[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER
31, 2006
|
[
]
|
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 89502-2306
|
||||
(Address
of principal executive offices, including zip code)
|
Common
Shares, no par value
(Title
of Class)
|
NASDAQ
Capital Market
(Name
of each exchange on which
registered)
|
Large
accelerated filer [ ]
|
Accelerated
filer [X]
|
Non-accelerated
filer [ ]
|
PART
I
|
1
|
Item
1: Business
|
1
|
Item
1A. Risk Factors
|
21
|
Item
1B. Unresolved Staff Comments
|
30
|
Item
2. Properties
|
30
|
Item
3. Legal Proceedings
|
31
|
Item
4. Submission of Matters to a Vote of Security Holders
|
31
|
PART
II
|
32
|
Item
5. Market for Registrant's Common Equity, Related Stockholder
Matters and
Issuer Purchases of Equity Securities
|
32
|
Item
6. Selected Financial Data
|
34
|
Item
7. Management's Discussion and Analysis of Financial Condition
and Results
of Operations
|
35
|
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
|
42
|
Item
8. Financial Statements and Supplementary Data
|
43
|
Item
9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure
|
43
|
Item
9A. Controls and Procedures
|
43
|
Item
9B. Other Information
|
45
|
PART
III
|
45
|
Item
10. Directors and Executive Officers of the Registrant
|
45
|
Item
11. Executive Compensation
|
45
|
Item
12. Security Ownership of Certain Beneficial Owners and Management
and
Related Stockholder Matters
|
45
|
Item
13. Certain Relationships and Related Transactions
|
45
|
Item
14. Principal Accountant Fees and Services
|
45
|
PART
IV
|
46
|
Item
15. Exhibits, Financial Statement Schedules and Reports on Form
8-K
|
49
|
·
|
AMPS
|
o
|
The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion
batteries
called lithium nanoTitanate batteries.
|
o
|
The
design, development, and production of power our NanoSafe brand
nanoTitanate battery cells, batteries, and battery packs as well
as
related design and test services.
|
·
|
Life
Sciences
|
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
co-development of Renalan, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in animals suffering from chronic renal
disease.
|
·
|
AHP
|
o
|
The
marketing and licensing of titanium dioxide pigment production
technology.
|
·
|
Performance
Materials
|
o
|
The
testing, development, marketing and/or licensing of nano-structured
ceramic powders for use in various application, such as advanced
performance coatings, air and water purification systems, and nano-sensor
applications.
|
·
|
Power:
A battery’s power rating is its ability to deliver current while
maintaining its voltage.
|
·
|
Discharge:
Discharge refers to the dissipation of a battery’s stored energy as a
result of intended transfer of that energy (either gradually or in
one or
more large bursts) or as a result of the unintended leakage of that
energy. This latter type of leakage is referred to as “self discharge” and
is a
natural tendency of all batteries at a rate that is proportional
to
temperature.
A
“deep discharge” refers to the discharge of substantially all of the
stored energy in a battery between recharges. In general, deep discharges
reduce the cycle life of batteries.
|
·
|
Energy
density: A
battery’s energy density relates to the total unit volume of materials
comprising a battery that will deliver a watt-hour of energy. A battery
with high energy density will deliver more energy per unit volume
than a
battery with lower energy density.
|
·
|
Cycle
life: The ability of a rechargeable battery to accept a charge tends
to
diminish as a result of repeat charge/discharge cycles. A battery’s “cycle
life” is the number of times it can be charged and discharged without a
significant reduction in its ability to accept a charge.
|
·
|
Calendar
life: A battery’s calendar life relates to the period of time that a
battery will preserve its capability to deliver a significant portion
of
its newly built energy storage
capacity.
|
·
|
Recharge
time: Recharge time is the minimum amount of time it takes to replenish
a
battery’s energy.
|
·
|
Lower
dosage requirements because of better phosphate binding per gram
of drug
compared with existing or currently proposed
drugs;
|
·
|
Fewer
and less severe side effects because of less gassing and lower dosage;
and
|
·
|
Better
patient compliance because of fewer and smaller
tablets.
|
·
|
Specifically
targeted to address chronic kidney disease in companion
animals
|
·
|
Palatable
with normal food intake regime
|
·
|
Can
be administered in powder form which can be mixed with the pet’s
food
|
·
|
New
delivery forms for existing drugs;
|
·
|
Delivery
methods for new drugs;
|
·
|
Enhanced
delivery of hard to dissolve drugs;
|
·
|
Delivery
of sustained release drugs; and
|
·
|
Delivery
of dual action drugs
|
|
•
|
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
|
· |
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.
|
|
•
|
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources, technology
and expertise on reasonable terms or at
all;
|
|
•
|
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other 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;
|
|
•
|
our
commercial partners may terminate joint testing, development or marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
•
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
•
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed our
associated development and operating
costs.
|
|
•
|
we
may find that the acquired company or technology does not further
our
business strategy, that we overpaid for the company or technology
or that
the economic conditions underlying our acquisition decision have
changed;
|
|
•
|
we
may have difficulty integrating the assets, technologies, operations
or
personnel of an acquired company, or retaining the key personnel
of the
acquired company;
|
|
•
|
our
ongoing business and management's attention may be disrupted or diverted
by transition or integration issues and the complexity of managing
geographically or culturally diverse
enterprises;
|
|
•
|
we
may encounter difficulty entering and competing in new product or
geographic markets or increased competition, including price competition
or intellectual property litigation;
and
|
|
•
|
we
may experience significant problems or liabilities associated with
product
quality, technology and legal contingencies relating to the acquired
business or technology, such as intellectual property or employment
matters.
|
|
•
|
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;
|
|
•
|
The
licensees may be unable to obtain FDA or other regulatory approval
for
technical, political or other reasons or, even if it obtains such
approval, may not obtain such approval on a timely basis;
and
|
|
•
|
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.
|
|
•
|
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;
|
|
•
|
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;
|
|
•
|
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
|
|
•
|
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.
|
|
•
|
market
factors affecting the availability and cost of capital
generally;
|
|
•
|
the
price, volatility and trading volume of our common
shares;
|
|
•
|
our
financial results, particularly the amount of revenue we are generating
from operations;
|
•
|
the
amount of our capital needs;
|
|
•
|
the
market's perception of companies in one or more of our lines of
business;
|
|
•
|
the
economics of projects being pursued;
and
|
|
•
|
the
market's perception of our ability to execute our business plan and
any
specific projects identified as uses of
proceeds.
|
•
|
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;
|
•
|
A
single acquisition or disposition, or several related acquisitions
or
dispositions, of a large number of our shares, including by short
sellers
covering their position;
|
•
|
The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
|
•
|
Positive
or negative statements or projections about our company or our industry,
by analysts, stock gurus and other persons;
|
•
|
The
adoption of governmental regulations or government grant programs
and
similar developments in the United States or abroad that may enhance
or
detract from our ability to offer our products and services or affect
our
cost structure; and
|
•
|
Economic
and other external market factors, such as a general decline in market
prices due to poor economic indicators or investor
distrust.
|
Fiscal
Year Ended December 31, 2005
|
Low
|
High
|
|
1st
Quarter
|
$1.93
|
$6.52
|
|
2nd
Quarter
|
$2.53
|
$4.38
|
|
3rd
Quarter
|
$2.40
|
$3.40
|
|
4th
Quarter
|
$1.93
|
$2.82
|
|
Fiscal
Year Ended December 31, 2006
|
Low
|
High
|
|
1st
Quarter
|
$1.98
|
$3.74
|
|
2nd
Quarter
|
$2.69
|
$4.21
|
|
3rd
Quarter
|
$2.80
|
$3.82
|
|
4th
Quarter
|
$2.52
|
$3.83
|
|
Number
of securities
to
be issued upon
exercise
of outstanding
options,
warrants
and
rights
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding securities
reflected
in column (a))
|
Plan
Category
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved
by
security holders
|
3,278,222
|
$3.06
|
1,641,029
|
Equity
compensation plans not approved
by
security holders
|
None
|
N/A
|
None
|
Total
|
3,278,222
|
$3.06
|
1,641,029
|
For
the Year Ended December 31,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
STATEMENTS
OF OPERATIONS
|
||||||||||||||||
Revenues
|
$
|
4,323,960
|
$
|
2,806,535
|
$
|
1,151,892
|
$
|
72,851
|
$
|
253,495
|
||||||
Operating
expenses
|
$
|
(22,005,375
|
)
|
$
|
(13,288,388
|
)
|
$
|
(8,056,847
|
)
|
$
|
(5,858,061
|
)
|
$
|
(8,110,206
|
)
|
|
Interest
expense
|
$
|
(171,500
|
)
|
$
|
(207,189
|
)
|
$
|
(194,180
|
)
|
$
|
(454,415
|
)
|
$
|
(1,151,388
|
)
|
|
Interest
income
|
$
|
654,182
|
$
|
750,306
|
$
|
96,229
|
$
|
1,879
|
$
|
2,105
|
||||||
Gain
(Loss) on foreign exchange
|
$
|
(1,550
|
)
|
$
|
1,524
|
$
|
626
|
$
|
(193
|
)
|
$
|
(835
|
)
|
|||
Loss
on extinguishment of debt
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(914,667
|
)
|
|||||
Net
Loss
|
$
|
(17,200,283
|
)
|
$
|
(9,937,212
|
)
|
$
|
(7,002,280
|
)
|
$
|
(6,237,939
|
)
|
$
|
(9,921,496
|
)
|
|
Basic
and diluted net loss per
|
||||||||||||||||
common
share
|
$
|
(0.29
|
)
|
$
|
(0.17
|
)
|
$
|
(0.14
|
)
|
$
|
(0.19
|
)
|
$
|
(0.40
|
)
|
|
Cash
dividends declared per
|
||||||||||||||||
common
share
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
BALANCE
SHEET DATA
|
||||||||||||||||
Working
capital
|
$
|
25,928,376
|
$
|
21,482,766
|
$
|
7,663,264
|
$
|
3,565,039
|
$
|
(204,365
|
)
|
|||||
Total
assets
|
$
|
43,120,573
|
$
|
33,464,016
|
$
|
15,547,021
|
$
|
11,659,754
|
$
|
8,914,405
|
||||||
Current
liabilities
|
$
|
(3,499,862
|
)
|
$
|
(2,427,543
|
)
|
$
|
(376,773
|
)
|
$
|
(397,141
|
)
|
$
|
(604,503
|
)
|
|
Long-term
obligations
|
$
|
(1,800,000
|
)
|
$
|
(2,400,000
|
)
|
$
|
(2,880,311
|
)
|
$
|
(2,686,130
|
)
|
$
|
(3,905,040
|
)
|
|
Net
shareholders' equity
|
$
|
(37,820,711
|
)
|
$
|
(28,636,473
|
)
|
$
|
(12,289,937
|
)
|
$
|
(8,576,483
|
)
|
$
|
(4,404,862
|
)
|
·
|
AMPS
|
o
|
The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion
batteries
called lithium nanoTitanate batteries.
|
o
|
The
design, development, and production of power our NanoSafe brand
nanoTitanate battery cells, batteries, and battery packs as well
as
related design and test services.
|
·
|
Life
Sciences
|
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
co-development of Renalan, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in animals suffering from chronic renal
disease.
|
·
|
AHP:
The marketing and licensing of titanium dioxide pigment production
technology.
|
·
|
Advanced
Materials: The testing, development, marketing and/or licensing of
nano-structured ceramic powders for use in various application, such
for
advanced performance coatings, air and water purification systems,
and
nano-sensor applications.
|
·
|
We
must continue the development work on our nano-structured LTO electrode
materials, produce sufficient quantities of batteries and battery
cells
for test purposes, obtain satisfactory test results and successfully
market the materials. Toward that end, we have hired additional employees,
have constructed test and production facilities and are purchasing
equipment. Our intent is to initially market our nano-structured
LTO
electrode materials to the automotive industry where we must be able
to
demonstrate to prospective customers that our nano-structured LTO
electrode materials offer significant advantages over existing
technologies.
|
·
|
On
January 9, 2007, we entered into a multi-year purchase and supply
agreement with Phoenix Motorcars, Inc. for NanoSafe nanoTitanate
battery
packs to be used in electric vehicles produced by Phoenix.
Contemporaneously, Phoenix placed a firm purchase order for $1,040,000
in
NanoSafe nanoTitanate battery packs and projected orders for 2007
of
between $16 and $42 million for the remainder of 2007. The agreement
provides Phoenix with limited exclusivity in the all electric vehicle
market during a three-year period. In order to maintain exclusivity,
Phoenix must purchase at least $16 million in battery packs during
2007.
Phoenix must be successful in their business strategy and we must
build
and deliver battery packs on a scale we have never before achieved,
in
order to fully benefit from this purchase
agreement.
|
·
|
Spectrum and
Elanco must
begin the testing and application processes necessary to receive
FDA approval
of our RenaZorb and
Renalan products, respectively. Toward that end, we must manufacture
RenaZorb and Renalan under pharmaceutical industry guidelines to
augment
such testing.
|
·
|
We
have commenced and are continuing discussions with Western Oil Sands
and
other potential partners with regard to licensing our AHP pigment
process.
Successful completion of such discussions is integral to continuing
development of AHP.
|
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
|
1,195,014
|
1,189,614
|
5,400
|
-
|
-
|
|||||||||||
Facilities
and Property Leases
|
408,868
|
221,321
|
187,547
|
-
|
-
|
|||||||||||
Unfulfilled
Purchase Orders
|
461,295
|
461,295
|
-
|
-
|
-
|
|||||||||||
Total
Contractual Obligations
|
$
|
4,885,176
|
$
|
2,640,229
|
$
|
1,602,947
|
$
|
642,000
|
$
|
-
|
||||||
·
|
Long-Lived
Assets. Our long-lived assets consist principally of the nanomaterials
and
titanium dioxide pigment assets, the intellectual property (patents
and
patent applications) associated with them, and a building. Included
in these long-lived assets are those that relate to our research
and
development process. These assets are initially evaluated for
capitalization based on Statement of Financial Accounting Standards
(“SFAS”) No. 2, Accounting
for Research and Development Costs.
If the assets have alternative future uses (in research and development
projects or otherwise), they are capitalized when acquired or constructed;
if they do not have alternative future uses, they are expensed as
incurred. At
December 31, 2006, the carrying value of these assets was $11,701,867,
or
27% 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 that provides for the
issuance of stock options, restricted stock and other awards to employees
and service providers. We calculate compensation expense under SFAS
123R
using a Black-Scholes 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 9
of
Notes to the Consolidated Financial Statements, are appropriate and
reasonable.
|
·
|
Revenue
Recognition. We
recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred or service has been performed, the fee is fixed
and
determinable, and collectibility is probable, in accordance with
the
Securities and Exchange Commission “Staff
Accounting Bulletin No. 104 - Revenue Recognition in Financial
Statements”.
During 2006, our revenues were derived from four sources: license
fees,
commercial collaborations, contract research and development and
product
sales. License fees are recognized when the agreement is signed, we
have performed all material obligations related to the particular
milestone payment or other revenue component and the earnings process
is
complete. Revenue for product sales is recognized upon delivery of
the
product, unless specific contractual terms dictate otherwise. Based
on the
specific terms and conditions of each contract/grant, revenues are
recognized on a time and materials basis, a percentage of completion
basis
and/or a completed contract basis. Revenue under contracts based
on time
and materials is recognized at contractually billable rates as labor
hours
and expenses are incurred. Revenue under contracts based on a fixed
fee
arrangement is recognized based on various performance measures,
such as
stipulated milestones. As these milestones are achieved, revenue is
recognized. From time to time, facts develop that may require us to
revise our estimated total costs or revenues expected. The
cumulative effect of revised estimates is recorded in the period
in which
the facts requiring revisions become known. The full amount of
anticipated losses on any type of contract is recognized in the period
in
which it becomes known.
|
·
|
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 overheads 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 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
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. We have recorded a valuation allowance to
reflect the estimated amount of deferred income tax assets that may
not be
realized. The ultimate realization of deferred income tax assets
is
dependent upon generation of future taxable income during the periods
in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making
this
assessment. Based on the historical taxable income and projections
for
future taxable income over the periods in which the deferred income
tax
assets become deductible, management believes it more likely than
not that
the Company will not realize benefits of these deductible differences
as
of December 31, 2006. Management has, therefore, established a full
valuation allowance against its net deferred income tax assets as
of
December 31, 2006. Due to the significant increase in common shares
issued
and outstanding from 2004 through 2006, Section 382 of the Internal
Revenue Code may provide significant limitations on the utilization
of our
net operating loss carryforwards. As a result of these limitations,
a
portion of these loss and credit carryovers may expire without being
utilized.
|
Supplementary
Financial Information by Quarter, 2006 and
2005
|
||||
(Unaudited)
|
Quarter
Ended
|
Quarter
Ended
|
Quarter
Ended
|
Quarter
Ended
|
||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
||||||||||
Year
Ended December 31, 2006:
|
|||||||||||||
Revenues
|
$
|
545,296
|
$
|
1,056,828
|
$
|
749,898
|
$
|
1,971,938
|
|||||
Operating
Expenses
|
$
|
5,270,989
|
$
|
4,985,237
|
$
|
4,908,681
|
$
|
6,840,468
|
|||||
Net
Loss
|
$
|
(4,560,064
|
)
|
$
|
(3,789,018
|
)
|
$
|
(4,054,686
|
)
|
$
|
(4,796,515
|
)
|
|
Loss
per Common Share: (1)
|
|||||||||||||
Basic
and Diluted
|
$
|
(0.08
|
)
|
$
|
(0.06
|
)
|
$
|
(0.07
|
)
|
$
|
(0.08
|
)
|
|
Year
Ended December 31, 2005:
|
|||||||||||||
Revenues
|
$
|
1,027,580
|
$
|
502,881
|
$
|
585,405
|
$
|
690,669
|
|||||
Operating
Expenses
|
$
|
3,325,584
|
$
|
2,554,426
|
$
|
2,939,565
|
$
|
4,468,813
|
|||||
Net
Loss
|
$
|
(2,245,959
|
)
|
$
|
(1,919,078
|
)
|
$
|
(2,176,826
|
)
|
$
|
(3,595,349
|
)
|
|
Loss
per Common Share: (1)
|
|||||||||||||
Basic
and Diluted
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
$
|
(0.06
|
)
|
(1)
Loss per common share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly loss per common share
amounts does not necessarily equal the total for the
year.
|
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of our
assets;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of
America;
|
·
|
provide
reasonable assurance that our receipts and expenditures are being
made
only in accordance with authorization of our management;
and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could
have a
material effect on our consolidated financial
statements.
|
(a) |
Documents
Filed
|
1. |
Financial
Statements.
The following Consolidated Financial Statements of the Company and
Auditors’ Report are filed as part of this Annual Report on Form
10-K:
|
·
|
Report
of Independent Registered Public Accounting
Firm
|
·
|
Report
of Independent Registered Public Accounting Firm on Internal Control
over
Financial Reporting
|
·
|
Report
of Former Independent Registered Public Accounting
Firm
|
·
|
Consolidated
Balance Sheets, December 31, 2006 and
2005
|
·
|
Consolidated
Statements of Operations for Each of the Three Years in
the Period Ended December 31,
2006
|
·
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive Loss for Each of the
Three Years in the Period Ended December 31,
2006
|
·
|
Consolidated
Statements of Cash Flows for Each of the Three Years in the Period
Ended
December 31, 2006
|
·
|
Notes
to Consolidated Financial
Statements
|
2. |
Financial
Statement Schedule.
Not applicable.
|
ALTAIR NANOTECHNOLOGIES INC. | ||
|
|
|
By: | /s/ Alan J. Gotcher | |
|
||
Alan
J. Gotcher,
President
and Chief Executive Officer
Date:
March 13, 2007
|
Signature
|
Title
|
Date
|
|
/s/
Alan J. Gotcher
Alan
J. Gotcher
|
President,
Chief Executive Officer and Director (Principal Executive
Officer)
|
March
13, 2007
|
|
/s/
Edward Dickinson
Edward
Dickinson
|
Chief
Financial Officer and Secretary (Principal Financial and Accounting
Officer)
|
March
13, 2007
|
|
/s/
Michel Bazinet
Michel
Bazinet
|
Director
|
March
13, 2007
|
|
/s/
Jon N. Bengtson
Jon
N. Bengtson
|
Director
|
March
13, 2007
|
|
/s/
James I. Golla
James
I. Golla
|
Director
|
March
13, 2007
|
/s/
George Hartman
George
Hartman
|
Director
|
March
13, 2007
|
|
/s/
Christopher E. Jones
Christopher
E. Jones
|
Director
|
March
13, 2007
|
|
/s/
Pierre Lortie
Pierre
Lortie
|
Director
|
March
13, 2007
|
Exhibit
No.
|
Description
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page
#)
|
3.1
|
Articles
of Continuance
|
Incorporated
by reference to the Current Report on Form 8-K filed with the SEC
on July
18, 2002.**
|
||
3.2
|
Bylaws
|
Incorporated
by reference to the Amendment No. 1 to Annual Report on Form 10-K/A
filed
with the SEC on March 10, 2005.
**
|
||
4.1
|
Form
of Common Stock Certificate
|
Incorporated
by reference to Registration Statement on Form 10-SB filed with the
SEC on
November 25, 1996.
**
|
||
4.2
|
Amended
and Restated Shareholder Rights Plan dated October 15, 1999, between
the
Company and Equity Transfer Services, Inc.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on November 19, 1999.
**
|
||
10.1
|
Altair
International Inc. Stock Option Plan adopted by shareholders
on May 10, 1996
|
Incorporated
by reference to the Company's Registration Statement on Form S-8,
File No.
333-33481 filed with the SEC on July 11, 1997.
|
||
10.2
|
1998
Altair International Inc. Stock Option Plan adopted
by
Shareholders on June 11, 1998
|
Incorporated
by reference to the Company’s Definitive Proxy Statement on Form 14A filed
with the SEC on May 12, 1998.
**
|
||
10.3
|
Altair
Nanotechnologies Inc. 2005 Stock Incentive Plan
|
Incorporated
by reference to the Company’s Registration Statement on Form S-8, File No.
333-125863, filed with the SEC on June 16, 2005.
|
||
10.4
|
Installment
Note dated August 8, 2002 (re Edison Way property)
|
Incorporated
by reference to the Company’s Amendment No. 1 to Registration Statement on
Form S-2, File No. 333-102592, filed with the SEC on February 7,
2003.
|
||
10.5
|
Trust
Deed dated August 8, 2002 (re Edison Way property)
|
Incorporated
by reference to the Company’s Amendment No. 1 to Registration Statement on
Form S-2, File No. 333-102592, filed with the SEC on February 7,
2003.
|
||
10.6
|
Employment
Agreement of Edward Dickinson
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on February 21, 2006. **
|
Exhibit
No.
|
Description
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page
#)
|
10.7
|
Employment
Agreement of Alan J. Gotcher, Ph.D.
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on February 21, 2006.**
|
||
10.8
|
Employment
Agreement of Bruce J. Sabacky
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on June 6, 2006**
|
||
10.9
|
License
Agreement dated January 28, 2005 with Spectrum Pharmaceuticals, Inc.*
|
Incorporated
by reference from the Company’s Current Report on Form 8-K filed with the
SEC on February 4, 2005.**
|
||
10.10
|
Letter
Agreement dated February 11, 2005 between the Company and Maxim Group
LLC
|
Incorporated
by reference from the Current Report on Form 8-K filed by the Company
on
February 15, 2005.
**
|
||
10.11
|
Subcontract
between the UNLV Research Foundation and Altair Nanomaterials,
Inc.
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q filed with the
SEC August 15, 2005.
**
|
||
10.12
|
Lease
dated October 1, 2005 (Main Indiana Office) with Flagship Enterprise
Center
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q filed with the
SEC November 14, 2005.
**
|
||
10.13
|
Lease
dated August 1, 2006 (Indiana Office Additional Space) with Flagship
Enterprise Center
|
Filed
herewith.**
|
||
10.14
|
Lease
dated September 1, 2007 (Indiana Office Additional Space) with Flagship
Enterprise Center
|
Filed
herewith.**
|
||
10.15
|
Addendum
dated February 1, 2007 (re Indiana Office Additonal 440 sq ft. Space)
with
Flagship Enterprise Center
|
Filed
herewith.**
|
||
10.16
|
Addendum
dated February 1, 2007 (re Indiana Office Additonal 1,375 sq ft.
Space)
with Flagship Enterprise Center
|
Filed
herewith.**
|
||
10.17
|
Placement
Agent Agreement with Cowen and Company, LLC
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on December 13, 2006.
**
|
||
10.18
|
Purchase
and Supply Agreement with Phoenix Motorcars, Inc.*
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on January 12, 2007.
**
|
||
10.19
|
Department
of Energy Grant Agreement
|
Filed
herewith.**
|
Exhibit
No.
|
Description
|
Incorporated
by Reference/
Filed
Herewith (and Sequential Page
#)
|
10.20
|
2007
Annual Executive Incentive Bonus Plan*
|
Filed
herewith.
|
||
21
|
List
of Subsidiaries
|
Incorporated
by reference from Item 1 of this report.
|
||
23.1
|
Consent
of Perry-Smith LLP
|
Filed
herewith.
|
||
23.2
|
Consent
of Deloitte & Touche LLP
|
Filed
herewith.
|
||
24
|
Powers
of Attorney
|
Included
in the Signature Page hereof.
|
||
31.1
|
Rule
13-14(a)/15d-14a Certification of Chief Executive Officer
|
Filed
herewith.
|
||
31.2
|
Rule
13-14(a)/15d-15a Certification of Chief Financial Officer
|
Filed
herewith.
|
||
32.1
|
Section
1350 Certification of Chief Executive Officer
|
Filed
herewith.
|
||
32.2
|
Section
1350 Certification of Chief Financial Officer
|
Filed
herewith.
|
Altair
Nanotechnologies Inc.
and
Subsidiaries
Consolidated
Financial Statements as of December 31, 2006 and 2005 and for Each of
the Three Years in the Period Ended December 31, 2006 and Reports
of
Independent Registered Public Accounting Firms
|
|
Page
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL
OVER
FINANCIAL REPORTING
|
F-2-F-3
|
REPORT
OF FORMER INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-4
|
FINANCIAL
STATEMENTS:
|
|
Consolidated
Balance Sheets, December 31, 2006 and 2005
|
F-5
|
Consolidated
Statements of Operations for Each of the Three Years in the Period
Ended December 31, 2006
|
F-6
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss for Each
of the Three Years in the Period Ended December 31, 2006
|
F-7-F-8
|
Consolidated
Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 2006
|
F-9-F-10
|
Notes
to Consolidated Financial Statements
|
F-11-F-31
|
PART
I - FINANCIAL INFORMATION
|
|||
Item
1. Financial Statements
|
|||
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||
CONSOLIDATED
BALANCE SHEETS
|
|||
(Expressed
in United States Dollars)
|
December
31,
|
December
31,
|
||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
12,679,254
|
$
|
2,264,418
|
|||
Investment
in available for sale securities
|
14,541,103
|
20,789,656
|
|||||
Accounts
receivable
|
1,624,825
|
602,168
|
|||||
Product
Inventories
|
169,666
|
-
|
|||||
Prepaid
expenses and other current assets
|
413,390
|
254,067
|
|||||
Total
current assets
|
29,428,238
|
23,910,309
|
|||||
Investment
in Available for Sale Securities
|
1,306,420
|
423,000
|
|||||
Property,
Plant and Equipment, net
|
11,229,406
|
8,169,445
|
|||||
Patents,
net
|
805,248
|
890,062
|
|||||
Notes
Receivable
|
330,000
|
-
|
|||||
Other
Assets
|
21,261
|
71,200
|
|||||
Total
Assets
|
$
|
43,120,573
|
$
|
33,464,016
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Trade
accounts payable
|
$
|
1,533,047
|
$
|
808,905
|
|||
Accrued
salaries and benefits
|
840,219
|
709,349
|
|||||
Accrued
liabilities
|
526,596
|
309,289
|
|||||
Note
payable, current portion
|
600,000
|
600,000
|
|||||
Total
current liabilities
|
3,499,862
|
2,427,543
|
|||||
Note
Payable, Long-Term Portion
|
1,800,000
|
2,400,000
|
|||||
Total
Liabilities
|
5,299,862
|
4,827,543
|
|||||
Commitments
and Contingencies (Notes 9, 13 and 15)
|
|||||||
Stockholders'
Equity
|
|||||||
Common
stock, no par value, unlimited shares authorized;
|
|||||||
69,079,270
and 59,316,519 shares issued and
|
|||||||
outstanding
at December 31, 2006 and December 31, 2005
|
115,989,879
|
92,126,714
|
|||||
Additional
paid in capital
|
2,002,220
|
||||||
Accumulated
deficit
|
(80,353,188
|
)
|
(63,152,905
|
)
|
|||
Deferred
compensation expense
|
-
|
(165,336
|
)
|
||||
Accumulated
other comprehensive gain/(loss)
|
181,800
|
(172,000
|
)
|
||||
Total
Stockholders' Equity
|
37,820,711
|
28,636,473
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
43,120,573
|
$
|
33,464,016
|
See
notes to the consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|||||
(Expressed
in United States Dollars)
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenues
|
||||||||||
License
fees
|
$
|
464,720
|
$
|
695,000
|
$
|
-
|
||||
Product
sales
|
961,380
|
149,373
|
7,503
|
|||||||
Commercial
collaborations
|
1,420,151
|
825,723
|
552,499
|
|||||||
Contracts
and grants
|
1,477,709
|
1,136,439
|
591,890
|
|||||||
Total
revenues
|
4,323,960
|
2,806,535
|
1,151,892
|
|||||||
Operating
Expenses
|
||||||||||
Cost
of product sales
|
1,034,431
|
69,489
|
1,361
|
|||||||
Research
and development
|
10,077,231
|
5,073,478
|
2,189,150
|
|||||||
Sales
and marketing
|
1,878,783
|
1,539,765
|
335,221
|
|||||||
General
and administrative
|
7,495,180
|
5,571,454
|
4,626,562
|
|||||||
Depreciation
and amortization
|
1,519,750
|
1,034,202
|
904,553
|
|||||||
Total
operating expenses
|
22,005,375
|
13,288,388
|
8,056,847
|
|||||||
Loss
from Operations
|
(17,681,415
|
)
|
(10,481,853
|
)
|
(6,904,955
|
)
|
||||
Other
Income (Expense)
|
||||||||||
Interest
expense
|
(171,500
|
)
|
(207,189
|
)
|
(194,180
|
)
|
||||
Interest
income
|
654,182
|
750,306
|
96,229
|
|||||||
(Loss)/gain
on foreign exchange
|
(1,550
|
)
|
1,524
|
626
|
||||||
Total
other income (expense), net
|
481,132
|
544,641
|
(97,325
|
)
|
||||||
Net
Loss
|
$
|
(17,200,283
|
)
|
$
|
(9,937,212
|
)
|
$
|
(7,002,280
|
)
|
|
Loss
per common share - Basic and diluted
|
$
|
(0.29
|
)
|
$
|
(0.17
|
)
|
$
|
(0.14
|
)
|
|
Weighted
average shares - Basic and diluted
|
59,709,487
|
57,766,557
|
48,677,283
|
See
notes to the consolidated financial statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
LOSS
|
|||||||
(Expressed
in United States Dollars)
|
Accumulated
|
||||||||||||||||||||||
Deferred
|
Other
|
|||||||||||||||||||||
Additional
|
Compen-
|
Compre-
|
||||||||||||||||||||
Common
Stock
|
Paid
In
|
Accumulated
|
sation
|
hensive
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Expense
|
Gain
(Loss)
|
Total
|
||||||||||||||||
BALANCE,
JANUARY 1, 2004
|
43,188,362
|
$
|
54,789,896
|
$
|
-
|
$
|
(46,213,413
|
)
|
$
|
-
|
$
|
-
|
$
|
8,576,483
|
||||||||
Stock
options issued to non- employees
|
-
|
270,560
|
-
|
-
|
-
|
-
|
270,560
|
|||||||||||||||
Modification
of stock options
|
||||||||||||||||||||||
issued
to employee
|
-
|
39,000
|
-
|
-
|
-
|
-
|
39,000
|
|||||||||||||||
Variable
accounting on stock options
|
-
|
136,212
|
-
|
-
|
-
|
-
|
136,212
|
|||||||||||||||
Shares
issued for services
|
200,000
|
413,000
|
-
|
-
|
-
|
-
|
413,000
|
|||||||||||||||
Exercise
of stock options
|
561,900
|
902,109
|
-
|
-
|
-
|
-
|
902,109
|
|||||||||||||||
Exercise
of warrants
|
5,825,432
|
8,954,853
|
-
|
-
|
-
|
-
|
8,954,853
|
|||||||||||||||
Net
Loss
|
-
|
-
|
-
|
(7,002,280
|
)
|
-
|
-
|
(7,002,280
|
)
|
|||||||||||||
BALANCE,
DECEMBER 31, 2004
|
49,775,694
|
$
|
65,505,630
|
-
|
$
|
(53,215,693
|
)
|
-
|
-
|
$
|
12,289,937
|
|||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
(9,937,212
|
)
|
-
|
-
|
(9,937,212
|
)
|
|||||||||||||
Other
comprehensive loss,
|
||||||||||||||||||||||
net
of taxes of $0
|
-
|
-
|
-
|
-
|
-
|
(172,000
|
)
|
(172,000
|
)
|
|||||||||||||
Comprehensive
loss:
|
(10,109,212
|
)
|
||||||||||||||||||||
Modification
of stock options
|
||||||||||||||||||||||
issued
to employees
|
-
|
56,060
|
-
|
-
|
-
|
-
|
56,060
|
|||||||||||||||
Variable
accounting on stock
|
||||||||||||||||||||||
options
|
-
|
297,138
|
-
|
-
|
-
|
-
|
297,138
|
|||||||||||||||
Exercise
of stock options
|
1,204,500
|
1,828,900
|
-
|
-
|
-
|
-
|
1,828,900
|
|||||||||||||||
Exercise
of warrants
|
3,201,511
|
4,828,567
|
-
|
-
|
-
|
-
|
4,828,567
|
|||||||||||||||
Issuance
of restricted stock
|
96,500
|
272,155
|
-
|
-
|
(272,155
|
)
|
-
|
-
|
||||||||||||||