Edgar Filing: ALTAIR NANOTECHNOLOGIES INC

altair_10q-063010.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________

ALTAIR NANOTECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

	Canada		1-12497		33-1084375
	(State or other jurisdiction of incorporation)		(Commission File No.)		(IRS Employer Identification No.)

204 Edison Way

Reno, Nevada 89502

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (775) 856-2500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o

Non-accelerated filer o

Accelerated filer x

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): YES o NO x

As of August 5, 2010 the registrant had 108,062,315 Common Shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except shares and per share amounts)
(Unaudited)


	June 30,			December 31,
	2010			2009
ASSETS
Current assets
Cash and cash equivalents	$	8,244		$	18,122
Investment in available for sale securities		446			505
Accounts receivable, net		2,631			683
Product inventories		6,347			5,043
Prepaid expenses and other current assets		1,516			1,820
Total current assets		19,184			26,173

Investment in available for sale securities		2,558			2,587

Property, plant and equipment, net held and used		10,314			8,670

Property, plant and equipment, net held and not used		-			2,211

Patents, net		464			551

Other assets		125			125

Total Assets	$	32,645		$	40,317

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	3,050		$	1,783
Accrued salaries and benefits		1,364			625
Accrued warranty		79			79
Accrued liabilities		385			447
Deferred revenues		1,814			311
Current portion of long-term debt		16			810
Total current liabilities		6,708			4,055

Long-term debt, less current portion		30			37

Stockholders' equity
Common stock, no par value, unlimited shares authorized;
107,973,051 and 105,400,728 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively		189,225			188,515
Additional paid in capital		11,526			10,933
Accumulated deficit		(173,196	)		(162,204	)
Accumulated other comprehensive loss		(1,648	)		(1,560	)
Total Altair Nanotechnologies, Inc.’s stockholders’ equity		25,907			35,684

Noncontrolling interest in Subsidiary		-			541
Total stockholders’ equity		25,907			36,225

Total Liabilities and Stockholders' Equity	$	32,645		$	40,317
See notes to the unaudited condensed consolidated financial statements.

	ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	(Expressed in thousands of United States Dollars, except share and per share amounts)
	(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Revenues
Product sales	$	57		$	62		$	132		$	253
Less sales returns		-			(183	)		-			(183	)
Commercial collaborations		26			67			320			766
Contracts and grants		1,417			51			2,240			63
Total net revenues		1,500			(3	)		2,692			899
Cost of Goods Sold
Product		7			163			60			348
Commercial collaborations		12			71			190			300
Contracts and grants		984			16			1,595			38
Warranty and inventory reserves		75			-			128			-
Total cost of goods sold		1,078			250			1,973			686
Gross profit (loss)		422			(253	)		719			213

Operating expenses
Research and development		1,715			2,400			4,155			5,443
Sales and marketing		1,146			622			2,330			1,223
General and administrative		2,181			2,537			4,466			5,097
Depreciation and amortization		451			673			927			1,407
Total operating expenses		5,493			6,232			11,878			13,170
Loss from operations		(5,071	)		(6,485	)		(11,159	)		(12,957	)
Other income (expense)
Interest expense		(3	)		(13	)		(10	)		(31	)
Interest income		27			48			52			119
Realized loss on investment		-			-			-			(18	)
Gain (loss) on foreign exchange		2			2			1			(2	)
Total other income, net		26			37			43			68

Loss from continuing operations		(5,045	)		(6,448	)		(11,116	)		(12,889	)
Gain from discontinued operations		124			-			124			-

Net loss		(4,921	)		(6,448	)		(10,992	)		(12,889	)
Less: Net (gain) loss attributable to non-controlling interest		(4	)		55			-			111
Net loss attributable to Altair Nanotechnologies, Inc.	$	(4,925	)	$	(6,393	)	$	(10,992	)	$	(12,778	)

Amounts attributable to Altair Nanotechnologies, Inc. shareholders:
Loss from continuing operations	$	(5,049	)	$	(6,393	)	$	(11,116	)	$	(12,778	)
Gain from discontinued operations		124			-			124			-
Net loss	$	(4,925	)	$	(6,393	)	$	(10,992	)	$	(12,778	)

Earnings per share attributable to Altair Nanotechnologies, Inc.
Loss from continuing operations - basic and diluted	$	(0.05	)	$	(0.07	)	$	(0.10	)	$	(0.13	)
Gain from discontinued operations - basic and diluted		-			-			-			-
Net loss		(0.05	)		(0.07	)		(0.10	)		(0.13	)

Weighted average shares - basic and diluted		105,255,482			97,358,071			105,175,304			95,182,687

See notes to the unaudited condensed consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(Expressed in thousands of United States Dollars, except shares and per share amounts)

(Unaudited)


	Altair Nanotechnologies, Inc. Shareholders															Noncontrolling Interest in Subsidiary
										Accumulated									Accumulated
										Other									Other
					Additional					Compre-						Interest			Compre-
	Common Stock				Paid In		Accumulated			hensive						In			hensive
	Shares		Amount		Capital		Deficit			Loss			Subtotal			Subsidiary			Loss		Subtotal			Total

Balance, April 1, 2009		93,153,271	$	180,127	$	5,614	$	(147,277	)	$	(1,755	)	$	36,709		$	1,042		$	-	$	1,042		$	37,751
Comprehensive loss:
Net loss		-		-		-		(6,393	)		-			(6,393	)		(55	)		-		(55	)		(6,448	)
Other comprehensive gain											1,560			1,560											1,560
Comprehensive loss:														(4,833	)							(55	)		(4,888	)
Share-based compensation		-		121		241		-			-			363			-			-		-			363
Issuance of restricted stock		372,115		-		-		-			-			-			-			-		-			-
Issuance of Common Stock, net of 1,220,735 issuance costs and 4,623,640 warrant fair market value costs		11,994,469		8,189		4,624		-			-			12,812			-			-		-			12,812
Balance, June 30, 2009		105,519,855	$	188,437	$	10,479	$	(153,670	)	$	(195	)	$	45,051		$	987		$	-	$	987		$	46,038


	Altair Nanotechnologies, Inc. Shareholders															Noncontrolling Interest in Subsidiary
										Accumulated									Accumulated
										Other									Other
					Additional					Compre-						Interest			Compre-
	Common Stock				Paid In		Accumulated			hensive						In			hensive
	Shares		Amount		Capital		Deficit			Loss			Subtotal			Subsidiary			Loss		Subtotal			Total

Balance, April 1, 2010		105,400,728	$	188,577	$	11,325	$	(168,271	)	$	( 1,682	)	$	29,949		$	537		$	-	$	537		$	30,486
Comprehensive loss:
Investment from non-controlling interest		-		-		-		-			-			-			(541	)		-		(541	)		(541	)
Net loss		-		-		-		(4,925	)		-			(4,925	)		4			-		4			(4,921	)
Other comprehensive loss											34			34											34
Comprehensive loss:														(4,891	)							-			(4,887	)
Share-based compensation		-		67		201		-			-			268			-			-		-			268
Issuance of restricted stock		710,976
At the Market Raise		1,861,347		581		-		-			-			581			-			-		-			581
Balance, June 30, 2010		107,973,051	$	189,225	$	11,526	$	(173,196	)	$	(1,648	)	$	25,907		$	-		$	-	$	-		$	25, 907

See notes to the unaudited condensed consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(Expressed in thousands of United States Dollars, except shares and per share amounts)

(Unaudited)


	Altair Nanotechnologies, Inc. Shareholders															Noncontrolling Interest in Subsidiary
										Accumulated									Accumulated
										Other									Other
					Additional					Compre-						Interest			Compre-
	Common Stock				Paid In		Accumulated			hensive						In			hensive
	Shares		Amount		Capital		Deficit			Loss			Subtotal			Subsidiary			Loss		Subtotal			Total

Balance, January 1, 2009		93,143,271	$	180,105	$	5,378	$	(140,892	)	$	(1,873	)	$	42,718		$	1,098		$	-	$	1,098		$	43,816
Comprehensive loss:
Net loss		-		-		-		(12,778	)		-			(12,778	)		(111	)		-		(111	)		(12,889	)
Other comprehensive gain											1,678			1,678											1,678
Comprehensive loss:														(11,101	)							(111	)		(11,211	)
Share-based compensation		-		143		478		-			-			621			-			-		-			621
Issuance of restricted stock		382,115		-		-		-			-			-			-			-		-			-
Issuance of Common Stock, net of 1,220,735 issuance costs and 4,623,640 warrant fair value market costs		11,994,469		8,189		4,623		--			-			12,812			-			-		-			12,812
Balance, June 30, 2009		105,519,855	$	188,437	$	10,479	$	(153,670	)	$	(195	)	$	45,051		$	987		$	-	$	987		$	46,038


	Altair Nanotechnologies, Inc. Shareholders															Noncontrolling Interest in Subsidiary
										Accumulated									Accumulated
										Other									Other
					Additional					Compre-						Interest			Compre-
	Common Stock				Paid In		Accumulated			hensive						In			hensive
	Shares		Amount		Capital		Deficit			Loss			Subtotal			Subsidiary			Loss		Subtotal			Total

Balance, January 1, 2010		105,400,728	$	188,515	$	10,933	$	(162,204	)	$	( 1,560	)	$	35,684		$	541		$	-	$	541		$	36,225
Investment from non-controlling interest																	(541	)				(541	)		(541	)
Comprehensive loss:
Net loss		-		-		-		(10,992	)		-			(10,992	)		-			-		-			(10,992	)
Other comprehensive loss											(88	)		(88	)										(88	)
Comprehensive loss:														(11,080	)							-			(11,080	)
Share-based compensation		-		129		593		-			-			722			-			-		-			722
Issuance of restricted stock		710,976
At the Market Raise		1,861,347		581		-		-			-			581			-			-		-			581
Balance, June 30, 2010		107,973,051	$	189,225	$	11,526	$	(173,196	)	$	(1,648	)	$	25,907		$	-		$	-	$	-		$	25,907

See notes to the unaudited condensed consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States Dollars)
(Unaudited)

	Six Months Ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(10,992	)	$	(12,889	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		940			1,407
Gain on discontinued operations		(124	)		-
Share-based compensation		723			621
Loss on disposal of fixed assets		27			10
Impairment of patents		47			-
Changes in operating assets and liabilities:
Restricted cash		1			(1	)
Accounts receivable, net		(1,948	)		741
Product inventories		(1,208	)		(526	)
Prepaid expenses and other current assets		304			(1,141	)
Other assets		-			34
Trade accounts payable		1,207			437
Accrued salaries and benefits		739			640
Deferred revenues		1,503			-
Accrued liabilities		(62	)		(410	)

Net cash used in operating activities		(8,843	)		(11,077	)

Cash flows from investing activities:
Proceeds from disposition of assets		7			-
Purchase of property and equipment		(820	)		(475	)

Net cash used in investing activities		(813	)		(475	)


				(continued)

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States Dollars)
(Unaudited)

	Six Months Ended
	June 30,
	2010			2009
Cash flows from financing activities:
Issuance of common stock shares, net of issuance costs		581			12,812
Payment of notes payable		(794	)		(706	)
Proceeds from long-term debt		-			58
Repayment of long-term debt		(8	)		(7	)

Net cash (used in) provided by financing activities		(221	)		12,157

Net (decrease) increase in cash and cash equivalents		(9,878	)		605

Cash and cash equivalents, beginning of period		18,122			28,088

Cash and cash equivalents, end of period	$	8,244		$	28,693

Supplemental disclosures:
Cash paid for interest	$	44		$	87

Cash paid for income taxes	None			None

Supplemental schedule of non-cash investing and financing activities:
For the six months ended June 30, 2010:
- We had an unrealized loss on available for sale securities of $88,566.
- We issued 710,976 shares of restricted stock to directors having a fair value of approximately $319,939 for which no cash will be received.
- We made property and equipment purchases of $59,832 which are included in trade accounts payable at June 30, 2010.

For the six months ended June 30, 2009:
- We had an unrealized gain on available for sale securities of $1,677,738.
- We issued 382,115 shares of restricted stock to directors having a fair value of approximately $396,657 for which no cash will be received.
- We made property and equipment purchases of $108,595 which are included in trade accounts payable at June 30, 2009.


See notes to the unaudited condensed consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Preparation of Consolidated Financial Statements

These unaudited interim condensed consolidated financial statements of Altair Nanotechnologies Inc. and its subsidiaries (collectively, “Altair” “we” or the “Company”) have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “Commission”). Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, so long as the statements are not misleading. In the opinion of Company management, these consolidated financial statements and accompanying notes contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position and results of operations for the periods shown. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Commission on March 12, 2010.

The results of operations for the three- and six-month periods ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year.

Note 2. Summary of Significant Accounting Policies

Cash and Cash Equivalents - Cash and cash equivalents consist principally of bank deposits and institutional money market funds. Short-term investments that are highly liquid have insignificant interest rate risk and original maturities of 90 days or less are classified as cash and cash equivalents. Investments that do not meet the definition of cash equivalents are classified as held-to-maturity or available-for-sale.

Our cash balances are maintained in bank accounts that are insured by the Federal Deposit Insurance Corporation (“FDIC”) and Canada Deposit Insurance Corporation (“CDIC”) up to a maximum of US $250,000 and CN $100,000, respectively, per depositor. At June 30, 2010 and December 31, 2009 we had $1.3 million and $1.2 million, respectively, in excess of insurance limits in bank accounts insured by the FDIC or CDIC.

Investment in Available for Sale Securities - The investment in short-term available for sale securities consists of 113,809 Shares of Spectrum Pharmaceuticals, Inc. common stock valued at $446,000 and $505,000 at June 30, 2010 and December 31, 2009, respectively. This stock was received in exchange for ownership assignment of all patent rights associated with RenazorbTM and RenalanTM compounds to Spectrum. Spectrum must also pay us future milestone and royalty payments as they develop revenues for these compounds.

Accounts Receivable — Accounts receivable consists of amounts due from customers for services and product sales, net of an allowance for losses. We determine the allowance for doubtful accounts by reviewing each customer account and specifically identifying any potential for loss.

The allowance for doubtful accounts is as follows:

In thousands of dollars
Beginning Balance, January 1, 2010	$	161
Additions charged to costs and expenses		-
Net deductions (write-offs, net of collections)		-
Ending Balance, June 30, 2010	$	161

Accumulated Other Comprehensive Loss – Accumulated other comprehensive loss consists entirely of unrealized loss on the investment in available for sale securities.

Long-Lived Assets - We evaluate the carrying value of long-lived assets whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows expected to be generated by the asset are less than the carrying value. Our estimate of the cash flows is based on the information available at the time including the following: internal budgets; sales forecasts; customer trends; anticipated production volumes; and market conditions over an estimate of the remaining useful life of the asset which may range from 3 to 10 years for most equipment and up to 22 years for our building and related building improvements. If an impairment is indicated, the asset value is written down to its fair value based upon market prices, or if not available, upon discounted cash flow value, at an appropriate discount determined by us to be commensurate with the risk inherent in the business model. The determination of both undiscounted and discounted cash flows requires us to make significant estimates and consider the expected course of action at the balance sheet date. Our assumptions about future sales and production volumes require significant judgment because actual sales prices and volumes have fluctuated significantly in the past and are expected to continue to do so. Until the Company’s products reach commercialization, the demand for our products is difficult to estimate. Subsequent changes in estimated undiscounted and discounted cash flows arising from changes in anticipated actions could impact the determination of whether an impairment exists, the amount of the impairment charge recorded and whether the effects could materially impact our consolidated financial statements. Events or circumstances that could indicate the existence of a possible impairment include obsolescence of the technology, an absence of market demand for the product or the assets used to produce it, a history of operating or cash flow losses and/or the partial or complete lapse of technology rights protection.

As of June 30, 2010, we estimate that our future cash flows, on an undiscounted basis, are greater than our $10.8 million investment in long-lived assets. Our estimated future cash flows include anticipated product sales, commercial collaborations, and contracts and grant revenue, since our long-lived asset base, which is primarily composed of production, laboratory and testing equipment is utilized to fulfill contracts in all revenue categories.

We reviewed our four capitalized patents and determined that three of these patents had value in excess of their net book value of $483,000. AlSher currently has an exclusive license to use this technology from Altair. The fourth patent no longer had value, thus an impairment charge of $47,000 was recorded in the quarter ended March 31, 2010.

Based on our assessment, which represents no change from the prior year in our approach to valuing long-lived assets, after recording the impairment described above, we believe that our long-lived assets are not impaired.

Property Plant and Equipment, net – held and not used - This balance sheet classification included assets being redeployed from our Life Sciences and Performance Materials Divisions, into our Power and Energy Group. During the quarter ending June 30, 2010 these assets were either redeployed into our Power and Energy Group or transferred to Sherwin Williams through our transfer of AlSher Titania, LLC on April 30, 2010.

Deferred Income Taxes - We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences on the basis of assets and liabilities as reported for financial statement purposes and income tax purposes. We have recorded a valuation allowance against all net deferred tax assets. The valuation allowance reduces deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or service has been performed, the fee is fixed and determinable, and collectability is probable. Our revenues were derived from product sales, commercial collaborations and contracts and grants. Revenue from product sales is recognized upon delivery of the product, unless specific contractual terms dictate otherwise. Based on the specific terms and conditions of each contract/grant, revenues are recognized on a time and materials basis, a percentage of completion basis and/or a completed contract basis. Revenue under contracts based on time and materials is recognized at contractually billable rates as labor hours and expenses are incurred. Revenue under contracts based on a fixed fee arrangement is recognized based on various performance measures, such as stipulated milestones. As these milestones are achieved, revenue is recognized. From time to time, facts develop that may require us to revise our estimated total costs or revenues expected. The cumulative effect of revised estimates is recorded in the period in which the facts requiring revisions become known. The full amount of anticipated losses on any type of contract is recognized in the period in which it becomes known. Payments received in advance relating to the future performance of services or deliveries of products are deferred until the performance of the service is complete or the product is shipped. Upfront payments received in connection with certain rights granted in contractual arrangements are deferred and revenue is recognized over the related time period which the benefits are received. Based on specific customer bill and hold agreements, revenue is recognized when the inventory is shipped to a third party storage warehouse, the inventory is segregated and marked as sold, the customer takes the full rights of ownership and title to the inventory upon shipment to the warehouse per the bill and hold agreement. When contract terms include multiple components that are considered separate units of accounting, the revenue is attributed to each component and revenue recognition may occur at different points in time for product shipment, installation, and service contracts based on substantial completion of the earnings process.

Accrued Warranty - We provide a limited warranty for battery packs and energy storage systems. A liability is recorded for estimated warranty obligations at the date products are sold. Since these are new products, the estimated cost of warranty coverage is based on cell and module life cycle testing and compared for reasonableness to warranty rates on competing battery products. As sufficient actual historical data is collected on the new product, the estimated cost of warranty coverage will be adjusted accordingly. The liability for estimated warranty obligations may also be adjusted based on specific warranty issues identified. The balance of our accrued warranty as of June 30, 2010 and December 31, 2009, was $79,000 and $79,000, respectively.

Overhead Allocation - Facilities overhead, which is comprised primarily of occupancy and related expenses, are initially recorded in general and administrative expenses and then allocated to research and development and product inventories based on relative labor costs.

Noncontrolling Interest – In April 2007, Sherwin-Williams entered into an agreement with us to form AlSher Titania LLC, a Delaware limited liability company (“AlSher”). AlSher is a joint venture combining certain technologies of ours and Sherwin-Williams in order to develop and produce titanium dioxide pigment for use in paint and coatings and nano titanium dioxide materials for use in a variety of applications, including those related to removing contaminants from air and water. Pursuant to a Contribution Agreement dated April 24, 2007 among Sherwin-Williams, AlSher, and us, we contributed to AlSher an exclusive license to use our technology (including our hydrochloride pigment process) for the production of titanium dioxide pigment and other titanium containing materials (other than battery or nanoelectrode materials) and certain pilot plant assets with a net book value of $3.1 million. We received no consideration for the license granted to AlSher other than our ownership interest in AlSher. Sherwin-Williams contributed to AlSher cash and a license agreement related to a technology for the manufacture of titanium dioxide using the digestion of ilmenite in hydrochloric acid. As a condition to enter into the second phase of the joint venture, we agreed to complete the pigment pilot processing plant and related development activities by January 2008. The 100 ton pigment pilot processing plant was commissioned in February 2008 and the costs associated with this effort were partially reimbursed by AlSher. AlSher is consolidated with our subsidiaries because we have a controlling interest in AlSher and any inter-company transactions are eliminated (refer to Note 1 – Basis of Preparation of Consolidated Financial Statements). The noncontrolling shareholder’s interest in the net assets and net income or loss of AlSher are reported as noncontrolling interest in subsidiary on the condensed consolidated balance sheet and as noncontrolling interest share in the condensed consolidated statement of operations, respectively.

We sold our 70% interest in AlSher to Sherwin-Williams on April 30, 2010. Please see Note 3 for further details.

Net Loss Per Common Share - Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common and potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of stock options and warrants, as well as unvested restricted stock. Potentially dilutive shares are excluded from the computation if their effect is anti-dilutive. We had a net loss for all periods presented herein; therefore, none of the stock options and warrants outstanding during each of the periods presented or unvested restricted stock were included in the computation of diluted loss per share as they were anti-dilutive.

Recent Accounting Pronouncements —

Issued and not yet adopted:

In January 2010, the FASB revised two disclosure requirements concerning fair value measurements and clarified two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. Our disclosures about fair value measurements are presented in Note 3 – Fair Value Measurements. We have adopted the changes required except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements which will become effective for the Company on January 1, 2011. Management has determined that the adoption of these changes will not have a material impact on the Financial Statements.

Issued and adopted:

In February 2010, the FASB issued an update to address certain implementation issues related to Accounting Standards Codification, or ASC, 855-10-50, Subsequent Events—Disclosure, regarding an entity's requirement to perform and disclose subsequent events procedures. Effective upon its issuance, the update exempts Securities and Exchange Commission registrants from disclosing the date through which subsequent events have been evaluated. This update affected disclosure only and had no impact on the Financial Statements.

Reclassifications - Certain reclassifications have been made to prior period amounts to conform to classifications adopted in the current period.

Note 3. Discontinued Operations

On April 30, 2010 we sold our 70% share in the AlSher Titania Joint Venture (AlSher) to Sherwin-Williams. Sherwin-Williams now owns 100% of AlSher. All previous agreements with Sherwin-Williams regarding the AlSher Joint Venture are superseded.

Under terms of the agreement, certain intellectual property relating to the Altairnano Hydrochloride Process (AHP), along with certain other intellectual property owned by us, has been licensed to AlSher. We may receive future payments from AlSher based upon future revenues generated from the AHP, or from royalty payments relating to the licensed intellectual property. The amount of future payments from AlSher to us is based on AlSher revenue. All payments are capped at $3,000,000. Payments to us and continuation of the intellectual property licenses are conditional upon certain milestones being achieved and payments being made to us. AlSher also has an option to purchase the licensed intellectual property for $2,000,000.

For the three and six months ended June 30, 2010, we recorded a gain of $124,000 on discontinued operations. The $124,000 gain was comprised of $400,000 of costs related to asset disposal and $524,000 remaining equity in noncontrolling interest.

Note 4. Fair Value Measurements

Our financial instruments are accounted for at fair value on a recurring basis. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. A market or observable inputs is the preferred source of values, followed by assumptions based on hypothetical transactions in the absence of market inputs.

The valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 -

Quoted prices for identical instruments in active markets.

Level 2 -

Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 -

Significant inputs to the valuation model are unobservable.

The following table summarizes the valuation of our assets recorded at fair value on a recurring basis at June 30, 2010:

In thousands of dollars
Assets at fair value :	Total		Level 1		Level 2		Level 3
Auction rate corporate notes	$	2,558	$	-	$	-	$	2,558
Spectrum Pharmaceuticals, Inc.		446		446		-		-
Investment in available for sale securities	$	3,004	$	446	$	-	$	2,558

The following table summarizes the valuation of our assets recorded at fair value on a recurring basis at December 31, 2009:

In thousands of dollars
Assets at fair value:	Total		Level 1		Level 2		Level 3
Auction rate corporate notes	$	2,587	$	-	$	-	$	2,587
Spectrum Pharmaceuticals, Inc.		505		505		-		-
Investment in available for sale securities	$	3,092	$	505	$	-	$	2,587

The Spectrum Pharmaceuticals shares listed above as of June 30, 2010 were acquired from Spectrum on August 4, 2009 when we entered into an amended agreement with Spectrum to license them the rights to RenalanTM and RenaZorbTM. A component of this agreement was the payment to us of an additional 113,809 shares of Spectrum common stock. These shares are valued at market closing price as of June 30, 2010.

The activity relating to assets recorded at fair value on a recurring basis utilizing Level 3 inputs for the three months ended June 30, 2010 and June 30, 2009 is summarized below:

In thousands of dollars
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Auction rate corporate notes 2010			Auction rate corporate notes 2009
Beginning Balance, April 1	$	2,448		$	2,866
Total gains or losses (realized/unrealized):
Included in other comprehensive loss		112			144
Other adjustments		(2	)		3
Ending Balance, June 30	$	2,558		$	3,013

The activity relating to assets recorded at fair value on a recurring basis utilizing Level 3 inputs for the six months ended June 30, 2010 and June 30, 2009 is summarized below:

In thousands of dollars
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Auction rate corporate notes 2010			Auction rate corporate notes 2009
Beginning Balance, January 1	$	2,587		$	2,816
Total gains or losses (realized/unrealized):
Included in other comprehensive loss		(29	)		197
Ending Balance, June 30	$	2,558		$	3,013

Total unrealized loss for the six months ended June 30, 2010 was $(88,000) and total unrealized gain for the six months ended June 30, 2009 was $197,000. These amounts were included in accumulated other comprehensive loss in Stockholder’s Equity attributable to the change in cumulative unrealized gains (losses) relating to assets still held at the reporting date. No assets or liabilities are valued on a non-recurring basis at June 30, 2010 and 2009.

Financial instruments that trade in less liquid markets with limited pricing information generally include both observable and unobservable inputs. In instances where observable data is unavailable, we consider the assumptions that market participants would use in valuing the asset. Such investments are categorized in Level 3 as the inputs generally are not observable. Our evaluation included consultation with our investment advisors, and we valued these securities using a risk-adjusted discount rate applied to the expected future cash flows. The discount rate was computed based on annual rates of return on securities with similar credit ratings trading in an active market. As a result, the market value of these securities decreased by $29,000, remaining flat at $2.6 million at December 31, 2009 and June 30, 2010.

Note 5. Investment in Available for Sale Securities

Investment in available for sale securities includes auction rate corporate notes (long-term) and investments in common stock (short-term) as discussed below.

The auction rate corporate notes are long-term instruments with maturity in 2017. Through the third quarter of 2007, the interest was settled and the rate reset every 7 to 28 days and historically these investments were classified as short-term investments. However, in the fourth quarter of 2007 due to a reduction in the liquidity of the auction rate market, sell orders exceed bid orders in that market, and the interest rate relating to these investments was reset to a contractual rate of London Interbank Offering Rate plus 50 basis points. The auction rate markets have not yet recovered. As such, we evaluated these investments at June 30, 2010 to determine if they were other than temporarily impaired. Our evaluation included consultation with our investment advisors, assessment of the strength of the financial institution paying the interest on these investments, credit ratings of the underlying collateral and a probability-weighted discounted cash flow analysis. Based on this analysis, we estimate that at June 30, 2010 the fair value was $2.6 million, representing a cumulative unrealized holding loss of approximately $1.3 million. Based on our evaluation and our ability and intent to hold these investments for a reasonable period of time sufficient for an expected recovery of fair value, we do not consider these investments to be other than temporarily impaired at June 30, 2010.

On August 4, 2009 we entered into an amended agreement with Spectrum where we assigned all patent rights associated with RenalanTM and RenaZorbTM. As part of this Agreement, we received 113,809 unregistered and restricted shares of Spectrum common stock. On receipt these shares were recorded at their market value of $750,000 as measured by their closing price on the National Association of Securities Dealers Automated Quotations (NASDAQ) Capital Market as of July 1, 2009. This investment had a market value of $446,000 as of June 30, 2010.

Note 6. Product Inventories

Product inventories consist of the following:

In thousands of dollars
	June 30, 2010		December 31, 2009

Raw materials	$	2,878	$	3,832
Work in process		2,145		1,038
Finished goods		1,324		173
Total product inventories	$	6,347	$	5,043

As products reach the commercialization stage, the related inventory is recorded. The costs associated with products undergoing research and development are expensed as incurred. As of June 30, 2010 and December 31, 2009, inventory consisted primarily of nano-structured lithium titanate spinel, battery cells and battery modules in various stages of the manufacturing process.

Note 7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

In thousands of dollars
	June 30, 2010		December 31, 2009

Prepaid inventory purchases	$	964	$	802
Prepaid insurance		44		301
Deposits		340		340
Other prepaid expenses and current assets		168		377
Total prepaid expenses and other current assets	$	1,516	$	1,820

Our prepaid inventory purchases are associated with unfulfilled purchase orders of $1.6 million. Other prepaid expenses and current assets consist primarily of prepaid property taxes, service contracts, marketing expenses and rent.

Note 8. Patents

Our patents are associated with the nanomaterials and titanium dioxide pigment technology. We are amortizing these assets on a straight-line basis over their useful lives. The amortized patents’ balances as of June 30, 2010 and December 31, 2009 were:

In thousands of dollars
	June 30, 2010			December 31, 2009
Patents and patent applications	$	1,366		$	1,518
Less accumulated amortization		(902	)		(967	)
Total patents and patent applications	$	464		$	551

The weighted average amortization period for patents is approximately 16.7 years. Amortization expense, which represents the amortization relating to the identified amortizable patents, for the six months ended June 30, 2010 and June 30, 2009, was $40,000 and $42,000, respectively. For each of the next five years, amortization expense relating to patents is expected to be approximately $76,000 per year.

In the first quarter, we reviewed our four capitalized patents and determined that three of these patents had value in excess of their net book value of $483,000. AlSher currently has an exclusive license to use this technology from Altair. In the first quarter, we determined that the fourth patent no longer had value. The fourth patent had an original cost of $152,000, accumulated depreciation of $105,000 and a net value of $47,000. Accordingly, an impairment charge of $47,000 was recorded, and is reflected for the six months ended June 30, 2010.

Note 9. Note Payable and Capital Leases

The current and long-term amounts of the notes payable and capital leases are as follows:

In thousands of dollars
	June 30, 2010			December 31, 2009
Note payable to BHP Minerals International, Inc.		-		$	600
Note payable to AICCO, Inc.		-			194
Capital leases	$	46			53
Subtotal		46			847
Less current portion		(16	)		(810	)
Long-term portion of notes payable and capital leases	$	30		$	37

On August 8, 2002, we entered into a purchase and sale agreement with BHP Minerals International, Inc. (“BHP”), wherein we purchased the land, building and fixtures in Reno, Nevada where our titanium processing assets are located. In connection with this transaction, BHP also agreed to terminate our obligation to pay royalties associated with the sale or use of the titanium processing technology. In return, we issued to BHP a note in the amount of $3.0 million, at an interest rate of 7%, secured by the property we acquired. The final payment of $600,000 plus accrued interest was paid on January 27, 2010.

On August 6, 2009, we entered into a financing arrangement with AICCO, Inc, our insurance provider to finance the annual cost of our insurance over ten months. We issued a note to AICCO in the amount of $387,000, at an interest rate of 5.2% per annum.

Note 10. Stock-Based Compensation

We have a stock incentive plan, administered by the Board of Directors, which provides for the granting of options and restricted shares to employees, officers, directors and other service providers.

The total compensation cost charged in connection with the stock incentive plan was $933,000 and $1.0 million for the six-months ended June 30, 2010 and 2009, respectively. During the six-months ended June 30, 2010, 673,045 options vested at a weighted average price of $2.12. During the six-months ended June 30, 2009, 640,815 options vested at a weighted average price of $3.02. There were no stock option and warrant exercises during the six months ended June 30, 2010 and 2009.

Compensation expense of $933,000 was recognized for the six-months ended June 30, 2010. This expense consisted of $210,000 related to the stock grant awards accrual of the “2010 Annual Incentive Bonus Plan” which is accrued to liabilities, as well as amortized expense of stock options of $594,000 and restricted stock of $129,000, the offset of which is additional paid in capital of stockholders’ equity. For the six-months ended June 30, 2009, compensation expense of $1.0 million consisted of $401,000 related to the stock grant awards accrual of the “2009 Annual Incentive Bonus Plan”, amortized stock options of $478,000 and restricted stock expense of $143,000.

Stock Options

The total number of shares authorized for issuance under our 2005 stock incentive plan is 9.0 million shares. Prior stock option plans, which are now terminated, authorized a total of 6.6 million shares, of which options for 5,745,500 were granted and options for 181,500 are outstanding and unexercised at June 30, 2010. The total number of options relating to the 2005 stock incentive plan that are outstanding and unexercised at June 30, 2010 is 5,963,569.

Total options granted for the six-month periods ended June 30, 2010 and 2009 were 1,568,250 and 1,437,000, respectively. The weighted average grant date per share fair value of options granted during the six months ended June 30, 2010 and June 30, 2009 was $1.02 and $1.18, respectively.

As of June 30, 2010, there was $1.2 million of total unrecognized compensation cost related to non-vested options granted under the plans. That cost is expected to be recognized over a weighted average period of 1 year as of June 30, 2010.

Restricted Stock

During the six-months ended June 30, 2010, the Board of Directors granted 710,976 shares of restricted stock under the plan with a weighted average fair value of $0.45 per share. During the six-months ended June 30, 2009, the Board of Directors granted 382,115 shares of restricted stock under the plan with a weighted average fair value of $1.04 per share.

As of June 30, 2010 we had $381,774 of total unrecognized compensation expense related to restricted stock which will be recognized over a weighted average of 1.4 years.

Warrants

For the six-months ended June 30, 2010, no new warrants were issued. Outstanding warrants as of June 30, 2010 were 7,028,440. All warrants are fully vested and expire on May 28, 2016.

Note 11. Other Transactions

On June 9, 2010, we entered into an At the Market Issuance Sales Agreement with Thomas Weisel Partners LLC pursuant to which we may issue and sell our common shares having an aggregate offering price of up to $15.0 million from time to time through Thomas Weisel, acting as agent. The sales, if any, of shares made under the Sales Agreement will be made on the NASDAQ Capital Market by means of ordinary brokers' transactions at market prices, in privately negotiated transactions or as otherwise agreed by Thomas Weisel and Altair. Thomas Weisel will use commercially reasonable efforts to sell the common shares from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay Thomas Weisel commissions at a fixed commission rate of 5% of the gross sales price per share for any shares sold under the Sales Agreement. We have also agreed to reimburse Thomas Weisel for certain specified expenses and have provided Thomas Weisel with customary indemnification rights.

As of June 30, 2010, we have sold 1,861,347 common shares. The sales were made at an average weighted price of $0.47 per share with net proceeds to the Company, after expenses, of $581,000. At June 30, 2010 , we had a stock subscription receivable balance of $93,000.

Note 12. Related Party Transactions

There were no material transactions with related parties during the three and six months ended June 30, 2010.

Note 13. Business Segment Information

Management views the Company as operating in two major business segments: Power and Energy Group, and All Other operations.

The Power and Energy Group develops, produces, and sells nano-structured lithium titanate spinel, battery cells, battery packs, and provides related design and test services. The All Others group consists of the remaining portions of the previous Life Sciences and Performance Materials groups. Management completed a thorough review of operations and strategies and determined that it was in the best interests of the shareholders for the Company to focus primarily on the Power and Energy Group. As a result of this assessment, resources devoted to the Performance Materials Group and Life Sciences Group were considerably reduced and no new significant development is being pursued in those areas by the Company.

The accounting policies of these business segments are the same as described in Note 2 to the unaudited condensed consolidated financial statements. Reportable segment data reconciled to the consolidated financial statements as of the three-month and six-month periods ended June 30, 2010 and June 30, 2009 is as follows:

In thousands of dollars
							Depreciation
				Loss (Income)			and
Three Months Ended	Net Sales			From Operations			Amortization		Assets
June 30, 2010:
Power and Energy Group	$	1,026		$	1,546		$	331	$	15,685
All Other		474			(36	)		42		1,203
Corporate		-			3,561			78		15,757
Consolidated Total	$	1,500		$	5,071		$	451	$	32,645


June 30, 2009:
Power and Energy Group	$	34		$	2,499		$	313	$	7,073
All Other		(37	)		431			315		6,456
Corporate		-			3,555			45		36,885
Consolidated Total	$	(3	)	$	6,485		$	673	$	50,414

					Depreciation
			Loss		and
Six Months Ended	Net Sales		From Operations		Amortization		Assets
June 30, 2010:
Power and Energy Group	$	1 ,929	$	3,747	$	626	$	15,685
All Other		763		70		178		1,203
Corporate		-		7,342		123		15,757
Consolidated Total	$	2,692	$	11,159	$	927	$	32,645


June 30, 2009:
Power and Energy Group	$	882	$	4,783	$	669	$	7,073
All Other		17		946		649		6,456
Corporate		-		7,228		89		36,885
Consolidated Total	$	899	$	12,957	$	1,407	$	50,414

In the table above, corporate expense in the Loss from Operations column includes overall company support costs as follows: corporate research and development expenses; sales and marketing expenses; general and administrative expenses; and depreciation and amortization of the Reno headquarters building improvements.

Corporate assets consist primarily of cash, short term investments, and long-lived assets. Since none of the business units have reached break-even, cash funding is provided at the corporate level to the business units. The long-lived assets primarily consist of the corporate headquarters building, building improvements, manufacturing equipment, test equipment and land. As such, these assets are reported at the all other level and are not allocated to the other business segment.

Substantially all of our assets are held within the United States.

For the six months ended June 30, 2010, we had sales to three major customers, each of which accounted for 10% or more of revenues. Total sales to these customers for the six months ended June 30, 2010 and the balance of their accounts receivable at June 30, 2010 were as follows:

In thousands of dollars
	Sales		Accounts Receivable
	Six Months Ended		Balance at
Customer	June 30, 2010		June 30, 2010
Power and Energy Group:
Office of Naval Research	$	1,597	$	528
Proterra LLC	$	283	$	1,383

All Other:
US Army RDECOM	$	638	$	277

For the six months ended June 30, 2009, we had sales to three major customers, each of which accounted for 10% or more of revenues. Total sales to these customers for the six months ended June 30, 2009 and the balance of their accounts receivable at June 30, 2009 were as follows:

In thousands of dollars
	Sales		Accounts Receivable
	Six Months Ended		Balance at
Customer	June 30, 2009		June 30, 2009
Power and Energy Group:
BAE Systems .Science & Technology	$	482	$	-
BAE Systems Marine Limited	$	263	$	48
Amperex Technology Limited	$	117	$	14

Sales for the six month periods ended June 30, 2010 and 2009 by geographic area were as follows:

In thousands of dollars
	Sales		Sales
	Six Months Ended		Six Months Ended
Geographic information (a):	June 30, 2010		June 30, 2009
United States	$	2,691	$	604
Other foreign countries		1