Canada
|
1-12497
|
33-1084375
|
(State
or other jurisdiction
|
(Commission
File No.)
|
(IRS
Employer
|
of
incorporation)
|
Identification
No.)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
PART
I - FINANCIAL INFORMATION
|
||||||||
Item
1. Financial Statements
|
||||||||
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Expressed
in United States Dollars)
|
||||||||
(Unaudited)
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ |
10,847,392
|
$ |
12,679,254
|
||||
Investment
in available for sale securities
|
3,907,733
|
14,541,103
|
||||||
Accounts
receivable, net
|
1,244,378
|
1,129,825
|
||||||
Accounts
receivable from related party, net
|
361,499
|
495,000
|
||||||
Notes
receivable from related party, current portion
|
1,235,479
|
-
|
||||||
Product
inventories
|
1,234,319
|
169,666
|
||||||
Prepaid
expenses and other current assets
|
542,998
|
413,390
|
||||||
Total
current assets
|
19,373,798
|
29,428,238
|
||||||
Investment
in Available for Sale Securities
|
1,012,800
|
1,306,420
|
||||||
Property,
Plant and Equipment, net
|
13,108,022
|
11,229,406
|
||||||
Patents,
net
|
741,637
|
805,248
|
||||||
Notes
Receivable from related party, long-term portion
|
356,957
|
330,000
|
||||||
Other
Assets
|
122,718
|
21,261
|
||||||
Total
Assets
|
$ |
34,715,932
|
$ |
43,120,573
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Trade
accounts payable
|
$ |
2,065,900
|
$ |
1,533,047
|
||||
Accrued
salaries and benefits
|
1,821,910
|
840,219
|
||||||
Accrued
liabilities
|
876,917
|
526,596
|
||||||
Note
payable, current portion
|
600,000
|
600,000
|
||||||
Total
current liabilities
|
5,364,727
|
3,499,862
|
||||||
Note
Payable, Long-Term Portion
|
1,200,000
|
1,800,000
|
||||||
Minority
Interest in Subsidiary
|
1,605,802
|
-
|
||||||
Stockholders'
Equity
|
||||||||
Common
stock, no par value, unlimited shares authorized;
|
||||||||
70,148,787
and 69,079,270 shares issued and
|
||||||||
outstanding
at September 30, 2007 and December 31, 2006
|
119,417,717
|
115,989,879
|
||||||
Additional
paid in capital
|
4,348,533
|
2,002,220
|
||||||
Accumulated
deficit
|
(97,095,447) | (80,353,188) | ||||||
Accumulated
other comprehensive (loss)/income
|
(125,400) |
181,800
|
||||||
Total
Stockholders' Equity
|
26,545,403
|
37,820,711
|
||||||
Total
Liabilities and Stockholders' Equity
|
$ |
34,715,932
|
$ |
43,120,573
|
||||
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
(Expressed
in United States Dollars)
|
||||||||
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Revenues
|
||||||||||||||||
Product
sales
|
$ |
1,864,330
|
$ |
22,940
|
$ |
3,797,333
|
$ |
33,598
|
||||||||
License
fees
|
-
|
-
|
-
|
364,720
|
||||||||||||
Commercial
collaborations
|
980,478
|
339,116
|
2,062,550
|
1,058,622
|
||||||||||||
Contracts
and grants
|
525,326
|
387,842
|
1,717,051
|
895,082
|
||||||||||||
Total
revenues
|
3,370,134
|
749,898
|
7,576,934
|
2,352,022
|
||||||||||||
Operating
Expenses
|
||||||||||||||||
Cost
of product sales
|
2,083,729
|
28,237
|
4,486,467
|
30,953
|
||||||||||||
Research
and development
|
4,423,159
|
2,763,566
|
10,659,356
|
6,917,218
|
||||||||||||
Sales
and marketing
|
519,464
|
423,615
|
1,309,230
|
1,384,787
|
||||||||||||
General
and administrative
|
2,385,871
|
1,288,191
|
7,597,903
|
5,746,759
|
||||||||||||
Depreciation
and amortization
|
506,970
|
405,072
|
1,412,019
|
1,085,190
|
||||||||||||
Total
operating expenses
|
9,619,193
|
4,908,681
|
25,464,975
|
15,164,907
|
||||||||||||
Loss
from Operations
|
(6,549,059) | (4,158,783) | (17,888,041) | (12,812,885) | ||||||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
expense
|
(33,402) | (42,000) | (99,902) | (129,500) | ||||||||||||
Interest
income
|
214,841
|
146,235
|
850,879
|
539,060
|
||||||||||||
Gain/(Loss)
on foreign exchange
|
892
|
(138) |
607
|
(444) | ||||||||||||
Total
other income, net
|
182,331
|
104,097
|
751,584
|
409,116
|
||||||||||||
Loss
from Continuing Operations Before
|
||||||||||||||||
Minority
Interest Share
|
(6,366,728) | (4,054,686) | (17,136,457) | (12,403,769) | ||||||||||||
Minority
Interest Share
|
236,518
|
-
|
394,198
|
-
|
||||||||||||
Net
Loss
|
$ | (6,130,210) | $ | (4,054,686) | $ | (16,742,259) | $ | (12,403,769) | ||||||||
Loss
per common share - Basic and diluted
|
$ | (0.09) | $ | (0.07) | $ | (0.24) | $ | (0.21) | ||||||||
Weighted
average shares - Basic and diluted
|
70,023,935
|
59,461,244
|
69,741,148
|
59,325,488
|
||||||||||||
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
LOSS
|
||||||
(Expressed
in United States Dollars)
|
||||||
(Unaudited)
|
Accumulated
|
||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||
Additional
|
Compre-
|
|||||||||||||||||||||||
Common
Stock
|
Paid
In
|
Accumulated
|
hensive
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Total
|
|||||||||||||||||||
BALANCE, JANUARY
1, 2007
|
69,079,270
|
$ |
115,989,879
|
$ |
2,002,220
|
$ | (80,353,188) | $ |
181,800
|
$ |
37,820,711
|
|||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
(16,742,259) |
-
|
(16,742,259) | ||||||||||||||||||
Other
comprehensive loss,
|
||||||||||||||||||||||||
net
of taxes of $0
|
-
|
-
|
-
|
-
|
(307,200) | (307,200) | ||||||||||||||||||
Comprehensive
loss
|
-
|
-
|
-
|
-
|
-
|
(17,049,459) | ||||||||||||||||||
Share-based
compensation
|
-
|
217,215
|
2,346,313
|
-
|
-
|
2,563,528
|
||||||||||||||||||
Exercise
of stock options
|
70,085
|
118,824
|
-
|
-
|
-
|
118,824
|
||||||||||||||||||
Exercise
of warrants
|
34,000
|
91,800
|
-
|
-
|
-
|
91,800
|
||||||||||||||||||
Issuance
of restricted stock,
|
||||||||||||||||||||||||
net
of cancellations/expired shares
|
69,909
|
|||||||||||||||||||||||
Common
stock issued
|
895,523
|
3,000,000
|
-
|
-
|
-
|
3,000,000
|
||||||||||||||||||
BALANCE, SEPTEMBER
30, 2007
|
70,148,787
|
$ |
119,417,717
|
$ |
4,348,533
|
$ | (97,095,447) | $ | (125,400) | $ |
26,545,403
|
|||||||||||||
See
notes to the unaudited condensed consolidated financial
statements.
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
|||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||
(Expressed
in United States Dollars)
|
|||
(Unaudited)
|
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (16,742,259) | $ | (12,403,769) | ||||
Adjustments
to reconcile net loss to net cash
|
||||||||
used
in operating activities:
|
||||||||
Depreciation
and amortization
|
1,412,019
|
1,085,190
|
||||||
Minority
interest in operations
|
(394,198) |
-
|
||||||
Securities
received in payment of license fees
|
(13,580) | (521,472) | ||||||
Share-based
compensation
|
2,563,528
|
1,417,504
|
||||||
Loss
on disposal of fixed assets
|
-
|
21,098
|
||||||
Accrued
interest on notes receivable
|
(46,733) |
-
|
||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, net
|
(114,553) |
384,706
|
||||||
Accounts
receivable from related party, net
|
133,501
|
(495,000) | ||||||
Notes
receivable from related party, net
|
(1,215,703) |
-
|
||||||
Product
inventories
|
(1,018,718) | (407,104) | ||||||
Prepaid
expenses and other current assets
|
(129,608) | (203,708) | ||||||
Other
assets
|
5,061
|
49,939
|
||||||
Trade
accounts payable
|
219,137
|
395,162
|
||||||
Accrued
salaries and benefits
|
981,691
|
315,925
|
||||||
Accrued
liabilities
|
243,803
|
177,202
|
||||||
Net
cash used in operating activities
|
(14,116,612) | (10,184,327) | ||||||
Cash
flows from investing activities:
|
||||||||
Sale
of available for sale securities
|
33,675,000
|
26,050,000
|
||||||
Purchase
of available for sale securities
|
(23,041,630) | (12,973,949) | ||||||
Purchase
of property and equipment
|
(2,959,244) | (2,956,423) | ||||||
Net
cash provided by investing activities
|
7,674,126
|
10,119,628
|
||||||
(continued)
|
ALTAIR
NANOTECHNOLOGIES INC. AND SUBSIDIARIES
|
||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
(Expressed
in United States Dollars)
|
||||
(Unaudited)
|
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from financing activities:
|
||||||||
Issuance
of common shares for cash
|
3,000,000
|
-
|
||||||
Proceeds
from exercise of stock options
|
118,824
|
340,685
|
||||||
Proceeds
from exercise of warrants
|
91,800
|
166,670
|
||||||
Payment
of notes payable
|
(600,000) | (600,000) | ||||||
Minority
interest
|
2,000,000
|
-
|
||||||
Net
cash provided by (used in) financing activities
|
4,610,624
|
(92,645) | ||||||
Net
decrease in cash and cash equivalents
|
(1,831,862) | (157,344) | ||||||
Cash
and cash equivalents, beginning of period
|
12,679,254
|
2,264,418
|
||||||
Cash
and cash equivalents, end of period
|
$ |
10,847,392
|
$ |
2,107,074
|
||||
Supplemental
disclosures:
|
||||||||
Cash
paid for interest
|
$ |
168,000
|
$ |
105,000
|
||||
Cash
paid for income taxes
|
None
|
None
|
||||||
Supplemental
schedule of non-cash investing and financing
activities:
|
||||||||
For
the nine months ended September 30, 2007:
|
||||||||
-
We received 1,000,000 of common stock valued at $106,518 in connection
with the Phoenix Motorcars, Inc. January 2007 purchase agreement. The
investment was recorded with an offset to deferred
revenue.
|
||||||||
-
We issued 75,575 shares of restricted stock to employees having a
fair
value of approximately $237,000 for which no cash will be
received.
|
||||||||
-
We made property and equipment purchases of $313,716, which are included
in trade accounts payable at September 30, 2007.
|
||||||||
-
We had an unrealized loss on available for sale securities of
$307,200.
|
||||||||
For
the nine months ended September 30, 2006:
|
||||||||
- We issued 56,875 shares of restricted stock to employees having
a fair
value of approximately $180,000
for which no cash will be received.
|
||||||||
|
||||||||
- We made property and equipment purchases of $94,564, which are
included
in trade accounts payable at September 30, 2006.
|
||||||||
- We had an unrealized gain on available for sale securities of
$291,400.
|
||||||||
(concluded)
|
||||||||
See
notes to the unaudited condensed consolidated financial
statements.
|
Nine
months ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Net
loss
|
$ |
16,742,259
|
$ |
12,403,769
|
||||
Unrealized
(gain)/loss on investment in available
|
||||||||
for
sale securities, net of taxes of $0
|
307,200
|
(291,400) | ||||||
Comprehensive
loss
|
$ |
17,049,459
|
$ |
12,112,369
|
September
30, 2007
|
December
31, 2006
|
|||||||
Raw
Materials
|
$ |
1,119,304
|
$ |
-
|
||||
Work
in Process
|
115,015
|
112,500
|
||||||
Demo
Units
|
-
|
57,165
|
||||||
Total
Product Inventories
|
$ |
1
,234,319
|
$ |
169,666
|
September
30, 2007
|
December
31, 2006
|
|||||||
Patents
and patent applications
|
$ |
1,517,736
|
$ |
1,517,736
|
||||
Less
accumulated amortization
|
(776,099) | (712,488) | ||||||
Total
patents and patent applications
|
$ |
741,637
|
$ |
805,248
|
September
30, 2007
|
December
31, 2006
|
|||||||
Beginning
Balance - January
|
$ |
495,000
|
$ |
-
|
||||
Additions
|
1,846,022
|
495,000
|
||||||
Less
cash collected
|
(1,979,523) |
-
|
||||||
Ending
Balance
|
$ |
361,499
|
$ |
495,000
|
September
30, 2007
|
December
31, 2006
|
|||||||
Beginning
Balance - January
|
$ |
330,000
|
$ |
-
|
||||
Additions
|
1,215,703
|
330,000
|
||||||
Plus
interest earned
|
46,733
|
-
|
||||||
Ending
Balance
|
1,592,436
|
330,000
|
||||||
Less
current portion
|
1,235,479
|
-
|
||||||
Long
term portion
|
$ |
356,957
|
$ |
330,000
|
September
31, 2007
|
December
31, 2006
|
|||||||
Note
payable to BHP Minerals
|
||||||||
International,
Inc.
|
$ |
1,800,000
|
$ |
2,400,000
|
||||
Less
current portion
|
(600,000) | (600,000) | ||||||
Long-term
portion of notes payable
|
$ |
1,200,000
|
$ |
1,800,000
|
Loss/(Income)
From
|
Depreciation and |
|||||||||||||||
Three
Months Ended
|
Net
Sales
|
Operations
|
Amortization
|
Assets
|
||||||||||||
September
30, 2007:
|
||||||||||||||||
Performance
Materials
|
$ |
514,878
|
$ |
973,379
|
$ |
247,570
|
$ |
5,806,332
|
||||||||
Power
and Energy Group
|
2,452,753
|
2,451,157
|
217,410
|
9,567,691
|
||||||||||||
Life
Sciences
|
402,504
|
(142,201) |
8,199
|
1,501,868
|
||||||||||||
Corporate
|
-
|
3,266,723
|
33,791
|
17,840,041
|
||||||||||||
Consolidated
Total
|
$ |
3,370,134
|
$ |
6,549,059
|
$ |
506,970
|
$ |
34,715,932
|
||||||||
September
30, 2006:
|
||||||||||||||||
Performance
Materials
|
$ |
506,856
|
$ |
1,284,568
|
$ |
281,764
|
$ |
5,458,925
|
||||||||
Power
and Energy Group
|
238,810
|
1,300,836
|
90,038
|
4,046,264
|
||||||||||||
Life
Sciences
|
4,232
|
163,674
|
2,669
|
1,375,828
|
||||||||||||
Corporate
|
-
|
1,409,705
|
30,601
|
12,778,342
|
||||||||||||
Consolidated
Total
|
$ |
749,898
|
$ |
4,158,783
|
$ |
405,072
|
$ |
23,659,359
|
Loss/(Income)
From
|
Depreciation
and
|
|||||||||||||||
Nine
months ended
|
Net
Sales
|
Operations
|
Amortization
|
Assets
|
||||||||||||
September
30, 2007:
|
||||||||||||||||
Performance
Materials
|
$ |
1,962,078
|
$ |
1,927,529
|
$ |
684,824
|
$ |
5,806,332
|
||||||||
Power
and Energy Group
|
4,754,769
|
6,475,302
|
605,841
|
9,567,691
|
||||||||||||
Life
Sciences
|
860,088
|
(147,129) |
22,202
|
1,501,868
|
||||||||||||
Corporate
|
-
|
9,632,338
|
99,152
|
17,840,041
|
||||||||||||
Consolidated
Total
|
$ |
7,576,934
|
$ |
17,888,041
|
$ |
1,412,019
|
$ |
34,715,932
|
||||||||
September
30, 2006:
|
||||||||||||||||
Performance
Materials
|
$ |
1,408,647
|
$ |
3,159,215
|
$ |
795,723
|
$ |
5,458,925
|
||||||||
Power
and Energy Group
|
428,535
|
3,582,422
|
194,434
|
4,046,264
|
||||||||||||
Life
Sciences
|
514,840
|
(147,356) |
7,374
|
1,375,828
|
||||||||||||
Corporate
|
-
|
6,218,604
|
87,660
|
12,778,342
|
||||||||||||
Consolidated
Total
|
$ |
2,352,022
|
$ |
12,812,885
|
$ |
1,085,190
|
$ |
23,659,359
|
Accounts
Receivable and
|
||||||||
Sales
- 3 Months Ended
|
Notes
Receivable at
|
|||||||
Customer
|
September
30, 2007
|
September
30, 2007
|
||||||
Performance
Materials Division:
|
||||||||
Department
of Energy
|
$ |
73,472
|
$ |
15,958
|
||||
Power
and Energy Group:
|
||||||||
Phoenix
Motorcars, Inc.
|
$ |
1,528,503
|
$ |
1,953,935
|
||||
Department
of Energy
|
$ |
190,915
|
$ |
167,400
|
||||
AES
Energy Storage, LLC.
|
$ |
352,795
|
$ |
-
|
||||
Life
Sciences Division:
|
||||||||
Department
of Energy
|
$ |
103,904
|
$ |
23,025
|
||||
Revenues
- 3 Months Ended
|
Accounts
Receivable at
|
|||||||
Customer
|
September
30, 2006
|
September
30, 2006
|
||||||
Performance
Materials Division:
|
||||||||
Western
Oil Sands
|
$ |
298,730
|
$ |
190,305
|
||||
UNLV
Research Foundation
|
$ |
74,152
|
$ |
52,266
|
||||
Department
of Energy
|
$ |
97,819
|
$ |
84,025
|
||||
Power
and Energy Group:
|
||||||||
National
Science Foundation
|
$ |
51,184
|
$ |
111,146
|
||||
Department
of Energy
|
$ |
152,438
|
$ |
136,575
|
Accounts
Receivable and
|
||||||||
Sales
- 9 Months Ended
|
Notes
Receivable at
|
|||||||
Customer
|
September
30, 2007
|
September
30, 2007
|
||||||
Performance
Materials Division:
|
||||||||
Western
Oil Sands
|
$ |
897,829
|
$ |
100,858
|
||||
Department
of Energy
|
$ |
472,268
|
$ |
15,958
|
||||
Power
and Energy Group:
|
||||||||
Phoenix
Motorcars, Inc.
|
$ |
3,067,121
|
$ |
1,953,935
|
||||
Department
of Energy
|
$ |
595,264
|
$ |
167,400
|
||||
Life
Sciences Division:
|
||||||||
Elanco
Animal Health/Eli Lilly
|
$ |
727,629
|
$ |
294,600
|
||||
Department
of Energy
|
$ |
127,565
|
$ |
23,025
|
Revenues
- 9 Months Ended
|
Accounts
Receivable at
|
|||||||
Customer
|
September
30, 2006
|
September
30, 2006
|
||||||
Performance
Materials Division:
|
||||||||
Western
Oil Sands
|
$ |
819,117
|
$ |
190,305
|
||||
UNLV
Research Foundation
|
$ |
377,406
|
$ |
52,266
|
||||
Department
of Energy
|
$ |
97,819
|
$ |
84,025
|
||||
Power
and Energy Group:
|
||||||||
National
Science Foundation
|
$ |
198,125
|
$ |
111,146
|
||||
Department
of Energy
|
$ |
152,438
|
$ |
136,575
|
||||
Life
Sciences Division:
|
||||||||
Spectrum
Pharmaceuticals, Inc.
|
$ |
514,840
|
$ |
1,232
|
Revenues
-
|
Revenues
-
|
||||||||||
3
Months Ended
|
3
Months Ended
|
||||||||||
Geographic
information (a):
|
September
30, 2007
|
September
30, 2006
|
|||||||||
United
States
|
$ |
2,864,455
|
$ |
428,228
|
|||||||
Canada
|
274,649
|
298,730
|
|||||||||
Other
foreign countries
|
231,031
|
22,940
|
|||||||||
Total
|
$ |
3,370,134
|
$ |
749,898
|
|||||||
(a)
Revenues are attributed to countries based on location of
customer.
|
Revenues
-
|
Revenues
-
|
||||||||||
9
Months Ended
|
9
Months Ended
|
||||||||||
Geographic
information (a):
|
September
30, 2007
|
September
30, 2006
|
|||||||||
United
States
|
$ |
6,253,966
|
$ |
1,457,421
|
|||||||
Canada
|
904,774
|
821,781
|
|||||||||
Other
foreign countries
|
418,194
|
72,820
|
|||||||||
Total
|
$ |
7,576,934
|
$ |
2,352,022
|
|||||||
(a)
Revenues are attributed to countries based on location of
customer.
|
|
·
|
Power
and Energy Systems
|
|
o
|
The
design, development, and production of our NanoSafe brand nanoTitanate
battery cells, batteries, and battery packs as well as related design
and
test services.
|
|
o
|
The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion
batteries
called lithium nanoTitanate
batteries.
|
|
·
|
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 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.
|
|
·
|
Performance
Materials
|
|
o
|
The
testing, development, marketing and/or licensing of nano-structured
ceramic powders for use in various applications, such as advanced
performance coatings, air and water purification systems, and nano-sensor
applications. As part of the AlSher Titania joint
venture, an exclusive license was granted to AlSher Titania to produce
nano titanium dioxide materials that will be purchased by the Company
for
internal development and commercial
sales.
|
|
o
|
In
April 2007, the AlSher Titania joint venture was formed to develop
and
produce high quality titanium dioxide pigment for use in paint and
coatings, and nano titanium dioxide materials for use in a variety
of
applications including those related to removing contaminants from
air and
water. The Performance Materials Division works with current
customers utilizing the Altair Hydrochloride Pigment Process technology
and also conducts internal research and development
activities.
|
|
·
|
We
must continue the development work on our nano-structured lithium
titanate
spinel (“LTO”) electrode materials, produce sufficient quantities of
batteries and battery cells for test purposes, obtain satisfactory
test
results and successfully market the materials. Toward that end,
we have hired additional employees, have constructed test and production
facilities and are purchasing equipment. Our intent is to
initially market our LTO electrode materials to the automotive industry
and stationary power markets where we must be able to demonstrate
to
prospective customers that our nano-structured LTO electrode materials
offer significant advantages over existing
technologies.
|
|
·
|
On
July 20, 2007, we entered into a multi-year joint development and
equipment purchase agreement related to our battery technology and
energy
storage products with AES Energy Storage, LLC (“AES”), a subsidiary of The
AES Corporation. Under this agreement, a pilot project to
jointly develop an energy storage system with AES is expected to
be
completed by the second quarter of 2008. Successful completion
of this project is key to begin commercially marketing and selling
these
energy storage systems.
|
|
·
|
On
January 9, 2007, we entered into a multi-year purchase and supply
agreement with Phoenix Motorcars, Inc. (“Phoenix”) for NanoSafe
nanoTitanate battery packs to be used in electric vehicles produced
by
Phoenix. Phoenix has placed firm purchase orders for $3,250,000
in NanoSafe nano lithium Titanate battery packs through September
30,
2007. Management believes that the projected orders for 2007 of
between $16 and $42 million for the remainder of 2007 may not be
achieved,
and that orders may fall below $16 million. We are currently
working with Phoenix to firm up orders through the remainder of
2007. In the third quarter, Phoenix notified us of their plan
to redesign the battery packs for their Generation II
vehicle. Based on their request, we continue to segregate and
hold the packs in a storage facility pending receipt of the new design
specifications. We anticipate performing the redesign work on a
time and materials basis. The agreement provides Phoenix with
limited exclusivity in the all-electric vehicle market during a three-year
period. In order to maintain exclusivity, Phoenix must purchase
at least $16 million in battery packs during 2007. Phoenix must
be successful in their business strategy and we must build and deliver
battery packs on a scale we have never before achieved, in order
to fully
benefit from this purchase
agreement.
|
|
·
|
Spectrum and
Elanco must begin the testing and application processes necessary to
receive Federal Drug Administration approval of
our pharmaceutical candidates. Toward that end, we must
manufacture these products under pharmaceutical industry
guidelines to support such testing.
|
|
·
|
We
have formed the AlSher Titania joint venture with Sherwin-Williams
to
develop and produce titanium dioxide pigment for use in paint and
coatings. The success of this joint venture and initial pilot
plant trials is integral to continuing development and the ultimate
commercialization of AHP.
|
Less
Than
|
After
|
|||||||||||||||||||
Contractual
Obligations
|
Total
|
1
Year
|
1-3
Years
|
4-5
Years
|
5
Years
|
|||||||||||||||
Notes
Payable
|
$ |
1,800,000
|
$ |
600,000
|
$ |
1,200,000
|
$ |
-
|
$ |
-
|
||||||||||
Interest
on notes payable
|
252,000
|
126,000
|
126,000
|
-
|
-
|
|||||||||||||||
Contractual
Service Agreements
|
1,688,634
|
1,527,534
|
161,100
|
-
|
-
|
|||||||||||||||
Facilities
and Property Leases
|
817,500
|
314,390
|
311,860
|
191,250
|
-
|
|||||||||||||||
Unfulfilled
Purchase Orders
|
3,225,588
|
3,225,588
|
-
|
-
|
-
|
|||||||||||||||
Total
Contractual Obligations
|
$ |
7,783,722
|
$ |
5,793,512
|
$ |
1,798,960
|
$ |
191,250
|
$ |
-
|
|
·
|
Product
Inventories. The Company values its inventories at
the lower of cost (first-in, first-out method) or market. We
employ a full absorption procedure using standard cost techniques,
which
approximates actual cost. The standards are customarily
reviewed and adjusted annually.
|
|
·
|
Long-Lived
Assets. Our long-lived assets consist principally of the
nanomaterials and titanium dioxide pigment assets, the intellectual
property (patents and patent applications) associated with them,
and a
building. Included in these long-lived assets are those that
relate to our research and development process. These assets are
initially evaluated for capitalization based on Statement of Financial
Accounting Standards No. 2, Accounting for Research and
Development Costs. If the assets have alternative future uses
(in research and development projects or otherwise), they are capitalized
when acquired or constructed; if they do not have alternative future
uses,
they are expensed as incurred. At September 30, 2007, the carrying
value of these assets was $13,523,485, or 39% of total
assets. We evaluate the carrying value of long-lived assets
when events or circumstances indicate that impairment may
exist. In our evaluation, we estimate the net undiscounted cash
flows expected to be generated by the assets, and recognize impairment
when such cash flows will be less than the carrying
values. Events or circumstances that could indicate the
existence of a possible impairment include obsolescence of the technology,
an absence of market demand for the product, and/or the partial or
complete lapse of technology rights
protection.
|
|
·
|
Share-Based
Compensation. We have a stock incentive plan that provides for
the issuance of common stock options to employees and service
providers. We calculate compensation expense under SFAS 123R
using a Black-Scholes option pricing model. In so doing, we
estimate certain key assumptions used in the model. We believe
the estimates we use are appropriate and
reasonable.
|
|
·
|
Revenue
Recognition. We recognize revenue when persuasive evidence of
an arrangement exists, delivery has occurred or service has been
performed, the fee is fixed and determinable, and collectibility
is
probable, in accordance with the Securities and Exchange Commission
“Staff Accounting Bulletin No. 104 – Revenue Recognition in Financial
Statements”. Historically, our revenues have been derived from
four sources: license fees, commercial collaborations, contract research
and development and product sales. License fees are recognized when
the agreement is signed, we have performed all material obligations
related to the particular milestone payment or other revenue component
and
the earnings process is complete. Revenue for product sales is
recognized upon delivery of the product, unless specific contractual
terms
dictate otherwise. Based on the specific terms and conditions
of each contract/grant, revenues are recognized on a time and materials
basis, a percentage of completion basis and/or a completed contract
basis. Revenue under contracts based on time and materials is
recognized at contractually billable rates as labor hours and expenses
are
incurred. Revenue under contracts based on a fixed fee
arrangement is recognized based on various performance measures,
such as
stipulated milestones. As these milestones are achieved, revenue is
recognized. From time to time, facts develop that may require us to
revise our estimated total costs or revenues expected. The
cumulative effect of revised estimates is recorded in the period
in which
the facts requiring revisions become known. The full amount of
anticipated losses on any type of contract is recognized in the period
in
which it becomes known. Based on specific customer bill and
hold agreements, revenue is recognized when the inventory is shipped
to a
third party storage warehouse, the inventory is segregated and marked
as sold, the customer takes the full rights of ownership and title to
the inventory upon shipment to the warehouse per the bill and hold
agreement. When contract terms include multiple components that
are considered separate units of accounting, the revenue is attributed
to
each component and revenue recognition may occur at different points
in
time for product shipment, installation, and service contracts based
on
substantial completion of the earnings
process.
|
|
·
|
Accrued
Warranty. We provide a limited warranty for battery packs and
energy storage systems. A liability is recorded for estimated
warranty obligations at the date products are sold. Since these
are new products, the estimated cost of warranty coverage is based
on cell
and module life cycle testing and compared for reasonableness to
warranty
rates on competing battery products. As sufficient actual
historical data is collected on the new product, the estimated cost
of
warranty coverage will be adjusted
accordingly.
|
|
·
|
Overhead
Allocation. Facilities overhead, which is comprised primarily
of occupancy and related expenses, is initially recorded in general
and
administrative expenses and then allocated monthly to research and
development expense and product inventories based on labor
costs. Facilities overhead allocated to research and
development projects may be chargeable when invoicing customers under
certain research and development
contracts.
|
|
·
|
Minority
Interest – In April 2007, the Company and Sherwin-Williams
entered into an agreement to form AlSher Titania LLC, a Delaware
limited
liability company. AlSher Titania is a joint venture combining
certain technologies of the Company and Sherwin-Williams in order
to
develop and produce titanium dioxide pigment for use in paint and
coatings
and nano titanium dioxide materials for use in a variety of applications,
including those related to removing contaminants from air and
water. Pursuant to a Contribution Agreement dated April 24,
2007 among Altairnano, Inc, Sherwin-Williams and AlSher Titania,
Altairnano contributed to AlSher Titania an exclusive license to
use
Altairnano’s technology (including its hydrochloride pigment process) for
the production of titanium dioxide pigment and other titanium containing
materials (other than battery or nanoelectrode materials) and certain
pilot plants assets with a net book value of
$3,110,000. Altairnano received no consideration for the
license granted to AlSher Titania other than its ownership interest
in
AlSher Titania. Sherwin-Williams agreed to contribute to AlSher
Titania cash and a license agreement related to a technology for
the
manufacture of titanium dioxide using the digestion of ilmenite in
hydrochloric acid. As a condition to enter into the second
phase of the joint venture, we agreed to complete the pigment pilot
processing plant and related development activities by January
2008. The costs associated with this effort are expected to be
partially reimbursed by AlSher Titania. Altairnano contributes
any work in process and fixed assets associated with completion of
the
pigment pilot processing plant to the AlSher Titania joint
venture. For each reporting period, AlSher Titania is
consolidated with the Company’s subsidiaries because the Company has a
controlling interest in AlSher Titania and any inter-company transactions
are eliminated (refer to Note 1 – Basis of Preparation of Consolidated
Financial Statements). The minority shareholder’s interest in
the net assets and net income or loss of AlSher Titania are reported
as
minority interest in subsidiary on the condensed consolidated balance
sheet and as minority interest share in the condensed consolidated
statement of operations,
respectively.
|
|
·
|
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 carry-forwards. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income
in the years in which those temporary differences are expected to
be
recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the
period
that includes the enactment date. Future tax benefits are subject to
a valuation allowance when management is unable to conclude that
its
deferred income tax assets will more likely than not be realized
from the
results of operations. The Company has recorded a valuation
allowance to reflect the estimated amount of deferred income tax
assets
that may not be realized. The ultimate realization of deferred income
tax
assets is dependent upon generation of future taxable income during
the
periods in which those temporary differences become deductible. Management
considers projected future taxable income and tax planning strategies
in
making this assessment. Based on the historical taxable income and
projections for future taxable income over the periods in which the
deferred income tax assets become deductible, management believes
there is
insufficient basis for projecting that the Company will realize the
benefits of these deductible differences as of September 30, 2007.
Management has, therefore, established a full valuation allowance
against
its net deferred income tax assets as of September 30,
2007.
|
|
•
|
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources,
technology
and expertise on reasonable terms or at all;
|
|
•
|
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other characteristics
necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus, unrelated to its
merits;
|
|
•
|
our
commercial partners may be in the early stages of development and
may not
have sufficient liquidity to invest in joint development projects,
expand
their businesses and purchase our products as expected or honor
contractual commitments;
|
|
•
|
our
commercial partners may terminate joint testing, development or
marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
•
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
•
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed
our
associated development and operating
costs.
|
•
|
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 characteristics necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus, unrelated to its
merits;
|
|
•
|
our
commercial partners may be in the early stages of development and
may not
have sufficient liquidity to invest in joint development projects,
expand
their businesses and purchase our products as expected or honor
contractual commitments;
|
|
•
|
our
commercial partners may terminate joint testing, development or marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
•
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
•
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed our
associated development and operating
costs.
|
|
•
|
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 a licensee obtains
such
approval, it may obtain such approval much later than expected
or
projected; 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 replacement, 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.
|
Altair
Nanotechnologies Inc.
|
|||
November
8, 2007
|
By: /s/ Alan
J. Gotcher
|
||
Date
|
Alan
J. Gotcher, Chief Executive Officer
|
||