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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_______________
ALTAIR INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Province of
Ontario,
Canada 1-12497 None
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(State or other (Commission File No.) (IRS Employer
jurisdiction Identification No.)
of incorporation)
1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (307) 587-8245
[ ] Securities registered pursuant to Section 12(b) of the Act: None
[X] Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value Nasdaq National Market
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(Title of Class) (Name of each exchange on which registered)
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 [ ]
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common shares held by non-affiliates
of the Registrant on March 15, 2001, based upon the closing sale price of the
common shares on the NASDAQ Stock Market of $2.75 per share on March 15, 2001,
was approximately $46,160,000. Common Shares held by each officer and director
and by each other person who may be deemed to be an affiliate of the Registrant
have been excluded. As of March 15, 2001 the Registrant had 19,510,488 common
shares outstanding.
OMITTED ITEMS
References to financial data in Item 1 of Part I, and all of Items 6, 7 and 8 of
Part I, are omitted pursuant to Rule 12b-25.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting
of Shareholders to be held on June 22, 2001 are
incorporated by reference in Part III of this Report.
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INDEX TO FORM 10-K
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PART I.......................................................................................................3
Item 1: Business..........................................................................................3
Item 2. Properties.......................................................................................28
Item 3. Legal Proceedings................................................................................29
Item 4. Submission of Matters to a Vote of Security Holders..............................................29
PART II.....................................................................................................29
Item 5. Market for the Common Shares and Related Shareholder Matters.....................................29
Item 6. Selected Financial Data..........................................................................30
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................31
Item 8. Financial Statements and Supplementary Data......................................................32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............32
PART III....................................................................................................32
Item 10. Directors and Executive Officers of the Registrant...............................................32
Item 11. Executive Compensation...........................................................................32
Item 12. Security Ownership of Certain Beneficial Owners and Management...................................32
Item 13. Certain Relationships and Related Transactions...................................................32
PART IV.....................................................................................................32
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................33
2
PART I
This Annual Report on Form 10-K for the year ended December 31, 2000 (this "Form
10-K") contains "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Exchange Act of 1934, as amended (the "Exchange Act"), that involve
risks and uncertainties. Purchasers of any of the common shares, no par value
(the "common shares") of Altair International Inc. ("Altair" or the "Company")
are cautioned that the Company's actual results will differ (and may differ
significantly) from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those factors
discussed herein under "Factors That May Affect Future Results" and elsewhere in
this Form 10-K generally. The reader is also encouraged to review other filings
made by the Company with the Securities and Exchange Commission (the
"Commission") describing other factors that may affect future results of the
Company.
Item 1: Business
Certain technical terms used in the following description of our
business are defined in a glossary set forth on page 16. We have identified such
terms by italicizing them the first time they are used in the text. Unless the
context requires otherwise, all references to "Altair," "we," "Altair
International Inc.," or the "Company" in this Form 10-K refer to Altair
International Inc. and all of its subsidiaries.
General
- -------
Altair International Inc. was incorporated under the laws of the
Province of Ontario, Canada in April 1973 for the purpose of acquiring and
exploring mineral properties. Since 1994, we have also devoted substantial
resources to the development and testing of mineral processing equipment for use
in the recovery of fine, heavy mineral particles.
In November 1999, we acquired all patents and technology related to a
hydrometallurgical process developed by BHP Minerals International, Inc. ("BHP")
primarily for the production of titanium dioxide ("TiO2") products from titanium
bearing ores or concentrates (the "titanium processing technology"), and all
tangible equipment and other assets used by BHP to develop and implement the
titanium processing technology. Although the titanium processing technology is
capable of producing a variety of titanium products, we plan to initially employ
the titanium processing technology for the production and sale of TiO2
nanoparticles. See "--Titanium Pigment Processing Technology."
We have also leased, and are exploring, approximately 14,000 acres of
land near Camden, Tennessee (the "Tennessee mineral property") to determine
whether it would be amenable to large-scale mining for titanium and zircon.
Preliminary reports suggest that the Tennessee mineral property contains
significant amounts of valuable heavy minerals, primarily titanium and zircon,
and is suitable for a large-scale sand mining operation with a multi-decade
life. See "--Tennessee Mineral Property."
During 1996, we acquired the rights to the Campbell Centrifugal Jig,
since modified and renamed the Altair Centrifugal Jig (the "jig"). The jig is a
machine that uses a rotating circular screen and pulsating water to separate
valueless mineral particles from more valuable mineral particles based on the
differences in their specific gravity. In tests, the jig has proven capable of
segregating and recovering extremely fine mineral particles which are not
economically recoverable using existing conventional techniques. We are
presently testing and customizing the jig for use in the recovery of heavy
minerals such as titanium and zircon, and we believe that the jig could also be
used to recover other minerals such as gold and for environmental remediation.
See "--Jig Technology and Proprietary Rights."
3
To date, we have derived no revenues from product sales or otherwise
and have experienced an operating loss in every year of operation. In the fiscal
year ended December 31, 2000, we experienced operating losses of
$-----------.
Throughout this Form 10-K, Altair may be referred to or defined as a
"development stage" company or firm. Such references are for financial and
accounting purposes only and are intended to signify that we are devoting
substantially all of our efforts to establishing a new business, and planned
principal operations have commenced, but there has been no significant revenue
therefrom. References to Altair as a development stage company are not intended
to imply that we are engaged in the preparation or exploration of an established
commercially minable deposit. For purposes of Regulation S-K, Item 802, Guide 7
promulgated under the Exchange Act of 1934, we are an "exploration stage"
company.
Titanium Pigment Processing Technology
Acquisition of the Processing Technology. On November 15, 1999, we
entered into an Asset Purchase and Sale Agreement with BHP pursuant to which we
purchased all patents and technology related to a hydrometallurgical process
developed by BHP primarily for the production of titanium dioxide products from
titanium bearing ores or concentrates (i.e., the titanium processing
technology), and all tangible equipment and other assets used by BHP to develop
and implement the titanium processing technology (the "titanium processing
assets").
The purchase price for the titanium processing technology and titanium
processing assets was $8,999,800. In addition, the Asset Purchase and Sale
Agreement also requires us to pay to BHP, until the earlier of November 15, 2014
or the date we have paid an aggregate royalty of AUD$105,000,000, a quarterly
royalty equal to:
o 1.5% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the titanium processing
technology by the Company or a transferee at the Company's mineral
properties in Tennessee;
o 1.5% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the titanium processing
technology by BHP or any affiliate of BHP at a specified heavy mineral
sand operation located near Auckland, New Zealand;
o 3% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the titanium processing
technology by the Company or a transferee of the Company at any
location other than its Tennessee mineral property or the Auckland, New
Zealand heavy mineral sand operation; and
o 3% of the sales proceeds (F.O.B. the Company's facility, reduced by the
amount of product returns) received by the Company or a transferee of
the Company from the sale of any products other than TiO2 pigment
produced through its use of the titanium processing technology.
4
In addition, in connection with the Asset Purchase and Sale
Agreement, Altair and BHP entered into a Lease dated November 15, 1999, pursuant
to which we lease approximately 20,000 square feet of laboratory and testing
space at BHP's testing facility in Reno, Nevada for a monthly rent of $15,000.
The Lease grants us a right of first refusal in the event BHP intends to sell
the building and property subject to the Lease and includes an agreement to
negotiate in good faith with respect to our possible purchase of such building
and property.
Description of the Titanium Processing Technology. Our titanium
processing technology is capable of producing conventional TiO2 pigment
products. Conventional TiO2 pigments are finely-sized powders consisting of TiO2
crystals. These crystals may be either anatase or rutile phase (shape) and
approximate 0.18 to 0.22 microns in size. Our titanium processing technology is
also capable of producing TiO2 nanoparticles, a specialty product with a size
range of 10 to 100 nanometers (approximately one tenth the size of conventional
pigments). We are currently using the processing plant to produce TiO2
nanoparticles.
Our titanium processing technology is fundamentally different from
current commercial processing techniques. The process permits exceptional
control over particle size, shape, and crystalline form. Other processes are
based on either a precipitation of particles from aqueous solution or the
formation of crystallites from molten droplets of titanium oxide generated in
high temperature flame reactors. While nanoparticle products made by these
methods exhibit the surface area and reactivity desired for many applications,
they are often amorphous or multiphase materials that grow in particle size and
change crystalline phase when subjected to high-temperature processing. In
contrast, our titanium processing technology produces discrete anatase crystals
in nanometer sizes that are thermally stable at 800 degrees Centigrade for 100
hours or more. By remaining stable in high-temperature processing, nanoparticles
produced by our titanium processing technology retain the desired nanoparticle
size and crystalline phase.
The titanium processing technology is based on a proprietary
dense-phase crystal growth technique which controls crystal formation using a
combination of mechanical and fluid dynamics and chemical and thermal control.
Through introduction of very small quantities of selected chemicals ("doping
elements") during crystal growth, the crystal size, phase, catalytic and
photocatalytic activity and size distribution of crystals can be controlled
within narrow limits and to specification. Other technologies exclude the
introduction of doping elements during crystal growth, thereby limiting their
ability to control final product characteristics.
Titanium Processing Assets. The titanium processing assets consist
principally of a production facility located in the leased premises. During
2000, we installed additional equipment to increase production capacity to a
nominal annual amount of 200 tons of TiO2 nanoparticles. We also added a
separate pilot facility to produce large sample quantities of product for
development, test and evaluation purposes.
Plans for Development of the Titanium Pigment Processing Technology. We
are initially employing our titanium processing technology for the production
and sale of TiO2 nanoparticles. We have transferred our titanium processing
assets and titanium processing technology to Altair Technologies, Inc. ("ATI"),
a wholly-owned subsidiary of Altair, and hired a president of ATI to provide
management and direction for the development of our titanium processing
technology. Effective January 1, 2001, we hired fourteen former BHP employees
who were instrumental in the development of our titanium processing technology.
Certain of these employees will continue research and development work and
others will be involved in operation and maintenance of the production facility.
Altair has commenced marketing TiO2 nonoparticles, has entered into an initial
sales contract with a single customer and is also investigating distributor
relationships.
5
We are also analyzing other means of exploiting out titanium processing
technology, including licensing arrangements and joint ventures. We believe
that, with additional research and development aimed at commercialization, our
titanium processing technology will be capable of producing industry standard
TiO2 pigments (larger particle size than nanoparticles). We are assessing
potential business arrangements which would facilitate the development of this
and other additional applications for the titanium processing technology.
The raw material used as a feedstock in the production of TiO2
nanoparticles, and an intermediate in the production of other TiO2 products, is
titanium tetrachloride, a commodity product manufactured by several suppliers
and readily available on the open market. Although Altair uses purchased
titanium tetrachloride as the feedstock in the production of TiO2 nanoparticles,
our titanium processing technology is capable of producing titanium
tetrachloride from an ilmenite raw material.
Target Market for Products of the Titanium Processing Technology.
Altair is initially targeting the markets that utilize the unique optical
properties of TiO2 nanocrystals such as producers of specialty surface coatings
and UV protectant cosmetics. Ultra-fine or nano-sized TiO2 may also be
effectively used in battery components and pollution control and detoxification.
Coatings and cosmetics utilize the ultraviolet shielding capabilities of the
material; pollution control and detoxification processes take advantage of the
material's photocatalytic properties; and battery applications utilize the
electrochemical capabilities of the material. The current global market for TiO2
nanoparticles is approximately 3,800 metric tons per year, but we expect the
nanoparticle market to grow more rapidly than the conventional pigment market as
applications for new technologies generate increased demand.
In addition, our titanium processing technology is adaptable to make
nanocrystals of materials suitable for optoelectronics, ceramics, thermal spray
coatings and catalysts as well. Nanomaterials applications being actively
pursued by many research groups include flexible ceramics (cast materials such
as automobile engines), special catalysts (chemical and petroleum processing,
fuel cells), health care products (pharmaceuticals and nano-sized sensors), and
optoelectronics. Nano-crystal optoelectronic components can be used to
miniaturize computers and other electronic devices and to expand bandwidth in
telecommunications.
Research, Testing and Development of the Titanium Processing
Technology. Our titanium processing technology is the result of several years of
research and development work done by BHP. Although we believe our titanium
processing technology is presently commercially viable, we intend to continue
the research and development work to both improve the process and develop
additional commercial applications for it. Such work will be conducted by the
former BHP employees who became employees of the Company on January 1, 2001.
In addition, we may consider joint research and development efforts with
customers and other interested parties. We have entered into a collaboration
agreement with Nanopowder Enterprises, Inc. ("NEI") wherein we have agreed to
prepare specialty nanoparticle powders using formulations patented by NEI. The
powders are under development, in cooperation with the Office of Naval Research,
for production of thermal spray coatings designed to enhance wear resistance and
improve ductility, toughness, and machineability for Navy systems. We have also
entered into a product sales contract with Inframat Corporation to provide
nanoparticle powders for use in thermal spray coatings being developed for U.S.
Navy applications.
In August 2000, we entered into an agreement with the Massachusetts
Institute of Technology ("MIT") to carry on joint research to develop a
nanostructured fuel cell system for direct hydrocarbon conversion. The research
program is aimed at developing economical hydrocarbon-powered fuel cells by
combining Altair's unique materials technology with novel nanostructured anode
and cathode catalysts developed by MIT.
6
We believe our nanoparticle products may have applications in several
alternative energy applications. As a result, we have created an alternative
energy group within ATI to carry out our research program with MIT and also
develop nanoparticle applications for batteries, solar cells, and photovoltaics.
The Titanium Processing Technology and Proprietary Rights. We believe
our titanium processing technology represents a significant improvement in the
recovery of titanium from titanium-containing ores and has the potential to
materially reduce processing costs for commodity and specialty products. The two
conventional technologies for processing titanium ores are generally known as
the chloride and sulphate processes. We believe that our titanium processing
technology is an improvement over these processes in that it offers precise
control of crystal size, structure and chemical composition, it uses a wide
variety of feedstocks, and it recycles wastes.
BHP has filed numerous patent applications with the United States
Patent and Trademark Office with respect to our titanium processing technology
and has transferred the rights to such applications to us. Such applications are
in the review process, and no patents with respect to the titanium processing
technology have been granted to date.
Competition--the Titanium Processing Technology. There are
approximately ten significant producers of TiO2 nanoparticles in the world, the
largest of which has approximately 20% of the market. We believe that, with a
lower cost structure than our competitors and the ability to produce a more
uniform, thermally stable product in a wide variety of sizes within narrow
ranges, we may have a competitive advantage that will allow our products to
quickly gain market acceptance. However, some producers of TiO2 nanoparticles
are major multinational corporations with far greater financial resources than
Altair. These producers also enjoy other advantages over us, including
established customer relationships and operating histories.
Tennessee Mineral Property
- --------------------------
Description of the Tennessee Mineral Property. The Tennessee mineral
property consists of approximately 14,000 acres of land that we have leased (or
have binding commitments to lease) in or near Camden, Tennessee, containing
fine, heavy minerals.
7
[GRAPHIC OMITTED][GRAPHIC OMITTED]
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From 1996, when we began acquiring leases, through 2000, exploration activities
on the Tennessee mineral property have included geologic mapping, sample
collection, drilling of 156 auger holes and preparation of geologic and deposit
models. The deposit model also incorporates 40 drill holes completed by an
earlier exploration company. Deposit model estimates are consistent with deposit
estimates previously determined by other resource companies. The mineralized
deposit on the Tennessee mineral property has not yet been proven to be a
reserve (as defined in Regulation S-K, Item 802, Guide 7 promulgated under the
Exchange Act), and our limited operations and proposed plan with respect to it
are exploratory in nature.
The production of saleable heavy minerals from heavy mineral sand ore
is a two-stage process. At the mine site, heavy mineral ore is treated in a "wet
mill" where a 90% total heavy mineral concentrate is prepared typically
utilizing gravity separation equipment. This concentrate is then taken to a "dry
mill" where individual mineral constituents are extracted using magnetic and
high tension electrical separators.
In order to assess the amenability of the Tennessee mineral property
ore to "wet mill" processing with the jig, we collected two bulk samples from
the Tennessee mineral property. Test work completed by Altair on the first
sample during the spring of 1997 suggested the sands can be processed with the
jig. Tests performed by Altair which emphasized recovery have yielded up to 94%
heavy mineral recovery with a six-to-one concentration ratio. (Stated
differently, after a single pass through the jig, 94% of the ore's value was
concentrated in about one-sixth of its original volume, and five-sixths of the
sand rendered a non-valuable discard.) As is typical of gravity separation
processing, several passes through the jig will be necessary to produce a 90%
total heavy mineral concentrate. Further, in the event the Tennessee mineral
property is proven to contain significant heavy mineral reserves, the jig would
likely be used in conjunction with traditional gravity separators, primarily
spirals, to most efficiently process the sand ore in the "wet mill."
A second bulk sample was collected during late 1997. Approximately
5,000 pounds of representative mineralized material was collected from an
exposed sand horizon. This sample was processed by an independent Florida heavy
sands producer and Altair utilizing both "wet mill" and "dry mill" processes to
produce representative samples of saleable products. The sample results were
reviewed by an independent consulting group hired by us to prepare a
pre-feasibility study of the Tennessee mineral property. In July 1998, the
independent consulting group completed their technical pre-feasibility study of
approximately 4,700 acres of the Tennessee mineral property known as the "Camden
Deposit." The study states that the Camden Deposit contains an indicated
resource of 12 million tons of total heavy minerals consisting of 65%
titanium-bearing minerals, 15% zircon and 20% non-valuable heavy minerals. It
indicated that saleable ilmenite, rutile and zircon products can be produced,
and that established markets currently exist for such products. The study then
modeled mining and production costs and concluded that the Camden Deposit has
the potential to be economically mined via a large-scale sand mining operation
with an approximate 20-year life.
8
In August 1998, based on the positive results of the consultant's
report, we commenced final feasibility testing. This involves the actual design,
pricing, and analysis of equipment and facilities that would be used to mine the
Tennessee mineral property. We have designed and constructed and, during the
first quarter of 2001, placed into operation a pilot test facility on the
Tennessee mineral property. The feasibility testing process is also expected to
involve an examination of the market for products produced at the pilot
facility, applications for permits necessary for any proposed full-scale mining
facility and attempts to secure financing of any proposed full-scale mining
facility. If production at the pilot plant and our marketing, permitting and
financing efforts are successful, a mine could be operational within 24-36
months after financing is obtained. See "--Plan of Operation" and "--Government
Regulation and Environmental Concerns."
Subsequent to the completion of the pre-feasibility study, further
exploration of the Tennessee mineral property by Altair suggested the existence
of an additional heavy mineral sands resource of approximately 10 million tons
in an area northwest of the Camden Deposit known as the "Little Benton Deposit."
Preliminary results indicate that the Little Benton Deposit contains a
high-grade titanium mineralization similar to the Camden Deposit. We have
approximately 7,900 acres under lease in the Little Benton area and intend to
conduct further testing of the Little Benton Deposit. If such testing affirms
the existence of the indicated resource, and the feasibility testing suggests
that cost-effective mining of the Tennessee mineral property is feasible, the
production capacity and/or life of the mining operation could be significantly
increased.
Research, Testing and Development of the Tennessee Mineral Property. As
discussed in "--Description of the Tennessee Mineral Property" above, in July
1998, an independent consulting group completed a technical pre-feasibility
study of approximately 4,700 acres of the Tennessee mineral property known as
the "Camden Deposit." Based on the positive results of the consultant's report,
we initiated final feasibility testing in August 1998, which we anticipate will
involve additional drilling to further define resource characteristics, detailed
analysis of mineralogical characteristics and mine processing methods, larger
scale testing of the Series 30 Jig, analysis of product markets, and evaluation
of possible strategic alliances. If the feasibility testing suggests that
cost-effective mining of the Tennessee mineral property is feasible, mining
could begin within 24-36 months after we obtain financing, subject to, among
other things, the price of, and demand for extractable heavy minerals and our
ability to obtain necessary permits and government approvals.
During 2000, we incurred $1.2 million in exploration expenditures on
the Tennessee mineral property. Expenditures were incurred for pilot plant
design, fabrication and site preparation, leasehold minimum advance royalty
payments, and other related exploration activities.
Competition--the Tennessee Mineral Property. Based on the exploratory
work done to date, we anticipate that the saleable products which may be
produced from the Tennessee mineral property are ilmenite, rutile and zircon.
Ilmenite, which may contain 40% to 70% titanium dioxide, is used in the
production of titanium dioxide pigment, a specialty chemical used principally as
a whitener and opacifier for paper, plastics and paint. According to the U.S.
Geological Survey, ilmenite is the most abundant naturally occurring,
commercially produced titanium mineral and supplies approximately 90% of the
world demand for titaniferous material. Such demand is projected to increase at
an annual rate of 2%-3% for the foreseeable future. The value of titanium
mineral concentrates consumed in the United States in 2000 was approximately
$530 million. There are presently two entities in the United States which
produce ilmenite concentrate from heavy mineral sands and virtually all
production is used by four titanium pigment producers whose plants are primarily
located in the southeastern U.S. Pigment producers use various methods to
process ilmenite concentrate into titanium dioxide pigment and require that the
concentrate feedstock meet certain chemical and size criteria applicable to the
process being used. We believe that, if we can economically mine the Tennessee
mineral property and produce satisfactory products for sale to pigment
producers, we may have a competitive advantage in being a domestic producer
operating in close proximity to our primary markets.
9
Rutile, which generally contains greater than 95% titanium dioxide, is
also used in the production of titanium dioxide pigment. Its processing costs
are significantly less than ilmenite due to the higher concentration of titanium
dioxide. Although this greatly enhances its market value, rutile is much less
abundant than ilmenite, representing approximately 5% of the total heavy
minerals contained in the Tennessee mineral property.
Zircon, which is used in ceramic, refractory and foundry applications,
represents approximately 15% of the heavy minerals contained in the Tennessee
mineral property. Zircon sand is currently being produced at three mines in the
southeastern U.S. and in several countries around the world. Titanium-bearing
minerals and zircon are commonly found and mined together.
The Jig
- -------
Description of the Jig. The Altair Centrifugal Jig segregates particles
based on differences in their specific gravity. Such technology may be
categorized as a "gravity separation" process. Gravity separators are widely
used in minerals beneficiation because of their relative simplicity, low cost of
operation and ability to continuously treat large tonnage throughput. We believe
the jig will prove able to economically recover smaller particles than can
presently be economically recovered by competing gravity technologies. While not
yet confirmed through actual operations, the cost to manufacture and operate the
jig is expected to be similar to the cost to manufacture and operate competing
gravity separators, which can efficiently process only particles larger than 150
mesh. In contrast, our tests suggest that the jig will be able to maintain
relative efficiency when processing feeds as small as 400 mesh. See "--
Competition -- The Jig". In tests conducted to date using the jig to process
relatively small particles, the jig has yielded product quality (grade and
contaminates) equivalent to that yielded by alternative technologies processing
larger particles. See "--Target Markets For the Jig" and "-- Competition -- The
Jig".
Several prototype and demonstration jigs have been built and tested by
Altair and previous owners of the jig. Our Series 12 Jig stands about six feet
tall, requires floor space of about 25 square feet and weighs approximately
2,000 pounds. Our Series 30 Jig stands about 10 feet tall, requires floor space
of about 54 square feet and weighs approximately 7,000 pounds. Recently
constructed jigs have been mounted on metal frames along with jig auxiliary
equipment--pulse water pump and tank and control panel--for transport by truck
and rapid on-site installation. Continued field testing of the jig is being
undertaken, as resources are available, to increase the volume capacity,
identify any design problems that may reside in the jig technology, evaluate the
jig's ability to perform sustained operations, determine the potential for
downtime during such operations, estimate the anticipated maintenance costs
associated with continued operations and identify design improvements for
specific applications. There can be no assurance that the testing program will
be successful for all applications or that testing will demonstrate the jig to
be economically attractive to end users. See "--Factors That May Affect Future
Results."
We have conducted preliminary testing of our Series 30 Jig at a mineral
recovery plant operated by a large heavy mineral sand producer located in
northern Florida. Results of the testing indicate that the Series 30 Jig is
capable of producing separation results comparable in efficiency to those of the
Series 12 Jig for zircon concentrates. (Results of tests using the Series 12 Jig
are discussed in "Target Markets for the Jig" below). The Series 30 Jig,
however, is designed to be capable of processing 500 tons of solids per day, or
more than four times the throughput capacity of the Series 12 Jig. The volumes
of solids per day that the Series 30 and Series 12 Jigs are actually capable of
processing have not been established through testing; however, we expect that
continued testing will confirm that the two models can process the volumes they
have been designed to process. We have also begun design work for a larger jig
that would have over twice the processing capacity of the Series 30 Jig. See "
- -- Research, Testing and Development." Such increased capacity would enhance the
jig's commercial potential for high volume applications such as coal washing and
recovery of iron ore fines. Also, multiple units might be used in series or
parallel configurations to process high volume operations.
10
Preliminary demonstration tests conducted by Altair and a previous
owner of the Jig suggest that the jig may be commercially viable in a number of
applications, including:
o Recovery of ultra fine gold from waste streams or former tailings;
o Recovery of zircon, rutile, ilmenite, leucoxene, and other
valuable fractions from heavy mineral sand operations,
especially from finely sized waste piles;
o Sulfur and ash removal from fine coal;
o Recovery of tin and iron ore fines from fine tailings;
o Concentration of heavy minerals, such as anatase, aparite,
barite, cassiterite, chromite, columbite, industrial diamonds,
fluorite, various garnets, monazite, tantalite and wolframite;
and
o Remediation of nuclear waste.
Target Markets for the Jig. Although we believe that, in the long
run, the jig may potentially be useful for a number of applications, we believe
that the most promising market for the jig in the short run is for use in
processing of heavy mineral sands in order to recover heavy minerals,
particularly zircon and titanium.
The primary valuable minerals produced from heavy mineral sands are
titanium and zircon. Titanium is used primarily as a basic component of titanium
dioxide, a pigment used principally as a whitener and opacifier for paper,
plastics, and paint. Zircon is used primarily for foundry molds and in the
manufacture of certain types of glass and ceramics. We believe the domestic and
international markets for both of these products are significant and well
established. Both are commodities traded in bulk, usually under long-term
contracts, and are also sold in 50-100 lbs. bags, usually traded as a
spot-priced product. The U.S. Geological Survey has reported that the value of
titanium mineral concentrates consumed in the United States in 2000 was
approximately $530 million. The U.S. Geological Survey estimates zirconium
production for the United States at approximately 100,000 metric tons in 2000,
representing a market value of approximately $34 million. There can be no
assurance that testing will demonstrate that the jig can economically extract
heavy minerals from heavy minerals sands or that the jig will prove attractive
to end users.
Verification testing with the Series 12 Jig suggests the jig's
potential for recovering zircon from heavy mineral sand dry mill tails in
Florida. In Phase 1 and 2 trials conducted by Altair involving separation of
commercial grade zircon products from mineral sands, the Series 12 Jig withdrew
a larger portion of zircon from the feed ore than other mineral sands processing
equipment in use today. In tests on zircon/alumina silicate feeds conducted by
Altair, the Series 12 Jig has yielded greater than 90% zircon concentrates and
recovered up to 75% of the zircon fed to the unit. Initial testing of the Series
30 Jig on zircon/alumina silicate feeds produced results which were generally
equivalent to the Series 12 Jig. See "--Plan of Operation." We have also
conducted tests of the Series 12 jig at our Reno test facility. Fine
titanium-bearing heavy mineral sands were processed through the jig with
resulting titanium recovery rates of 86% and heavy mineral grades of 80%.
Research, Testing and Development of the Jig. Field testing to date
suggests that the jig possesses the ability to process continuous tonnage
throughput in several applications. The jig has multiple operating parameters,
primarily rotational speed, pulsing pressure, and screen characteristics, which
must be adjusted to fit the processing requirements of the particular feed
11
stream being treated. We believe that more extensive testing is needed to
identify the most efficient operating parameters for specifically identified
applications. Further, demonstration of sustained operation is critical to
marketing efforts. We are assessing our options for furthering development of
the jig and may consider selling the jig technology or licensing it to others.
In the meantime, we will continue development work on a limited basis utilizing
available resources. Such development work will likely focus on equipment design
and amenability testing of mineral ores using Series 12 and Series 30 Jigs
located in Northern Florida and our test facility in Reno, Nevada. We also
intend to incorporate the jig into the pilot plant testing process at our
Tennessee mineral property for use in the recovery of titanium and zircon.
Jig Technology and Proprietary Rights. In operation, the jig utilizes a
combination of standard mechanical jig and centrifugal technologies. Without
having tested the jig in sustained, commercial operations, we believe production
models of the jig, if completed, will be capable of sustaining high reliability
and low maintenance costs in a production environment. Use of the jig requires
no chemical additives. .
A conventional jig separates a slurry of mineral particles as it flows
across the top of a screen. Water is periodically pulsed up through the screen
to eliminate interparticle friction and allow differential settling according to
the variations in the net specific gravities of the ore. Heavier minerals are
allowed to pass downward through the screen while lighter materials flow across
the screen to a discharge point. The jig operates according to conventional jig
principles except that the screen surface is cylindrical and is rotated to
subject the particles to centrifugal forces. As currently designed, materials to
be processed by the jig are introduced into the top of the jig in a slurry mix
with water. The slurry is diffused across the top of the interior of a vertical
cylindrical screen which is rotating. Water is pulsed through the screen
allowing differential separation in the slurry material. Heavy particles pass
through the screen, are collected, and exit the machine in a "concentrate"
stream. Lighter particles flow down the screen interior, are collected and exit
out the bottom of the machine in a separate "tails" stream.
Initial patents related to the concept of the jig as a whole were
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These patents expired on various dates between May 1999 and December 2000. A
series of second patents with respect to the process by which water is pulsed
through the cylindrical screen on the jig, a critical component differentiating
the jig from competing products, have been issued in the United States, South
Africa, Japan, Europe, Australia, Canada, United Kingdom, Germany and France.
These patents expire on various dates between January 2010 and January 2011. A
third series of patents with respect to an efficiency enhancing component of the
jig have been issued in the United States, Europe, Australia, Japan, South
Africa, Canada and Brazil. These patents have expiration dates between April and
November 2018.
Competition--the Jig.
--------------------
Alternative Technologies. Various mineral processing technologies
perform many functions similar or identical to those for which the jig is
designed. See "Factors That May Affect Future Results--Competing Products and
Alternative Technologies." Minerals processing technologies are generally
predicated on the physical and chemical characteristics of the materials being
processed. A minerals processor may exploit contrasts in size, specific gravity,
hardness, magnetic susceptibility, electrical conductivity, and similar
characteristics to selectively extract and concentrate mineral constituents.
Minerals processors also exploit variations in chemical reactivity and molecular
affinity to selectively separate minerals.
The jig competes in an arena in which particle specific gravity is the
primary criteria for particle segregation and capture. Competing technologies in
this arena include the following:
12
Spirals and Cones. To separate out valuable particles with a spiral or
cone, a mineral processor runs a sand-size feed slurried in water
through a tilted trough (spiral) or over a convex surface (cone). In
this process, fine-sized particles tend to "float" and not settle as
quickly as larger particles. The difference in settling speed permits
the mineral processor to separate out and extract the more valuable
heavy particles. Spirals and cones are most effective in feed sizes
larger than 150 mesh.
Froth Flotation Devices. To separate minerals using a froth floatation
device, a processor introduces chemical agents into a pool of mixed
particles, which agents attach to certain sulfides. Once attached to
the chemical agents, the sulfides float to the surface. The froth
flotation method can be effective on particles 200 mesh or smaller in
size.
Heavy Media Separation. Heavy media separation is a process in which a
feed containing both dense and light particles is fed into a solution
whose specific gravity is midway between the particles to be separated.
The light particles float to the surface of the solution, while the
heavy particles sink. Heavy media separation is effective primarily in
the removal of ash from coal and in small-scale analytic laboratory
applications.
We believe that, in certain applications, the jig may prove more
efficient, cost effective, or adaptable than spirals and cones, froth flotation
devices, or heavy media separation devices. Nevertheless, results from further
tests or actual operations may reveal that these alternative technologies are
better adapted to any or all of the uses for which the jig is intended.
Moreover, regardless of test results, consumers may view any or all of such
alternative technologies as technically superior to, or more cost effective
than, the jig.
Competing Jig-Like Products. We believe the jig currently
faces several forms of competition in the commercial segregation of dense
particles contained in feeds between 150 and 400 mesh, including the Kelsey jig,
Falcon concentrators and the Knelsen batch concentrator unit, which are
currently being used worldwide. Another centrifugal jig device, the Kelsey jig,
has been developed in Australia subsequent to the invention of the jig. The
Kelsey jig is more complicated in design than the jig, which we believe makes it
more expensive to manufacture, operate and maintain in a production environment.
According to the Kelsey jig's manufacturer, Geo Logics Pty. Ltd., Kelsey jigs
are in service at 25 plants worldwide. In addition, Falcon, a Canadian company,
produces a concentrator which is used mainly for pre-concentration and
scavenging. Their principal applications to date have been in the gold and
tantalum industries. There also exists a batch concentrator known as the Knelsen
Bowl, which we believe is best suited to small volumes. (A batch concentrator
differs from the jig in that it process a finite "batch" of material, is
completely emptied, and then processes a completely new finite batch, while the
jig processes a continuous flow of materials). Knelsen Bowls have been installed
in various mining applications, primarily gold, throughout the world. Both the
Falcon and Knelson concentrators utilize different technologies than the
technology employed by the jig.
Altair is a small player in an industry comprised of major mining
companies possessing tremendous capital resources and we are an insignificant
competitive factor in the industry. There is no assurance that competitors, many
of whom may have significant capital and resources, will not develop or are not
now in the process of developing competitive equipment that may be functionally
or economically superior to our equipment.
13
Business Development--the Jig. We have concluded that, in the
foreseeable future, our limited human and financial resources can most
effectively be utilized in the development of the titanium processing assets and
titanium processing technology and the Tennessee mineral property. Consequently,
we are assessing our options for furthering the development of the jig and may
consider selling the jig technology or licensing it to others who have adequate
resources to complete development of the jig, establish marketing and
distribution channels and initiate manufacturing. In the meantime, we expect to
continue development work, primarily equipment design, on a limited basis.
Subsidiaries.
- -------------
Altair International Inc.1 was incorporated under the laws of the
province of Ontario, Canada in April 1973. Altair currently has three
wholly-owned subsidiaries, Fine Gold Recovery Systems, Inc., a Nevada
corporation ("Fine Gold"), Mineral Recovery Systems, Inc., a Nevada corporation
("MRS"), and 660250 Ontario Limited, an Ontario Corporation, and two indirect
wholly-owned subsidiaries, Altair Technologies, Inc., a Nevada corporation, and
Tennessee Valley Titanium, Inc., a Nevada corporation.
Fine Gold was acquired by Altair in April 1994. Fine Gold is, for
accounting purposes, a development stage company with no operating revenues
earned to date. Fine Gold acquired the intellectual property associated with the
jig in 1996. Another wholly-owned subsidiary, formerly known as Carlin Gold
Company, is now operated under the name Mineral Recovery Systems, Inc. Altair
intends that Fine Gold will hold and maintain jig technology rights, including
patents, and will enter into a royalty arrangements to allow MRS to develop and
commercially utilize the jig.
MRS was incorporated by Altair in April, 19872. MRS previously has been
involved in the exploration for minerals and development of unpatented mining
claims in Nevada, Oregon and California. All mining claims have now been
abandoned. Altair currently intends that MRS will arrange for the manufacture of
the jig for commercial sales, rental or royalty arrangements with end users. In
addition, MRS currently holds, directly or indirectly, all of Altair's interest
in the Tennessee mineral property, and Altair intends that MRS will continue to
lease or acquire and develop mineral properties in the future, particularly
properties that contain mineral resources that may be processed with the jig.
Altair Technologies, Inc. was incorporated in 1998 and holds all of the
Company's interest in our titanium pigment processing technology and related
assets. The remaining 100% owned subsidiaries do not presently have any assets
or operations.
- -------------------
1 The Company was incorporated in April 1973 under the name Diversified Mines
Limited, which was subsequently changed to Tex-U.S. Oil & Gas Inc. in February
1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold Company
Inc. in July 1988, to Altair International Gold Inc. in March 1994, and to
Altair International Inc. in November 1996.
2 MRS was formerly known as Carlin Gold Company. The name change was effective
in June 1996.
14
Government Regulation and Environmental Concerns.
- -------------------------------------------------
Government Regulation. Our exploration of the Tennessee mineral
property, testing of the jig, and operation of the titanium pigment processing
facility are, and any future testing, operation, construction or mining
activities of Altair will be, subject to a number of federal, state, and local
laws and regulations concerning mine and machine safety and environmental
protection. Such laws include, without limitation, the Clean Air Act, the Clean
Water Act, the Resource Conservation and Recovery Act, and the Comprehensive
Environmental Response Compensation Liability Act. Such laws require that we
take steps to, among other things, maintain air and water quality standards,
protect threatened, endangered and other species of wildlife and vegetation,
preserve certain cultural resources, and reclaim exploration, mining and
processing sites.
Compliance with federal, state, or local laws or regulations represents
a small part of our present budget; nevertheless, continued compliance may be
extremely costly, especially if we actually commence extraction operations on
the Tennessee mineral property. If we fail to comply with any such laws or
regulations, a government entity may levy a fine on us or require us to take
costly measures to ensure compliance. Any such fine or expenditure may adversely
affect our development.
We are committed to complying with and, to our knowledge, are in
compliance with all governmental regulations. We cannot, however, predict the
extent to which future legislation and regulation could cause us to incur
additional operating expenses, capital expenditures, and/or restrictions and
delays in the development of our products and properties.
Environmental Regulation and Liability. Any proposed mining or
processing operation on the Tennessee mineral property, at the titanium pigment
processing facility or any other property acquired by us will be subject to
federal, state, and local environmental laws. Under such laws, we may be jointly
and severally liable with prior property owners for the treatment, cleanup,
remediation, and/or removal of substances discovered on the Tennessee mineral
property or any other property used by us, which are deemed by the federal
and/or state government to be toxic or hazardous ("Hazardous Substances").
Courts or government agencies may impose liability for, among other things, the
improper release, discharge, storage, use, disposal, or transportation of
Hazardous Substances. We might use Hazardous Substances and, although we intend
to employ all reasonably practicable safeguards to prevent any liability under
applicable laws relating to Hazardous Substances, companies engaged in mineral
exploration and processing are inherently subject to substantial risk that
environmental remediation will be required.
Employees.
- ----------
The business of Altair is currently managed by Dr. William P. Long,
President and Chief Executive Officer of the Company and Mr. C. Patrick Costin,
Vice President of the Company and President of MRS and Fine Gold. In addition,
we employ a Chief Financial Officer, a President of Altair Technologies, Inc.
and 21 additional employees. Aside from Dr. Long, Mr. Costin, the Chief
Financial Officer, and the President of Altair Technologies, Inc., we have no
employment agreements with any of our personnel.
On January 1, 2001 we hired fourteen former BHP employees who had been
involved in developing the titanium processing technology, and we also hired a
general counsel. During 2001, we expect to hire sales, marketing and production
employees for the titanium pigment processing business. The quantity and timing
of new hires will be dependent on business activity. We do not otherwise
anticipate that the number of Company employees will significantly increase
until we have sufficient sales and business activity to warrant it.
15
Our future success will depend, in part, on our ability to attract and
retain highly qualified technical, marketing and management personnel. There is
no assurance we will be successful in retaining or attracting highly qualified
individuals in key positions. See "Factors That May Affect Future Results - We
are Dependent on Key Personnel."
Where You Can Find More Information
- -----------------------------------
We file annual, quarterly, and current reports, proxy statements, and other
information with the SEC. You may read and copy any reports, statements, or
other information that we file at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the Public Reference Room. The SEC also maintains an
Internet site (http://www.sec.gov) that makes available to the public reports,
proxy statements, and other information regarding issuers, such as Altair, that
file electronically with the SEC.
Our common shares are quoted on the Nasdaq National Market. Reports, proxy
statements and other information concerning Altair can be inspected and copied
at the Public Reference Room of the National Association of Securities Dealers,
1735 K Street, N.W., Washington, D.C. 20006.
Enforceability of Civil Liabilities Against Foreign Persons.
- ------------------------------------------------------------
We are an Ontario corporation, and a majority of our directors are
residents of Canada. In addition, certain of our experts (including Canadian
legal counsel) are located in Canada. As a result, investors may be unable to
effect service of process upon such persons within the United States and may be
unable to enforce court judgments against such persons predicated upon civil
liability provisions of the United States securities laws. It is uncertain
whether Canadian courts would (i) enforce judgments of United States courts
obtained against us or such directors, officers or experts predicated upon the
civil liability provisions of United States securities laws or (ii) impose
liability in original actions against Altair or its directors, officers or
experts predicated upon United States securities laws.
Glossary of Terms.
- ------------------
Amenability means responsiveness of an ore deposit to processing.
Anatase means one of three naturally occurring mineral phases of TiO2
(along with rutile and brookite). Anatase particles have a tetragonal crystal
structure.
Anode catalyst means the substance that activates the oxidizing
reaction at the negative electrode (fuel side) of a solid oxide fuel cell.
Ash means inorganic residue remaining after coal combustion. Ash is an
undesirable component of coal because it reduces thermal value and produces a
waste product after combustion.
Beneficiate means to improve the grade of ore by processing.
Cathode catalyst means the substance that activates the reducing
reaction at the positive electrode (air side) of a solid oxide fuel cell.
Centrifugal force means the component of force on a body in curvilinear
motion that is directed away from the axis of rotation.
16
Coal washing means processing of pulverized coal to remove ash and
pyrite.
Ductility means the property of solid material that undergoes more or
less plastic deformation before it ruptures.
Environmental remediation means removal of harmful mineral particles
from a site previously altered by human activities.
Heavy minerals sands means beach or dune sands which contain a small
fraction of heavy particles. Heavy mineral sands are commercially mined to
produce titanium minerals and zircon.
Ilmenite means a titanium-bearing oxide mineral containing variable
percentages of iron and used as a raw material in the production of titanium
pigments.
Iron ore fines means particles of iron ore, usually less than 1
millimeter in diameter.
Mesh means one of the openings or spaces in a screen. The value (size)
of the mesh is given as the number of openings per linear inch.
Micron means one millionth of a meter. One micron equals 1000
nanometers.
Mill means a building with machinery for processing ore. Dry mill
refers to heavy minerals sand processing of dry materials. Wet mill refers to
heavy minerals sand process of material that are mixed with water in slurry.
Mineralized Deposit or Mineral Deposit means a mineralized body which
has been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metals. Such a deposit does
not qualify as a reserve until a comprehensive evaluation based upon unit cost,
grade, recoveries and other material factors conclude legal and economic
feasibility.
Placer means deposits of sand, gravel and other detrital or residual
material containing a valuable mineral which has accumulated through weathering
and natural mechanical concentration processes. A placer mine is an operation
that recovers certain valuable minerals based on differences in specific
gravity.
Photocatalytic means a process by which light frequencies activate the
catalytic nature of a substrate.
Pyrite means a yellowish-brown mineral sulfide containing iron and
sulphur. Pyrite is an undesirable component of coal because sulphur dioxide gas
is released when it is burned with coal.
Rutile means one of three naturally occurring mineral phases of TiO2
(along with anatase and brookite). Rutile particles have a tetragonal crystal
structure.
Specific gravity means the ratio of the mass of a solid or liquid to
the mass of an equal volume of water at a specified temperature.
Tails or tailings means those portions of washed ore that are regarded
as too poor to be treated further, as distinguished from material (concentrates)
that is to be smelted or otherwise utilized.
17
Forward-looking Statements.
- ---------------------------
This Form 10-K 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 the following
section and other cautionary statements throughout this Form 10-K and our other
filings with the 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 Form
10-K 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.
Among the key factors that may have a direct bearing on our operating
results are risks and uncertainties described under "Factors That May Affect
Future Results," including those attributable to the absence of operating
revenues or profits, uncertainties regarding the development and
commercialization of the jig, development risks associated with the Tennessee
mineral property, risks related to our proposed development and exploitation of
our titanium processing technology and titanium processing assets and
uncertainties regarding our ability to obtain capital sufficient to continue our
operations and pursue our proposed business strategy.
Factors that May Affect Future Results.
- ---------------------------------------
We have not generated any operating revenues or profits.
- --------------------------------------------------------
We are a development stage company. To date, we have not generated
revenues from operations or realized a profit. We are presently investing
substantial resources in the testing and development of the jig, the exploration
of the Tennessee mineral property, and the development and commercialization of
our titanium processing technology. There can be no assurance that the jig, the
Tennessee mineral property, our titanium processing technology or any other
project undertaken by us will ever enable Altair to generate revenues or that we
will at any time realize a profit from operations.
We may continue to operate at a net loss.
- ------------------------------------------
We have experienced a loss from operations in every fiscal year since
our inception. Our losses from operations in 1999 were $____________ and losses
from operations in 2000 were $___________. Although we expect to begin product
sales of titanium dioxide nanoparticles in the first half of 2001, total sales
will probably not be at a level sufficient to produce a positive net income for
the year. We will continue to experience a net operating loss until, and if, our
titanium processing technology, the jig and/or the Tennessee mineral property
begin generating revenues. Even if our titanium processing technology and
titanium processing equipment, the jig or the Tennessee mineral property begin
generating revenues, the revenues may not exceed the costs of production.
Accordingly, we may not ever realize a profit from operations.
18
We may not be able to raise sufficient capital to meet present and future
obligations.
- --------------------------------------------------------------------------------
As of December 31, 2000, we had unrestricted cash and cash equivalents
of $1,335,729. We believe that the unrestricted cash we currently possess,
together with the collection of $561,300 of receivables at December 31, 2000
that were collected during the first quarter of 2001, is sufficient to fund our
basic operations through June 30, 2001. In the absence of revenue, this amount
of capital will likely prove insufficient to fund development work necessary to
complete the testing necessary to place our titanium processing technology into
continuous operation in a commercial setting. In addition, we will likely need
additional capital to complete testing and development of the jig or exploration
of the Tennessee mineral property. If we determine to construct and operate a
mine on the Tennessee mineral property, we will need to obtain a significant
amount of additional capital to complete construction of the mine and
commencement of operations.
In addition, we may need additional capital for necessary or
discretionary acquisitions of equipment, properties, intellectual property
rights or companies. General and industry market factors or other unforeseen
events may also affect our use of and need for capital.
If we need additional capital, we may not to be able obtain the amount
of additional capital needed or may be forced to pay an extremely high price for
capital. Factors affecting the availability and price of capital may include,
without limitation, the following:
o market factors affecting the availability and cost of capital
generally;
o our performance;
o the size of our capital needs;
o the market's perception of mining, technology and/or minerals stocks;
o the economics of projects being pursued;
o industry perception of our ability to recover minerals with the jig or
titanium processing technology; and
o the price, volatility and trading volume of our common shares.
If we are unable to obtain sufficient capital or are forced to pay a high price
for capital, we may be unable to place the titanium processing technology into
continuous operation, complete testing and production of the jig, complete
exploration and development of the Tennessee mineral property, or otherwise
pursue and fully exploit existing or future development opportunities. In
addition, because of their size, resources, history and other factors, certain
of our competitors may have better access to capital than we do and, as a
result, may be able to exploit opportunities more rapidly, easily or thoroughly
than we are.
Unless the exchangeable term note is earlier redeemed for cash, the common
shares issued upon exchange of the exchangeable term note may dilute existing
shareholders and cause downward pressure on our stock price.
We have issued a $7,000,000 10% Asset-Backed Exchangeable Term Note.
Under the Exchangeable Term Note, we are required to make monthly payments in
the principal amount of $291,667 plus accrued interest. If we do not make such
monthly payment in cash by the 15th of each month, the holder of the
Exchangeable Term Note has the right to exchange the monthly payment amount into
common shares at the applicable exchange price. The exchange price for any date
is the lesser of (a) a fixed exchange price of $3.00, subject to adjustment, and
(b) the average of the lowest three daily trading prices of the common shares
during the 15 trading days ending on the day before an exchange right is
exercised.
19
If the average of the lowest three daily trading prices during the 15
trading days ending on the day before an exchange rate is exercised is less than
the $3.00 (or the adjusted fixed exchange price), the number of shares issuable
upon exchange of the monthly payment amount increases significantly as the
market price of our common shares declines. A decline in the market price of our
common shares could be caused or exacerbated by the exchange of the monthly
payment amount and subsequent sale of the common shares issuable upon such
exchange. A decline in the market price of our common shares could also
encourage short sales on the part of the holder of the Exchangeable Term Note or
others, which short sales could further depress the market price of our common
shares. The exchange of the Exchangeable Term Note may cause substantial
dilution to existing shareholders.
In order to illustrate the relationship between the market price of our
common shares and the number of common shares issuable upon exchange of the
monthly payment amounts on the Exchangeable Term Note, the following table sets
forth how many additional common shares would be issued upon exchange of the
entire exchangeable amount of the Exchangeable Term Note if the average of the
lowest three daily trading prices during the 15 trading days ending on the day
before an exchange rate is exercised were (a) $3.00 or greater, (b) $2.50 per
share, (c) $2.00 per share, (d) $1.00 per share, and (e) $.50 per share. Such
prices are selected for illustration purposes only and do not reflect our actual
estimate of the average of the lowest three daily trading prices during any 15
trading day period. For purposes of the following table, we assume, among other
things, that shareholder approval is obtained for the issuance of the Exchange
Term Note, that no principal or interest is redeemed with cash or prepaid, that
all exchange rights are exercised on the date of accrual and that no penalties
or premiums are required to be paid.
Shares issuable upon exchange of the total amount exchangeable under
the Exchangeable Term Note if the average of the lowest three daily
trading prices of the common shares ending on the day before an
exchange rate is exercised is as follows:
$3.00 or Greater $2.50 $2.00 $1.00 $.50
2,576,388 3,091,666 3,864,583 7,729,166 15,458,332
We have pledged substantial assets to secure a loan.
- ----------------------------------------------------
We have pledged all of the intellectual property and common stock of Altair
Technologies, Inc., our second-tier wholly-owned subsidiary, to secure the
$7,000,000 10% Asset-backed Exchangeable Term Note. Altair Technologies, Inc.
owns and operates the titanium processing technology we acquired in 1999. The
Exchangeable Term Note is also secured by a pledge of the common stock of
Mineral Recovery Systems, Inc., which owns and operates our leasehold interests
in the Camden, Tennessee area. If we default on the Exchangeable Term Note,
severe remedies will be available to the holder of the Exchangeable Term Note,
including immediate seizure and disposition of all pledged assets.
Our operations are and will be subject to extensive government regulation.
- --------------------------------------------------------------------------
Our exploration of the Tennessee mineral property, testing of the jig,
and operation of the titanium pigment processing facility are, and any future
testing, operation, construction or mining activities of Altair will be, subject
to a number of federal, state, and local laws and regulations concerning mine
and machine safety and environmental protection. Such laws include, without
limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, and the Comprehensive Environmental Response Compensation
Liability Act. Such laws require that we take steps to, among other things,
maintain air and water quality standards, protect threatened, endangered and
other species of wildlife and vegetation, preserve certain cultural resources,
and reclaim exploration, mining and processing sites. These laws are continually
changing and, as a general matter, are becoming more restrictive.
20
Compliance with federal, state, or local laws or regulations represents
a small part of our present budget; nevertheless, continued compliance may be
extremely costly, especially if we actually commence mining operations on the
Tennessee mineral property. If we fail to comply with any such laws or
regulations, a government entity may levy a fine on us or require us to take
costly measures to ensure compliance. Any such fine or expenditure may adversely
affect our development.
We are dependent on key personnel.
- ----------------------------------
Our continued success will depend to a significant extent on the
services of Dr. William P. Long, our President and Chief Executive Officer, and
Mr. C. Patrick Costin, our Vice President and President of Fine Gold and MRS.
The loss or unavailability of Mr. Long or Mr. Costin could have a material
adverse effect on us. We do not carry key man insurance on the lives of such key
officers.
In addition to the individuals identified above, we employ a Chief
Financial Officer, the President of Altair Technologies, Inc. and 21 additional
employees. Aside from Dr. Long, Mr. Costin, the Chief Financial Officer, and the
President of Altair Technologies, Inc., we have no employment agreements with
any of our personnel. Competition for such personnel is intense, and we can
provide no assurance that we will be able to attract and maintain all personnel
necessary for the development and operation of our business.
We may fail to identify or be unable to consummate important strategic
transactions.
- --------------------------------------------------------------------------------
We are currently evaluating, and plan to continue to evaluate,
licensing or acquiring additional mining technologies, products or properties.
We also plan to remain open to acquiring, or developing strategic relations with
other companies that have products, manufacturing capabilities, or other
qualities that are compatible with our business objectives. We must compete for
attractive acquisition or strategic alliance candidates with numerous other
companies, many of whom have significantly greater financial and technological
resources than we do. In addition, to the extent we are in a competitive
position, we may fail to identify or consummate acquisition or strategic
alliance opportunities.
Even if we identify and complete such alliances, consummation thereof
may require us to incur additional debt, amortize expenses related to goodwill
and intangible assets, or issue dilutive equity securities, all of which could
adversely affect our operating results or financial condition. In addition, a
failure by Altair to integrate its operations with that of an ally or
acquisition target may adversely affect operating results. Disruptions in
operations are likely to be especially severe during the fiscal quarters
immediately following any acquisition or alliance transaction, while the
operations of the acquired or combined business are being integrated into our
operations.
We may issue substantial amounts of additional shares without stockholder
approval.
- --------------------------------------------------------------------------------
Our Articles of Incorporation authorize the issuance of an unlimited
number of common shares. All such shares may be issued without any action or
approval by our stockholders. In addition, we have two stock option plans which
have potential for diluting of the ownership interests of our stockholders. The
issuance of any additional common shares would further dilute the percentage
ownership of Altair held by existing stockholders.
21
The market price of our common shares is extremely volatile.
- ------------------------------------------------------------
Our common shares have been listed on the Nasdaq National Market since
January 26, 1998. Trading in our common shares has been characterized by a high
degree of volatility. See "Price Range of Common Shares." Trading in our common
shares may continue to be characterized by extreme volatility for numerous
reasons, including the following:
o Uncertainty regarding the viability of the titanium processing
technology;
o The continued absence of any revenues from the jig, the Tennessee
mineral property or the titanium processing technology;
o Uncertainty regarding the viability of mining the Tennessee mineral
property;
o Continued dominance of trading in our common shares by a small number
of firms;
o Positive or negative announcements by us or our competitors;
o Industry trends, general economic conditions in the United States or
elsewhere, or the general markets for equity securities, minerals, and
commodities;
o The announcement of financial or research and development results that
differ from analyst and investor expectations, regardless of our
health;
o Significant changes in our future prospects; and
o Speculation by short sellers our common shares or other persons (such
as the holders of the Exchangeable Term Note) who stand to profit from
a rapid increase or decrease in the price of our common shares.
We have never declared a dividend and may not for the foreseeable future.
- -------------------------------------------------------------------------
We have never declared or paid dividends on our common shares.
Moreover, we currently intend to retain any future earnings for use in our
business and, therefore, do not anticipate paying dividends on our common shares
in the foreseeable future.
We have not yet confirmed the viability and effectiveness of the processing
technology and processing assets.
- --------------------------------------------------------------------------------
The titanium processing technology and titanium processing equipment
have not been used by Altair or anyone else in a commercial setting, and may
prove ineffective or unreliable when subjected to continuous use. We have used
the titanium processing technology to effectively produce sample quantities of
TiO2 nanoparticles but have not completed testing of product applications. The
titanium processing technology may prove wholly or partially ineffective when
applied on a continuous basis in a commercial setting. In addition, the titanium
processing equipment may break down, be costly to maintain or prove unreliable
when operated on a continuous basis in a commercial setting. If the titanium
processing technology proves ineffective or the titanium processing equipment
proves unreliable in a commercial setting, we may be unable to recoup the
investment in the titanium processing technology and titanium processing
equipment.
22
Nanoparticles produced using the processing technology may be perceived as
substandard or not fit for a particular use.
- --------------------------------------------------------------------------------
In the short run, we plan to use the titanium processing technology and
titanium processing equipment to produce TiO2 nanoparticles. We have not
previously produced or marketed TiO2 nanoparticles and, to date, have obtained
only a small order for TiO2 nanoparticles. The TiO2 nanoparticles and other
products produced using the titanium processing technology and titanium
processing equipment may be of inferior quality to alternative products or,
regardless of actual quality, may be perceived as lacking adequate quality or
reliability. In addition, even if TiO2 nanoparticles we produce are of adequate
quality for general use, they may have properties that make them unsuitable for
the particular use of a potential customer. Even if we are able to efficiently
produce TiO2 nanoparticles and other products using the titanium processing
technology and titanium processing equipment, we may not be able to sell such
products in the marketplace.
The current market for TiO2 nanoparticles is limited.
- -----------------------------------------------------
In the short run, we plan to use the titanium processing technology to
produce TiO2 nanoparticles. The uses for such nanoparticles are
limited--primarily cosmetics and surface coatings--and the market for such
nanoparticles is small, estimated at 3,800 tons per annum. Even if we are able
to effectively produce TiO2 nanoparticles and other products using the titanium
processing technology, we may not be able to profitably market such products for
any of the following reasons:
o there may be insufficient demand for such products;
o despite strong initial demand for such products, the market for such
products may contract or collapse as a result of a decrease in demand
for goods incorporating such mineral products, a worldwide or regional
financial crisis, or other unforeseen event;
o the increased supply of such products as a result of our entrance into
the market may cause the price to drop, reducing or eliminating
profitability;
o competing entities may begin producing, or increase their production of
nanoparticles, causing the price to drop or displacing potential sales.
o such products may be of inferior quality to alternative products or,
regardless of actual quality, may be perceived as lacking adequate
quality or reliability.
Our cost of production may exceed estimates.
- --------------------------------------------
We purchased the titanium processing technology and related titanium
processing equipment based on the belief that it will be able to produce TiO2
and other products more cheaply than many competitors. We have not, however,
produced any mineral products using the titanium processing technology and
titanium processing equipment on a commercial basis. Our actual costs of
production may exceed those of competitors and, even if our costs of production
are lower, competitors may be able to sell TiO2 and other products at a lower
price than is economical for Altair.
Pending patent applications may be denied or may provide inadequate protection.
- -------------------------------------------------------------------------------
BHP Minerals has filed numerous patent applications with the United
States Patent and Trademark Office with respect to the titanium processing
technology and has transferred the rights to such applications to Altair. Such
23
applications are being reviewed by the Patent and Trademark Office, and no
patents with respect to the titanium processing technology have been granted to
date. If the applications for any patents related to the titanium processing
technology are denied, the value of the titanium processing technology, and any
competitive advantage gained from our ownership of the titanium processing
technology, will be substantially diminished. We can provide no assurance that
pending patent applications will be granted.
In addition, persons in jurisdictions outside of the United States in
which no application has been filed, or which do not honor United States
patents, may develop and market infringing technologies. Also, the cost of
enforcing patents outside of North America, as well as other obstacles, may
limit our ability to enforce any patents related to the titanium processing
technology outside of the United States.
Use of the processing technology may lead to substantial environmental
liability.
- --------------------------------------------------------------------------------
Any proposed use of the titanium processing technology and titanium
processing equipment will be subject to federal, state, and local environmental
laws. Under such laws, we may be jointly and severally liable with prior
property owners for the treatment, cleanup, remediation and/or removal of
substances discovered at the leased Reno, Nevada facility or any other property
used by Altair that are hazardous substances. Courts or government agencies may
impose liability for, among other things, the improper release, discharge,
storage, use, disposal or transportation of hazardous substances. We might use
hazardous substances and, although we intend to employ all reasonably
practicable safeguards to prevent any liability under applicable laws relating
to hazardous substances, companies engaged in mineral exploration and processing
are inherently subject to substantial risk that environmental remediation will
be required.
Our Series 12 Jig is too small for most commercial uses.
- --------------------------------------------------------
To date, we have developed and tested a lower-capacity Series 12 Jig
and a higher-capacity Series 30 Jig. Test results on the Series 12 Jig, designed
to be capable of processing approximately 120 tons of solids per day, suggest
that commercial use of the Series 12 Jig is technically feasible. Nevertheless,
the designed capacity of the Series 12 Jig is too small for coal washing, heavy
minerals extraction, and most other intended applications of the jig, except use
in small placer gold mines or similar operations. Even if the Series 12 Jig
performs to design specifications in subsequent tests or at a commercial
facility, we believe that, because of its small capacity, the potential market
for the Series 12 Jig is limited.
Testing is incomplete on our Series 30 Jig.
- -------------------------------------------
The Series 30 Jig is designed to process approximately 500 tons of
solids per day. We believe that this designed capacity is sufficient for heavy
mineral sands processing and many other intended commercial applications.
Nevertheless, the Series 30 Jig may not prove attractive to potential end users.
Even if we are successful in leasing the Series 30 Jig to end users, the Series
30 Jig may not prove efficient, durable, or cost-effective enough to satisfy the
expectations of end users once operated in an uncontrolled environment. In
addition, the introduction of new technologies by competitors could render the
Series 30 Jig or larger Jig obsolete or unmarketable or require costly
alterations to make it marketable.
24
Performance of the jig in a commercial setting may not match test results.
- --------------------------------------------------------------------------
Although test results from controlled tests on the Series 30 Jig
suggest that it is capable of separating valuable heavy minerals from mineral
sands, the Series 30 Jig has not been operated as part of an actual commercial
mineral processing facility. When integrated into actual commercial operations,
the Series 30 Jig:
o may not be able to process sand at its design capacity;
o may not recover a commercially valuable end product at a commercial
viable rate when processing mineral sands;
o may break down frequently or otherwise be too costly to operate and
maintain;
o may be displaced or rendered obsolete by the introduction of competing
technologies or jigs and may be incompatible with developing mining or
extraction processes; and
o may be rendered obsolete by the absence of demand for heavy minerals or
other end product of processing.
The jig faces competition from alternative technologies.
- --------------------------------------------------------
The centrifugal jig process may not prove superior, either technically
or commercially, to alternative technologies. Various mineral processing
technologies perform many functions similar or identical to those for which the
jig is designed. Results from further tests or actual operations may reveal that
these alternative technologies are better adapted to any or all of the uses for
which the jig is intended. Moreover, regardless of test results, consumers may
view any or all of such alternative technologies as technically superior to, or
more cost effective than, the jig.
The jig faces competition from other jig-like products.
- -------------------------------------------------------
We believe that the jig currently faces several forms of competition in
the commercial segregation of dense particles contained in feeds between 150 and
400 mesh, including the Kelsey jig, Falcon concentrators and the Knelsen batch
concentrator unit, which are currently being used worldwide. Another centrifugal
jig device, the Kelsey jig, has been developed in Australia subsequent to the
invention of the jig. According to the Kelsey jig's manufacturer, Geo Logics
Pty. Ltd., Kelsey jigs are in service worldwide. In addition, Falcon, a Canadian
company, produces a small batch concentrator as well as a machine which is used
mainly for pre-concentration and scavenging. Their principal applications to
date have been in the gold and tantalum industries. There also exists a batch
concentrator known as the Knelsen Bowl. Knelsen units have been installed in
various mining applications, primarily gold, throughout the world. Competitors,
many of whom may have significant capital and resources, may develop, or be in
the process of developing, superior or less expensive alternatives to the jig.
25
The market for commodities that might be produced using the jig or extracted
from the Tennessee mineral property may collapse.
- --------------------------------------------------------------------------------
If the jig is successfully developed and manufactured, we intend to use
the jig, or lease the jig for use, to separate and recover valuable, heavy
mineral particles. Active international markets exist for gold, titanium, zircon
and many other minerals potentially recoverable with the jig. Prices of such
minerals fluctuate widely and are beyond our control. A significant decline in
the price of minerals capable of being extracted by the jig could have
significant negative effect on the value of the jig. Similarly, a significant
decline in the price of minerals being produced or expected to be produced on
the Tennessee mineral property could have a significant negative effect on the
viability of a mine or processing facility on either such property. In addition,
because we intend to market the jig primarily to mining companies, a general
economic downturn in the mining or mineral industries may have a material
adverse effect on Altair.
We are dependent upon others to manufacture the jig.
- ----------------------------------------------------
We currently contract on a per-unit basis with a machine shop located
in central Tennessee for assembly of the jig but have no long-term contract with
such entity. If we complete testing of the jig and develop a final production
model, we do not currently have the know-how or resources to establish our own
manufacturing facility. Management is considering options for manufacture of the
jig, including manufacturing under a long-term contract or through an exclusive
licensing arrangement or joint venture. We may not be able to obtain adequate
manufacturing capacity. Moreover, even if a manufacturer is found, we may not be
able to cost-effectively produce affordable, high-quality units capable of
sustaining continuous operations with low maintenance costs in a production
environment.
Certain patents for the centrifugal jig have expired and remaining patents may
be unenforceable.
- --------------------------------------------------------------------------------
Initial patents on the jig were issued in the United States, South
Africa, United Kingdom, Australia and Canada. These patents expired on various
dates between May 1999 and December 2000. A series of second patents have been
issued with respect to a critical component of the jig in the United States,
South Africa, Japan, Europe, Australia, Canada, United Kingdom, Germany and
France. These patents expire on various dates between January 2010 and January
2011. A third series of patents with respect to an efficiency enhancing
component of the jig have been issued in the United States, Europe, Australia,
Japan, South Africa, Canada and Brazil. These patents have expiration dates
between April and November 2018.
Persons in countries in which we have not patented the jig or certain
critical components may develop and market an infringing product. The cost of
enforcing patents outside of North America, and similar obstacles, may limit our
ability to enforce our patents and keep infringing products out of the market
for the jig.
We have not completed examining the feasibility of mining the Tennessee mineral
property.
- --------------------------------------------------------------------------------
The Tennessee mineral property is currently in the exploratory stage.
An independent consultant hired by Altair has completed a pre-feasibility study
on the Tennessee mineral property. Based on the positive results of such study,
we have determined to commence final feasibility testing of the Tennessee
mineral property.
26
Commenced during August 1998, final feasibility testing involves the
actual design, pricing, and analysis of equipment and facilities that would be
used to mine the Tennessee mineral property. To date, we have designed and
constructed a pilot test facility on the Tennessee mineral property. The
feasibility testing process is also expected to involve an examination of the
market for products produced at the pilot facility, applications for permits
necessary for any proposed full-scale mining facility and attempts to secure
financing of any proposed full-scale mining facility. If production at the pilot
plant and our marketing, permitting and financing efforts are successful, a mine
would not be operational for 24-36 months after financing is obtained. Our final
feasibility testing may indicate that the Tennessee mineral property does not
contain minable quantities of heavy minerals or that such deposits are not
amenable to large-scale, low-cost mining, as contemplated by Altair. Even if the
tests suggest that mining is economically feasible on the Tennessee mineral
property, we may be unable to obtain the capital, resources and permits
necessary to mine the Tennessee mineral property. Moreover, market factors, such
as a decline in the price of, or demand for, minerals recoverable at the
Tennessee mineral property, may adversely affect the development of mining
operations on such property.
We may be unable to obtain necessary environmental permits for the Tennessee
mineral property.
- --------------------------------------------------------------------------------
We have obtained all permits necessary for construction and operation
of our pilot facility on the Tennessee Mineral property. Nonetheless, these
permits relate only to the pilot facility, and, as set forth below, we will be
required to obtain additional, broader permits if we determine to commence
commercial mining on the Tennessee mineral property.
In order to begin construction and commercial mining on the Tennessee
mineral property, we may have to obtain additional federal, state and local
permits, none of which we have obtained. Because we have not yet commenced
design of a commercial mining facility in the Tennessee mineral property, we are
not in a position to definitively ascertain which federal, state and local
mining and environmental laws or regulations would apply to a mine on the
Tennessee mineral property. Nevertheless, we anticipate that compliance with the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
and the Comprehensive Environmental Response Compensation Liability Act would be
necessary if we determined to commence construction and operation of a mine on
the Tennessee mineral property.
In addition to these federal laws and regulations, we anticipate that,
if the Tennessee mineral property is developed, we will be required to obtain a
surface mining permit from the State of Tennessee under the Tennessee Mineral
Surface Mining Law of 1972. The application for such a permit must be preceded
by public notice and must include, among other things, a filing fee, a
reclamation and revegetation plan, and a bond to cover the costs of reclamation.
We expect that we will be required to obtain a National Pollution Discharge
Elimination System permit from the Tennessee Department of Environment and
Conservation. We can provide no assurance that we will be able to obtain any
such permit.
Any operations on the Tennessee mineral property may lead to environmental
liability.
- --------------------------------------------------------------------------------
Any proposed mining or processing operation on the Tennessee mineral
property, or any other property acquired by Altair, will be subject to federal,
state, and local environmental laws. Under such laws, we may be jointly and
severally liable with prior property owners for the treatment, cleanup,
remediation, and/or removal of substances discovered on either of the Tennessee
mineral property or any other property used by Altair, which are deemed by the
federal and/or state government to be toxic or hazardous ("Hazardous
Substances"). Courts or government agencies may impose liability for, among
other things, the improper release, discharge, storage, use, disposal or
transportation of Hazardous Substances. We might use Hazardous Substances and,
although Altair intends to employ all reasonably practicable safeguards to
prevent any liability under applicable laws relating to Hazardous Substances,
companies engaged in mineral exploration and processing are inherently subject
to substantial risk that environmental remediation will be required.
27
Item 2. Properties
We maintain a registered office at 56 Temperance Street, Toronto,
Ontario M5H 3V5. We do not lease any space for, or conduct any operations out
of, the Toronto, Ontario registered office. In addition, we lease 900 square
feet of office space at 1725 Sheridan Avenue, Suite 140, Cody, Wyoming 82414,
which serves as the corporate headquarters for Altair and its subsidiaries. Our
lease for the Cody, Wyoming office space may be terminated by either party on 30
days' prior written notice.
Altair Technologies Inc. leases 15,000 square feet of production,
laboratory, testing and office space at 204 Edison Way, Reno, Nevada, 89502. The
initial term of the lease expired on December 31, 2000, but is subject to
automatic renewal for six-month periods at inflation-adjusted rent until
terminated by Altair. The lease grants us a right of first refusal in the event
BHP intends to sell the building and property subject to the lease and includes
an agreement to negotiate in good faith with respect to our possible purchase of
such building and property.
Fine Gold and MRS lease 5,700 square feet of office space at 230 South
Rock Boulevard, Suite 21, Reno, Nevada 89502. The lease for the Reno, Nevada
offices expires on January 31, 2002. MRS leases approximately 1,550 square feet
of laboratory space at 7950 Security Circle, Reno, Nevada 89506, for its jig
testing operations. The test facility lease may be terminated by either party
upon eight weeks prior written notice. We believe that the existing offices and
test facilities of Altair and its subsidiaries are adequate for our current
needs. In the event that alternative or additional office space is required, we
believe we could obtain additional space on commercially acceptable terms.
The Tennessee mineral property consists of approximately 14,000 acres
of real property located near Camden, Tennessee, which MRS leases (or has
binding commitments to lease) from multiple owners of the real property. Such
leases grant MRS certain exclusive rights, including the right to explore, test,
mine, extract, process, and sell any minerals or other materials found on the
land, in exchange for the payment of minimum annual advanced royalty payments
prior to commencement of production on the properties (or after commencement of
production, to the extent production royalty payments do not equal nominal
royalty payments) and, thereafter, production royalty payments in an amount
equal to a percentage of the value of minerals mined and sold from the property.
See Note __ to the Consolidated Financial Statements for information regarding
present and future minimum advanced royalty payments. The leases typically are
for a minimum term of ten years, and may be extended indefinitely at MRS'
option, provided Altair is actively conducting exploration, development, or
mining operations. The leases are cancelable by MRS at any time, and are
cancelable by the lessor in the event MRS breaches the terms of the lease. The
mineralized deposit on the Tennessee mineral property has not yet proven to be a
reserve, and our operations and proposed plan with respect to it are exploratory
in nature. See "Item 1. Business--Tennessee Mineral Property." The Tennessee
mineral property is accessed by public roads and, to our knowledge, has not been
used in prior mining operations.
During 1999 and 2000, we incurred $___________ and $__________,
respectively, in exploration expenditures on the Tennessee mineral property.
Expenditures were incurred for construction of pilot plant facilities, leasehold
minimum advance royalty payments, auger hole drilling, sampling, sample analysis
and assay, geological and mineralized deposit characterization studies, and
other related exploration activities.
28
Item 3. Legal Proceedings
We are from time to time involved in routine litigation incidental to
the conduct of our business. We are currently not involved in any suit, action
or other legal proceedings, nor are we aware of any threatened suit, action or
other legal proceedings which management believes will materially and adversely
affect the business or operations of Altair or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to a vote of security holders during the
fourth quarter of the 2000 fiscal year.
PART II
Item 5. Market for the Common Shares and Related Shareholder Matters
Market Price
Our common shares are traded on the Nasdaq National Market under the
symbol "ALTI." The following table sets forth, for the periods indicated, the
high and low bid quotations for our common shares, as reported on the Nasdaq
National Market.
Fiscal Year Ended December 31, 1999 Low High
----------- -----------
1st Quarter $6.063 $10.188
2nd Quarter 4.000 6.875
3rd Quarter 3.531 5.094
4th Quarter 3.375 5.188
Fiscal Year Ended December 31, 2000 Low High
----------- -----------
1st Quarter $3.563 $9.250
2nd Quarter 2.000 5.375
3rd Quarter 1.000 4.469
4th Quarter 0.688 3.375
The quotations set forth above reflect inter-dealer prices, without retail
mark-up, mark down or commission and may not represent actual transactions. The
last sale price of our common shares, as reported on the Nasdaq National Market,
on March 15, 2001 was $2.75 per share.
Outstanding Shares and Number of Shareholders.
- ----------------------------------------------
As of March 15, 2001, the number of common shares outstanding was
19,510,488 held by 456 holders of record. In addition, as of the same date, we
have reserved 5,411,700 common shares for issuance upon exercise of options that
have been, or may be, granted under our employee stock option plans.
29
Dividends
- ---------
We have never declared or paid dividends on our common shares.
Moreover, we currently intend to retain any future earnings for use in our
business and, therefore, do not anticipate paying any dividends on our common
shares in the foreseeable future.
Transfer Agent and Registrar
- ----------------------------
The Transfer Agent and Registrar for our common shares is Equity
Transfer Services, Inc., Suite 420, 120 Adelaide Street West, Toronto, Ontario,
M5H 4C3.
Canadian Taxation Considerations
- --------------------------------
Dividends paid on common shares owned by non-residents of Canada are
subject to Canadian withholding tax. The rate of withholding tax on dividends
under the Income Tax Act (Canada) (the "Act") is 25%. However, Article X of the
reciprocal tax treaty between Canada and the United States of America (the
"Treaty") generally limits the rate of withholding tax on dividends paid to
United States residents to 15%. The Treaty further generally limits the rate of
withholding tax to 5% if the beneficial owner of the dividends is a U.S.
corporation which owns at least 10% of the voting shares of the Company.
If the beneficial owner of the dividend carries on business in Canada
through a permanent establishment in Canada, or performs in Canada independent
personal services from a fixed base in Canada, and the shares of stock with
respect to which the dividends are paid is effectively connected with such
permanent establishment or fixed base, the dividends are taxable in Canada as
business profits at rates which may exceed the 5% or 15% rates applicable to
dividends that are not so connected with a Canadian permanent establishment or
fixed base. Under the provisions of the Treaty, Canada is permitted to apply its
domestic law rules for differentiating dividends from interest and other
disbursements.
A capital gain realized on the disposition of common shares by a person
resident in the United States ("a non-resident") will be subject to tax under
the Act if the shares held by the non-resident are "taxable Canadian property."
In general, common shares will be taxable Canadian property if the particular
non-resident used (or in the case of a non-resident insurer, used or held) the
Common Stock in carrying on business in Canada or, pursuant to proposed
amendments to the Act, where at any time during the five-year period immediately
preceding the realization of the gain, not less than 25% of the issued and
outstanding shares of any class or series of shares of the Company were owned by
the particular non-resident, by persons with whom the particular non-resident
did not deal at arms' length, or by any combination thereof. If common shares
constitute taxable Canadian property, relief nevertheless may be available under
the Treaty. Under the Treaty, gains from the alienation of common shares owned
by a non-resident who has never been resident in Canada generally will be exempt
from Canadian capital gains tax if the shares do not relate to a permanent
establishment or fixed base which the non-resident has or had in Canada, and if
not more than 50% of the value of the shares was derived from real property
(which includes rights to explore for or to exploit mineral deposits) situated
in Canada.
Item 6. Selected Financial Data
Omitted pursuant to Rule 12b-25.
30
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Omitted pursuant to Rule 12b-25.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have issued a $7,000,000 10% Asset-Backed Exchangeable Term Note.
Under the Exchangeable Term Note, we are required to make monthly payments in
the principal amount of $291,667 plus accrued interest. If we do not make such
monthly payment in cash by the 15th of each month, the holder of the
Exchangeable Term Note has the right to exchange the monthly payment amount into
common shares at the applicable exchange price. The exchange price for any date
is the lesser of (a) a fixed exchange price of $3.00, subject to adjustment, and
(b) the average of the lowest three daily trading prices of the common shares
during the 15 trading days ending on the day before an exchange right is
exercised.
If the average of the lowest three daily trading prices during the 15
trading days ending on the day before an exchange rate is exercised is less than
the $3.00 (or the adjusted fixed exchange price), the number of shares issuable
upon exchange of the monthly payment amount increases significantly as the
market price of our common shares declines. A decline in the market price of our
common shares could be caused or exacerbated by the exchange of the monthly
payment amount and subsequent sale of the common shares issuable upon such
exchange. A decline in the market price of our common shares could also
encourage short sales on the part of the holder of the Exchangeable Term Note or
others, which short sales could further depress the market price of our common
shares. The exchange of the Exchangeable Term Note may cause substantial
dilution to existing shareholders.
In order to illustrate the relationship between the market price of our
common shares and the number of common shares issuable upon exchange of the
monthly payment amounts on the Exchangeable Term Note, the following table sets
forth how many additional common shares would be issued upon exchange of the
entire exchangeable amount of the Exchangeable Term Note if the average of the
lowest three daily trading prices during the 15 trading days ending on the day
before an exchange rate is exercised were (a) $3.00 or greater, (b) $2.50 per
share, (c) $2.00 per share, (d) $1.00 per share, and (e) $.50 per share. Such
prices are selected for illustration purposes only and do not reflect our actual
estimate of the average of the lowest three daily trading prices during any 15
trading day period. For purposes of the following table, we assume, among other
things, that shareholder approval is obtained for the issuance of the Exchange
Term Note, that no principal or interest is redeemed with cash or prepaid, that
all exchange rights are exercised on the date of accrual and that no penalties
or premiums are required to be paid.
Shares issuable upon exchange of the total amount exchangeable under
the Exchangeable Term Note if the average of the lowest three daily
trading prices of the common shares ending on the day before an
exchange rate is exercised is as follows:
$3.00 or Greater $2.50 $2.00 $1.00 $.50
2,576,388 3,091,666 3,864,583 7,729,166 15,458,332
31
Item 8. Financial Statements and Supplementary Data.
Omitted pursuant to Rule 12b-25.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Previously reported on Amendment No. 1 to Current Report on Form 8-K
filed with the SEC on March 28, 2001.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by reference to
the section entitled "Election of Directors" in the Company's definitive proxy
statement to be filed with the Commission.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to
the section entitled "Executive Compensation" in the Company's definitive proxy
statement to be filed with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Company's definitive proxy statement to be filed with the
Commission.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference to the section entitled "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement to be filed with the
Commission.
32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents Filed
1. Financial Statements. Omitted pursuant to Rule 12b-25
2. Financial Statement Schedule. Not applicable.
3. Exhibit List
Exhibit No. Exhibit Incorporated by Reference/ Filed Herewith
- ---------------- --------------------------------------------- ------------------------------------------------
Incorporated by reference to Registration
3.1.1 Articles of Incorporation of the Registrant Statement on Form 10-SB filed with the
Commission on November 25, 1996.
Incorporated by reference to Amendment No. 1
3.1.2 Amendment to Articles of Incorporation of to Registration Statement on Form 10 filed
the Registrant dated November 6, 1996 with the Commission on December 23, 1996.
Incorporated by reference to Registration
3.2 Bylaws of the Registrant Statement on Form 10-SB filed with the
Commission on November 25, 1996.
Incorporated by reference to Registration
4.1 Form of Common Stock Certificate Statement on Form 10-SB filed with the
Commission on November 25, 1996.
Amended and Restated Shareholder Rights Incorporated by reference to the Company's
4.2 Plan dated October 15, 1999, between the Current Report on Form 8-K filed with the
Company and Equity Transfer Services, Inc. Commission on November 19, 1999.
Incorporated by reference to the Company's
4.3 Form of Doral Warrant Current Report on Form 8-K filed with the
Commission on December 26, 2000.
Incorporated by reference to the Company's
4.4 Asset-backed Exchangeable Term Note dated Current Report on Form 8-K filed with the
December 15, 2000 Commission on December 26, 2000.
Incorporated by reference to the Company's
Employment Agreement between Altair Annual Report on Form 10-K filed with the
10.1 International Inc. and William P. Long Commission on March 31, 1998, as amended by
dated January 1, 1998 Amendment No. 1 to Annual Report on Form
10-K/A filed on May 15, 1998.
Employment Agreement between Fine Gold Incorporated by reference to Registration
10.2 Recovery Systems Inc. and C. Patrick Costin Statement on Form 10-SB filed with the
dated August 15, 1994 Commission on November 25, 1996.
Incorporated by reference to the Company's
10.3 Altair International Inc. Stock Option Plan Registration Statement on Form S-8 filed with
adopted by shareholders on May 10, 1996 the Commission on July 11, 1997.
1998 Altair International Inc. Stock Option Incorporated by reference to the Company's
10.4 Plan adopted by Shareholders on June 11, Definitive Proxy Statement on Form 14A filed
1998 with the Commission on May 12, 1998.
33
Incorporated by reference to the Company's
Annual Report on Form 10-K filed with the
10.5 Form of Mineral Lease Commission on March 31, 1998, as amended by
Amendment No. 1 to Annual Report on Form
10-K/A filed on May 15, 1998.
Incorporated by reference to the Company's
10.6 Lease dated November 15, 1999, between the Current Report on Form 8-K filed with the
Company and BHP Minerals International Inc. Commission on November 19, 1999.
Asset Purchase and Sale Agreement dated Incorporated by reference to the Company's
10.7 November 15, 1999, between the Company Current Report on Form 8-K filed with the
and BHP Minerals International Inc Commission on November 19, 1999.
Incorporated by reference to the Company's
10.8 Securities Purchase Agreement dated Current Report on Form 8-K filed with the
December 15, 2000. Commission on December 26, 2000.
Incorporated by reference to the Company's
10.9 Registration Rights Agreement dated Current Report on Form 8-K filed with the
December 15, 2000. Commission on December 26, 2000.
Stock Pledge Agreement dated December 15, Incorporated by reference to the Company's
10.10 2000 (Mineral Recovery Systems common Current Report on Form 8-K filed with the
stock). Commission on December 26, 2000.
Incorporated by reference to the Company's
10.11 Stock Pledge Agreement dated December 15, Current Report on Form 8-K filed with the
2000 (Altair Technologies common stock). Commission on December 26, 2000.
Incorporated by reference to the Company's
10.12 Assignment and Agreement dated December 15, Current Report on Form 8-K filed with the
2000. Commission on December 26, 2000.
24 Power of Attorney Included on the Signature Page hereof.
(b) Reports on Form 8-K
--------------------
The Company filed a Current Report on Form 8-K on December 26, 2000, in
which it reported (i) the issuance of a $7 million Asset-Backed Exchangeable
Term Note together with a War rant to purchase 350,000 common shares at an
initial exercise price of $3.00, and (ii) the assignment and termination of
repricing rights u nder a March 31, 2000 Common Stock Purchase Agreement.
(c) Exhibits
--------
Exhibits to this Report are attached following page F-17
hereof.
(d) Financial Statement Schedule
----------------------------
Not applicable.
34
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 30, 2001.
ALTAIR INTERNATIONAL INC.
By: /s/ William P. Long
----------------------------------------
William P. Long,
President, Chief Executive Officer
POWER OF ATTORNEY AND ADDITIONAL SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature to this Form 10-K appears below
hereby constitutes and appoints William P. Long and Edward Dickinson, and each
of them, as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Form 10-K, and any and all
instruments or documents filed as part of or in connection with this Form 10-K
or the amendments thereto and each of the undersigned does hereby ratify and
confirm all that said attorney-in-fact and agent, or his substitutes, shall do
or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ William P. Long President and Chief Executive March 30, 2001
- ---------------------
William P. Long Officer and Director (Principal
Executive Officer)
/s/ Edward Dickinson Chief Financial Officer
- -------------------- (Principal Financial and March 30, 2001
Edward Dickinson Accounting Officer)
/s/ James I. Golla Secretary and Director March 30, 2001
- ---------------------
James I. Golla
/s/ George Hartman Director March 30, 2001
- ---------------------
George Hartman
/s/ Robert Sheldon Director March 30, 2001
- ---------------------
Robert Sheldon
35