Edgar Filing: ALTAIR NANOTECHNOLOGIES INC

altair_10q-033111.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 March 31, 2011

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	(Commission File No.)	(IRS Employer
of incorporation)		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.

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 [ ]

Non-accelerated filer [ ]

Accelerated filer [ ]

Smaller reporting company [ X ]

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

As of May 4, 2011 the registrant had 30,615,680 Common Shares outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

	March 31,			December 31,
	2011			2010
ASSETS
Current assets
Cash and cash equivalents	$	5,714		$	4,695
Accounts receivable, net		941			1,318
Product inventories		5,919			6,825
Prepaid expenses and other current assets		2,157			2,269
Total current assets		14,731			15,107

Property, plant and equipment, net		8,396			8,727

Patents, net		407			426

Total Assets	$	23,534		$	24,260

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable	$	2,661		$	2,873
Accrued salaries and benefits		1,271			743
Accrued warranty		219			211
Accrued liabilities		431			387
Deferred revenues		1,518			2,516
Warrant liabilities		1,928			-
Current portion of long-term debt		98			216
Total current liabilities		8,126			6,946

Long Term Liabilities
Long-term debt, less current portion		11			16
Total long term liabilities		11			16

Total Liabilities		8,137			6,962


Stockholders' equity
Common stock, no par value, unlimited shares authorized; 30,615,680 and 27,015,680 shares issued and outstanding at March 31, 2011 and December 31, 2010		193,373			189,491
Additional paid in capital		12,425			12,297
Accumulated deficit		(190,401	)		(184,490	)
Total Stockholders' Equity		15,397			17,298

Total Liabilities and Stockholders' Equity	$	23,534		$	24,260

See notes to the consolidated financial statements.

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

	Three Months Ended March 31,
	2011			2010
Revenues
Product sales	$	2,366		$	75
License fees		60			-
Commercial collaborations		2			294
Contracts and grants		123			823
Total revenues		2,551			1,192

Cost of goods sold
Product		2,611			53
Commercial collaborations		-			178
Contracts and grants		128			611
Warranty and inventory reserves		46			53
Total cost of goods sold		2,785			895

Gross (loss) profit		(234	)		297

Operating expenses
Research and development		2,056			2,439
Sales and marketing		1,051			1,185
General and administrative		2,171			2,239
Depreciation and amortization		375			463
Loss on disposal of assets		16			47
Total operating expenses		5,669			6,373
Loss from operations		(5,903	)		(6,076	)

Other income (expense)
Interest expense		(7	)		(8	)
Interest income		-			26
Loss on foreign exchange		(1	)		-
Total other (expense) income, net		(8	)		18
Loss from continuing operations		(5,911	)		(6,058	)
Loss from discontinued operations		-			(13	)
Net loss		(5,911	)		(6,071	)
Less: Net loss attributable to non-controlling interest		-			4
Net loss attributable to Altair Nanotechnologies Inc.	$	(5,911	)	$	(6,067	)

Net loss attributable to Altair Nanotechnologies Inc. shareholders:
Loss from continuing operations	$	(5,911	)	$	(6,058	)
Loss from discontinued operations		-			(9	)
Net loss	$	(5,911	)	$	(6,067	)

Earnings per share attributable to Altair Nanotechnologies Inc. shareholders:
Basic and diluted:
Loss from continuing operations	$	(0.22	)	$	(0.24	)
Loss from discontinued operations	$	-		$	-
Loss per common share - Basic and diluted	$	(0.22	)	$	(0.24	)

Weighted average shares - basic and diluted		26,844,583			26,273,559

See notes to the consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

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

Non-controlling Interest in Subsidiary

Accumulated

Other

Additional

Compre-

Interest

Compre-

Common Stock

Paid In

Accumulated

hensive

Amount

Capital

Deficit

Loss

Subtotal

Subsidiary

Gain (Loss)

Subtotal

Total

Balance, January 1, 2010	26,350,282	$	188,515	$	10,933	$	(162,204	)	$	(1,560	)	$	35,684		$	541		$	-	$	541		$	36,225

Comprehensive loss:
Net loss	-		-		-		(6,067	)		-			(6,067	)		(4	)		-		(4	)		(6,071	)
Other comprehensive loss	-		-		-		-			(122	)		(122	)		-			-		-			(122	)
Comprehensive loss:													(6,189	)							(4	)		(6,193	)
Share-based compensation	-		62		392		-			-			454			-			-		-			454
Balance, March 31, 2010	26,350,282	$	188,577	$	11,325	$	(168,271	)	$	(1,682	)	$	29,949		$	537		$	-	$	537		$	30,486

Altair Nanotechnologies Inc. Shareholders

Non-controlling Interest in Subsidiary

Accumulated

Other

Additional

Compre-

Interest

Compre-

Common Stock

Paid In

Accumulated

hensive

Amount

Capital

Deficit

Loss

Subtotal

Subsidiary

Gain (Loss)

Subtotal

Total

Balance, January 1, 2011	27,015,680	$	189,491	$	12,297	$	(184,490	)	$	-	$	17,298		$	-	$	-	$	-	$	17,298

Net loss	-		-		-		(5,911	)		-		(5,911	)		-		-		-		(5,911	)
Share-based compensation	-		77		128		-			-		205			-		-		-		205
Common stock issued, net of issuance costs of $689 and warrant liabilities	3,600,000		3,806		-		-			-		3,806			-		-		-		3,806
Balance, March 31, 2011	30,615,680	$	193,373	$	12,425	$	(190,401	)	$	-	$	15,397		$	-	$	-	$	-	$	15,397

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

	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(5,911	)	$	(6,071	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		375			463
Loss on discontinued operations		-			13
Securities received in payment of license fees		-			(3	)
Share-based compensation		205			454
Loss on disposal of fixed assets		16			-
Impairment of patents		-			47
Changes in operating assets and liabilities:
Accounts receivable, net		377			(157	)
Product inventories		1,021			(847	)
Prepaid expenses and other current assets		112			180
Trade accounts payable		(297	)		535
Accrued salaries and benefits		528			942
Accrued warranty		8			3
Deferred revenues		(998	)		-
Accrued liabilities		44			(219	)
Net cash used in operating activities		(4,520	)		(4,660	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(76	)		(392	)
Proceeds from disposition of assets		5			-
Net cash used in investing activities		(71	)		(392	)

Cash flows from financing activities:
Issuance of common shares for cash, net of issuance costs		5,734			-
Payment of notes payable		(119	)		(716	)
Repayment of long-term debt		(5	)		(4	)
Net cash provided by (used in) financing activities		5,610			(720	)

Net increase (decrease) in cash and cash equivalents		1,019			(5,772	)

Cash and cash equivalents, beginning of period		4,695			18,122

Cash and cash equivalents, end of period	$	5,714		$	12,350

Supplemental disclosures:
Cash paid for interest	$	1		$	43

Cash paid for income taxes	None			None

Non-cash transactions:
Acquisition of assets included in accounts payable	$	85		$	69
Unrealized loss on available for sale securities	$	-		$	122


See notes to the consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Going Concern

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 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, 2010, as filed with the Commission on February 28, 2011.

The results of operations for the three-month period ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year.

The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses from operations resulting in an accumulated deficit of $190 million. Additionally, the Company experienced $4.5 million in negative cash flows from operations during the three months ended March 31, 2011, offset by $5.7 million (net of issuance costs) received from a capital raise on March 30, 2011, resulting in a cash balance of $5.7 million at March 31, 2011. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In September of 2010 the Company entered into a Share Subscription Agreement (the “Share Subscription Agreement”) with Canon Investment Holdings Limited (“Canon”) under which they have agreed, subject to conditions to closing and the risk of termination, to purchase a number of common shares such that, following closing, Canon will own 51% of the outstanding common shares of the Company on a fully diluted basis. Based upon the number of common shares and the rights to acquire common shares outstanding as of March 31, 2011, the Company estimates that the number of shares to be purchased will be 37,125,983, at an aggregate purchase price of $57,649,226. As a result of initial delays in closing the Canon transaction, management began taking steps in the fourth quarter of 2010 to reduce its cash burn rate and extend its runway until the Canon transaction closes. Those steps included:

	▪	a freeze on all hiring,
	§	a deferral of all inventory purchases not tied to a specific customer contract,

	§	a delay in all development efforts not needed in the immediate timeframe,
	§	a cancellation of a number of non-critical consulting contracts,

	§	sale of the auction rate securities that the Company was holding, and
	§	sale of the remaining Spectrum Pharmaceutical common stock that the Company held.

The Company anticipated closing the Share Subscription Agreement with Canon in early February 2011, however, Canon indicated that it was not in a position to close. The rights of Zhuhai Yingtong Energy Company (“YTE”), a Canon subsidiary, under the Conditional Supply and Licensing Agreement to purchase the Company’s nano-lithium titanate, and manufacture batteries using the Company’s design principles, were significant motivations for Canon to enter into the share purchase transaction, and Canon indicated that its operating subsidiary was having difficulty implementing the battery manufacturing technology called for in the Conditional Supply and Licensing Agreement. Canon also stated, although the Company has not verified, that it had permitted certain credit facilities required to close to expire near January 31, 2011, the original end date of the Share Subscription Agreement and needed time to re-establish these credit facilities.

On February 16, 2011, the Company and Canon signed the First Amendment to the Share Subscription Agreement (the “SSA Amendment”) which, among other things, extended the end date under the Share Subscription Agreement to May 17, 2011. The SSA Amendment also authorized the Company, subject to certain limitations, to sell equity securities in order to raise interim capital. The Company engaged JMP Securities and completed a capital raise on March 30, 2011 which resulted in additional capital of $5.7 million, net of issuance costs of $689,000. A total of 3,600,000 units were sold at a price of $1.784 per unit and consisted of (i) one common share of Altair and (ii) one Series A warrant to purchase 0.5 of a common share at an exercise price of $2.56 per share. The warrants will be exercisable beginning six months after the closing for a period of five years. In addition, the Purchase Agreement with investors provides for a purchase price adjustment, and the issuance of additional common shares (“Adjustment Shares”) following such adjustment, if the Share Subscription Agreement with Canon is terminated or adversely amended, or if the transaction contemplated thereby is not closed by July 17, 2011. The number of Adjustment Shares is determined by subtracting the number of common shares issued at the closing from the number of common shares that would have been issued at the closing if the purchase price had been equal to 85% of volume weighted average price of the common shares during a 10 trading day period following the announcement of the triggering event, subject to a maximum number of 1,800,000 Adjustment Shares.

The Company has continued to take additional steps to further extend our runway and lower our cash burn including:

	§	an immediate reduction in the manufacture of nano-lithium titanate that was to be shipped to YTE and termination of employment of the individuals performing this work,
	§	elimination of all contract personnel not working directly on customer contract activities,

	§	renegotiation of payment terms with our suppliers and vendors,
	§	elimination of all but essential travel related to customer contracts or this immediate financing, and

deferral of all activities requiring the purchase of supplies or material not tied directly to an existing customer contract.

At this point, it is the Company’s expectation that the Canon transaction will close and the going concern issue will be resolved. During the first quarter of 2011, the Company sold nano-lithium titanate, batteries and an energy storage system to YTE, a wholly-owned subsidiary of Canon, for $1.7 million. The cost of goods sold associated with this sale was $1.8 million.

If the Canon transaction were not to close, however, the Company would face an immediate liquidity shortage and need to find an alternative source of financing.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to obtain additional financing or refinancing as may be required, to develop commercially viable products and processes, and ultimately to establish profitable operations. We have financed operations through operating revenues and through the issuance of equity securities (common shares, convertible debentures, stock options and warrants), and debt (term notes). Until we are able to generate positive operating cash flows, additional funds will be required to support operations.

Note 2. Recently Adopted and Recently Issued Accounting Guidance

Adopted

On January 1, 2011, Altair adopted changes issued by the Financial Accounting Standards Board (FASB) to revenue recognition for multiple-deliverable arrangements. These changes (a) require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; (b) eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable’s selling price; (c) require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and (d) expand the disclosures related to multiple-deliverable revenue arrangements. The adoption of these changes had no impact on the Consolidated Financial Statements, as Altair does not currently have any such arrangements with its customers.

On January 1, 2011, Altair adopted changes issued by the FASB to disclosure requirements for fair value measurements. Specifically, the changes require a reporting entity to disclose, in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). These changes were applied to the disclosures in Note 3 to the Consolidated Financial Statements.

On January 1, 2011, Altair adopted changes issued by the FASB to the testing of goodwill for impairment. These changes require an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative factors. This will result in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. The adoption of these changes had no impact on the Consolidated Financial Statements.

On January 1, 2011, Altair adopted changes issued by the FASB to the disclosure of pro forma information for business combinations. These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of these changes had no impact on the Consolidated Financial Statements.

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

Note 3. Fair Value Measurements

The following are the methods and assumptions we use to estimate the fair value of our financial instruments.

Cash and cash equivalents

Due to their short term nature, carrying amount approximates fair value.

Accounts receivable

Due to their short term nature, carrying amount approximates fair value.

Investment in available for sale securities

For investment in available for sale securities, fair values are based on quoted market prices.

Trade accounts payable

Due to their short term nature, carrying amount approximates fair value.

Warrant liabilities

Fair values are determined using the Black-Scholes-Merton option-pricing model, a Level 3 input.

Long-term debt

Due to the short term nature of the current portion of long-term debt, the carrying amount approximates fair value. The non-current portion of long-term debt is not material and the carrying amount approximates fair value.

Our financial instruments are accounted for at fair value on a recurring basis. We have no financial instruments accounted for on a non-recurring basis as of March 31, 2011 or 2010. 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 input is the preferred source of value, 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 liabilities by the fair value hierarchy at March 31, 2011:

Liabilities at fair value:	Total		Level 1		Level 2		Level 3
Warrant liabilities	$	1,928	$	-	$	-	$	1,928
Total	$	1,928	$	-	$	-	$	1,928

No assets or liabilities were recorded at fair value on a recurring basis at December 31, 2010.

The following table summarizes current and non-current marketable securities, accounted for as "available for sale" securities at March 31, 2011 and 2010:

In thousands of dollars

	2011								2010
							Unrealized								Unrealized
			Fair		Carrying		(loss)/gain				Fair		Carrying		loss
	Cost		Value		Value		accumulated		Cost		Value		Value		accumulated
Current marketable securities:
Spectrum Pharmaceuticals, Inc.		-		-		-		-		755		525		525		(230	)
Total current	$	-	$	-	$	-	$	-	$	755	$	525	$	525	$	(230	)
Non-current marketable securities:
Auction rate corporate notes		-		-		-		-		3,900		2,445		2,445		(1,455	)
Total non-current	$	-	$	-	$	-	$	-	$	3,900	$	2,445	$	2,445	$	(1,455	)

The Spectrum Pharmaceuticals shares listed above at March 31, 2010 were acquired from Spectrum on August 4, 2009 when we entered into an amended agreement with Spectrum in which we transferred them the rights to RenalanTM in addition to RenaZorbTM. A component of this agreement was the payment to us of an additional 113,809 shares of Spectrum common stock. On December 10, 2010, Altair sold 113,809 shares of Spectrum stock at $5.752 per share for a gross amount of $655,000. After charges and fees, net proceeds were $649,000. Altair realized a loss on sale of investment of $95,000.

The activity relating to financial instruments valued on a recurring basis utilizing Level 3 inputs for the three months ended March 31, 2011 and March 31, 2010 is summarized below:

	Warrant		Auction rate
	liabilities		corporate notes
	2011		2010
Beginning Balance, January 1	$	-	$	2,587
Issuances		1,928		-
Sale or settlements		-		-
Realized losses		-		-
Unrealized (losses)		-		(141	)
Other adjustments		-		2
Reclassification adjustment for realized loss on securities included in net loss		-		-
Ending Balance, March 31	$	1,928	$	2,448

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 instruments are categorized in Level 3 as the inputs generally are not observable. Our evaluation included consultation with our investment advisors, assessment of the strength of the financial institution paying the interest on these investments, ratings of the underlying collateral, and a probability-weighted discounted cash flow analysis.

Note 4. Investment in Available for Sale Securities

We sold all auction rate corporate notes and all shares of Spectrum Pharmaceuticals, Inc. in the fourth quarter of 2010. The sales resulted in $2.61 million in cash received and a $2.05 million realized loss on investments.

Note 5. Product Inventories

Product inventories consist of the following:

In thousands of dollars
	March 31, 2011		December 31, 2010
Raw materials	$	2,918	$	2,979
Work in process		1,001		920
Finished goods		2,000		2,926
Total product inventories	$	5,919	$	6,825

Once 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 March 31, 2011 and December 31, 2010, inventory relates to the production of batteries targeted at the stationary power and electric bus markets.

We recorded an inventory valuation allowance on finished goods of $725,000 and $623,000 at March 31, 2011 and December 31, 2010, respectively.

Note 6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

In thousands of dollars
	March 31, 2011		December 31, 2010
Prepaid inventory purchases	$	547	$	568
Prepaid insurance		154		269
Deposits		340		340
Prepaid financing costs		902		831
Deferred contract costs		39		87
Other prepaid expenses and current assets		176		174
Total prepaid expenses and other current assets	$	2,157	$	2,269

Other prepaid expenses and current assets consist primarily of prepaid property taxes, service contracts, marketing expenses and rent.

Note 7. Patents

Our patents are associated with the nanomaterials and titanium dioxide pigment technology. We are amortizing these assets on a straight-line basis over their useful lives. The amortized patents’ balances as of March 31, 2011 and December 31, 2010 were:

In thousands of dollars
	March 31, 2011			December 31, 2010
Patents and patent applications	$	1,366		$	1,366
Less accumulated amortization		(959	)		(940	)
Total patents and patent applications	$	407		$	426

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 three months ended March 31, 2011 and March 31, 2010, was $19,000 and $21,000, respectively. For each of the next five years, amortization expense relating to patents is expected to be approximately $76,000 per year.

Note 8. Note Payable and Long-Term Debt

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

In thousands of dollars
	March 31, 2011			December 31, 2010

Note payable to Imperial Credit Corporation	$	78		$	196
Capital leases		30			36
Subtotal		109			232
Less current portion		(98	)		(216	)
Long-term portion	$	11		$	16

Note 9. Stock-Based Compensation

At March 31, 2011, we have the 2005 stock incentive plan (the “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 of ours. This Plan is described in more detail below. The compensation cost that has been charged against income for this Plan was $205,000 and $454,000, for the three months ended March 31, 2011, and 2010, respectively. Of this amount, $69,000 and $61,000 was recognized in connection with restricted stock and options granted to non-employees for the three months ended March 31, 2011 and 2010, respectively.

The total number of shares authorized to be granted under the Plan was increased from 750,000 to an aggregate of 2,250,000 based on the proposal approved at the annual and special meeting of shareholders on May 30, 2007. Prior stock option plans, under which we may not make future grants, authorized a total of 1,650,000 shares, of which options for 1,047,475 were granted (net of expirations) and options for 34,125 are outstanding and unexercised at March 31, 2011. Options granted under the plans generally are granted with an exercise price equal to the market value of a common share at the date of grant, have five-year or ten-year terms and typically vest over periods ranging from immediately to four years from the date of grant. The estimated fair value of equity-based awards, less expected forfeitures, is amortized over the awards’ vesting period utilizing the graded vesting method. Under this method, unvested amounts begin amortizing at the beginning of the month in which the options are granted.

For the three months ended March 31, 2011, there were no awards granted under the Plan. In calculating compensation recorded related to stock option grants for the three months ended March 31, 2010, the fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option-pricing model and the following weighted average assumptions:

	2011		2010
Dividend yield		N/A	None
Expected volatility		N/A	84%
Risk-free interest rate		N/A	1.96%
Expected life (years)		N/A	5.88

The computation of expected volatility used in the Black-Scholes Merton option-pricing model is based on the historical volatility of our share price. The expected term is estimated based on a review of historical and future expectations of employee exercise behavior.

A summary of option activity under our equity-based compensation plans as of March 31, 2011 and 2010 and changes during the three months then ended is presented below:

	2011									2010
						Weighted									Weighted
				Weighted		Average							Weighted		Average
				Average		Remaining		Aggregate					Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic					Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value		Shares			Price		Term		Value
Outstanding at January 1,		1,514,025		$	7.93		7.5	$	-		1,230,034		$	9.60		7.8	$	2,000
Granted		-			-						371,000			4.08
Exercised		-			-						-			-
Forfeited/expired		(45,633	)		7.92						(29,626	)		12.48

Outstanding at March 31,		1,468,392		$	7.93		7.3	$	-		1,571,408		$	8.23		8.1	$	-

Exercisable at March 31,		843,715		$	9.96		6.6	$	-		675,500		$	11.28		6.9	$	-

Vested or expected to vest at March 31,		1,394,972		$	7.93		7.3	$	-		1,492,838		$	8.23		8.1	$	-

Shares issued to non-employees reflected in the table above include 93,416 shares outstanding at January 1, 2011, with no shares granted, no shares exercised, and 25,000 shares forfeited or expired during the three months ended March 31, 2011, resulting in 68,416 shares outstanding of which 65,292 shares were exercisable as of March 31, 2011. Shares issued to non-employees reflected in the table above include 133,417 shares outstanding at January 1, 2010, with no shares granted, no shares exercised, and no shares forfeited or expired during the three months ended March 31, 2010, resulting in 133,417 shares outstanding of which 111,646 shares were exercisable as of March 31, 2010.

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2011 was $0.00 as no options were granted and was $2.44 for the three months ended March 31, 2010. The total intrinsic value of options exercised during the three months ended March 31, 2011 and 2010 was $0.

A summary of the status of non-vested shares at March 31, 2011, and 2010 and changes during the three months then ended, is presented below:

	2011					2010
				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value
Non-vested shares at January 1,		844,153		$	5.17		675,180		$	7.52
Granted		-			-		371,000			4.08
Vested		(207,194	)		6.43		(135,646	)		8.55
Forfeited/expired		(12,282	)		7.50		(14,626	)		7.85

Non-vested shares at March 31,		624,677		$	5.10		895,908		$	5.41

Non-vested shares relating to non-employees reflected in the table above include 17,187 shares outstanding at January 1, 2011, no shares granted, no shares exercised, and 7,813 shares vested, and 6,250 shares expired during the three months ended March 31, 2011, resulting in 3,124 non-vested shares outstanding at March 31, 2011. Non-vested shares relating to non-employees reflected in the table above include 29,583 shares outstanding at January 1, 2010, no shares granted, no shares exercised, and 7,813 shares vested during the three months ended March 31, 2010, resulting in 21,770 non-vested shares outstanding at March 31, 2010.

As of March 31, 2011 and 2010, there was $622,000 and $1.4 million respectively, 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 11 months and one year, respectively, for the three months ended March 31, 2011 and 2010. The total fair value of options that vested during the three months ended March 31, 2011 and 2010, was $826,000 and $717,000, respectively. There was no cash received from warrant and stock option exercises for the three months ended March 31, 2011 and 2010.

Restricted Stock

Our stock incentive plan provides for the granting of other incentive awards in addition to stock options. During the three months ended March 31, 2011 and 2010, the Board of Directors did not approve the grant of any new restricted stock under the plan. Restricted shares have the same voting and dividend rights as our unrestricted common shares, vest over a two-year period and are subject to the employee’s or director’s continued service. Compensation cost for restricted stock is recognized in the financial statements on a pro rata basis over the vesting period.

A summary of the changes in restricted stock outstanding during the three months ended March 31, 2011 and 2010:

	2011				2010
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
	Shares		Fair Value		Shares		Fair Value
Non-vested shares at January 1,		210,996	$	2.16		76,624	$	4.64
Granted		-		-		-		-
Vested		-		-		-		-
Forfeited/expired		-		-		-		-

Non-vested shares at March 31,		210,996	$	2.16		76,624	$	4.64

As of March 31, 2011, and 2010, we had total unrecognized compensation expense of $151,000 and $163,000, respectively, net of estimated forfeitures, related to restricted stock which will be recognized over the weighted average period for March 31, 2011, and 2010 of 0.67 years and 1.6 years, respectively.

Note 10. Warrants

Warrants Issued to Investors

The warrants issued in the 2011 offering (described in Note 1) are considered financial liabilities due primarily to their anti-dilution protection provisions that allow for the automatic reset of the exercise price upon any future sale of common stock instruments at or below the current exercise price of the warrants. As such the warrants are required to be adjusted to fair value each reporting period and the change in fair value of the warrant liabilities is classified in other (expense)/income in the statement of operations. The warrants are classified as short-term warrant liabilities in the balance sheet.

The fair value of the warrants was determined using the Black-Scholes-Merton option-pricing model and the following weighted average assumptions were used:

		March 31, 2011
Stock Price		$1.58
Exercise Price		$2.56
Expected Volatility		94%
Expected Dividend Yield		None
Expected Term (in years)		5.5
Risk-free Interest Rate		2.26%

As of March 31, 2011, the value of the warrant liability was $1.9 million and there was no change in fair value during the three months ended March 31, 2011.

Warrant activity for the three months ended March 31, 2011 and 2010 is summarized as follows:

In thousands of dollars

	2011				2010
			Weighted				Weighted
			Average				Average
			Exercise				Exercise
	Warrants		Price		Warrants		Price
Outstanding at January 1,		1,757,115	$	4.61		1,757,115	$	4.61
Issued		1,800,000		2.56		-		-
Expired		-		-		-		-
Exercised		-		-		-		-
Outstanding at March 31,		3,557,115	$	3.23		1,757,115	$	4.61
Currently exercisable		1,757,115	$	4.61		1,757,115	$	4.61

The following table summarizes information about warrants outstanding at March 31, 2011:

	Warrants Outstanding and Exercisable
			Weighted
			Average		Weighted
			Remaining		Average
Range of			Contractual		Exercise
Exercise Prices	Warrants		Life (Years)		Price
$1.00 to $3.00		1,800,000		5.5	$	2.56
$3.01 to $4.00		1,649,244		5.2		4.00
$4.01 to $13.50		57,871		0.7		13.50
$13.51 to $14.56		50,000		0.3		14.56
		3,557,115		5.3	$	-

Note 11. Related Party Transactions

There were no material transactions with related parties during the three months ended March 31, 2011.

Note 12. Business Segment Information

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

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

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

Corporate expenses include overall company support costs as follows: research and development expenses; general and administrative expenses; and depreciation & amortization of the Reno headquarters building improvements.

The accounting policies of these business segments are the same as described in Note 2 to the unaudited consolidated financial statements. Reportable segment data reconciled to the consolidated financial statements as of the three-month periods ended March 31, 2011 and March 31, 2010 is as follows:

In thousands of dollars:
						Depreciation
			Loss (Gain)			and
	Net Sales		From Operations			Amortization		Assets
March 31, 2011
Power & Energy Group	$	2,297	$	3,429		$	258	$	10,969
All Other		254		(69	)		19		528
Corporate		-		2,551			98		12,037
Consolidated Total	$	2,551	$	5,911		$	375	$	23,534


March 31, 2010
Power & Energy Group	$	903	$	3,387		$	296	$	12,234
All Other		289		102			123		3,354
Corporate		-		2,578			44		19,600
Consolidated Total	$	1,192	$	6,067		$	463	$	35,188

In the table above, corporate expense in the Loss from Operations column includes such expenses as business consulting, general legal expense, accounting and audit, general insurance expense, stock-based compensation expense, shareholder information expense, investor relations, and general office expense.

Additions to long-lived assets in the first quarter of 2011 consisted of $162,000 for the Power and Energy Group. During the first quarter of 2010, long-lived asset additions consisted of $46,000 for Corporate and $417,000 for the Power and Energy Group.

For the three months ended March 31, 2011, we had sales to the following major customers, each of which accounted for 10% or more of revenues. Total sales to these customers for the three months ended March 31, 2011 and the balance of their accounts receivable at March 31, 2011 were as follows:

In thousands of dollars:
	Sales		Accounts Receivable
	Three Months Ended		Balance at
Customer	March 31, 2011		March 31, 2011
Power and Energy Group:
Yintong Energy (YTE)	$	1,713	$	150
Proterra, LLC	$	512	$	379

All Other Division:
	$	-	$	-

For the three months ended March 31, 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 three months ended March 31, 2010 and the balance of their accounts receivable at March 31, 2010 were as follows:

In thousands of dollars:
	Sales		Accounts Receivable
	Three Months Ended		Balance at
Customer	March 31, 2010		March 31, 2010
Power and Energy Group:
Office of Naval Research	$	602	$	528
Proterra, LLC	$	283	$	85

All Other Division:
US Army RDECOM	$	203	$	193

Revenues for the three-month periods ended March 31, 2011, and 2010 by geographic area were as follows:

In thousands of dollars
	Sales		Sales
	Three Months Ended		Three Months Ended
Geographic information (a):	March 31, 2011		March 31, 2010

United States	$	826	$	1,192
China		1,713		-
Other foreign countries		12		-
Total	$	2,551	$	1,192

(a) Revenues are attributed to countries based on location of customer.

Note 13. Subsequent Events

On April 11, 2011, we received written notice of termination from Inversiones Energeticas S.A. de C.V. (“INE”) for the contract signed February 9, 2011 between the Company and INE related to the proposed purchase by INE of a ten megawatt ALTI-ESS advanced battery system in El Salvador for approximately $17.97 million. Neither party will incur any liability as a result of the termination. The stated reason for the termination was that the authority that regulates INE had determined that the application of the technology in El Salvador was not feasible in the short term.

On April 27, 2011, we entered into a Note Secured by Deed of Trust, a Deed of Trust, Guaranty and Hazardous Materials Indemnity Agreement (collectively, the “Loan Documents”) for the provision of a $1,500,000 loan (the “Loan”) secured by the Company’s headquarters located in Reno, Nevada. Under the terms of the Loan Documents, interest accrues on the outstanding principal balance at the rate of 11% per annum. We are obligated to make interest-only payments on a monthly basis during the term of the Loan and to repay all principal and any outstanding interest on or before May 1, 2012. Although we may prepay the Loan, we are obligated to pay a minimum of five months’ interest. Proceeds of the Loan will be used for general working capital requirements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains various forward-looking statements. Such statements can be identified by the use of the forward-looking words "anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or similar words. These statements discuss future expectations, contain projections regarding future developments, operations, or financial conditions, or state other forward-looking information. When considering such forward-looking statements, you should keep in mind the risk factors noted in Part II – Other Information, “Item 1A. Risk Factors” and other cautionary statements throughout this Report and our other filings with the Securities and Exchange Commission. You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If one or more risks identified in this Report or any other applicable filings materializes, or any other underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected, or intended.

Unless the context requires otherwise, all references to “Altair,” “we,” “Altair Nanotechnologies Inc,” or the “Company” in this Report refer to Altair Nanotechnologies Inc. and all of its consolidated subsidiaries. Altair currently has one wholly owned subsidiary, Altair US Holdings, Inc., a Nevada corporation. Altair US Holdings, Inc. directly or indirectly wholly owns Altairnano, Inc., a Nevada corporation, and Mineral Recovery Systems, Inc., a Nevada corporation. AlSher Titania LLC, a Delaware limited liability company, was 70% owned by Altairnano, Inc. until we sold our interest to Sherwin-Williams on April 30, 2010. We have registered the following trademarks: Altair Nanotechnologies Inc® and Altairnano®. Any other trademarks and service marks used in this Report are the property of their respective holders.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto.

Overview

We are a Canadian corporation, with principal assets and operations in the United States, whose primary business is developing, manufacturing and selling our nano-lithium titanate battery cells, batteries and battery packs and providing related design, installation and test services. Our primary focus is marketing our large-scale energy storage solutions to power companies and electric grid operators throughout the world. In addition, we market our batteries to electric and hybrid-electric bus manufacturers, and began expanding in 2010 into new industrial markets.

Starting in 2010 we began looking at additional opportunities to expand the application of our battery technology into various industrial markets that have a need for the attributes of our battery technology. We believe that in the aggregate, our target markets are multi-billion dollar emerging markets with room for a number of successful suppliers. At the present time, we perceive no dominant provider and we believe that as a result of our significant differentiated product attributes, the overall strength of our management team, and the recognition we are receiving in the marketplace, that we have a very good chance of becoming one of the successful suppliers. Direct product costs are relatively high compared to certain competitor solutions and we are working on bringing down our direct product costs to become more competitive in each of our targeted markets. Our proprietary technology platform gives our products a number of unique, highly sought after attributes that clearly differentiate our products from their alternatives. Included in these attributes are substantially longer cycle and calendar lives, a rapid recharge time, the ability to provide instantaneous high power, a wide operating temperature range and increased operational safety.

On September 20, 2010, we entered into a Share Subscription Agreement (the “Share Subscription Agreement”) with Canon Investment Holdings Limited (“Canon”), pursuant to which Canon has agreed, subject to conditions precedent to closing and rights of termination set forth in the agreement, to purchase a number of common shares such that, following closing, Canon will own 51% of our outstanding common shares on a fully diluted basis. The purchase price to Canon will be $1.5528 per share. We entered into a First Amendment to Share Subscription Agreement on February 16, 2011 extending the end date until May 17, 2011. Based upon the number of common shares and the rights to acquire common shares outstanding as of March 31, 2011, the Company estimates that the number of shares to be purchased will be 37,125,983, at an aggregate purchase price of $57,649,226.

2010 was a transition year. As of December 31, 2010 we had completely exited the life sciences and performance materials markets to focus exclusively on selling products into the power and energy systems market, the large-scale transportation vehicles market and selected industrial markets with a need for the attributes of our batteries. Additionally, as a condition in preparing for the pending Canon transaction, we have exited all defense markets as of the end of 2010. We anticipate 2011 to be the year that we begin to gain serious traction in the sale of our various battery products into our targeted markets. We are already seeing interest from elevator manufacturers and in large-scale transportation applications.

Historically, we have provided contract research services on select projects where we can utilize our resources to develop intellectual property and/or new products and technology. Although contract services revenue comprised a significant portion of our total revenues in recent years accounting for 50%, 65%, and 87%, respectively in 2010, 2009 and 2008, we expect this percentage to diminish significantly in 2011 and beyond because we have discontinued our military contracts and as our battery sales expand.

Our revenues have been generated by license fees, product sales, commercial collaborations, and government contracts and grants. We expect future revenues to consist primarily of product sales. We currently have agreements in place to (1) provide battery modules to a U.S. based bus manufacturer and are negotiating agreements to develop battery modules for various other industrial applications, (2) supply a one-megawatt ALTI-ESS energy storage system for a test of wind energy integration into the electric grid and (3) supply our nano-lithium titanate powder to an early stage Chinese battery manufacturer affiliated with Canon (although deliveries under such agreement are temporarily suspended). We have also sold an ALTI-ESS battery system and battery cells under this latter agreement.

We have incurred recurring losses from operations resulting in an accumulated deficit of $190 million. Additionally, we experienced $4.5 million in negative cash flows from operations during the three months ended March 31, 2011, offset by $5.7 million (net of issuance costs) received from a capital raise on March 30, 2011, resulting in a cash balance of $5.7 million at March 31, 2011. This raises substantial doubt about our ability to continue as a going concern if the Canon transaction does not close as currently scheduled. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

General Outlook

We have generated net losses in each fiscal year since incorporation. Revenues from product sales increased from $75,000 for the three months ending March 31, 2010 to $2.4 million for the three months ending March 31, 2011 primarily from LTO, battery cells and an ALTI-ESS system sold to Zhuhai Yingtong Energy Company (“YTE”) and from battery module sales to Proterra for their all-electric and hybrid commercial buses. Contracts and grant revenues dropped from $894,000 to $148,000 during the three months ending March 31, 2010 and 2011 respectively. This drop resulted from the wind-down of our military contracts as a condition to closing the Canon investment.

Our current focus is on the development of products in energy storage that we anticipate will eventually bring a substantial amount of higher-margin revenues from product sales. We expect our nano lithium titanate batteries and battery systems to be the source of such higher-margin revenues.

As we attempt to significantly expand our revenues from licensing, manufacturing and other sources, some of the key near-term events that will affect our long-term success prospects include the following:

▪

Based on the success of the 2008 AES two-megawatt frequency regulation trial, as validated in the KEMA, Inc. analysis and report, and more importantly, on two years of successful commercial operation of the ALTI-ESS system installed at PJM Interconnect in Southeast Pennsylvania we have experienced a substantial amount of interest in our large scale battery systems from other entities and are in active sales development discussions with a number of them. On February 4, 2011, we accepted a $1.6 million purchase order to supply the University of Hawaii - Hawaii Natural Energy Institute (“HNEI”) a 1 megawatt ALTI-ESS energy storage system for a test of wind energy integration. We anticipate installing this system for HNEI during the fourth quarter of 2011.

▪

On February 9, 2011 we signed a contract with Inversiones Energéticas, S.A. de C.V. (INE), a major utility in El Salvador, to install a 10 Megawatt ALTI-ESS advanced battery system for frequency control at their Talnique Power Station. Unfortunately on April 15, 2011, as a result of unexpected regulatory issues, INE notified us that they needed to cancel the contract in accordance with the terms of the agreement. We are continuing to work with INE in an attempt to resolve the regulatory issues.

▪

In June 2010, we signed a contract with Proterra, LLC, a Golden, Colorado based leading designer and manufacturer of heavy-duty drive systems, energy storage systems, vehicle control systems and transit buses to sell them battery modules for their all-electric and hybrid-electric buses. Proterra’s systems are scalable to all forms of commercial buses and Class 6-8 trucks. During 2010 we sold $2.4 million of battery modules to Proterra. Although Proterra experienced financial challenges with its primary investor during the first quarter, we expect to sell at least a comparable amount of battery modules to Proterra during 2011 and anticipate substantial growth starting in 2012 and future years as they resume the scale up of their business.

▪	Based on the demonstrated success of our battery in the Proterra bus application, we have also entered into discussions with a number of other bus manufacturers and systems integrators regarding the purchase of our battery products for their specific applications.

▪	We are in discussions with a number of industrial manufacturers of fork lifts, elevators and other equipment whose use requires the long-life, rapid recharge, extreme operating temperature range or other differentiating attributes of our battery technology.

▪

In September of 2010 we signed a supply agreement with YTE, an affiliate of Canon, to provide them with 122 metric tons of nano-lithium titanate by the end of 2011. This agreement was temporarily suspended in February 2011 in order to allow YTE to resolve a number of internal manufacturing issues. We anticipate renewing this agreement as YTE gains proficiency in using our nano-lithium titanate in their batteries. As specified in the Share Subscription Agreement with Canon (YTE’s corporate parent), if such transaction closes, we will explore the establishment of a nano-lithium titanate manufacturing plant in China to supply YTE with over 1,000 metric tons of nano-lithium titanate per year.

Although it is not essential that all of these markets become successful for our battery technology in order to permit substantial long-term revenue growth, we believe that full commercialization of several of our battery applications will be necessary in order to expand our revenues enough to create a likelihood of our business becoming profitable in the long-term. We remain optimistic with respect to our current key projects, as well as others we are pursuing, but recognize that, with respect to each, there are development, marketing, financing, partnering and other risks to overcome.

Contracts and Grants

We completed our $3.8 million ONR II contract as of December 31, 2010.

Our $1.7 million U.S. Army nanosensor grant will be completed by July 2, 2011. We earned $128,000 in revenue on this contract during the three months ending March 31, 2011 and expect to finish the $162,000 balance by July 2, 2011. This 2011 activity is the residual work to be completed by Western Michigan University under this overall grant. The work directly performed by us was completed as of December 31, 2010.

Liquidity and Capital Resources

Current and Expected Liquidity

Our cash increased by $1.0 million, from $4.7 million at December 31, 2010 to $5.7 million at March 31, 2011, due primarily to net cash used in operations of $4.5 million along with our issuance of common stock for $5.7 million in net proceeds.

Net cash used in operating activities for the quarter ended March 31, 2011 totaled $4.5 million compared to $4.7 million for the quarter ended March 31, 2010. The slight decrease in cash used in operating activities for the first quarter of 2011 compared to first quarter of 2010 was due primarily to less inventory purchases of $1.9 million netted with a decrease in deferred revenues collected of $998,000 and an increase in payment of our trade accounts payables of $832,000.

Investing activities for the three months ended March 31, 2011 reflects the purchase of $76,000 in production related property and equipment versus $392,000 in purchases made for production related equipment during the three months ended March 31, 2010.

During the three months ending March 31, 2011 we issued common shares and warrants to purchase common shares for net proceeds of $5.7 million. We recorded a $1.9 million warrant liability related to this capital raise. During the three months ending March 31, 2010 we made the last payment on our Reno building mortgage for $600,000. We had a single note payable in the original principal amount of $3.0 million secured by a first lien on our building. The final payment of principal and interest was due on February 8, 2010 and paid on January 29, 2010.

Assuming we close the pending Canon equity investment in May 2011 as scheduled, we believe we will have enough cash on hand to fund our operations through 2012 and to provide a portion of the capital needed to construct a China-based nano-lithium titanate manufacturing facility. If such a facility is constructed as anticipated by the Share Subscription Agreement, we will most likely seek project financing or other capital specifically for the construction of the facility. If the Canon transaction does not close in May 2011, we will need to promptly raise additional capital, through a strategic investor or from the equity markets, in order to continue funding our ongoing operations until we achieve cash flow breakeven. We recently took out a $1.5 million mortgage on our Reno property to give us a longer operating runway to secure this alternative strategic investor should the Canon transaction not close as expected.

We evaluate our capital needs and the availability of capital on an ongoing basis and, consistent with past practice, expect to seek capital when and on such terms as we deem appropriate based upon our assessment of our current liquidity, capital needs and the availability of capital. Given that we are not yet in a positive cash flow position, the options available to us are fewer than to a positive cash flow company. Specifically, we would not generally qualify for long-term institutional debt financing. Other than the Share Subscription Agreement, we do not have any commitments from any party to provide required capital and may or may not, be able to obtain such capital on reasonable terms. The cost of capital, and our ability to raise capital in the near term, will be affected by certain covenants in the Securities Purchase Agreement dated March 28, 2011, including a 15-month right of first offer in favor of the purchasers under that agreement, a 100-day restriction on additional financing by us and restrictions on subsequent equity sales by us at a price below $2.23 per share for a two-year period. Consistent with past practice we expect to raise additional capital through the sale of common shares, convertible notes, stock options, and warrants. We do not expect the current economic environment to preclude our ability to raise capital, however, we do expect that the cost of capital would be high and our ability to raise capital outside of a strategic transaction to be limited.

To the extent we expect shortages in capital and do not have significant order volume, purchases of raw materials would be discontinued and other measures to conserve cash would be implemented as necessary to extend cash availability. Other measures to preserve cash on hand as required would include the following:

▪	reducing production levels;

▪	deferring discretionary expenditures such as capital purchases, internal research costs, training, and routine equipment and building maintenance;

▪	eliminating or deferring filling non-critical positions through attrition; and

▪	reductions in workforce.

Over the long-term, we anticipate substantially increasing revenues by entering into new contracts and increasing product sales in the stationary power, electric bus and selected other industrial markets. However, this increase in revenues will be dependent on our ability to transition our stationary power products from prototypes into commercial grade products.

During 2011, we do not expect to build up our inventory for anticipated sales more than its current level. With regard to inventory decisions, we also consider the lengthy manufacturing cycle of four to six months required to produce our large battery systems. Depending on the time lag between the initial inventory buildup and the actual sales, our cash balance will be negatively impacted. Since actual sales and production volumes for the full year of 2011 are unknown at this time, we are not able to currently estimate our anticipated inventory purchases through December 31, 2011. We expect that we will end 2011, however, with an inventory level, excluding inventory specifically tied to identified customer sales, in the same range or lower than we ended 2010. Liquidity will be a consideration in our final determination of production volumes. Our objective is to manage cash expenditures in a manner consistent with rapid product development that leads to the generation of revenues in the shortest possible time.

Capital Commitments and Expenditures

The following table discloses aggregate information about our contractual obligations and the periods in which payments are due as of March 31, 2011:

In thousands of dollars

In thousands of dollars

Contractual Obligations	Total		< 1 yr		1-3 yrs		3-5 yrs		> 5 yrs
Notes payable	$	78	$	78	$	-	$	-	$	-
Contractual service agreements		447		447		-		-		-
Capital leases		30		19		11		-		-
Operating leases		439		365		74		-		-
Purchase obligations		3,957		3,957		-		-		-
Total	$	4,951	$	4,865	$	85	$	-	$	-

Depending upon the speed of our revenue growth in 2011, we plan to spend approximately $3.2 million on production and tooling equipment associated with our Power and Energy Group capacity expansion (excluding the construction of a China based nano-lithium titanate manufacturing plant). This level of expenditures assumes that we will continue to rely on contract manufacturers to manufacture our cells. Should we change this model and decide to manufacture the cells ourselves, a much higher level of capital investment would be required to build a cell manufacturing capability here in the U.S. or elsewhere. The size of this investment would be dependent upon the size of the facility required and to what extent we could use existing available space in our current locations.

In addition, assuming the Canon transaction closes and based upon projected nano-lithium titanate order volume, in 2011 or 2012, we anticipate significant capital expenditures related to the construction of a nano-lithium titanate manufacturing plant in China in accordance with the use of proceeds provisions of the Share Subscription Agreement. Such a plant is at the early stage of planning, and we cannot yet reasonably estimate the related capital expenditures.

Off-Balance Sheet Arrangements

The company did not have any off-balance sheet transactions during the first quarter of 2011.

Critical Accounting Policies and Estimates

Management based the preceding and following discussion and analysis of our financial condition and results of operations on our consolidated financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates, including those related to long-lived assets, share-based compensation, revenue recognition, accrued warranty, overhead allocation, allowance for doubtful accounts, inventory, and deferred income tax. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the critical accounting policies set forth in Note 2 to the Consolidated Financial Statements in Part I of this Form 10-Q affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. These judgments and estimates affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting periods. Changes to these judgments and estimates could adversely affect the Company’s future results of operations and cash flows.

Results of Operations

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

In thousands of dollars

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


	Power and Energy Group		All Other		Corporate		Consolidated
	Three Months Ended		Three Months Ended		Three Months Ended		Three Months Ended
	March 31		March 31		March 31		March 31
	2011	2010	2011	2010	2011	2010	2011	2010
Revenues
Product sales	$ 2,302	$ -	$ 64	$ 75	$ -	$ -	$ 2,366	$ 75
Less: Sales returns	-	-	-	-	-	-	-	-
License fees	-	-	60	-	-	-	60	-
Commercial collaborations	-	283	2	11	-	-	2	294
Contracts and grants	(5)	620	128	203	-	-	123	823
Total revenues	2,297	903	254	289	-	-	2,551	1,192

Cost of goods sold
Product	2,605	-	6	53	-	-	2,611	53
Commercial collaborations	-	170	-	8	-	-	-	178
Contracts and grants	-	465	128	146	-	-	128	611
Warranty and inventory reserves	46	53	-	-	-	-	46	53
Total cost of goods sold	2,651	688	134	207	-	-	2,785	895
Gross (loss) profit	(354)	215	120	82