Edgar Filing: ALTAIR NANOTECHNOLOGIES INC

alti20130930_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
	1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2013

☐	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)

Delaware	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 ☒ NO ☐.

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 ☒ 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 November 12, 2013 the registrant had 11,590,067 shares of Common Stock outstanding.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars, except shares)

	September 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,293		$	12,372
Restricted cash		15,515			6,245
Accounts receivable, net		1,473			1,498
Product inventories, net		5,229			7,416
Prepaid expenses and other assets, current		1,846			937
Deferred contract costs		1,831			4,532
Other assets, related party		1,791			1,754
Total current assets		30,978			34,754

Restricted cash					11,803
Property, plant and equipment, net		11,702			4,076
Property, plant and equipment, net held and not used					1,857
Patents, net		217			274
Prepaid equipment purchases		1,351
Land use right, net		22,359			13,625

Total Assets	$	66,607		$	66,389

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Trade accounts payable	$	2,860		$	2,599
Accrued salaries and benefits		676			632
Accrued warranty		634			418
Accrued liabilities		376			384
Deferred revenues		5,639			7,218
Warrant liabilities		120			90
Notes payable, current		11,533			6,680
Capital lease obligation		6			5
Total current liabilities		21,844			18,026

Deferred income		17,627			11,803
Capital lease obligation, less current portion					4

Total Liabilities		39,471			29,833

Commitments and Contingencies

Stockholders' equity
Common stock, $.001 par value, 200,000,000 shares authorized; 11,590,067 shares issued and outstanding at September 30, 2013 and December 31, 2012		12			12
Additional paid in capital		259,198			259,065
Accumulated deficit		(232,558	)		(222,409	)
Accumulated other comprehensive income (loss)		484			(112	)
Total stockholders' equity		27,136			36,556

Total Liabilities and Stockholders' Equity	$	66,607		$	66,389

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 September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues
Product sales	$	1,072		$	300		$	5,958		$	891
License fees		60			60			180			180
Total revenues		1,132			360			6,138			1,071

Cost of goods sold
Product		1,206			788			6,586			2,282
Total cost of goods sold		1,206			788			6,586			2,282

Gross loss		(74	)		(428	)		(448	)		(1,211	)

Operating expenses
Research and development		1,079			1,423			3,124			5,046
Sales and marketing		201			499			883			2,344
General and administrative		1,908			1,837			4,843			5,010
Depreciation and amortization		444			252			1,063			771
Gain on disposal of assets		49						31
Total operating expenses		3,681			4,011			9,944			13,171
Loss from operations		(3,755	)		(4,439	)		(10,392	)		(14,382	)

Other income (expense)
Interest income, net		25			37			237			67
Change in market value of warrants		(20	)		(267	)		(30	)		(88	)
Other income		7			(2	)		36			(2	)
Total other income (expense), net		12			(232	)		243			(23	)

Net loss	$	(3,743	)	$	(4,671	)	$	(10,149	)	$	(14,405	)

Loss per common share - basic and diluted	$	(0.32	)	$	(0.40	)	$	(0.88	)	$	(1.24	)
Weighted average shares - basic and diluted		11,590,067			11,590,067			11,590,067			11,590,067

See notes to the consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in thousands of United States Dollars)

(Unaudited)

	Three Months Ended September 30,
	2013			2012

Net loss	$	(3,743	)	$	(4,671	)

Other comprehensive loss, net of tax:
Foreign currency translation adjustment		(17	)		(61	)
Comprehensive loss	$	(3,760	)	$	(4,732	)

	Nine Months Ended September 30,
	2013			2012
Net loss
	$	(10,149	)	$	(14,405	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment		596			(193	)
Comprehensive loss	$	(9,553	)	$	(14,598	)

See notes to the consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Expressed in thousands of United States Dollars, except shares)

(Unaudited)

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Capital		Deficit			Income (Loss)			Total
Balance, July 1, 2012		11,590,067	$	12	$	257,881	$	(214,157	)	$	(132	)	$	43,604

Net loss								(4,671	)					(4,671	)
Other comprehensive loss											(61	)		(61	)
Reduction in issuance costs from legal claims settlement						1,050								1,050
Share-based compensation						73								73
Balance, September 30, 2012		11,590,067	$	12	$	259,004	$	(218,828	)	$	(193	)	$	39,995

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Capital		Deficit			Income (Loss)			Total
Balance, July 1, 2013		11,590,067	$	12	$	259,154	$	(228,815	)	$	501		$	30,852

Net loss								(3,743	)					(3,743	)
Other comprehensive loss											(17	)		(17	)
Share-based compensation						44								44
Balance, September 30, 2013		11,590,067	$	12	$	259,198	$	(232,558	)	$	484		$	27,136

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Capital		Deficit			Income (Loss)			Total
Balance, January 1, 2012		11,590,067	$	12	$	257,884	$	(204,423	)				$	53,473

Net loss								(14,405	)					(14,405	)
Other comprehensive loss											(193	)		(193	)
Reduction in issuance costs from legal claims settlement						1,050								1,050
Share-based compensation						70								70
Balance, September 30, 2012		11,590,067	$	12	$	259,004	$	(218,828	)	$	(193	)	$	39,995

	Common Stock				Additional Paid In		Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Capital		Deficit			Income (Loss)			Total
Balance, January 1, 2013		11,590,067	$	12	$	259,065	$	(222,409	)	$	(112	)	$	36,556

Net loss								(10,149	)					(10,149	)
Other comprehensive income											596			596
Share-based compensation						133								133
Balance, September 30, 2013		11,590,067	$	12	$	259,198	$	(232,558	)	$	484		$	27,136

See notes to the consolidated financial statements.

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of United States Dollars)

(Unaudited)

	Nine Months Ended September 30,
	2013			2012

Cash flows from operating activities:
Net loss	$	(10,149	)	$	(14,405	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		1,063			771
Share-based compensation		133			70
Change in fair value of warrants		30			88
Changes in operating assets and liabilities:
Accounts receivable, net		27			(616	)
Product inventories		645			(1,211	)
Prepaid expenses and other current assets		(858	)		(356	)
Deferred contract costs		2,701			(3,331	)
Trade accounts payable		263			(203	)
Accrued salaries and benefits		45			(280	)
Accrued warranty		216			43
Deferred revenues		(1,527	)		3,710
Accrued liabilities		(8	)		24
Cash flows from operating activities		(7,419	)		(15,696	)

Cash flows from investing activities:
Decrease (increase) in restricted cash		3,007			(293	)
Purchase of land use right		(8,591	)
Purchase of property, plant and equipment		(6,268	)		(170	)
Cash flows from investing activities		(11,852	)		(463	)

Cash flows from financing activities:
Issuance of common shares for cash, net of issuance costs					1,050
Deferred income		6,162
Proceeds from notes payable		5,893			1,000
Repayment of notes payable		(1,025	)
Repayment of capital lease obligation		(3	)		(4	)
Cash flows from financing activities		11,027			2,046

Effect of exchange rate changes on cash and cash equivalents		(835	)		(193	)

Decrease in cash and cash equivalents		(9,079	)		(14,306	)

Cash and cash equivalents, beginning of period		12,372			46,519

Cash and cash equivalents, end of period	$	3,293		$	32,213

Supplemental disclosures:
Cash paid for interest	$	221		$	28

Cash paid for income taxes	None			None

Non-cash transactions:
Transfer of inventory to property, plant and equipment	$	1,593

See notes to the consolidated financial statements.

Note 1. Basis of Presentation and Going Concern

The interim consolidated financial statements of Altair Nanotechnologies Inc. and its subsidiaries (the “Company”) are unaudited. These consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The 2012 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Form 10-Q (this “Report”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, which includes all disclosures required by GAAP.

The Company incurred net losses of $10.1 million for the nine months ended September 30, 2013 and has an accumulated deficit of $232.6 million as of September 30, 2013. The Company used $7.4 million in its operations for the nine months ended September 30, 2013 and working capital levels have decreased from $16.7 million at December 31, 2012 to $9.1 million at September 30, 2013. The Company has substantial debt coming due in the next 12 months. We expect to continue to have negative cash flows from operations as we ramp up production at our new manufacturing facilities. If we are not able to refinance this debt or obtain additional capital, we will not be able to pay off our current debt obligations. This matter raises substantial doubt about the Company’s ability to continue as a going concern. To address this matter, management is taking actions to refinance existing loans, obtain additional loans collateralized by the land use rights and to obtain approval for the remaining grant incentives from the Government of Wu’an, China. Restricted cash is available to fund development of operations (both capital and non-capital) in China subject to meeting certain guidelines agreed upon by the Wu’an government and the Company. Based on our current forecast, we expect to use the existing restricted cash to support the non-capital development of our China operations. If the non-capital needs are met, excess restricted cash or additional grant funds received will be used for capital needs. The consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments if the Company were unable to do so.

Note 2. Recently Adopted and Recently Issued Accounting Guidance

Adopted

On January 1, 2013, the Company adopted changes to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The enhanced disclosures will enable users of an entity’s financial statements to understand and evaluate the effect or potential effect of master netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. The adoption of these changes had no impact on the Consolidated Financial Statements or related disclosures.

On January 1, 2013, the Company adopted changes to the information provided about the amounts reclassified out of accumulated other comprehensive income by component. These changes require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The adoption of these changes had no impact on the Consolidated Financial Statements or related disclosures.

Note 3. Fair Value Measurements and Other Financial Measurements

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 September 30, 2013 or December 31, 2012. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In arriving at fair-value estimates, we utilize the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement characterized based upon the lowest level of input that is significant is applied to the fair-value measurement. For us, recurring fair-value measurements are performed for warrant liabilities.

All warrant liability financial instruments are recognized in the balance sheet at their fair value. Changes in the fair values of warrant liability financial instruments are reported in earnings. We do not hold any derivative liability financial instruments that reduce risk associated with hedging exposure and we have not designated any of our warrant liability financial instruments as hedge instruments.

The Company has no items valued using Level 1 and Level 2 inputs. The fair values and corresponding classifications under the appropriate level of the fair value hierarchy of outstanding warrants recorded as recurring liabilities in the consolidated balance sheet were as follows:

In thousands of dollars

		Level				September 30, 2013				December 31, 2012
Warrant liabilities:			3			$	120			$	90

The following table presents quantitative information for Level 3 measurements:

In thousands of dollars

	Fair value at September 30, 2013		Valuation technique	Unobservable input
Liabilities:
Warrant liabilities	$	120	Monte Carlo option simulation model	Prevailing interest rates, Company’s stock price volatility, expected warrant term

There have been no transfers between Level 1, Level 2, or Level 3 categories.

The following table summarizes current warrant liabilities recorded at fair value at September 30, 2013:

In thousands of dollars

	Fair Value		Carrying Value
Warrant liabilities:	$	120	$	120
Total	$	120	$	120

Financial instruments classified as Level 3 in the fair value hierarchy represent warrant liabilities in which management has used at least one significant unobservable input in the valuation model. The following table represents a reconciliation of activity for such warrant liabilities:

In thousands of dollars

Warrant liabilities
Opening balance – December 31, 2012	$	90
Purchases, sales, issuances, and settlements
Transfers into and (or) out of Level 3
Change in fair value		30
Unrealized gains / (losses)
Other adjustments
Closing balance – September 30, 2013	$	120

There were no purchases, sales, transfers, issuances or settlements of Level 3 financial instruments. There were no assets or liabilities measured on a non-recurring basis as of September 30, 2013 and December 31, 2012.

Other Financial Instruments

The carrying values and fair values of the Company’s other financial instruments were as follows:

In thousands of dollars

		September 30, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Accounts receivable, net	2	$	1,473	$	1,473	$	1,498	$	1,498
Trade accounts payable	2	$	2,860	$	2,860	$	2,599	$	2,599
Capital lease obligation	2	$	6	$	6	$	9	$	9
Note payable	2	$	11,533	$	11,533	$	6,680	$	6,680

The following methods were used to estimate the fair values of other financial instruments:

Accounts receivable, Trade accounts payable, Capital lease obligation and Notes payable. The carrying amounts approximate fair value due to their short term nature.

Note 4. Product Inventories

Product inventories consist of the following:

In thousands of dollars

	September 30, 2013		December 31, 2012
Raw materials	$	1,359	$	2,337
Work in process		1,614		3,666
Finished goods		2,256		1,413
Total product inventories	$	5,229	$	7,416

As of September 30, 2013 and December 31, 2012, inventory relates to the production of battery systems targeted at the electric grid, transportation, and industrial markets.

Inventory valuation allowances, totaled $250,000 and $331,000 at September 30, 2013 and December 31, 2012, respectively.

Note 5. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

In thousands of dollars

	September 30, 2013		December 31, 2012

Deferred contract costs	$	1,831	$	4,532

Other assets, related party	$	1,791	$	1,754

Prepaid equipment purchases	$	1,351	$	-

Prepaid inventory purchases		1,039		159
Deposits		342		342
Prepaid insurance		395		258
Other prepaid expenses and current assets		70		178
Total prepaid expenses and other current assets	$	1,846	$	937

Other prepaid expenses and current assets consist primarily of prepaid property taxes, service contracts, marketing expenses and rent. Other assets, related party, relates to a payment made to Yintong Energy (YTE) (an affiliate of Canon) as the Company will be working with YTE to supply the initial order of fifty electric buses to Wu’an, China. The deferred contract costs were incurred, under the completed contract method, for multiple large scale projects for which revenue has not been recognized. Prepaid equipment purchases relate to payments made for production equipment to be used by our Northern Altair facilities.

Note 6. Property, Plant and Equipment

In thousands of dollars
	September 30, 2013			December 31, 2012
Machinery and equipment, held and used	$	11,241		$	6,643
Building and improvements		4,324			4,324
Furniture, office equipment & other		1,669			1,930
Leased assets		1,593
Construction in progress		4,345
		23,172			12,897

Less accumulated depreciation		(11,470	)		(8,821	)
Total property, plant and equipment held & used	$	11,702		$	4,076

Property, plant and equipment held and not used in operations consists of the following:

In thousands of dollars
	September 30, 2013		December 31, 2012
Machinery and equipment, held and not used	$	-	$	4,249
Less accumulated depreciation				(2,392	)
Total property, plant and equipment held and not used	$	-	$	1,857

The construction in progress relates to our new facilities under construction in Wu’an, China. Three new facilities are expected to be operational and fully accepted during the fourth quarter of 2013. Property, plant and equipment held and not used relates to machinery and equipment that was decommissioned at our Reno, Nevada facility and shipped to our China subsidiary. This machinery and equipment was received and installed during the third quarter by our China subsidiary for use in operations.

The lease asset includes a 1.8 megawatt system for Energy Storage Holdings, LLC. (ESH), which is providing commercial frequency regulation services in the PJM market on the East Coast. This system went into operation in January 2013. We are leasing the ALTI-ESS Advantage™ system to ESH and receive lease payments of approximately $20,000 per month and a share of the revenue generated by the system under the agreed upon terms. The lease term ends February 2016, and ESH has an option to purchase the system during the lease term.

Depreciation expense, for the nine months ended September 30, 2013 and 2012, totaled $721,000 and $714,000, respectively.

Note 7. Land Use Right and Patents

Northern Altair signed an agreement in April 2012 to receive a Land Use Right for a period of 50 years with respect to approximately 66 acres of industrial land in Wu’an, China from Heibei Wu’an Municipal People’s Government. Northern Altair was required to bid for the Land Use Right. Northern Altair completed the bidding process and paid approximately $13,670,000 which included various land transfer taxes and fees of approximately $1,670,000. Closing occurred on November 9, 2012 and Northern Altair received the Land Use Right (Wu State-Used, State-Owned Land Use) on this date. This Land will be used for the Company’s nLTO and energy storage system manufacturing operations in China.

Northern Altair signed an agreement in May 2013 to receive a second Land Use Right for a period of 50 years with respect to approximately 40 acres of industrial land in Wu’an, China from Heibei Wu’an Municipal People’s Government. Northern Altair was required to bid for the Land Use Right. Northern Altair completed the bidding process and paid approximately $8,600,000 which included various land transfer taxes and fees of approximately $1,200,000. Closing occurred on May 27, 2013 and Northern Altair received the Land Use Right (Wu State-Used, State-Owned Land Use) on this date. This Land will be used for the Company’s nLTO and energy storage system manufacturing operations in China. Shortly after closing, Northern Altair applied for approximately $8.6 million in cash incentives from the City of Wu’an, China. The amortized land use right’s balances as of September 30, 2013 and December 31, 2012 were:

In thousands of dollars
	September 30, 2013			December 31, 2012
Land use right	$	22,689		$	13,670
Less accumulated amortization		(330	)		(45	)
Total land use right, net	$	22,359		$	13,625

The land use rights were recorded at cost and will be amortized on a straight-line basis over their 50 year useful life at approximately $445,000 per year. Amortization expense for the nine months ended September 30, 2013 totaled $285,000.

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 September 30, 2013 and December 31, 2012 were:

In thousands of dollars
	September 30, 2013			December 31, 2012
Patents and patent applications	$	1,366		$	1,366
Less accumulated amortization		(1,149	)		(1,092	)
Total patents and patent applications	$	217		$	274

The weighted average amortization period for patents is approximately 2.9 years. Amortization expense, which represents the amortization relating to the identified amortizable patents, for the nine months ended September 30, 2013 and December 31, 2012, was $57,000. For each of the next two years, amortization expense relating to patents is expected to be approximately $76,000 per year. Amortization expense is expected to be approximately $65,000 in the third year.

Note 8. Stock-Based Compensation

As of September 30, 2013, we have the Altair Nanotechnologies Inc. 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 total number of shares authorized to be granted under the Plan was increased from 125,000 to an aggregate of 375,000 based on the proposal approved at the annual and special meeting of shareholders on May 30, 2007. On June 23, 2011, we held an annual and special meeting of shareholders. The proposal to increase the number of authorized shares under the Plan from 375,000 to 1,208,333 shares was approved at this meeting. The additional 833,333 shares approved by the stockholders are not available for stock option issuance at this time, as the Board of Directors has not authorized the filing of the related Registration Statement on Form S-8.

Prior stock option plans, under which we may not make future grants, authorized a total of 275,000 shares, of which options for 127,667 shares of common stock were granted (net of expirations) and options for 1,041 shares of common stock are outstanding and unexercised at September 30, 2013. Options granted under the plans are granted with an exercise price equal to the fair 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.

Note 9. Warrants

Warrants Issued to Investors

The fair value of the warrants was determined using the Monte Carlo Simulation model and the following weighted average assumptions were used:

	September 30, 2013			September 30, 2012
Stock Price	$	2.57		$	4.44
Exercise Price	$	14.93		$	14.93
Expected Volatility		77	%		112	%
Expected Dividend Yield	None			None
Expected Term (in years)		2.8			4.0
Risk-free Interest Rate		0.66	%		0.37	%

As of September 30, 2013, the value of the warrant liabilities was $120,000 and the change in fair value during the first nine months of 2013 was a loss of $30,000. The loss was recorded as other expense in the statement of operations.

Warrant activity for the nine months ended September 30, 2013 and 2012 is summarized as follows:

	2013				2012
	Warrants		Weighted Average Exercise Price		Warrants		Weighted Average Exercise Price
Outstanding at January 1,		412,776	$	14.93		412,776	$	14.93
Issued
Expired
Warrant redemption Exercised
Outstanding at September 30,		412,776	$	14.93		412,776	$	14.93
Currently exercisable		412,776	$	14.93		412,776	$	14.93

The following table summarizes information about warrants outstanding at September 30, 2013:

		Warrants Outstanding and Exercisable
Range of Exercise Prices			Warrants		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
	$13.80			112,776		2.6	$	13.80
$13.86	to	$24.00		300,000		3.0		15.36
				412,776		2.8	$	14.93

The warrants expire on various dates ranging to September 2016.

Note 10. Note Payable

Notes payable consisted of the following at September 30, 2013 and December 31, 2012:

In thousands of dollars

	September 30, 2013		December 31, 2012
Note payable Mortgage	$	975	$	1,000
Note payable Bank of China		1,980		1,980
Note payable ICBC		3,700		3,700
Note payable Handan Bank		4,878
Total	$	11,533	$	6,680

On August 8, 2012, we entered into a Note payable secured by, a Deed of Trust, corporate guaranty and hazardous materials indemnity agreement for the provision of a $1,000,000 loan secured by the Company’s Reno, Nevada Facility. Under the terms of the loan documents, interest accrues on the outstanding principal balance at the rate of 11% per annum. We were obligated to pay five months of prepaid interest to the lender upon closing and make interest-only payments on a monthly basis during the remaining term of the loan and to repay all principal and any outstanding interest on or before August 1, 2013. The required interest payments were made and the proceeds of the loan were used for general working capital requirements.

On August 1, 2013, the Company entered into a First Modification of Note and First Modification of Deed of Trust (the “Modification Agreement”) pursuant to which the maturity date for the above-described loan was extended until August 1, 2014. As part of the Modification Agreement, the Company agreed to pay a $19,750 amendment fee and agreed to make a payment of $12,500 to reduce the outstanding principal amount and to make three additional principal payments of $12,500 each on September 1, 2013, October 1, 2013 and November 1, 2013. The $975,000 modified loan is secured by the Company’s Reno, Nevada Facility.

In October 2012, the Company and Northern Altair entered into a series of transactions, wherein, Northern Altair set aside, as restricted cash, $2,057,900 with the Bank of China. In return, the Bank of China loaned the Company $1,980,000 for use as operating capital. The interest rate on this loan is .0053% daily and the maturity date is October 18, 2013. This loan was paid off in October 2013. See Note 13 for additional information.

In November 2012, the Company and Northern Altair entered into a series of transactions, wherein, Northern Altair set aside, as restricted cash, $3,894,180 with the Industrial and Commercial Bank of China (“ICBC”). In return, the ICBC loaned the Company $3,700,000 for use as operating capital. The interest rate on this loan is .0056% daily and the maturity date is November 15, 2013. This loan was paid off in November 2013. See Note 13 for additional information.

In August 2013, Northern Altair entered into a loan agreement for $8,130,000 with Handan Bank. On September 27, 2013, Northern Altair received approximately $4,878,000 with the final balance of approximately $3,252,000 received on October 15, 2013. The due date of the loan is August 27, 2014 and it is secured by the second land use right in Wu’an.

Note 11. 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 battery systems. The All Other group consists of the remaining portions of the previous Life Sciences and Performance Materials groups.

During the nine months ended September 30, 2013, the Company and its affiliates received a total of $4,924,000 in cash payments for its various Power and Energy Group projects. Of this received amount, $2,766,000 was associated with contractual milestone payments for our larger utility-scale energy storage system projects, two of which have not been recognized in our reportable segment data for the year, as the related contracts are recognized under the completed contract method.

Reportable segment data reconciled to the consolidated financial statements as of the three and nine months ended September 30, 2013 and September 30, 2012 is as follows:

In thousands of dollars:

Three Months	Net Revenue		Loss (Income) From Operations			Depreciation and Amortization		Assets
September 30, 2013
Power & Energy Group	$	1,072	$	3,796			425	$	66,330
All Other		60		(41	)		19		277
Consolidated Total	$	1,132	$	3,755		$	444	$	66,607


September 30, 2012
Power & Energy Group	$	296	$	4,483		$	233	$	54,087
All Other		64		(44	)		19		353
Consolidated Total	$	360	$	4,439		$	252	$	54,440

Nine Months	Net Revenue		Loss (Income) From Operations			Depreciation and Amortization		Assets
September 30, 2013
Power & Energy Group	$	5,958	$	10,515			1,006	$	66,330
All Other		180		(123	)		57		277
Consolidated Total	$	6,138	$	10,392		$	1,063	$	66,607


September 30, 2012
Power & Energy Group	$	886	$	14,507		$	714	$	54,087
All Other		185		(125	)		57		353
Consolidated Total	$	1,071	$	14,382		$	771	$	54,440

In the table above, the Loss (Income) 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.

For the nine months ended September 30, 2013, we had revenue to three major customers, which accounted for 10% or more of revenues. The Company did not have material related party revenue during the nine months ended September 30, 2013. Total revenue to the customer for the nine months ended September 30, 2013 and the balance of the accounts receivable at September 30, 2013 were as follows:

In thousands of dollars

Customer	Revenue Nine Months Ended September 30, 2013		Accounts Receivable Balance at September 30, 2013
Power and Energy Group:
Hawaiian Electric Light Company	$	2,082
Proterra, LLC		1,529	$	676
Vestas		1,291		62

For the nine months ended September 30, 2012, we had revenue to four major customers, each of which accounted for 10% or more of revenues. Total revenue from these customers for the nine months ended September 30, 2012 and the balance of their accounts receivable at September 30, 2012 were as follows:

In thousands of dollars

Customer	Revenue Nine Months Ended September 30, 2012		Accounts Receivable Balance at September 30, 2012
Power and Energy Group:
Emrol	$	139
Hybricon		131
Proterra		121	$	121
ABB Secheron		111		2

Revenues for the nine-month period ended September 30, 2013, and 2012 by geographic area were as follows:

In thousands of dollars

	Revenue Nine Months Ended		Sales Nine Months Ended
Geographic information (a)	2013		2012
United States	$	4,542	$	251
Denmark		1,291
Belgium		137		139
Germany				145
Sweden		43		131
Switzerland				111
Other foreign countries		125		294
Total	$	6,138	$	1,071

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

Geographic information for long-lived assets was as follows (based on physical location of the assets):

In thousands of dollars

Long-lived assets:	Balance at September 30, 2013		Balance at December 31, 2012
United States	$	4,841	$	6,207
China		29,436		13,625
Total	$	34,277	$	19,832

Note 12. Commitments and Contingencies

On October 31, 2012, Northern Altair entered into a Contract on Assignment of State-owned Construction Land Use Right as described in Note 7. As consideration for the land use right, Northern Altair agreed to make fixed asset investments on the land of approximately $167 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50 year life of the land use right, with initial construction being required to begin by March 31, 2013. In January 2013, initial construction on a manufacturing facility began on the Company’s land use right in China. The costs incurred to date by the Company total $4.3 million. The Company estimates the remaining costs of this project will cost approximately $1.4 million and will be completed in the fourth quarter of 2013. The remaining costs of this project are expected to be funded by loan guarantees or other incentives from Wu’an, China. Additional construction is contingent upon loan guarantees and other incentives from Wu’an, China as well as other market conditions. The total fixed asset investments shall include the cost of buildings, structures, auxiliary facilities, and equipment, as well as the land-use fee. Northern Altair may transfer and sublease portions of the granted land once it has invested 25% of the required fixed asset investments amount and completed 25% of the project. Closing occurred on November 9, 2012.

On May 16, 2013, Northern Altair entered into a second Contract on Assignment of State-owned Construction Land Use Right as described in Note 7. As consideration for the second land use right, Northern Altair agreed to make fixed asset investments on the land of approximately $99.1 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50 year life of the land use right, with initial construction being required to begin by May 16, 2014. In November 2013, initial construction on a manufacturing facility began on the Company’s second land use right in China. There are minimal costs incurred to date by the Company, although the expected total is approximately $4 million. The Company estimates this next phase will be completed in the first quarter 2014. The remaining costs of this project are expected to be funded by loan guarantees or other incentives from Wu’an, China. Additional construction is contingent upon loan guarantees and other incentives from Wu’an, China as well as other market conditions. The total fixed asset investments shall include the cost of buildings, structures, auxiliary facilities, and equipment, as well as the land-use fee. Northern Altair may transfer and sublease portions of the granted land once it has made 25% of the required investments. Closing occurred on May 27, 2013.

Contingencies — We are subject to claims in the normal course of business. Except for the items noted below, management, after consultation with legal counsel, believes that liabilities, if any, resulting from such claims will not materially affect our financial position or results of operations.

Supplier Concentration — We rely on certain suppliers as the sole-source, or as a primary source, of certain services, raw materials and other components of our products. We do not yet have long-term supply or service agreements engaged with any such suppliers, which are subject to claims in the normal course of business.

Note 13. Subsequent Events

In the third quarter, Northern Altair entered into a loan agreement for $8.1 million with the Bank of Handan. On September 27, 2013 Northern Altair received $4.9 million with the final balance of $3.3 million deposited on October 15, 2013. The due date of the loan is August 27, 2014 and is secured by the Company’s Land Use Right with respect to industrial land in Wu’an, China.

In September 2013, the Company and Northern Altair entered into a series of agreements, wherein, Northern Altair set aside restricted cash of $2.8 million with the ICBC. In return, the ICBC loaned the Company $2.7 million which was received in October 2013. The interest rate on this loan is .0053% daily and the maturity date is September 27, 2014. A portion of the loan proceeds was used to pay off the $1.98 million loan with the Bank of China in October 2013 and released restricted cash of $2.06 million.

On October 31, 2013, Northern Altair received approximately $12.2 million of a $16.1 million loan from the Rural Credit Cooperative. The due date of the loan is October 31, 2014 and is secured by the Company’s Land Use Right with respect to industrial land in Wu’an, China.

In November 2013, the Company and Northern Altair entered into a series of agreements, wherein, Northern Altair set aside restricted cash of approximately $4.0 million with the Bank of China. In return, the Bank of China loaned the Company $3.8 million which was received in November 2013. The interest rate on this loan is .0053% daily and the maturity date is November 7, 2014. A portion of the loan proceeds was used to pay off the $3.7 million loan with the ICBC in November 2013 and released restricted cash of $3.9 million.

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

Forward-Looking Statements

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 under “Risk Factors” below and other cautionary statements throughout this Report and our other filings with the SEC. 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.

Overview

We are a Delaware company that develops, manufactures and sells nano lithium titanate batteries and energy storage systems. Our nano lithium titanate battery systems offer higher power density, longer cycle life, rapid charge and discharge capabilities, a wider operating temperature range and higher levels of safety than conventional lithium-ion batteries. We target applications that effectively utilize the key attributes of our technology, and these applications can be found primarily in the electric grid, transportation (commercial vehicles), and industrial market segments.

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 reasonable chance of becoming one of the successful suppliers. 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. Generally speaking, our systems are projected to have a longer useful life and a lower total cost of ownership than competing battery systems.

Our historical 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 and government contracts. We currently have agreements in place to deliver: (1) energy storage systems for electric grid applications; (2) battery modules to EV integrators and manufacturers; and (3) battery systems for various industrial applications.

In 2012, we formed Altair Nanotechnologies (China) Co., Ltd. (“Altair China”) and Northern Altair Nanotechnologies Co., Ltd. (“Northern Altair”) in order to aggregate key elements of our supply chain and expand into the Chinese market. We anticipate this expansion will allow us to participate in the fast-growing China market.

General Outlook

Our current focus is on the development and sale of energy storage systems that we anticipate will eventually bring a substantial amount of revenue volume and gross profit from product sales into the electric grid, transportation, and industrial markets. As we attempt to expand our revenues from product sales, manufacturing and other sources in 2013, some of the key near-term events that will affect our long-term success prospects include the following:

	●	In 2012, we adopted a new manufacturing and supply chain strategy. Given that our contract cell manufacturers were all based in Asia, we decided to move our nano lithium titanate materials production to China. In addition, we decided to enhance our battery module and energy storage system manufacturing capabilities by building a new plant in China. In this way, we are better able to aggregate critical portions of our supply chain in order to reduce lead times, cost, and ultimately support the emerging Asian markets. Previously, we expected to be manufacturing our nano lithium titanate materials in Reno, Nevada, shipping those materials to our contract cell manufacturer in Asia, and then shipping those cells back to Anderson, Indiana to produce battery modules and packs. We expect that, when implementation is complete, our new manufacturing strategy will greatly streamline this process.
	●	In April 2012, we entered into an economic development deal with the cities of Wu’an and Handan in Hebei Province in China. Under our multi-year contract with the City of Wu’an, Northern Altair is required to sell and deliver 200 electric buses to Wu’an over a multi-year period. In August 2012, we received a $1.9 million down payment on the first $6.3 million electric bus order from Wu’an. We are currently procuring these buses from an affiliate, Yintong Energy. We anticipate that the deliveries will occur in 2014, 2015 and 2016 for this order and the corresponding $4.4 million payment will be made based on the delivery schedule, at which time we will be able to recognize the revenue and gross margin associated with this order.
	●	On October 25, 2012, Northern Altair successfully completed a bidding process for a 66 acre parcel of land in Wu’an China, which will be used for the Company’s nLTO and energy storage system manufacturing operations in China. On October 31, 2012, Northern Altair entered into a Contract on Assignment of State-owned Construction Land Use Right (the "Land-Use Agreement"), pursuant to which Northern Altair acquired the right to use the 66 acres of commercial land north of Dongzhuchang Village in Wu'an City, China for a period of 50 years subject to the terms and conditions of the Land-Use Agreement. As consideration for the land use right, Northern Altair paid a land use fee of approximately $11.8 million and land transfer taxes and fees of approximately $1.7 million and agreed to make fixed asset investments on the land of approximately $167 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50 year life of the land use right, with initial construction being required to begin by March 31, 2013.

	●	In January 2013, initial construction on a manufacturing facility began on the Company’s first land use right in China. The Company is building a 136,760 square foot nano lithium titanate production facility and a 130,200 square foot assembly facility for battery modules and energy storage systems. The Company estimates the remaining costs of the initial phase of this project to cost approximately $1.4 million and is scheduled to be completed in the fourth quarter of 2013. Additional construction phases will be contingent upon loan guarantees and other incentives from Wu’an, China as well as other market conditions. The Company has not yet obtained loan guarantees for these costs, but has entered into discussions with a number of banks regarding potential project financing. Northern Altair may transfer and sublease portions of the granted land once it has invested 25% of the total fixed asset investments amount and completed 25% of the project. The total fixed asset investments shall include the cost of buildings, structures, auxiliary facilities, and equipment, as well as the land-use fee. Closing occurred on November 9, 2012. Separate from the Land-Use Agreement, Northern Altair received $11.8 million package of cash incentives in November 2012 to facilitate Northern Altair’s establishment of operations and construction efforts. The actual scope of Northern Altair’s construction project and manufacturing operations will be based on the anticipated market demand for the Company’s products and on the level of negotiated incentives.
	●	In May 2013, Northern Altair bid for and acquired a second conditional 50-year land use right with respect to approximately 40 acres of industrial land in Wu’an, China with an acquisition price of approximately $8,600,000 which includes various land transfer taxes and fees that are equal to approximately $1,200,000. In turn, we expect to receive cash incentives as part of our economic development deal, which shall be equal to our acquisition price. The closing occurred on May 27, 2013 and Northern Altair received the Land Use Right (Wu State-Used, State-Owned Land Use) on this date. This Land will be used for the Company’s nano lithium titanate and energy storage system manufacturing operations in China. As consideration for the second land use right, Northern Altair agreed to make fixed asset investments on the land of approximately $99.1 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50 year life of the land use right, with initial construction being required to begin by May 16, 2014. In November 2013, initial construction on a manufacturing facility began on the Company’s second land use right in China. There are minimal costs incurred to date by the Company, although the expected total is approximately $4 million. The Company estimates this next phase will be completed in the first quarter 2014. The Company has obtained loan guarantees for these costs. Northern Altair may transfer and sublease portions of the granted land once it has made 25% of the required investments.
	●	In 2012, we built five 1 to 2 megawatt energy storage systems for our energy storage system customers. Four of these systems were shipped during the year.

Two 1 megawatt systems were built for the Hawaiian Electric Light Company (“HELCO”) and Hawaii Natural Energy Institute (“HNEI”). The first HELCO/HNEI system was commissioned at the Hawi Wind Farm on Hawaii’s Big Island in March 2013. The second HNEI system, which is slated for installation on Oahu, was built in 2012. We are currently finalizing the site location details with our customer and anticipate that this system will be commissioned in the first quarter of 2014.

We built a 1.2 megawatt system for Vestas Wind Systems, which is being used to integrate wind power at a wind farm in Denmark. This system was fully commissioned in March 2013. We received a final payment of $117,035 in July 2013.

We built a 1.8 megawatt system for Energy Storage Holdings, LLC. (ESH), which is providing commercial frequency regulation services in the PJM market on the East Coast. This system went into operation in January 2013. We are leasing the ALTI-ESS Advantage™ system to ESH and receive monthly lease payments and a share of the revenue generated by the system under the agreed upon terms. The lease term ends February 2016, and ESH has an option to purchase the system during the lease term.

We built a 2 megawatt ALTI-ESS Advantage™system for TSK Solar, which shall be used for the integration of solar power at the San Fermin 26 MW photovoltaic solar farm in Loiza, Puerto Rico. This system was delivered in December 2012 and installed in January 2013 and is scheduled to be commissioned in the fourth quarter of 2013 upon the completion of the solar farm.

		We anticipate that the deployment, demonstration and commercial use of these energy storage systems will further establish the commercial value of our products and facilitate the future sale of our systems.
	●	In June 2013, we entered into a memorandum of understanding with Tauron Dystrybucja SA. to jointly determine the necessary infrastructure needs for stationary energy storage systems based on nano lithium titanate batteries, and for the construction of power and frequency stabilization systems in Poland. TAURON is a subsidiary of TAURON Polska Energia S.A., Poland's second largest energy company.
	●	In January 2013, the Hawaii Natural Energy Institute agreed to purchase its third energy storage system from us. They ordered our new 2 megawatt ALTI-ESS Advantage™, and we are working with them to schedule the installation of this system in early-2014.
	●	In May 2012, we signed a contract to supply nano lithium titanate battery modules to Proterra, a leading developer of all-electric transit buses. Proterra uses Altair’s battery modules to create a rapid charging electric bus, which can recharge in as little as six minutes. Proterra’s buses can deliver 22.5 miles per gallon (mpg) equivalent versus 3.8 mpg for a comparable diesel bus. The running cost per mile for a Proterra electric bus is just $0.18 versus $1.05 for a diesel bus. In June 2012, Proterra released its first purchase order under the agreement. We commenced shipments to Proterra in February 2013 and are scheduled to ship modules through the end of the year. Proterra’s customers include Foothill Transit and San Joaquin Regional Transit District in California; the City of Seneca in South Carolina; Star Metro in Florida; and Via Metropolitan in Texas. In 2013, Proterra expanded their target market to include commercial customers.

	●	We have entered into discussions with a number of transportation and industrial customers in the U.S, Europe and Asia regarding joint development products or purchases of our battery products. Some of these customers are now testing our modules, application kits and Power Rack battery systems in a variety of applications, where the unique attributes of a nano lithium titanate battery system are a critical consideration.
	●	In August 2012, we entered into a memorandum of understanding with Shenhua Science & Technology and the National Institute of Low Carbon Energy (NICE) in China. We entered into discussions about a possible pilot project that would test and demonstrate the commercial use of our systems. We continue to work with Shenhua to identify the best commercial applications of our technology.
	●	In 2012, we submitted our nano lithium titanate battery cells for testing at the 201 Institute, which regulates the sale of batteries in China. We received approval for the sale of our nano lithium titanate batteries in China in December 2012.

The Company operates in emerging markets for energy storage. We remain optimistic with respect to our current key projects, but we continue to face development, marketing, partnering and other risks. However, we now have a growing number of reference customers, including AES, Vestas, HNEI, HELCO and ESH, which should help us validate the technical merits and commercial operation of our systems to our prospective customers.

Liquidity and Capital Resources

Current and Expected Liquidity

Altair’s cash and cash equivalents decreased by $9.1 million, from $12.4 million at December 31, 2012 to $3.3 million at September 30, 2013. The net decrease of $9.1 million resulted from the net change in operating activities of $(7.4) million, net change in investing activities of $(11.8) million and the net change in financing activities of $11.0 million. The investing activities included the acquisition of the second land use right from the Government of Wu’an, China, which was paid for by using restricted cash and the purchase of fixed assets by Northern Altair. The financing activity included the increase of deferred income against the amortization period cost for the second land use right and the receipt of the $5.5 million in grant incentives which were applied for after the receipt of the first land use right.

Cash inflows included receipts related to closing three large projects during the nine months ending September 30, 2013. Two of these projects were completed contracts; one for an ALTI-ESS Advantage™to Vestas Wind Systems A/S and one for an ALTI-ESS to Hawaiian Electric Light Company (“HELCO”) and Hawaii Natural Energy Institute (“HNEI”). The third project was for an ALTI-ESS Advantage™system which was delivered as an equipment lease to Energy Storage Holdings, LLC.

A summary of our cash position at September 30, 2013 included cash and cash equivalents of $3.3 million. In addition, we had $15.5 million in restricted cash of which $6.7 million, related to collateral for indebtedness, is classified as short-term leaving $8.8 million in short-term grant incentives. In May 2013, we applied for additional grant incentives in the amount of approximately $8.6 million. We received $3.6 million of the expected grant incentives in the third quarter and expect the remaining amount of $5.0 million in the fourth quarter of 2013. We received $4.9 million in customer receipts during the nine months ended September 30, 2013.

In the near term, U.S. operations may be supported from revenues from product sales, by selling inventory, equipment and services to Altair China and receiving fees associated with intellectual property licensing and royalties. In the longer term, U.S. operations will need to obtain capital, which we anticipate it would obtain through the issuance of equity securities, strategic partnerships or investments or loans supported by its Chinese assets.

We evaluate our capital needs and the availability of capital on an ongoing basis and, consistent with past practice, expect to seek capital when appropriate and on such terms as are available to us and we deem appropriate, based upon our assessment of our current liquidity, capital needs and the availability of capital. We continue to use significant amounts of cash for our operations and have no commitments to receive capital and can provide no assurance adequate capital will be available when and as required.

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.

Capital Commitments and Expenditures

The following table discloses aggregate information about our contractual obligations and the periods in which payments are due as of September 30, 2013:

In thousands of dollars

Contractual Obligations	Total		< 1 yr		1-3 yrs		3-5 yrs		> 5 yrs
Note payable	$	11,533	$	11,533	$	-	$	-	$	-
Contractual service agreements		601		601
Capital leases		6		6
Purchase obligations		25,050		13,636		11,414
Total	$	37,190	$	25,776	$	11,414	$	-	$	-

*Purchase obligations include a commitment to “YTE” a related party.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet transactions during the nine months ending September 30, 2013.

Recently Adopted and Recently Issued Accounting Guidance

See Note 2 to the interim consolidated financial statements in Part I Item 1 of this form 10-Q.

Results of Operations

Three and Nine Months Ended September 30, 2013 and Compared to Three and Nine Months Ended September 30, 2012

In thousands of dollars

	Power and Energy Group						All Other				Consolidated
	Three Months Ended September 30						Three Months Ended September 30				Three Months Ended September 30
	2013			2012			2013		2012		2013		2012
Revenues
Product sales	$	1,072		$	296		$	-	$	-	$	1,072	$	296
License fees								60		64		60		64
Total revenues		1,072			296			60		64		1,132		360

Cost of goods sold
Product		1,206			788							1,206		788
Total cost of goods sold		1,206			788			-		-		1,206		788

Gross (loss) profit		(134	)		(492	)