differences in judgments
or estimates utilized may result in material differences in the amount
and
timing of our bad debt expenses.
|
·
|
Deferred
Income Taxes. Income taxes are accounted for using the asset and
liability
method. Deferred income tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the
period
that includes the enactment date. Future tax benefits are subject to
a valuation allowance when management is unable to conclude that
its
deferred income tax assets will more likely than not be realized
from the
results of operations. The Company has recorded a valuation
allowance to reflect the estimated amount of deferred income tax
assets
that may not be realized. The ultimate realization of deferred income
tax
assets is dependent upon generation of future taxable income during
the
periods in which those temporary differences become deductible. Management
considers projected future taxable income and tax planning strategies
in
making this assessment. Based on the historical taxable income and
projections for future taxable income over the periods in which the
deferred income tax assets become deductible, management believes
there is
insufficient basis as of September 30, 2006 for projecting that the
Company will realize the benefits of these deductible differences
as of
September 30, 2006. Management has, therefore, established a full
valuation allowance against its net deferred income tax assets as
of
September 30, 2006.
|
·
|
fluctuations
in the size and timing of customer orders from one quarter to the
next;
|
·
|
timing
of delivery of our services and products;
|
·
|
addition
of new customers or loss of existing customers;
|
·
|
our
ability to commercialize and obtain orders for products we are
developing;
|
·
|
costs
associated with developing our manufacturing capabilities;
|
·
|
new
product announcements or introductions by our competitors or potential
competitors;
|
·
|
the
effect of variations in the market price of our common shares on
our
equity-based compensation expenses;
|
·
|
acquisitions
of businesses or customers;
|
·
|
technology
and intellectual property issues associated with our products;
and
|
·
|
general
economic trends, including changes in energy prices, or geopolitical
events such as war or incidents of terrorism.
|
·
|
Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
|
·
|
The
patents we have been granted may be challenged, invalidated or
circumvented because of the pre-existence of similar patented or
unpatented intellectual property rights or for other
reasons;
|
·
|
Parties
to the confidentiality and invention agreements may have such agreements
declared unenforceable or, even if the agreements are enforceable,
may
breach such agreements;
|
·
|
The
costs associated with enforcing patents, confidentiality and invention
agreements or other intellectual property rights may make aggressive
enforcement cost prohibitive;
|
·
|
Even
if we enforce our rights aggressively, injunctions, fines and other
penalties may be insufficient to deter violations of our intellectual
property rights; and
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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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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 characteristic necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus unrelated to its
merits;
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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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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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Further
testing of potential life science products using our technology
may
indicate that such products are less effective than existing products,
unsafe, have significant side effects or are otherwise not
viable;
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The
licensee 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; and
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End
products for which FDA approval is obtained, if any, may fail to
obtain
significant market share for various reasons, including questions
about
efficacy, need, safety and side effects or because of poor marketing
by
the licensee.
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If
we fail to supply products in accordance with contractual terms,
including
terms related to time of delivery and performance specifications,
we may
become liable for direct, special, consequential and other damages,
even
if manufacturing or delivery was
outsourced;
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Raw
materials used in the manufacturing process, labor and other key
inputs
may become scarce and expensive, causing our costs to exceed cost
projections and associated
revenues;
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Manufacturing
processes typically involve large machinery, fuels and chemicals,
any or
all of which may lead to accidents involving bodily harm, destruction
of
facilities and environmental contamination and associated liabilities;
and
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We
may have, and may be required to, make representations as to our
right to
supply and/or license intellectual property and to our compliance
with
laws. Such representations are usually supported by indemnification
provisions requiring us to defend our customers and otherwise make
them
whole if we license or supply products that infringe on third-party
technologies or violate government
regulations.
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market
factors affecting the availability and cost of capital
generally;
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the
price, volatility and trading volume of our common
shares;
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our
financial results, particularly the amount of revenue we are generating
from operations;
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the
amount of our capital needs;
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the
market’s perception of companies in one or more of our lines of
business;
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the
economics of projects being pursued;
and
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the
market’s perception of our ability to execute our business plan and any
specific projects identified as uses of
proceeds;
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Intentional
manipulation of our stock price by existing or future shareholders
or a
reaction by investors to trends in our stock rather than the fundamentals
of our business;
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A
single acquisition or disposition, or several related acquisitions
or
dispositions, of a large number of our shares, including by short
sellers
covering their position;
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The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
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Positive
or negative statements or projections about our company or our
industry,
by analysts, stock gurus and other
persons;
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The
adoption of governmental regulations or government grant programs
and
similar developments in the United States or abroad that may enhance
or
detract from our ability to offer our products and services or
affect our
cost structure; and
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Economic
and other external market factors, such as a general decline in
market
prices due to poor economic indicators or investor
distrust.
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