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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10
ON
FORM 10/A
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
ALTAIR INTERNATIONAL INC.
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(Name of Small Business Issuer in its charter)
PROVINCE OF
ONTARIO, CANADA NONE
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(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
1725 SHERIDAN AVENUE
SUITE 140
CODY, WYOMING 82414
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(Address of principal executive offices) (Zip Code)
(307) 587-8245
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(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
----------------------------- -----------------------------------
None None
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
--------------------------
(Title of Class)
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TABLE OF CONTENTS
EXCHANGE RATE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . 1
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Technology and Proprietary Rights . . . . . . . . . . . . . . . . . 4
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Recent Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Government Regulation and Environmental Concerns . . . . . . . . . . 8
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .10
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . .10
Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . .10
Item 3. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . .13
Item 5. DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . .14
Item 6. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . .15
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . .15
Option Grants in 1995 . . . . . . . . . . . . . . . . . . . . . . .16
Options Exercised and Aggregate Remaining at Year-End . . . . . . .16
Compensation of Directors . . . . . . . . . . . . . . . . . . . . .16
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . .17
Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . .17
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . .18
Item 8. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . .18
Item 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . .18
Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . .19
Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . .20
Taxation Considerations . . . . . . . . . . . . . . . . . . . . . .20
Item 10. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . . .20
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED . . . . . . .22
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Item 12. INDEMNIFICATION OF OFFICERS AND DIRECTORS . . . . . . . . . . . . . .24
Item 13. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . .24
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS . . . . . . . . . . . .24
Item 15. FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . . . . . . . . . .25
(a) List of Financial Statements . . . . . . . . . . . . . . . . .25
(b) Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . F-1
Audited Financial Statements. . . . . . . . . . . . . . . . . . . . . . F-2
Interim Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-17
INDEX TO EXHIBITS
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EXCHANGE RATE INFORMATION
EXCEPT AS OTHERWISE INDICATED, ALL DOLLAR AMOUNTS HEREIN, INCLUDING AMOUNTS
SET FORTH IN THE FINANCIAL STATEMENTS APPEARING ON PAGES F-1 TO F-38 HEREOF, ARE
EXPRESSED IN CANADIAN DOLLARS. IN ADDITION, THE FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA,
WHICH DIFFER IN CERTAIN RESPECTS FROM THOSE GENERALLY ACCEPTED IN THE UNITED
STATES. SEE NOTE 11 TO THE INTERIM FINANCIAL STATEMENTS WHICH APPEARS ON
PAGE F-32 HEREOF.
The following exchange rates represent the noon buying rate in New York
City for cable transfers in Canadian dollars, as certified for customs purposes
by the Federal Reserve Bank of New York. The following table sets forth, for
each of the years indicated, the period end exchange rate, the average exchange
rate (i.e., the average of the exchange rates on the last day of each month
during the period), and the high and low exchange rates of the Canadian dollar
in exchange for U.S. currency for the years indicated below, based on the noon
buying rates.
YEAR ENDED DECEMBER 31,
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1996* 1995 1994 1993 1992 1991
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(US DOLLAR PER CANADIAN DOLLAR)
High .............. .7513 .7527 .7632 .8046 .8757 .8926
Low ............... .7235 .7023 .7103 .7439 .7761 .8587
Average ........... .7319 .7305 .7299 .7729 .8235 .8726
Year End .......... .7481 .7323 .7128 .7544 .7865 .8652
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* Data through November 15, 1996.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10 includes forward-looking statements. All statements, other
than statements of historical fact, included in this Form 10, including,
without limitation, statements under "Description of Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's business strategy and plans and objectives
of management of the Company for future operations, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from the Company's
expectations are disclosed in this Form 10, including, without limitation, in
conjunction with the forward-looking statements included in this Form 10. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by this section.
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ITEM 1. BUSINESS.
A glossary of technical terms used in the following description of the
Company's business is set forth at the conclusion of this Item 1.
Altair International Inc. (the "Company" or "Altair") was incorporated
under the laws of the province of Ontario, Canada in April 1973 for the purpose
of acquiring and developing mineral properties. Since 1994, the Company has
increasingly shifted its emphasis from acquisition and development of mineral
properties to the acquisition, development and testing of mineral processing
equipment for use in the recovery of fine, heavy mineral particles, including
gold and environmental contaminants. In furtherance of this purpose, the
Company has recently acquired the rights to the Campbell Centrifugal Jig,
through a merger involving the Company, Fine Gold Recovery Systems, Inc., a
wholly owned subsidiary of the Company, and Trans Mar, Inc., a Washington
corporation ("TMI"). See "--Recent Merger." The Campbell Centrifugal Jig (the
"CJ") is a patented device capable of segregating and recovering extremely fine
mineral particles or contaminants which are not presently commercially
recoverable utilizing conventional techniques or processes. See "--Technology
and Proprietary Rights."
Management of the Company views the acquisition of TMI as strategically
significant. As a result of the acquisition, the Company now owns patented
technology believed to be state-of-the-art in the commercial recovery of
extremely fine, heavy particulate matter. The acquisition has added to the
Company's historical minerals acquisition and exploration operations an
opportunity to become a developer of unique minerals processing technology.
The CJ 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. What makes the CJ unique, in management's opinion, is the
ability to economically recover smaller particles than can be presently
recovered by competing gravity technologies due to the fact that density
variations are accentuated when particles are subjected to centrifugal force.
While not yet confirmed through actual operations, the cost to manufacture and
operate the CJ is expected to be substantially similar to the cost to
manufacture and operate competing gravity separators which can only process
particles larger than 100 mesh. In contrast, the Company's tests indicate that
the CJ can process feeds as small as 400 mesh. See "--Competition." CJ testing
to date has yielded product quality (grade and contaminates) equivalent to those
technologies processing larger particles. See "--Target Markets."
Several prototype and demonstration jigs have been built and tested by the
Company and TMI. Continued field testing of the CJ is being undertaken to
identify any design problems that may reside in the CJ technology, evaluate the
CJ's ability to perform sustained operations, determine the potential for
downtime during such operations and estimate the anticipated maintenance costs
associated with continued operations. In addition, field testing is being
carried out to improve operating design for specific applications. There can be
no assurance that the testing program will be successful for all applications or
that testing will demonstrate the CJ to be economically attractive to end users.
Most recently, the Company has focused on testing of its Series 12 CJ,
designed to be capable of processing 120 tons of solids per day. A
demonstration unit of the Series 24 CJ, designed to be capable of processing
500 tons of solids per day, is currently in the final design stage and
testing is planned for the first quarter of 1997. See "--Plan of Operation."
The volume of solids per day that the Series 12 and Series 24 CJs are
actually capable of processing has not yet been established through testing;
however, the Company expects that planned testing over the next twelve months
will confirm that the CJs can actually process the volumes they have been
designed to process. Larger CJ units may be designed and, the Company
believes, can be readily constructed. Also, multiple units may be used in
series or parallel configurations to process high volume operations.
Demonstration tests conducted by the Company and TMI suggest economic
potential for the use of the CJ in a number of applications, including:
- Recovery of ultrafine gold from waste streams or former tailings
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- Recovery of zircon, rutile, leucoxene, and other valuable fractions
from heavy minerals and operations, especially from finely sized waste
piles
- Sulfur and ash removal from fine coal
- Recovery of iron ore fines from fine tailings
- Concentration of heavy minerals, such as anatase, aparite, barite,
cassiterite, chromite, columbite, industrial diamonds, fluorite,
various garnets, monazite, tantalite and wolframite
- Remediation of nuclear waste
The Company is a development stage firm and has been since its inception.
The Company to date has derived no revenues from product sales or otherwise.
TARGET MARKETS
The Company's present focus is on developing markets for the CJ that have
the greatest near-term profit potential-- minerals recovery, coal washing and
environmental remediation. In the minerals arena, the Company is seeking
royalty or limited licensing agreements with mineral producers where there is
potential for value added to the beneficiation process, especially heavy mineral
sands and placer gold operations. Verification testing with the CJ is currently
underway to evaluate the CJ's potential for recovery of zircon from heavy
minerals sand dry mill tails in Florida and titanium dioxide (TiO2) from a
pigment processing plant in the southern United States. Phase 1 and 2 trials
conducted by the Company during 1996 have separated commercial grade zircon
products while withdrawing a larger portion of zircon from the feed ore than
other high volume processing equipment in use today. Tests on zircon/contaminate
feeds conducted by the Company in 1996 have yielded greater than 90% zircon
concentrates and recovered up to 75% of the zircon fed to the unit.
Comparisons of these results to existing commercial zircon spiral circuit
results, must be qualified because the CJ results are based on a single pass
through the unit while results from conventional circuits typically include
processing through 6 or more successive banks of spirals. Without disclosure
of proprietary spiral performance information, the Company believes the CJ's
recovery rate is higher than other high volume processing equipment currently
available, while delivering a commercial grade zircon product.
At the pigment processing plant in the southern United States the CJ is
being tested for installation into an intermediate step in the plant process in
the function of a "scavenger circuit" designed to recover titanium dioxide and
thereby mitigate losses. Preliminary testing results have yielded an upgraded
titanium dioxide product which is suitable for reintroduction into the plant
processing stream. There can be no assurance that testing will demonstrate the
CJ to be economically attractive to end users. See "--Plan of Operation."
Zircon is used primarily for foundry molds and in the manufacture of
certain types of glass and ceramics. Titanium is used primarily as a basic
component of paint. The Company believes 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. There is also a
market for "bag material," often traded as a spot-priced product. The U.S.
Geologic Survey has reported that production of titanium dioxide in the United
States during 1995 was approximately 1,280,000 metric tons, representing a
market value of approximately $2.6 billion. The U.S. Geologic Survey does not
report zirconium production for the United States, however, according to the
1993 Mineral Commodities Summaries prepared by the U.S. Department of the
Interior, Bureau of Mines, consumption of zirconium in the United States during
1992 was approximately 75,000 metric tons, representing a market value of
approximately $16.1 million.
Additionally, the Company believes there are a number of proven mineral
deposits in the United States which have not been developed because they have
very fine particle sizes which current gravity separation technology cannot
recover economically. The Company intends to acquire and process these deposits
with the CJ, and believes that acquisition costs will be relatively low, as
these deposits have limited value without an economical means to process them.
To this end, the Company has recently leased approximately 2,000 acres of land
containing fine heavy minerals in the eastern United States. The Company
intends to use the CJ to extract the minerals from this site. The Company has
previously processed heavy mineral sands similar in character to the deposits
located
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on the Company's leased property, and believes the CJ is an appropriate
technology for this site. Verification testing with the CJ at the site is
planned to commence in the first half of 1997. Such testing is designed to
evaluate the CJ's potential to recover the valuable heavy minerals contained
in the leased property. There can be no assurance that testing will
demonstrate the CJ to be able to economically process the fine heavy minerals
at this site. See "--Plan of Operation." and "Item 3. Properties."
The Company has commenced testing of the CJ to evaluate its ability to
remove fine pyrite particles and ash from coal fines, creating a saleable
product from material currently discharged as mine waste. Tests conducted
during 1990 in Montana removed about 85% of the pyrite and about 50% of the ash
from high sulphur coals. Based on these test results, the Company believes
utilities in the eastern United States may be able to use the CJ to remove
pyrite from high sulphur eastern coals, potentially reducing the need to incur
the expense of transporting low-sulphur western coals. The cost of transporting
coal from Wyoming coal mining areas to the midwestern United States typically
comprises 75% of the cost of the delivered coal product. In addition, removal
of ash from coal offers other benefits to utilities, as ash reduces the thermal
value of coal and causes undesirable environmental impacts. Verification
testing with the CJ to demonstrate its ability to remove fine pyrite particles
and ash is currently underway at Southern Illinois University with the
participation of the Company and a United States coal producer. The CJ has
been installed and extensive testing will take place over the next several
months. See "--Plan of Operation." There can be no assurance that testing
will demonstrate the CJ to be economically attractive to end users.
Testing of the CJ conducted under a grant from the U.S.Environmental
Protection Agency at Montana College of Mineral Science and Technology during
1994 indicated that the CJ may be effective in removing heavy minerals from old
mine and mill tailing sites. The 1994 tests indicated that the CJ removed
approximately 64% of the fine pyrite contained in mill tailings in a single pass
through the machine. Nearly 80% of the fine pyrite content of such tailings was
removed in two passes through the machine. In 1995, the U.S. Department of
Energy (the "D.O.E.") sponsored tests suggesting that the CJ may be capable of
removing dense nuclear particles from radioactive waste. The tests conducted by
the D.O.E. reported that the CJ was able to remove up to 54% of the contained
nuclear contaminate in a single pass. Company management is currently exploring
these potential environmental remediation applications.
TECHNOLOGY AND PROPRIETARY RIGHTS
In operation, the CJ utilizes a combination of standard mechanical jig and
centrifugal technologies. The CJ is a simple, yet sophisticated piece of
equipment. Containing only one moving part, the CJ is relatively economical to
manufacture and management believes production machines, if completed, will be
capable of sustaining high reliability and low maintenance costs in a production
environment. See "--Plan of Operation." Use of the CJ requires no chemical
additives. The Series 12 CJ stands about six feet tall, requires floor space
of about 25 square feet and weighs approximately 2,000 lbs. Recently
constructed jigs are mounted on a metal frame along with jig auxiliary
equipment--pulse water pump and tank and control panel--for transport by
truck and rapid on-site installation.
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. Basically, the CJ 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 CJ are introduced into the top of the CJ 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.
The Company does not intend to establish its own manufacturing facility.
Management is considering options for manufacture of the CJ, including
manufacturing under contract, exclusive licensing, or a joint venture. The
arrangement could eventually include an exclusive license for manufacture,
warehousing and distribution of
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spare parts, as well as maintenance and leasing of the CJ. Currently, the
Company has entered into an agreement with Herboth's Machine Shop, a full
service machine shop located in Marysville, California, to manufacture the
initial production models of the CJ. Under the terms of the agreement,
Herboth's has constructed two Series 12 CJs and is in the process of
constructing two additional machines.
Initial patents on the CJ have been issued in the United States, South
Africa, United Kingdom, Australia, and Canada. A second patent has been issued
with respect to a critical component of the CJ in the United States, Australia,
Canada, Great Britain, General European, and South Africa. There are patents in
process on the CJ in Germany, France, and Japan.
COMPETITION
ALTERNATIVE TECHNOLOGIES. Minerals processing technologies are predicated
on the physical and chemical characteristics of the materials being processed.
Contrasts in size, specific gravity, hardness, magnetic susceptibility, and
electrical conductivity are physical characteristics that the processor exploits
to selectively extract and concentrate mineral constituents. Variations in
chemical reactivity and molecular affinity are also used to selectively
segregate feed components.
The CJ competes in an arena in which particle specific gravity is the
primary criteria for particle segregation and capture. Spirals and cones are
mechanical gravity separation devices commercially used in the recovery of heavy
minerals from sand-sized feeds and are most effective when feed sizes are larger
than 100 mesh. Recovery efficiency falls dramatically, however, with smaller
feeds. In contrast, the Company's tests indicate that the CJ will separate
particles sized from 20 to 400 mesh.
Froth floatation is a minerals beneficiation process used to selectively
separate sulfide particles by introducing chemical agents which attach to
certain sulfides; once attached, the sulfides are separated by floatation. This
method may be effective on particles as small as 200 mesh. Froth floatation
requires the use of chemical agents and does not separate particles based on
density as does the CJ. Froth floatation applications are limited to certain
sulfide particles, and will not work on a broad range of heavy minerals.
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 used
primarily in the removal of ash from coal and in small scale analytic laboratory
applications. Its application elsewhere is limited because the process is time
consuming where the media required is highly viscous. Also, the cost of the
media may limit the commercial usefulness of this method.
COMPETING PRODUCTS. The Company believes that the CJ currently has limited
competition in the commercial segregation of dense particles contained in feeds
between 100 and 400 mesh. A second centrifugal jig device, the Kelsey jig, has
been developed in Australia subsequent to the invention of the CJ. The Kelsey
machine is more complicated in design, which the Company believes makes it more
expensive to manufacture, operate and maintain in a production environment. As
of mid-1995, according to the Kelsey jig's manufacturer, Geologics Pty. Ltd., 36
Kelsey jigs were in service at 28 sites worldwide, including two machines at one
site in the United States. In addition, there exists another device that
separates dense particles from feeds sized between 50 and 400 mesh, the Knelsen
Bowl. The Knelsen unit is a batch concentrator best suited to small volumes.
Knelsen units have been installed in various mining applications, primarily
gold, throughout the world.
The Company is a small player in an industry comprised of major mining
companies possessing tremendous capital resources. The Company is 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.
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PLAN OF OPERATION
BUSINESS DEVELOPMENT. Testing conducted to date by the Company indicates
the CJ may have economic potential in a wide variety of industries, and
management believes the CJ can be used for finely sized heavy minerals recovery,
coal cleaning and environmental remediation. See "--Target Markets". During
the upcoming 12 months, the Company plans to continue developing these target
markets, which may have near-term profit potential, through implementation of
the following critical steps:
(1) Continued field testing and demonstration of the CJ to improve
operating design for specific applications. In addition, sustained
operational testing is critical in determining if any material design
problems reside in the CJ technology, if the CJ is capable of
sustained operation with little downtime, and if its maintenance costs
are low. See "--Research, Testing and Development."
(2) Development of royalty, rental or limited licensing agreements with
prospective industrial users and introduction of the Company's
products into targeted markets.
(3) Acquisition and development of undervalued proven mineral deposits for
which the Company's patented technology may provide an economic means
of recovery.
The Company's market efforts in the near future will continue to be
directed to opportunities within North America, with future expansion into
foreign markets developing over time. Because the Company does not intend to
engage in the actual manufacture of its own products, the Company does not
expect to purchase any manufacturing facility or significant manufacturing
equipment. Management does not anticipate that the number of Company employees
will significantly increase until the Company has sufficient sales and business
activity to warrant additional employees. Management hopes that circumstances
will warrant the addition of as many as nine new employees during the next 12-
month period. Such new employees would be primarily engineering and technical
staff to support testing programs.
RESEARCH, TESTING AND DEVELOPMENT. Field testing to date suggests that the
CJ possesses the ability to process continuous tonnage throughput in several
applications. The CJ 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 stream being treated.
Management believes 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.
To this end, the Company has installed or is in the process of installing the CJ
in several test sites. Specifically designed research, testing and development
efforts planned for the upcoming twelve months include the following:
(1) The Company plans continued testing of the Series 12 CJ currently
installed at a large heavy minerals sand processor located in Northern
Florida for recovery of zircon from dry mill tails. Future testing is
designed to increase CJ processing capacity and improve other
operating design parameters. Also, sustained operational testing is
intended to determine whether the CJ is capable of sustained
operations with little downtime. Access to the Florida test site is
controlled by a large heavy minerals sand producer that supplies test
materials for processing. On-site testing, which is expected to be
completed during the first half of 1997, is being conducted by a
single Company employee. In addition, two additional Company
employees provide periodic testing analysis and engineering services
at the site. A Series 12 CJ unit will also be used to perform
testing for removal of titanium dioxide (TiO2) from the tails stream
of a pigment processing plant located in Mississippi. TiO2 to be
processed from the pigment plant is extremely finely sized (from less
than 10 mesh to less than 400 mesh) and testing is required to
determine amenability of the material to processing by the CJ.
Testing of this application is being performed by Company personnel at
sites controlled by the owner of the pigment plant. Completion of
this testing is scheduled to occur during the first half of 1997.
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(2) A newly constructed Series 12 CJ has recently been installed at the
Southern Illinois University high bay coal test facility to test the
CJ's capability to remove of fine pyrite and ash from high sulfur
coals. A large, respected coal producer is co-sponsoring this testing
effort, which is being performed by two Southern Illinois University
test facility employees with periodic reviews conducted by Company
employees as required. Altair management has planned the testing
procedure and monitors test performance. Completion of this testing
is scheduled to occur during the first half of 1997.
(3) The Company has commenced mineral deposit characterization studies at
its eastern U.S. minerals resource property. These studies should be
completed during the first quarter of 1997 at which time the Company
intends to install a Series 12 CJ at the site to commence amenability
testing. The Company's studies are being conducted by two independent
consultants with periodic geologic characterization analysis provided
by a Company employee. Altair plans to utilize a combination of
Company employees and consultants for this testing. Amenability
testing is scheduled to be completed during the first half of 1997.
(4) The Company plans to establish a CJ testing facility near Reno, Nevada
to test samples supplied by mineral companies and other geographically
diverse users. Establishment of the test facility is planned for the
first quarter of 1997.
(5) Additional testing of fine gold recovery in placer operations is
planned during 1997. The Company plans to use Company personnel,
located at operating mine sites, to perform these tests.
(6) The Company is currently in the final design stage of constructing a
Series 24 CJ which the Company believes may be capable of more
efficiently handling larger processing volumes than the smaller Series
12 CJ. The Company currently intends to retain Herboth's Machine
Shop, the current manufacturer of the Series 12 CJ, to manufacture the
Series 24 CJ; however, the Company has not entered into a formal
manufacturing agreement. The Company presently anticipates that
construction of the new CJ will be completed during the first half of
1997 and the Company plans to install and test the machine at one of
its test sites.
Provided that the planned testing over the next twelve months as
described above is successful, the Company believes the CJ would be ready at
that time for commercial use in applications involving the recovery of
titanium, zircon and gold. While such capabilites of the CJ could then be
"marketed," the Company expects that the CJ's multiple operating parameters
would need to be adjusted to fit each particular customer's and application's
requirements. In the event any of the foregoing tests are not successful,
the Company expects that it would conduct additional testing, the nature of
which would depend upon the results obtained in the above-described tests.
SUBSIDIARIES
Altair International Inc.(1) was incorporated under the laws of the
province of Ontario, Canada in April 1973. The Company currently has two
wholly owned subsidiaries: (i) Fine Gold Recovery Systems, Inc. ("Fine
Gold") and (ii) Mineral Recovery Systems, Inc., a Nevada corporation ("MRS").
Fine Gold was acquired by the Company in April 1994. Fine Gold is a
development stage company with no operating revenues earned and no operating
expenses incurred. The Company's acquisition of TMI in February 1996 was
effected by merging TMI with and into Fine Gold. See "--Recent Merger." Fine
Gold also now includes the operations of a wholly owned subsidiary of the
Company formerly known as Mineral Recovery Systems, Inc. which was merged with
and into Fine Gold in June 1996. As discussed below, another wholly owned
subsidiary
- ----------------------
(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.
7
<PAGE>
of the Company formerly known as Carlin Gold Company is now operated under
the name Mineral Recovery Systems, Inc. The Company intends that Fine Gold
will hold and maintain CJ technology rights, including patents, and that Fine
Gold will enter into a royalty arrangement to allow MRS to manufacture and
commercially utilize the CJ.
MRS(2) was incorporated by the Company in April 1987. 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. The Company currently intends that MRS will manufacture or
arrange for the manufacture of the CJ for commercial sales, rental or royalty
arrangements with end users. In addition the Company intends that MRS will
lease or acquire and develop mineral properties, particularly properties that
contain mineral resources that may be processed with the CJ.
RECENT MERGER
The Company's recent acquisition of TMI was effected through a merger of
TMI with and into Fine Gold (the "TMI Merger"). See "--Corporate Subsidiaries."
The TMI Merger was effected pursuant to the terms and conditions of a Merger
Agreement, dated as of February 8, 1996, entered into by and among the Company,
Fine Gold and TMI (the "TMI Merger Agreement"), and approved by the shareholders
of TMI at a special meeting of shareholders held on February 29, 1996.
As a result of the TMI Merger: (i) TMI was merged with Fine Gold in
accordance with the laws of the States of Washington and Nevada, with Fine Gold
surviving as a wholly owned subsidiary of the Company; (ii) the Articles of
Incorporation of Fine Gold became the Articles of Incorporation of the surviving
corporation and the officers and directors of Fine Gold became the officers and
directors of the surviving corporation, (iii) all outstanding options to
purchase TMI stock were terminated and, in exchange therefor, the Company issued
580,000 Series E warrants, each entitling the holder thereof to purchase one
share of the Common Stock, no par value, of the Company (the "Common Stock"),
for $2.00 until January 31, 1997; (iv) all shares of the capital stock of TMI
were converted into and exchanged for 1,919,957 shares of the Common Stock,
which were issued and deposited into escrow pursuant to the terms of two escrow
agreements. Of the 1,919,957 shares, 1,170,000 are to be released dependent
upon Altair receiving revenues from the assets formerly held by TMI. The basis
for share release is one share of Common Stock for each $1.80 in cash flow
received by Altair, provided that no more than one-third of the original number
of shares of Common Stock escrowed may be released in any one year over the
first three years of the escrow. Shares of Common Stock still in escrow at the
end of five years may be canceled by the Alberta Stock Exchange. The remaining
749,957 shares of Common Stock will be released from escrow to each former TMI
shareholder at a rate equal to the greater of 15,000 shares or 5% of such
shareholder's total escrowed holdings each calendar quarter. In addition, each
former TMI shareholder or warrant holder is restricted from selling more than
the greater of 15,000 shares or 10% of such holder's holdings in any calendar
quarter.
The holder of a Series E warrant is not entitled to any right or interest
as a shareholder of the Company prior to exercise of the Series E warrant. The
number of shares of Common Stock subject to each Series E warrant may be
adjusted in the event the Company enters into certain extraordinary corporate
transactions, on the terms and subject to the conditions described in the Series
E warrant Certificates. All of the Series E warrants remained outstanding and
unexercised as of July 31, 1996.
GOVERNMENT REGULATION AND ENVIRONMENTAL CONCERNS
The Company's activities are subject to extensive federal, state and local
laws and regulations controlling the exploration and mining of mineral
properties as well as the processing and production of mineral products, and the
possible effects of Company activities upon the environment. In addition, the
Company's activities in the manufacture, development and testing of CJ equipment
are also subject to extensive federal, state and local regulation. Permits from
a variety of regulatory authorities are required for many aspects of mine
operation and reclamation, and equipment manufacture and distribution.
Environmental and other government regulations at the
- ----------------------
(2) MRS was formerly known as Carlin Gold Company. The name change was
effective in June 1996.
8
<PAGE>
federal, state and local level pertaining to the Company's business and
properties may include: (1) surface impact, (2) water acquisition and
discharge, (3) site access, (4) reclamation, (5) wildlife preservation, (6)
licenses and permits, and (7) maintaining fees for unpatented mining claims.
The Company is committed to complying with and, to its knowledge, is in
compliance with all governmental regulations. The Company's primary product,
the CJ, does not require the addition of chemicals in its processing of
minerals. However, the Company cannot predict the extent to which future
legislation and regulation could cause the Company to incur additional operating
expenses, capital expenditures, and/or restrictions and delays in the
development of the Company's products and properties, including those with
respect to unpatented mining claims.
EMPLOYEES
The business of the Company is currently managed by Dr. William P. Long,
President and Chief Executive Officer of the Company, Mr. C. Patrick Costin,
Vice President of the Company and President of MRS and Fine Gold, and Mr. Edward
Dickinson, Director of Finance of MRS. In addition, MRS employs a senior
process engineer, a technician and one part-time employee in an office
management and administrative assistance capacity. There are no other employees
of the Company or the Subsidiaries.
Other than the employment agreements of Dr. Long and Mr. Costin described
below, there are no employment agreements between the Company or its
Subsidiaries and their respective executive officers. See "Item 6. Executive
Compensation--Employment Agreements." The future success of the Company will
depend, in part, on its ability to attract and retain highly qualified
technical, marketing and management personnel. There is no assurance the
Company will be successful in retaining or attracting highly qualified
individuals in key positions.
GLOSSARY OF TERMS
AMENABILITY means responsiveness of an ore deposit to processing.
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.
BENIFICIATE means to improve the grade of ore by processing.
CENTRIFUGAL FORCE means the component of force on a body in curvilinear
motion that is directed away from the axis of rotation.
COAL FINES means finely pulverized coal particles which will pass through a
50 mesh screen.
COAL WASHING means processing of pulverized coal to remove ash and pyrite.
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.
JIG means a device for concentrating minerals based on specific gravity and
particle size.
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.
MILL means a building with machinery for processing ore. (Dry mill refers
to heavy minerals sand processing of dry materials.)
9
<PAGE>
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.
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.
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.
THERMAL VALUE means a measure of the ability of a fuel (coal) to produce
energy when ignited.
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information with respect to the Company for the periods indicated. The data
is derived from financial statements prepared in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"), which differ in
certain respects from those in the United States. See Note 11 to the
management financial statements included herein for certain reconciliations to
accounting principles generally accepted in the United States ("US GAAP").
The selected financial data should be read in conjunction with " --
Management's Discussion and Analysis of Financial Condition and Results of
Operation," and the consolidated financial statements and accompanying notes
included herein. As discussed previously in Item 1, the Company acquired
TMI in February 1996. This merger was treated as a purchase for accounting
purposes. The following selected financial data was derived from the
Consolidated Financial Statements of the Company, which were audited for the
years 1992-1995 by McGovern, Hurley, Cunningham, independent chartered
accountants.
<TABLE>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
------------------------------- ---------------------------------------------------------
SEPT. 30, 1996 SEPT. 30, 1995 1995 1994 1993 1992 1991
--------------- -------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Revenues from Operations ........... $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Administrative and General Expenses. 1,129,684 546,787 589,212 169,022 120,850 178,818 305,888
Interest Income .................... 22,730 -0- 1,370 1,342 3,173 -0- 582
Net Loss ........................... 1,106,954 546,787 599,097 784,078 317,952 572,431 326,171
Loss per Common Share .............. (0.10) (0.07) (0.09) (0.17) (0.08) (0.15) (0.09)
Cash Dividends declared per Common
Share ............................ -0- -0- -0- -0- -0- -0- -0-
Deficit, Beginning of Year ......... 4,566,930 3,967,833 $3,967,833 $3,183,755 2,865,803 2,288,818 1,992,687
Net Loss ........................... 1,106,954 546,787 599,097 784,078 317,952 576,985 296,131
Other Expense (Income).............. (891,787) 0 -0- -0- -0- -0- -0-
Deficit, End of Year ............... 4,782,097 4,514,620 $4,566,930 $3,967,833 3,183,755 2,865,803 2,288,818
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital..................... 1,443,576 446,154 429,682 (155,035) 28,591 175,323 (69,630)
Total Assets ....................... 8,839,217 1,082,637 1,336,691 527,574 670,100 757,174 648,768
Long-term Obligations .............. -0- -0- -0- -0- -0- -0- -0-
Current Liabilities ................ 876,936 101,841 124,605 224,791 161,848 56,250 78,966
Net Stockholders' Equity ........... 7,962,281 980,796 1,212,086 302,783 508,252 700,924 569,802
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
OVERVIEW
From inception through the end of 1993, the Company's business consisted
principally of acquisition and development of mineral properties. During 1994,
the Company's focus changed as it became primarily engaged in the acquisition,
development and testing of mineral processing equipment for use in the recovery
of fine, heavy mineral particles, including gold and environmental contaminants.
On November 15, 1994, the Company executed an option agreement to acquire
Trans Mar, Inc., a development stage enterprise which owned all patent rights to
the CJ, an apparatus for the separation and recovery of fine, heavy mineral
particles. The Company funded $373,955 of option-related costs during 1994 and
1995. Subsequently, during early 1996, the Company renegotiated the acquisition
agreement and acquired all of the outstanding common stock of Trans Mar, Inc.
The acquisition was accounted for as a purchase by the Company, which agreed to
issue to Trans Mar's shareholders 1,920,000 shares of its common stock over a
five-year period and 580,000 warrants entitling the holder to purchase one
common share of Altair for $2.00 until January 31, 1997.
The effective purchase price of Trans Mar, Inc. was $5,115,693. This
consisted of $3,455,923 of stock issuance to Trans Mar shareholders (1,919,557
Altair shares with a deemed value of $1.80 per share) and the absorption of
Trans Mar's assets and liabilities, with liabilities exceeding assets by
$1,659,770 at February 29, 1996. The purchase price was allocated to
centrifugal jig patents and development costs.
Prior to 1994, the Company operated its minerals business as an exploration
stage company, in that it intended to receive income from property sales, joint
ventures, or other business arrangements with larger companies, rather than
developing and placing its properties into production on its own. At present,
there are no business arrangements or joint venture prospects involving the
Company's properties, or potential property sales from which the Company expects
to receive income. No royalty income has been received in the past by the
Company.
RESULTS OF OPERATIONS
YEARS ENDING DECEMBER 31, 1993, 1994, AND 1995
The Company is a development stage firm and has earned no revenues to
date. Net losses from operations totaled $599,097 ($0.09 per share) for the
year ending December 31, 1995, $784,078 ($0.17 per share) for 1994, and
$317,952 ($0.08 per share) for 1993. Principal factors contributing to the
losses during these periods were absence of revenue, administrative and
general ("G&A") expenses and the write-off of mineral exploration properties.
G&A expenses increased from $117,677 during 1993 to $167,680 during 1994 and
$587,842 during 1995, reflecting increasing expenditures starting in 1994
for acquiring, testing and developing the CJ and its potential applications.
Similarly, write-offs of mineral properties reflect the Company's transition
during the period from mineral property exploration to development of mineral
property equipment.
Mineral Properties and deferred exploration expenditures during the years
ending December 31, 1995 were as follows:
Ponte McEwen Others Total
Balance, December 31, 1992 118,539 199,756 206,457 524,752
Additions during 1993 49,762 (3,388) 100,923 147,297
Write-off during 1993 0 0 200,275 200,297
Balance, December 31, 1993 168,301 196,368 107,105 471,774
Additions during 1994 70,186 72,145 2,294 144,625
Write-off during 1994 238,487 268,513 109,398 616,398
Balance, December 31, 1994 0 0 1 1
Additions during 1995 0 0 0 0
Write-off during 1995 0 0 1 1
Balance, December 31, 1995 0 0 0 0
PONTE LEASE: Pursuant to an agreement dated March 1, 1989 (as amended)
the Company leased the mineral rights on property located in Calaveras County,
California subject to royalties ranging from 3% to 5%. The Company's field
exploration work included excavation of multiple trenches, sampling and
assaying. The Company's joint venture partner, Freeport MacMoran Gold
Company, drilled 18 exploration holes on the property. Mineralization was
encountered but grades were too low to support commercial production, and the
claims were written off during 1994.
MCEWEN LEASE: Pursuant to an agreement dated January 5, 1990 (as amended)
the Company leased the mineral rights on property located in Malheur County,
Oregon and staked additional claims surrounding the property. The Company
performed geological field exploration, including rock chip sampling and
geo-chemical analysis. The Company's joint venture partner, BHP Minerals,
did extensive geo-chemical analysis and drilled 20 exploration holes. The
exploration holes encountered pervasive low grade mineralization, but no
sections of minable grade were cut. BHP withdrew from the joint venture. As
a result, the Company determined the property was not economically viable,
and the claims were written off during 1994.
OTHER LEASES AND CLAIMS: During the three years ending December 31, 1994,
1993 and 1992 the Company held mineral leases and claims in several additional
areas including the District of Kenora, Ontario; Mayo District, Yukon
Territory; Calaveras County, California; and South Eastern Oregon. The
Company conducted successive phased exploration work on each property until
it was determined that the likelihood of encountering economic mineralization
was slim. Following such determination, all of these leases and claims were
written off during 1993, 1994, and 1995.
11
<PAGE>
NINE MONTHS ENDING SEPTEMBER 30, 1996 AND 1995
Operating losses before extraordinary items totaled $546,787 ($0.07 per
share) during the nine months ending September 30, 1995 as compared to
$1,106,954 ($0.10) for the same period ending 1996. Principal factors
contributing to losses during the comparable periods were G&A expenses and
write-offs of mineral properties and related exploration costs. Of the
$1,106,954 of G&A expenses incurred during 1996, $340,736, representing 31%
of the total G&A, was related to amortization of the Company's assets, as
compared to $1,372 (less than 1% of total G&A) during the same period of
1995. Increases in 1995 amortization are due primarily to amortization of CJ
patent and development costs acquired in the 1996 TMI merger. G&A expenses,
exclusive of amortization, increased from $285,581 for the nine months ending
September 30, 1995 to $766,218 in 1996 due to increased activity in
acquiring, testing and developing applications for the CJ. In this regard,
during the nine months ended September 30, 1996 the Company expanded into new
leased office space in Reno, Nevada and increased the level of staffing at
this location from one to four personnel. Also, finalization of the Trans Mar
purchase required increased levels of professional, accounting and corporate
services beyond the level of similiar costs incurred during the nine months
ending September 30, 1995.
As a result of the Company's acquisition of TMI, Fine Gold assumed all of
TMI's liabilities. During June 1996, Fine Gold entered into agreements
extinguishing certain of the TMI accounts payable and notes payable at less than
the book amounts of such debt. The net amount of such forgiveness of debt was
$891,787 and resulted in an extraordinary gain of $0.08 per share for the nine
months ending September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily by the
issuance of equity securities (Common Stock and warrants to purchase Common
Stock) with aggregate net proceeds of $12,744,379. The Company received cash
proceeds from the sale of Common Stock and the exercise of options and warrants
to acquire Common Stock of $49,880 during 1993; $180,000 in 1994; $1,508,400 in
1995; and $3,509,363 during the first nine months of 1996.
The Company has earned no revenues and has incurred recurring losses in
operations. At September 30, 1996, the Company's accumulated deficit was
$4,782,097. However, due to increasing proceeds from the issuance of common
stock, the Company has significantly increased its operating capital and
improved its financial condition and ability during the last three years. From
a working capital deficit of $155,035 at year end 1994, the Company's working
capital position was a positive $429,682 at year end 1995. This trend continued
in 1996 as working capital at September 30, 1996, rose to $1,443,576 and the
Company's cash position increased from $424,185 at December 31, 1995 to
$2,267,808 at September 30, 1996.
As of September 30, 1996, the Company had $2,267,808 in cash and
short-term investments available to meet its near-term development and
operating needs. In addition, the Company has issued and outstanding
warrants to purchase shares of Common Stock at various prices, which expire
at various dates through June 20, 1998. See "Item 11. Description of
Registrant's Securities to Be Registered." Proceeds in the amount of
$4,640,278 would be received by the Company pursuant to the exercise of
warrants, if all outstanding warrants were exercised. If all outstanding
warrants expiring prior to September 30, 1997 are exercised, the Company
would receive $2,147,156 in proceeds. There can be no assurance, however, as
to the number of warrants, if any, that may be exercised. The Company has
not yet earned revenues, although revenue from the sale or rental of CJs now
being fabricated is anticipated during the first half of 1997. This
anticipation of revenues is based upon "proof of process" tests completed
during the fourth quarter of 1996 which indicate the CJ's suitability in a
titanium dioxide scavenger circuit of a pigment processing plant, and
discussions which are currently underway with pigment plant management
personnel regarding utilization of the CJ. See "Item 1. Plan of Operation --
Research, Testing and Development." There can be no assurance, however, that
such discussions will result in an agreeement or generation of revenue.
While the Company hopes to derive additional liquidity from the exercise of
warrants and revenue generated from the CJ, cash and short term investments
on hand as of September 30, 1996 are expected to be adequate to continue
current levels of testing and staffing through approximately September 30,
1997. If the Company is not successful in raising additional capital to fund
its operations beyond September 30, 1997, product revenues would be required
to fund the Company's operations beyond that date. There can be no assurance
that the Company will be successful in its efforts to raise additional
capital or that the Company would be able to generate product sales necessary
to fund the Company's operations beyond September 30, 1997.
12
<PAGE>
While the Company has no definite plans to do so at this time, the
Company is considering raising up to $5 million additional capital through
private placements of its Common Stock sometime during the next six months.
Such proceeds would allow the Company to expand and accelerate its activities
to develop, test and market the CJ, and to invest in mineral properties
suitable for development and processing with the CJ. The funds are expected
to be targeted for specific testing efforts at several test sites, for
development of commercial marketing opportunities and for the acquisition and
development of proven mineral deposits. See "Item 1. Plan of
Operation--Research, Testing and Development." While the Company believes
that the additional funds necessary to continue the full scope of activities
to develop and market its products for the next twelve months will be
available, there can be no assurance that the Company's planned capital
efforts will be successful.
ITEM 3. PROPERTIES.
The Company maintains a registered office at 67 Richmond Street West, Suite
500, Toronto, Ontario M5H 1Z5. In addition, the Company maintains an office at
1725 Sheridan Avenue, Suite 140, Cody, Wyoming 82414, which serves as the
corporate headquarters for the Company and its Subsidiaries. Fine Gold and MRS
maintain offices at 230 South Rock Boulevard, Suite 21, Reno, Nevada 89502. All
three of these offices are leased from unrelated parties and are believed by
management to be adequate for the Company's current needs. In the event that
alternative or additional office space is required, the Company believes it will
be readily available.
The Company has leased approximately 2,000 acres of real property
containing heavy minerals in the eastern United States, pursuant to leases
entered into by MRS and multiple owners of the real property. The 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 certain production royalties to the lessors for
minerals mined and sold from the property. The leases typically are for a
minimum term of ten years, and may be extended indefinitely provided the Company
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 of MRS's breach of the terms of the lease.
13
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Following is information with respect to beneficial ownership of shares of
the Common Stock as of November 30, 1996 by persons known to the Company to own
more than 5% of the outstanding Common Stock, each of the Company's executive
officers and directors, and by all officers and directors of the Company as a
group. Unless otherwise indicated, each of the shareholders named in the table
has sole voting and investment power with respect to the shares identified as
beneficially owned. The Company is not aware of any arrangements, the operation
of which may at a subsequent date result in a change in control of the Company.
<TABLE>
- -------------------------------------------------------------------------------------
AMOUNT AND
NATURE OF
TITLE OF NAME AND ADDRESS OF BENEFICIAL PERCENT
CLASS BENEFICIAL OWNER OWNERSHIP (1) OF CLASS (2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common William P. Long 2,152,304(3) 15%
57 Sunset Rim
Cody, Wyoming 82414
Common C. Patrick Costin 1,025,833(4) 7%
1850 Aquila Avenue
Reno, Nevada 89509
Common James I. Golla 22,000(5) *
829 Terlin Boulevard
Mississauga, Ontario L5H 1T1
Common Christopher J. Proud
7225 Woodbine Avenue, Suite 111
Markham, Ontario L3K 1A3 0 *
Common All Directors and Officers as a Group 3,200,137(6) 22%
(4 persons)
</TABLE>
- --------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Includes all shares issuable pursuant to the exercise or conversion of
options and warrants that are exercisable within 60 days.
(2) Based on 14,396,159 shares outstanding as of November 30, 1996. Shares of
Common Stock underlying options or other convertible securities are deemed
to be outstanding for purposes of calculating the percentage ownership of
the owner of such securities, but not for purposes of calculating any other
person's percentage ownership.
(3) Includes 116,500 shares held in an irrevocable trust for the benefit of the
children of Dr. Long. Dr. Long disclaims any beneficial interest in such
116,500 shares.
(4) Includes 617,500 shares held in escrow and to be released dependent upon
net income adjusted for non-cash items ("Cash Flow"), as defined in the
escrow agreement, generated by Fine Gold. The basis for share release is
one share of Common Stock for $0.45 of Cash Flow. Shares still in escrow
on April 21, 1999 are subject to cancellation by the Company. Mr. Costin
is entitled to exercise all voting rights applicable to the escrowed
shares. As of September 30, 1996, none of such shares had been released
from escrow. See "Item 7. Certain Relationships and Related
Transactions". The number of shares held by Mr. Costin also includes
185,000 shares subject to presently exercisable options granted to Mr.
Costin pursuant to the Altair International Inc. Stock Option Plan (the
"Option Plan").
(5) Includes 20,000 shares subject to presently exercisable options granted to
Mr. Golla pursuant to the Option Plan.
(6) Includes 205,000 shares subject to presently exercisable options granted to
officers and directors pursuant to the Option Plan.
14
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information regarding the executive
officers and directors of the Company.
HELD POSITION
NAME OFFICE SINCE
- ----------------------- -------------------------------------- -------------
William P. Long........ President, Chief Executive Officer and
Director 1988
C. Patrick Costin...... Vice President 1996
Christopher D. Proud... Director 1990
James I. Golla......... Secretary and Director 1994
The directors of the Company are elected at the annual meeting of
shareholders of the Company. Each director of the Company holds office until
his successor is elected and qualified or until his earlier death,
resignation or removal. The executive officers of the Company serve at the
discretion of the Company's Board of Directors. None of the foregoing
officers and directors of the Company was selected pursuant to any
arrangement or understanding between him and any other person.
WILLIAM P. LONG, 49, has been the President, Chief Executive Officer and
a director of the Company since 1988, and the Secretary and a director of
Fine Gold since the Merger. Dr. Long also served as the Vice President of
the wholly owned subsidiary of the Company formerly known as Mineral Recovery
Systems, Inc. which was merged with and into Fine Gold in June 1996. Dr.
Long has been an executive officer and director of Carlin Gold Company, now
MRS, since its formation in April 1987. From 1987 to 1988, Dr. Long was a
mineral and energy consultant, providing various services to clients in the
mining and energy industries, including arranging precious metal property
acquisitions, supervising mineral evaluations, and providing market analyses.
From 1980 to 1986, Dr. Long served as the Executive Vice President and Chief
Financial Officer of Thermal Exploration Company. From 1974 to 1980, Dr.
Long was employed by Amax Exploration, Inc. in various capacities, including
Systems Engineer, Business Analyst and Business Manager. Dr. Long is
affiliated with the American Institute of Chemical Engineers and the American
Institute of Mining Engineers. He obtained a bachelors degree in Chemical
and Petroleum Refining Engineering and a Ph.D. in Mineral Economics from the
Colorado School of Mines in 1969 and 1974, respectively.
C. PATRICK COSTIN, 53, was appointed a Vice President of the Company in
June 1996, and also currently serves as the President and a director of Fine
Gold and MRS. Mr. Costin also served as the President of the wholly owned
subsidiary of the Company formerly known as Mineral Recovery Systems, Inc.
from March 1995 until its merger with and into Fine Gold in June 1996. Mr.
Costin is the chief executive officer of Costin and Associates, a minerals
consulting organization founded by Mr. Costin in 1992 which specializes in
identification and evaluation of North American mine and mineral deposit
acquisition opportunities. From 1982 to 1992, Mr. Costin served as the
manager of U.S. exploration for Rio Algom Ltd. Mr. Costin's additional
experience in the mining and minerals industry includes Senior Mineral
Economist for the Stanford Research Institute from 1977 to 1982, Senior
Geologist for Chevron Resources from 1975 to 1976, Senior Geologist for
Newmont Mining Corporation of Canada from 1967 to 1975, and Geologist for
United Keno Hill Mines Ltd. from 1965 to 1967. Mr. Costin obtained a
bachelors degree in Geological Engineering and a masters degree in Minerals
Economics from the Colorado School of Mines in 1965 and 1975, respectively.
He is a member of the American Institute of Mining Engineers, and a member of
the Colorado Mining Association, for which he served as director from 1987 to
1992.
CHRISTOPHER D. PROUD, 50, has been a director of the Company since 1990.
Mr. Proud is President of Proud Enterprises Inc., an Ontario corporation
engaged in executive counseling and relocation services, which he founded in
1977. He is also currently Vice President of Belmont Rose Granite
Corporation, an industrial minerals corporation located in Canada, and serves
as a director of two publicly traded Canadian corporations, Garrison Gold
Inc. and Canreos Mineral (1980) Ltd. Mr. Proud has been employed in the
Canadian mining industry since 1967 in various capacities, including geology,
engineering and production.
15
<PAGE>
JAMES I. GOLLA, 64, was appointed Secretary of the Company in November
1996 and has been a director of the Company since February, 1994. He also
currently serves as a director of Nova Beaucage Resources Ltd., and Thornburg
Capital Ltd. Mr. Golla has been a journalist with the Globe and Mail, a
Toronto business newspaper, since 1954, specializing in business news for the
past five years.
ITEM 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth all annual and long-term compensation for
services rendered in all capacities to the Company for the fiscal years ended
December 31, 1995, 1994 and 1993 by William P. Long, the President of the
Company. The Company had no other executive officers whose total salary and
bonuses during the fiscal year ended December 31, 1995 exceeded $100,000.
<TABLE>
Annual Compensation (1) Long Term Compensation
----------------------------------- ------------------------------------------------
Restricted
Other Securities Shares or
Fiscal Annual Under Restricted LTIP All Other
Name and Year Compensa- Options Share Units Payouts Compensa-
Title Ended Salary ($)(2) Bonus ($) tion Granted (3) ($) ($) tion
- -------- ----- ------------- -------- ---------- ----------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William 1995 91,200 9,120 -0- 166,000 -0- -0- -0-
P. Long 1994 91,200 9,120 -0- 221,000(4) -0- -0- -0-
1993 91,200 9,120 -0- 143,333(5) -0- -0- -0-
</TABLE>
_________________________
(1) All compensation paid is stated in United States dollars.
(2) Bonus and salary amounts reflect amounts accrued and payable to Dr. Long
for each fiscal year in accordance with the terms of his employment
agreement with the Company. See "--Employment Agreements." Amounts
actually paid to Dr. Long in fiscal years 1995, 1994 and 1993 were U.S.
$110,000, U.S. $120,200 and U.S. $15,200, respectively. Such payments
include payment of earned but unpaid salary and bonus for 1992 of U.S.
$16,720. At December 31, 1995 U.S. $75,016 remained outstanding and
payable to Dr. Long, including interest on unpaid bonuses ($2,736).
(3) Options to purchase shares of Common Stock granted pursuant to the Option
Plan. See "--Stock Option Plan."
(4) These options were granted following the cancellation of the 143,333
options granted in 1993. The 1993 options were canceled and new options
granted in 1994 in order that the exercise price of the options would more
closely reflect the then-current market price of the Common Stock.
(5) These options were canceled by a resolution of the directors on August 1,
1994, which was subsequently approved by the shareholders of the Company on
June 22, 1995.
16
<PAGE>
OPTION GRANTS IN 1995
The following table provides detailed information regarding options to
purchase shares of Common Stock granted to Dr. Long during the year ended
December 31, 1995:
<TABLE>
% of Total
Options Market Value of
Securities Granted to Securities
Under Employees Underlying
Options in Financial Exercise Options on the Expiration Date
Name Granted ($) Year Price ($) Date of Grant ($) (2)
- ---------------------- ----------- ------------ --------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
William P. Long, 166,000 44% 0.65 0.65(1) 11/13/00
President and Director
</TABLE>
_________________________
(1) Reflects the closing price of the shares of Common Stock on November 13,
1995, as reported by the Alberta Stock Exchange.
(2) Unexercised options are subject to early expiration upon the termination of
employment of the optionee with the Company or its affiliates and on the
optionee's retirement or death.
OPTIONS EXERCISED AND AGGREGATE REMAINING AT YEAR-END
The following table provides detailed information regarding options held by
Dr. Long as of December 31, 1995. No options were exercised by Dr. Long during
the year ended December 31, 1995.
<TABLE>
Securities
Acquired Aggregate
on Value Value of Unexercised In-the-
Exercise Realized Unexercised Options at money Options at
Name ($) ($) December 31, 1995 December 31, 1995(1)
- ----------------- ----------- -------- ---------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
(#) (#) ($) ($)
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. Long, -0- -0- 221,000(2) -0- 386,750 -0-
President and 166,000(3) -0- 215,800 -0-
Director
</TABLE>
_________________________
(1) The closing price of the Common Stock on December 31, 1995, as reported by
The Alberta Stock Exchange was $1.95.
(2) Exercisable at $0.20 per share until 5:00 p.m. (Toronto time) on August 1,
1999.
(3) Exercisable at $0.65 per share until 5:00 p.m. (Toronto time) on November
13, 2000.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company are not currently paid any
fees for their services as directors. Directors who are not officers are
entitled to receive compensation to the extent that they provide services to the
Company at rates that would be charged by such directors for such services to
arm's length parties. Christopher D. Proud, a director of the Company, was paid
an aggregate of $20,000 in 1996 for management consulting services rendered to
the Company during the period from April through August of 1996.
17
<PAGE>
Directors also have been and currently are entitled to participate in the
Option Plan. See "--New Stock Option Plan." As of July 31, 1996, the Company
had outstanding options to purchase 1,307,000 Common Shares pursuant to the
Option Plan, 652,000 of which are held by directors of the Company.
EMPLOYMENT AGREEMENTS
William P. Long, President of the Company, has entered into an employment
agreement with the Company dated January 1, 1988, as amended June 30, 1990 and
April 1, 1996 (the "Employment Agreement"). The 1990 and 1996 amendments have
not been reflected in a written amendment to the Employment Agreement. Pursuant
to the Employment Agreement, Dr. Long is paid a salary of $7,600 per month and
an annual bonus, determined by the board of directors of the Company, of not
less than 10% of Dr. Long's annual compensation. In the event of a takeover,
merger or consolidation of the Company and provided that (i) the voting control
of over 35% of the issued and outstanding Common Stock is acquired by an
individual or group, and (ii) the Employment Agreement is terminated by the
Company within 180 days before or one year thereafter, or by Dr. Long within one
year thereafter, then Dr. Long shall be issued 200,000 shares of Common Stock.
C. Patrick Costin, a Vice President of the Company and the President of
Fine Gold, is employed by Fine Gold pursuant to the terms of an employment
agreement entered into August 15, 1994. Unless sooner terminated in accordance
with the terms of the agreement, the agreement will terminate on December 31,
1997. The agreement provides that Mr. Costin shall be paid a salary of at least
$5,000 per month and may be entitled to bonuses as determined by the Board of
Directors of Fine Gold.
STOCK OPTION PLAN
In May 1996, the shareholders of the Company approved the adoption by the
board of directors of a stock option plan (the "Option Plan") for directors,
officers, employees and consultants of the Company, which replaced the stock
option plan initially adopted in 1990 (the "1990 Option Plan"). The Option Plan
will comply with revised rules and regulations of certain stock exchanges in
Canada regarding share incentive arrangements. Options granted under the 1990
Option Plan remain outstanding under the Option Plan and form part of the shares
of Common Stock reserved for issuance under the Option Plan. The purpose of the
Option Plan is to attract, retain and motivate Company management, staff and
consultants by providing them with the opportunity, through share options, to
acquire a proprietary interest in the Company and benefit from its growth. The
options are non-assignable and may be granted for a term not exceeding five
years. Other material aspects of the Option Plan are described below:
- A total of 2,000,000 shares of Common Stock may be reserved for issue
under the Option Plan;
- Options granted under the Option Plan will terminate three months
following the termination of an optionee's employment or, in the case
of options granted to a director, three months following the optionee
ceasing to be a director, unless the directors of the Company
otherwise determine;
- Options granted under the Option Plan will terminate one year
following the death of an optionee;
- The total number of shares of Common Stock which may be reserved for
issuance to any one individual under the Option Plan shall not exceed
5% of the total number of issued and outstanding shares of Common
Stock and the total number of shares which may be reserved for
issuance to insiders under the Option Plan shall not exceed 10% of the
total number of issued and outstanding shares of Common Stock;
- Options may not be granted at prices that are less than the market
price, where "market price" shall mean the most recent closing price
of the shares on any exchange or over-the-counter market in Canada on
which the shares of Common Stock are listed or quoted for unlisted
trading privileges; and
- Any extension of the terms of an option shall be subject to regulatory
approval.
18
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Included in accounts payable and accrued liabilities of the Company for
fiscal years 1995 and 1994 are approximately $64,000 and $86,000, respectively,
owing to Dr. William P. Long, the President of the Company. Such amounts
represent accrued salary and bonuses payable to Dr. Long. No terms of repayment
have been negotiated with respect to such amounts.
In May 1994, the Company effected a private placement of 600,000 shares of
Common Stock with William P. Long, President of the Company, for aggregate
proceeds of $180,000. The private placement was approved by the shareholders of
the Company at a special meeting of shareholders held June 22, 1995.
Pursuant to an agreement dated April 21, 1994, the Company issued 750,000
shares of Common Stock, with a deemed value of $0.47 ($352,500) per share for
all of the outstanding common shares of Fine Gold. Mr. Costin owned 95% of the
Fine Gold common shares and, as a result, was issued 712,500 shares of Common
Stock. Of the shares of Common Stock issued to Mr. Costin, 617,500 are held in
escrow, to be released dependent upon cash flow generated by Fine Gold, pursuant
to the terms of an escrow agreement among the Company, Equity Transfer Services,
Inc., Thomas P. Campbell and Mr. Costin, dated June 1, 1994 (the "Fine Gold
Escrow Agreement"). See "Item 4. Security Ownership of Certain Beneficial
Owners and Management".
During the 1995 fiscal year, the Company advanced to Dr. Long approximately
$45,000, which does not bear interest and is not subject to a repayment
schedule. This amount was paid to Dr. Long as an advance against expenses to be
incurred by Dr. Long on behalf of the Company. As of July 1996, $23,000 of this
amount remained outstanding. Other than the 1995 advance to Dr. Long, no
officer or director of the Company, nor any associate thereof, has been indebted
to the Company or its subsidiaries at any time during the last three years.
ITEM 8. LEGAL PROCEEDINGS.
The Company is from time to time involved in routine litigation incidental
to the conduct of its business. Currently, the Company is not involved in any
suit, action or other legal proceedings, nor is it aware of any threatened suit,
action or other legal proceedings, which management believes will materially and
adversely affect the business or operations of the Company or its subsidiaries.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
MARKET PRICE
The Common Stock is publicly traded under the symbol "AIG" on the Alberta
Stock Exchange (the "ASE"). The following tables set forth, on a quarterly
basis, the high and low closing sales prices during the last two fiscal years
and the first three quarters of 1996 for shares of the Common Stock on the ASE.
All amounts are stated in Canadian dollars, the currency in which the prices are
quoted.
Low High
----- ------
1994:
1st Quarter.......... .30 .72
2nd Quarter.......... .28 .75
3rd Quarter.......... .04 .28
4th Quarter.......... .07 .19
19
<PAGE>
1995:
1st Quarter........... .10 .48
2nd Quarter........... .195 .70
3rd Quarter........... .42 .87
4th Quarter........... .60 2.20
1996:
1st Quarter........... 1.78 4.25
2nd Quarter........... 2.70 6.50
3rd Quarter........... 3.90 6.20
In the United States, the shares of Common Stock are quoted under the
symbol AIGDF on the over-the-counter Bulletin Board maintained by the National
Association of Securities Dealers. The prices listed below are stated in U.S.
dollars, the currency in which they are quoted, and represent the closing high
and low bid prices for shares of the Common Stock on the over-the-counter
Bulletin Board during the first three quarters of 1996. No information on bid
prices for the Common Stock prior to such time is available. In addition,
quotes for the first quarter of 1996 represent only trading from March 27
through March 29. The bid prices are market quotations based on interdealer bid
prices, without markup, markdown or commission, and may not represent actual
transactions.
Low High
----- -----
1996:
-----
1st Quarter........... 2.30 2.30
2nd Quarter........... 1.375 4.125
3rd Quarter........... 2.85 4.625
As of November 30, 1996, there were 14,396,159 outstanding shares of Common
Stock, held by 395 holders of record. During the period from September 30,
1996, the date of the most recent financial statements, to November 30, 1996,
166,667 Series D Warrants, 221,214 Series E Warrants, 84,690 Series H
warrants and 592,000 options issued pursuant to the Option Plan were
exercised.
DIVIDENDS
The Company has never declared or paid dividends on the Common Stock.
Moreover, the Company currently intends to retain any future earnings for use in
its business and, therefore, does not anticipate paying any dividends on the
Common Stock in the foreseeable future.
RESTRICTIONS ON TRANSFER
None of the shares of Common Stock or warrants to purchase shares of Common
Stock issued by the Company have been registered under the Securities Act of
1933, as amended (the "Securities Act"). Accordingly, such shares and warrants
constitute restricted securities and may not be resold or otherwise transferred
in the United States unless they are registered under the Securities Act or an
exemption from such registration is available. The Transfer Agent and Registrar
for the Common Stock has been instructed that all shares sold by the Company in
the United States must bear a legend advising the holder thereof of the
foregoing restrictions. In addition, transfer of the shares of Common Stock in
Canada are subject to Canadian provincial securities laws and exchange
regulations, which may impose a holding period on shares of Common Stock
acquired in certain private sales transactions.
20
<PAGE>
Certain shares of Common Stock are held in escrow in accordance with the
terms and conditions of the TMI Merger and the Fine Gold Merger, and their
transfer and release from escrow are subject to the terms of the escrow
agreements governing such shares. See "Item 11. Description of Registrant's
Securities to Be Registered." In addition, the TMI Merger Agreement imposes
certain additional limitations on the transferability of shares of Common Stock
received in the TMI Merger. The TMI Merger Agreement limits the number of such
shares that may be transferred by any holder thereof in any calendar quarter for
one year after the closing of the TMI Merger to the greater of (i) 15,000 shares
or (ii) the sum of (a) 5% of the aggregate number of shares received by such
holder in the TMI Merger plus 10% of the aggregate number of Warrant Shares
(shares acquired upon exercise of the Series E warrants issued in the TMI
Merger) then by held by such holder. Commencing one year from the closing of
the TMI merger, the number of shares described in subsection (ii)(a) of the
foregoing sentence shall be increased to 10%.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Equity Transfer
Services, Inc., Suite 800, 120 Adelaide, Toronto, Ontario, M5H 3V1.
TAXATION CONSIDERATIONS
Dividends paid on shares of Common Stock 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% (6% in 1996 only) 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% (6% in 1996 only) 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 shares of Common Stock 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, shares of Common Stock will be taxable Canadian property
if the particular non-resident used (or in the case of a non-resident insurer,
used or held) the shares of 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 the shares of Common Stock constitute taxable Canadian property,
relief nevertheless may be available under the Treaty. Under the Treaty, gains
from the alienation of shares of Common Stock 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 10. RECENT SALES OF UNREGISTERED SECURITIES.
Following is a summary of all securities of the Company sold within the
past three years (since August 1, 1993) which were not registered under the
Securities Act. Unless otherwise indicated, all amounts set forth below are
stated in Canadian dollars. In addition, all share amounts have been adjusted
to reflect the one-for-three reverse stock split of the Common Stock effected in
March 1994.
21
<PAGE>
On October 6, 1993, the Company issued 16,666 shares to a U.S. investor in
consideration of mineral property valued at $25,000. The transaction was
effected in reliance upon the exemption for sales of securities not involving
any public offering set forth in Section 4(2) of the Securities Act ("Section
4(2)").
On January 31, 1994, the Company issued in two transactions, exempt from
registration pursuant to Section 4(2), 16,667 shares of Common Stock and 66,666
shares of Common Stock in consideration of the forgiveness of U.S. $10,000 and
$25,000, respectively, of certain obligations incurred by the Company in
connection with the Company's acquisition of certain mineral rights. On May 25,
1994, the Company sold 600,000 shares of Common Stock to William P. Long,
President of the Company, for cash consideration of $180,000 in a transaction
exempt from registration pursuant to Section 4(2). See "Item 7. Certain
Relationships and Related Transactions." On June 1, 1994, the Company acquired
Fine Gold by issuing 750,000 shares of Common Stock to the two shareholders of
Fine Gold in consideration for all of the outstanding shares of the common stock
of Fine Gold, 650,000 of which are held in escrow, to be released dependent upon
Cash Flow generated by Fine Gold. Of the 750,000 shares issued in the Fine Gold
acquisition, 712,500 were issued to C. Patrick Costin, who is now an officer of
the Company. See "Item 7. Certain Relationships and Related Transactions." The
transaction was exempt from registration by virtue of Section 4(2).
On March 14, 1995, the Company privately placed with two U.S. corporate
investors an aggregate of 1,000,000 units, each consisting of one share of
Common Stock and a Series A warrant to purchase one share of Common Stock, for
cash consideration totaling $200,000. The Company issued an additional 500,000
shares on February 27, 1996 and 500,000 shares on February 29, 1996 to such
investors upon the exercise of the Series A warrants and the payment of cash
consideration of $100,000 on each of such dates. The transactions were exempt
from registration by virtue of Section 4(2).
On May 15, 1995, the Company privately placed 200,000 units, each
consisting of one share of Common Stock and a Series B warrant to purchase one
share of Common Stock, with one offshore corporate investor resident in Hong
Kong, for cash consideration of $100,000. The Company issued an additional
100,000 shares of Common Stock on November 16, 1995 and 100,000 shares on April
19, 1996 to such investor upon the exercise of the Series B warrants and the
payment of cash consideration of $60,000 and $75,000, respectively, on such
dates. The transactions were effected pursuant to the exemption from
registration provided by Regulation S promulgated under the Securities Act.
On June 22, 1995, the Company privately placed with one U.S. investor
500,000 units, each consisting of one share of Common Stock and a Series C
warrant to purchase one share of Common Stock, for cash consideration of
$300,000. The Company issued an additional 250,000 shares of Common Stock on
December 18, 1995 and 250,000 shares on June 19, 1996 pursuant to the exercise
of Series C warrants and the payment of cash consideration of $175,000 and
$200,000, respectively, on such dates. The transactions were exempt from
registration pursuant to Section 4(2).
On October 10, 1995, the Company privately placed with two U.S. investors,
in transactions exempt from registration pursuant to Section 4(2), an aggregate
of 1,000,000 units, each consisting of one share of Common Stock and a Series D
warrant to purchase one share of Common Stock, for total cash consideration of
$600,000. The Company has issued additional shares of Common Stock upon the
exercise of Series D warrants and the payment of cash consideration as follows:
250,000 shares on each of February 16 and March 29, 1996 for a total of
$375,000; 250,000 shares on April 22, 1996 for $225,000; and 83,333 shares on
June 5, 1996 for $75,000.
On February 8, 1996, the Company entered into an agreement to acquire TMI
(the "Merger Agreement"), which was approved by the shareholders of TMI on
February 29, 1996, providing for the issuance of Common Stock and Series E
warrants to purchase Common Stock in exchange for all of the outstanding shares
of the common stock of TMI and the cancellation of outstanding options to
purchase shares of the common stock of TMI. Pursuant to the Merger Agreement,
the Company issued 1,920,000 shares of Common Stock to the 45 shareholders of
TMI (10 of which were accredited investors) and issued 580,000 Series E warrants
to purchase one share of Common Stock. The transaction was effected in reliance
upon the exemption from registration provided by Section 4(2), based on a number
of considerations, including the following.
22
<PAGE>
Each former shareholder of TMI received a proxy statement which contained,
among other things, descriptions of (i) the business and management of Altair,
(ii) the shares of Common Stock to be issued in the TMI Merger, (iii) the terms
and conditions of the TMI Merger Agreement, (iv) certain risk factors associated
with the TMI Merger, (v) the reasons for and effects of the TMI Merger and the
favorable recommendation of the Board of Directors regarding the TMI Merger,
(vi) the tax consequences of the TMI Merger, (vii) the restrictions on
transferability of the shares of Common Stock to be received in the TMI Merger,
including those imposed by securities laws, the escrow to which the shares would
be subject and the additional sale restrictions imposed by the TMI Merger
Agreement itself, and (viii) the dissenters' rights afforded to the shareholders
by Washington law. Audited financial statements of Altair for the year ended
December 31, 1995, a copy of the TMI Merger Agreement, and the Washington
dissenters' rights provisions were included, among other things, as exhibits to
the proxy statement. The former TMI Shareholders voted to approve the TMI
Merger; none of the former TMI Shareholders exercised dissenters' rights.
No general advertising or solicitation preceded the distribution of the
Common Stock in the TMI Merger. Rather, the TMI Merger was a negotiated
agreement which developed as a natural outgrowth of the pre-existing
relationship between Altair and TMI. At the time the TMI Merger negotiations
commenced, Altair was working with TMI on the development of the CJ pursuant to
a license granted to Altair by TMI. It was this prior business relationship,
rather than any general form of solicitation, that resulted in the TMI Merger.
In connection with the TMI Merger, each former TMI shareholder was required
to execute a subscription agreement and questionnaire, which solicited
information as to each shareholder's status as an accredited investor and/or
background, education and experience which would enable the shareholder
individually, or with the assistance of a qualified purchaser representative, to
effectively evaluate the merits and risks of acquiring shares of Common Stock in
the TMI Merger. Each subscription agreement included customary representations
and warranties regarding the shareholder's intent to acquire the shares of
Common Stock as an investment, and covenants not to serve as a conduit for
further distribution of the Common Stock.
On March 27, 1996, the Company privately placed with one U.S. corporate
accredited investor, 100,000 units, each consisting of one share of Common Stock
and a Series F warrant to purchase one share of Common Stock, for total cash
consideration of $350,000. To date, no additional shares of Common Stock have
been issued pursuant to the exercise of Series F warrants. The transaction was
effected in reliance upon the exemption from registration provided by Section
4(2).
On June 27, 1996, the Company privately placed 60,000 units, each
consisting of one share of Common Stock and a Series H warrant to purchase one
share of Common Stock, with one non-U.S. investor resident in Bermuda, for cash
consideration of $210,000 pursuant to Regulation S. Also on June 27, the
Company privately placed with seven U.S. accredited investors, including the two
owners of the U.S. corporate accredited investor that purchased shares of Common
Stock in the March 27, 1996 placement, an aggregate of 494,027 units, each
consisting of one share of Common Stock and a Series G warrant to purchase one
share of Common Stock, for total cash consideration of $1,729,095. The
placements were effected in reliance upon Section 4(2).
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Company's Articles of Incorporation (the "Articles") authorize the
issuance of an unlimited number of shares of Common Stock. As of November 30,
1996, there were 14,396,159 shares of Common Stock issued and outstanding and
held by approximately 395 registered holders of the Company. Holders of
shares of Common Stock are entitled to one vote per share on all matters to be
voted on by shareholders of the Company. The holders of Common Stock are
entitled to receive dividends, if any, as may be declared from time to time by
the Company's Board of Directors in its discretion from funds legally available
therefor. Upon liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive ratably any assets available for
distribution to shareholders. The shares of Common Stock have no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. All of the outstanding
shares of Common Stock are fully paid and nonassessable. Neither the Articles
nor the Bylaws of the Company contains any provision that would delay, defer or
prevent a change in control of the Company.
23
<PAGE>
Pursuant to the terms of the TMI Merger Agreement, all of the 1,919,957
shares of Common Stock issued in the TMI Merger were deposited into escrow (the
"TMI Escrowed Shares"), and are governed by terms of two escrow agreements dated
as of February 27, 1996 and February 29th, respectively, among the Company, Hage
Corporate Services, Inc., and the former TMI shareholders (collectively, the
"TMI Escrow Agreements"). Of such 1,919,957 TMI Escrowed Shares, 1,170,000 (the
"Performance Shares") are to be released based on the revenues, if any, received
by the Company from the assets formerly held by TMI. For each $1.80 in revenue
received by Altair from such assets, one TMI Escrowed Share will be released;
provided, however, that no more than one-third of the original number of TMI
Escrowed Shares may be released in any one year during the first three years of
the escrow. As of September 30, 1996, none of such 1,170,000 TMI Escrowed
Shares had been released from escrow. The remaining 749,957 TMI Escrowed Shares
(the "Principal Shares") will be released from escrow in increments of the
greater of 15,000 shares or 5% of each former TMI shareholder's total escrowed
holdings each calendar quarter. As of September 30, 1996, approximately 442,961
of such 749,957 Principal Shares had been released from escrow. Any TMI
Escrowed Shares still held in escrow at the end of five years will be cancelled
by the Company upon the instruction of the Alberta Stock Exchange.
Holders of TMI Escrowed Shares are entitled to exercise all voting rights
associated with such shares. Holders are entitled to receive any cash
dividends paid in respect of the Principal Shares, but are not entitled to
receive cash dividends paid in respect of the Performance Shares. Shares of
Common Stock distributed as dividends to Holders of the TMI Escrowed Shares are
added to the TMI Escrowed Shares and governed by all of the terms and conditions
of the TMI Escrow Agreement. Except as may be required by reason of the death
or bankruptcy of a holder of TMI Escrowed Shares, holders may not sell, assign
or otherwise transfer TMI Escrowed Shares without the prior written consent of
the Alberta Stock Exchange and in accordance with all applicable U.S. and
Canadian securities laws.
The TMI Escrow Agreement also provides that the TMI Escrowed Shares secure
certain indemnification obligations of TMI set forth in Article 4 of the TMI
Merger Agreement. Accordingly, in the event that the Company or Fine Gold
incurs any loss, claim, damage, expense or liability for which TMI has agreed to
indemnify the Company or Fine Gold, all or a portion of the TMI Escrowed Shares
may be sold to satisfy the amount of such indemnification obligations.
In connection with the Company's acquisition of Fine Gold, the Company and
the former shareholders of Fine Gold entered into the Fine Gold Escrow
Agreement, pursuant to which 650,000 shares of Common Stock of Altair issued to
the former shareholders of Fine Gold were deposited in escrow pursuant to the
terms of the Fine Gold Escrow Agreement (the "Fine Gold Escrowed Shares"). The
Fine Gold Escrow Agreement provides that one Fine Gold Escrowed Share may be
released for each $0.45 of (i) cash flow (as defined therein) or (ii) certain
expenditures incurred by Fine Gold to maintain its assets. As of September 30,
1996, no Fine Gold Escrowed Shares had been released from escrow. Other than as
may be required by reason of the death or bankruptcy of a holder of Fine Gold
Escrowed Shares, such shares may not be sold, assigned or otherwise transferred.
Holders of Fine Gold Escrowed Shares are entitled to exercise all voting rights
accorded to such shares, but do not receive dividends, if any, declared with
respect to such shares.
As of September 30, 1996, the Company had issued and outstanding options to
acquire 1,307,000 shares of Common Stock issued pursuant to the Option Plan, and
1,399,272 warrants to purchase shares of Common Stock issued in five series. As
of such date, there were outstanding 166,667 Series D warrants, 573,578 Series E
warrants, 100,000 Series F warrants, 494,027 Series G warrants and 60,000 Series
H warrants.
Each Series D warrant outstanding as of September 30, 1996 entitled the
holder thereof to purchase one share of Common Stock at a price of $0.90 per
share until October 10, 1996. All such Series D warrants were exercised on such
date. Each Series E warrant entitles the holder thereof to purchase one share
of Common Stock at a price of $2.00 until March 1, 1997. Each Series F warrant
entitles the holder thereof to purchase one share of Common Stock at a price of
$7.00 until December 26, 1996 (the "Initial Exercise Period"); provided,
however, that (i) only 50,000 of the Series F warrants may be exercised during
the Initial Exercise Period and (ii) if the Common Stock trades at or in excess
of $8.00 per share during the Initial Exercise Period, the exercise price shall
be adjusted to $10.00 and the Initial Exercise Period shall terminate on the
forty-fifth day following the date on which the Common Stock first trades at or
in excess of $8.00. Thereafter, the Series F warrants may be exercised
24
<PAGE>
at a price of $10.00 from the date of termination of the Initial Exercise
Period until September 26, 1997 (the "Final Exercise Period"), provided,
however, that (i) the number of Series F warrants exercised during the Final
Exercise Period may not exceed the number of Series F warrants exercised
during the Initial Exercise Period and (ii) if the Common Stock trades at or
in excess of $11.00 per share during the Final Exercise Period, the Series F
warrants shall expire and the Final Exercise Period shall terminate on the
forty-fifth day following the date on which the Common Stock first trades at
or in excess of $11.00. Each Series G warrant entitles the holder thereof to
purchase one share of Common Stock at a price of $4.50 per share until June
26, 1998; provided, however, that if shares of Common Stock trade on the
Alberta Stock Exchange at or in excess of $6.50 per share on five days prior
to such date, the Series G warrants shall expire on the thirtieth day
following the fifth day on which the Common Stock so trades at or in excess
of $6.50. Each Series H warrant entitles the holder thereof to purchase one
share of Common Stock at a price of $4.50 until December 26, 1997.
Holders of Series E, F, G and H warrants are not entitled to any right or
interest as a shareholder of the Company prior to exercise of such warrants.
The number of shares of Common Stock subject to such warrants may be adjusted in
certain events, including, without limitation, distribution by the Company of
shares, rights, options, warrants or other securities to holders of Common
Stock, a capital reorganization of the Company, reclassification of the Common
Stock, or a consolidation or merger of the Company with or into another entity.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide that every director and officer of the Company
shall be indemnified by the Company against (i) any liability and all costs,
charges and expenses that he or she may incur in respect of any action, suit or
proceeding that is proposed or commenced against him or her for, or in respect
of, anything the officer or director has done or permitted in respect of the
execution of the duties of his or her office, and (ii) all other costs, charges
and expenses that he or she sustains or incurs in respect of the affairs of the
Company, except costs, charges or expenses that are occasioned by the director
or officer's own willful neglect or default.
ITEM 13. FINANCIAL STATEMENTS
Please refer to the Consolidated Financial Statements and the index thereto
which appear on pages F-1 to F-38 hereof.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
25
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements:
PAGE NO.
--------
AUDITED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . F-2
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Balance Sheets as at December 31, 1995, 1994
and 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Operations and Deficit for the
years ended December 31, 1995, 1994 and 1993. . . . . . . . . F-6
Consolidated Statements of Changes in Financial Position for
the years ended December 31, 1995, 1994 and 1993. . . . . . . F-7
Notes to the Consolidated Financial Statements . . . . . . . . . . F-8
INTERIM FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . .F-17
Consolidated Balance Sheets as at September 30, 1996, and
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . .F-18
Consolidated Statements of Administrative Expenditures and
Deficit for the nine-month periods ended September 30,
1996 and 1995, and for the years ended December 31, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . .F-19
Consolidated Statements of Changes in Financial Position for
the nine-month periods ended September 30, 1996 and 1995,
and for the years ended December 31, 1995, 1994 and 1993. . .F-20
Notes to the Consolidated Financial Statements . . . . . . . . . .F-21
Proforma Combined Financial Information . . . . . . . . . . . . .F-34
Pro Forma Combined Statements of Operations for Altair
International Inc. and Trans Mar, Inc. for the year ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . .F-36
Pro Forma Combined Statement of Operations for Altair
International Inc. and Trans Mar, Inc. for the nine months
ended September 30, 1996. . . . . . . . . . . . . . . . . . .F-37
Exhibit A to the Consolidated Financial Statements --
Consolidated Statement of Cash Flows for the nine-month
periods ended September 30, 1996 and 1995, and/or the years
ended December 31, 1995, 1994 and 1993, prepared in
accordance with U.S. GAAP . . . . . . . . . . . . . . . . . .F-38
All financial statements, unless otherwise stated, are presented in
accordance with generally accepted accounting principles applicable in Canada.
See Note 11 to the Interim Financial Statements for certain reconciliations to
accounting principles generally accepted in the United States.
(b) Please refer to the Index to Exhibits which appears immediately after
page F-38.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 10 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALTAIR INTERNATIONAL INC.
By: /s/ WILLIAM P. LONG
---------------------------------
William P. Long, President
Date: March 13, 1997
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
AUDITED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . F-2
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Balance Sheets as at December 31, 1995, 1994
and 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Operations and Deficit for the
years ended December 31, 1995, 1994 and 1993. . . . . . . . . F-6
Consolidated Statements of Changes in Financial Position for
the years ended December 31, 1995, 1994 and 1993. . . . . . . F-7
Notes to the Consolidated Financial Statements . . . . . . . . . . F-8
INTERIM FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . F-17
Consolidated Balance Sheets as at September 30, 1996, and
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . . F-18
Consolidated Statements of Administrative Expenditures and
Deficit for the nine-month periods ended September 30,
1996 and 1995, and for the years ended December 31, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . F-19
Consolidated Statements of Changes in Financial Position for
the nine-month periods ended September 30, 1996 and 1995,
and for the years ended December 31, 1995, 1994 and 1993. . . F-20
Notes to the Consolidated Financial Statements . . . . . . . . . . F-21
Pro Forma Combined Financial Information . . . . . . . . . . . . . F-34
Pro Forma Combined Statements of Operations for Altair
International Inc. and Trans Mar, Inc. for the year
ended December 31, 1995 . . . . . . . . . . . . . . . . . . . F-36
Pro Forma Combined Statement of Operations for Altair
International Inc. and Trans Mar, Inc. for the nine months
ended September 30, 1996. . . . . . . . . . . . . . . . . . . F-37
Exhibit A to the Consolidated Financial Statements --
Consolidated Statement of Cash Flows for the nine-month
periods ended September 30, 1996 and 1995, and/or the years
ended December 31, 1995, 1994 and 1993, prepared in
accordance with U.S. GAAP . . . . . . . . . . . . . . . . . . F-38
All financial statements, unless otherwise stated, are presented in
accordance with generally accepted accounting principles applicable in Canada.
See Note 11 to the Interim Financial Statements for certain reconciliations
to accounting principles generally accepted in the United States.
F-1
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
F-2
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
INDEX PAGE
- ----- ----
Auditor's Report 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations and Deficit 3
Consolidated Statement of Changes in Financial Position 4
Notes to the Consolidated Financial Statements 5-13
F-3
<PAGE>
Page 1
AUDITORS REPORT
To the Directors of Altair International Gold Inc.
(formerly Carlin Gold Company Inc.)
We have audited the consolidated balance sheets of Altair International Gold
Inc. (formerly Carlin Gold Company Inc.) as at December 31, 1995, 1994 and
1993 and the consolidated statements of operations and deficit, and changes
in financial position for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31,
1995, 1994 and 1993 and the results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles in Canada.
McGOVERN, HURLEY, CUNNINGHAM
/s/ McGOVERN, HURLEY, CUNNINGHAM
North York, Canada Chartered Accountants
January 15, 1996
COMMENTS BY THE AUDITORS FOR U.S. READERS ON
CANADA - U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described
in Note 1 to the financial statements. Our report to the directors dated
January 15, 1996 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the auditors'
report when these are adequately disclosed in the financial statements.
North York, Canada
January 15, 1996
F-4
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
==============================================================================
1995 1994 1993
(Expressed in Canadian Dollars) $ $ $
==============================================================================
ASSETS
CURRENT
Cash 424,185 9,816 125,148
Advances and accounts receivable
(Note 6) 130,102 59,940 65,291
---------- ---------- ----------
554,287 69,756 190,439
MINERAL PROPERTIES AND DEFERRED
EXPLORATION EXPENDITURES (Note 2) - 1 471,774
CAPITAL
Office equipment, net of accumulated
amortization of $6,664 (1994;
$3,167 1993; $1,759) 33,365 5,630 7,038
OTHER
Option agreement costs (Note 3) 373,955 82,247 849
Centrifugal jig (Note 4(a)) 359,475 353,509 -
Goodwill, net 15,609 16,431 -
---------- ---------- ----------
1,336,691 527,574 670,100
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES
CURRENT
Accounts payable and accrued
liabilities (Note 6(b)) 124,605 224,791 161,848
---------- ---------- ----------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 5)
Issued
8,497,849 Common shares 5,779,016 4,270,616 3,692,007
DEFICIT (4,566,930) (3,967,833) (3,183,755)
---------- ---------- ----------
1,212,086 302,783 508,252
---------- ---------- ----------
1,336,691 527,574 670,100
---------- ---------- ----------
---------- ---------- ----------
APPROVED ON BEHALF OF THE BOARD:
"CHRISTOPHER I. PROUD" , Director
- ----------------------------
"JAMES GOLLA" , Director
- ----------------------------
F-5
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
==============================================================================
1995 1994 1993
(Expressed in Canadian Dollars) $ $ $
==============================================================================
ADMINISTRATIVE AND GENERAL EXPENSES
General exploration 222,350 - -
Wages and administration 141,494 3,402 3,609
Professional fees 91,257 31,711 43,091
General and office 29,379 20,781 14,566
Public relations 28,812 21,148 29,082
Financing fees 17,810 - -
Insurance 11,457 6,520 5,480
Transfer agent's fees 9,378 7,991 3,702
Loss (gain) on foreign exchange 8,894 5,621 (4,381)
Accounting and corporate services 8,348 8,120 8,088
Shareholders' meeting 6,946 9,768 6,767
Stock exchange fees 5,091 3,100 1,300
Government fees and taxes 2,650 3,343 4,886
Travel 1,027 - 2,901
Royalties - 46,109 -
Write-off of mineral properties and
related exploration expenditures 11,255 616,398 200,275
Amortization 4,319 1,408 1,759
---------- ---------- ----------
600,467 785,420 321,125
Less: interest income 1,370 1,342 3,173
---------- ---------- ----------
NET LOSS FOR THE YEAR 599,097 784,078 317,952
DEFICIT, beginning of year 3,967,833 3,183,755 2,865,803
---------- ---------- ----------
DEFICIT, end of year 4,566,930 3,967,833 3,183,755
---------- ---------- ----------
---------- ---------- ----------
Net loss per share
Basic (Note 7) $ (0.09) $ (0.17) $ (0.08)
---------- ---------- ----------
---------- ---------- ----------
F-6
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1995 1994 1993
(Expressed in Canadian Dollars) $ $ $
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CASH WAS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net loss for the year (599,097) (784,078) (317,952)
Charges not involving cash:
Amortization 4,319 1,408 1,759
Write-off of mineral properties and
related exploration expenditures 11,255 616,398 200,275
--------- -------- --------
(583,523) (166,272) (115,918)
--------- -------- --------
Changes in noncash working capital balances:
Decrease (increase) in advances and
accounts receivable (70,162) 5,351 (61,446)
Increase (decrease) in accounts payable (100,186) 62,943 105,598
--------- -------- --------
(170,348) (68,294) 44,152
--------- -------- --------
(753,871) (97,978) (71,766)
--------- -------- --------
FINANCING ACTIVITIES
Issuance of common shares for cash 1,200,000 180,000 49,880
Issuance of common shares for shares
of subsidiary - 352,500 -
Issuance of common shares for royalties
owed - 46,109 -
Issuance of common shares for mineral
properties - - 75,400
Exercise of stock options 73,400 - -
Exercise of warrants 235,000 - -
--------- -------- --------
1,508,400 578,609 125,280
--------- -------- --------
INVESTING ACTIVITIES:
Mineral properties and deferred
exploration expenditures (11,255) (144,625) (147,297)
Purchase of capital assets (31,232) - (8,797)
Centrifugal jig (5,965) (353,509) -
Goodwill - (16,431) -
Option agreement costs (291,708) (81,398) -
--------- -------- --------
(340,160) (595,963) (156,094)
--------- -------- --------
Increase (decrease) in cash 414,369 (115,332) (102,580)
Cash, beginning of year 9,816 125,148 227,728
--------- -------- --------
Cash, end of year 424,185 9,816 125,148
--------- -------- --------
--------- -------- --------
F-7
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The financial statements include the accounts of the company and its
wholly owned subsidiaries, Carlin Gold Company, Fine Gold Recovery
Systems, Inc., Mineral Recovery Systems, Inc. and 660250 Ontario
Limited.
Nature of Operations and Going Concern Considerations:
The company and its subsidiaries are engaged in the business of
acquiring, developing and testing mineral processing equipment for use
in the recovery of fine, heavy mineral particles, including gold and
environmental contaminants. The company and its subsidiaries are also
in the process of exploring mineral properties, however, the current
year's exploration was carried out on property in which the company does
not have an interest, in order to test the processing equipment. The
recovery of the amounts shown for the centrifugal jig and option
agreement costs is dependent upon the confirmation of the Company's
interest in the centrifugal jig, the ability of the Company and its
subsidiaries to obtain necessary financing to complete the development,
and future profitable production.
Mineral Properties:
Mineral properties are carried at cost until they are brought into
production at which time they are depleted on a unit-of-production
method based on proven and probable reserves. If a property is
subsequently determined not to be economic, the property and related
deferred costs are written down to net realizable value.
Exploration expenses relating to mineral properties in which the
company has an interest in are deferred until the properties are
brought into production at which time they are amortized on a
unit-of-production basis. Other general exploration expenses are
charged to operations as incurred.
The cost of the mineral properties abandoned or sold and the deferred
exploration costs relating to properties abandoned or sold are charged
to operations in the current year. The Company renews its mineral
properties on an annual basis to determine if events or changes in
circumstances have transpired which indicate that the carrying value
of its assets may not be recoverable. In performing its review, the
Company estimates the future cash flows expected to result from the
asset and its eventual disposition. If the sum of the undiscounted,
expected future cash flow is less than the carrying value of the asset,
an impairment loss is recognized.
Administrative Expenditures:
Administrative expenditures are charged to operations as incurred.
Capital Assets and Amortization:
Office equipment is stated at acquisition cost. Amortization is
provided on the diminishing balance basis at 20% per annum.
Continued...
F-8
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
Goodwill is the excess of the cost of investment in subsidiaries over
the estimated fair value of net assets acquired and is amortized on a
straight-line basis over 20 years.
Translation of Foreign Currency:
The operations of the company's subsidiaries are determined to be of an
integrated nature. The accounts of the U.S. subsidiaries are
translated using the temporal method, under which monetary assets
and liabilities are translated at the rate of exchange prevailing at
the year end; capital assets are translated at the rates prevailing at
the acquisition dates; and, revenue and expenses at average rates of
exchange during the year, with the exception of amortization, which is
translated at historical exchange rates. Exchange gains and losses are
included in the consolidated statement of administrative expenditures
and deficit.
Translations Involving Non-Cash Consideration:
When exchanging its shares of common stock for non-cash consideration,
the company values its exchanged shares at contemporaneous trade prices
on the Alberta Stock Exchange, with larger transactions subject to
arm's length discounting in order to arrive at fair market value.
2. MINERAL PROPERTIES AND DEFERRED EXPLORATION EXPENDITURES
NEAWANGANK LAKE
The company holds a 100% interest in 17 unpatented claims in the Patricia
Portion, District of Kenora, Ontario, Canada subject to the reservation
of a 10% net profit interest. The company has the option to purchase the
10% net profit interest for the issuance of 100,000 common shares.
During the year the claims were written off.
3. OPTION AGREEMENT COSTS
Pursuant to an option agreement dated November 15, 1994, the company has
the option to acquire all of the shares of Trans Mar, Inc., a Washington
corporation (see Note 9). Trans Mar, Inc. is the owner of all patent and
other rights relating to the Campbell Centrifugal jig (CCJ).
Continued...
F-9
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
3. OPTIONS AGREEMENT COSTS (CONTINUED)
Total consideration for the option is as follows:
a) U.S. $25,000 on signing of agreement (paid).
b) U.S. $25,000 six months after signing the agreement (paid).
c) U.S. $15,000 per month commencing March 1, 1995 continuing until the
exercise or termination of the option.
The option is exercisable at any time prior to April 1, 1996 at which
time the option expires.
The exercise price is U.S.$7,000,000 payable in quarterly instalments to
October 1, 1999. The exercise price can be satisfied by a combination of
cash and/or common shares of the company.
In the event that the company elects to exercise the option, commencing
on April 1, 1998, the company is obligated to pay a gross revenue payment
equal to 2.5% of the aggregate gross revenues to a maximum of
U.S.$13,000,000.
As a condition to the exercise of the option, the company is also
obligated to expend U.S.$600,000 on the development and marketing of the
CCJ prior to April 1, 1996. The U.S.$15,000 monthly payments will be
credited against this obligation. The company has paid U.S.$268,898 to
Trans Mar, Inc. in accordance with the agreement. The company is in
compliance with all the terms of the definitive option agreement as of
December 31, 1995. (See Note 10).
4. ACQUISITION
(a) FINE GOLD RECOVERY SYSTEMS, INC. (FINE GOLD)
Pursuant to an agreement dated April 21, 1994 the company issued
750,000 common shares, with a deemed value of $0.47 ($352,500) per
share for all of the outstanding common shares of Fine Gold, a
corporation incorporated in the State of Nevada and involved in the
development of a "Centrifugal Jig"; an apparatus designed to recover
fine gold from mineral properties. Pursuant to an Agreement dated
as of January 1, 1994, between Thomas P. Campbell, the inventor of
the Centrifugal Jig, and Fine Gold, Fine Gold acquired the rights to
develop and market applications for the Jig at specified target
sites and utilize the Jig in the exploitation of such sites, and
obtained the agreement of Mr. Campbell to provide certain services
and assistance to Fine Gold in doing so, during the term of the
Agreement and throughout the world, excepting (i) areas subject to
patents held by Trans Mar, and (ii) the Republic of Costa Rica, and
certain areas in Mexico and Guiana, South America. As at December
31, 1995, Fine Gold was still in the development stage in that no
operating revenues have been earned and no operating expenses have
been incurred. Costs relating to the development of the centrifugal
jig have been capitalized. The fair value attributed to the
centrifugal jig was equal to the carrying value of the accumulated
costs on Fine Gold's financial statement.
Continued...
F-10
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- --------------------------------------------------------------------------------
4. ACQUISITIONS (CONTINUED)
A total of 650,000 shares issued pursuant to the acquisition are subject
to a Performance Escrow Agreement which states that one share can be
released from escrow for each U.S. $0.45 of (i) cash flow generated by or
from the centrifugal jig; or (ii) Deferred Expenditures incurred on the
assets of Fine Gold. As at December 31, 1995, 650,000 shares remain in
escrow. (See Note 3)
5. CAPITAL STOCK
The capital stock is as follows:
<TABLE>
<S> <C>
Authorized
Unlimited common shares
Issued
8,497,849 common shares $5,779,016
----------
----------
</TABLE>
Transactions during the years are as follows:
<TABLE>
Shares Amount
---------- ----------
<S> <C> <C>
Balance, December 31, 1993 11,203,294 $3,692,007
Common shares issued for royalties owed 250,000 46,109
---------- ----------
11,552,294 3,738,116
---------- ----------
Share consolidation (3 for 1, adjusted for rounding) 3,850,849 3,738,116
Common shares issued for shares of subsidiary 750,000 352,500
Common shares issued for cash 600,000 180,000
---------- ----------
Balance, December 31, 1994 5,200,849 4,270,616
Common shares issued for cash 2,700,000 1,200,000
Exercise of stock options 247,000 73,400
Exercise of warrants 350,000 235,000
---------- ----------
Balance, December 31, 1995 8,497,849 $5,779,016
---------- ----------
---------- ----------
</TABLE>
Continued...
F-11
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
STOCK OPTIONS
As at December 31, 1995, 677,000 common shares are reserved for issuance
to directors, officers and employees under the company's stock option plan.
The exercise price and expiry dates of options outstanding as of
December 31, 1995 are as follows:
Number
of Shares Price Expiry Date
--------- ----- -----------
271,000 $0.20 August 1, 1999
110,000 0.60 August 8, 1998
166,000 0.65 November 13, 2000
30,000 0.50 March 30, 2000
100,000 0.50 March 28, 2000
WARRANTS
i) Series A
Issued 1,000,000
Pursuant to a subscription agreement, the company issued 1,000,000
units at $0.20 per unit for total proceeds of $200,000. Each unit
consists of one common share and one Series A share purchase warrant.
Each Series A share purchase warrant entitles the holder to purchase
one common share at $0.20 per share to March 14, 1996.
ii) Series B
Issued 100,000
Pursuant to a subscription agreement, the company issued 200,000
units at $0.50 per unit for total proceeds of $100,000. Each unit
consists of a common share and one Series B share purchase warrant.
Each Series B share purchase warrant entitles the holder to purchase
one common share at a price of $0.60 per share to November 15, 1995
provided that only 50% of the warrants may be exercised during the
initial period, and at a price of $0.75 per share to May 15, 1996
provided that the number of warrants that may be exercised after
November 15, 1995 may not exceed the number of warrants exercised
prior to November 15, 1995.
Prior to November 15, 1995, 100,000 warrants were exercised for
total proceeds of $60,000.
(Continued)...
F-12
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
iii) Series C
Issued 250,000
Pursuant to a subscription agreement, the company issued 500,000
units at $0.60 per unit for total proceeds of $300,000. Each unit
consists of a common share and one Series C share purchase warrant.
Each Series C share purchase warrant entitles the holder to purchase
one common share at a price of $0.70 per share to December 21, 1995
provided that only 50% of the warrants may be exercised during the
initial period, and at a price of $0.80 per share to June 22, 1996
provided that the number of warrants that may be exercised after
December 22, 1995 may not exceed the number of warrants exercised
prior to December 22, 1995.
Prior to December 22, 1995, 250,000 warrants were exercised for
total proceeds of $175,000.
iv) Series D
Issued 1,000,000
Pursuant to a subscription agreement, the company issued 1,000,000
units at $0.60 per unit for total proceeds of $600,000. Each unit
consists of a common share and one Series D share purchase warrant.
Each Series D share purchase warrant entitles the holder to purchase
one common share at a price of $0.75 per share to April 10, 1996
provided that only 50% of the warrants may be exercised during the
initial period, and at a price of $0.90 per share to October 10,
1996 provided that the number of warrants that may be exercised after
April 10, 1996 may not exceed the number of warrants exercised prior
to April 10, 1996.
6. RELATED PARTY TRANSACTIONS
Pursuant to an employment agreement dated January 1, 1988 and as amended
June 30, 1990 the company hired the current president in accordance with
the following terms:
A minimum monthly salary of U.S.$7,600 and an annual bonus to be determined
by the Board of Directors of not less that 10% of the annual compensation.
In the event of a takeover, merger or consolidation and if the voting
control of over 35% of the issued stock is acquired by an individual or a
group of individuals and this agreement is terminated by the company within
180 days before or one year thereafter, or by the president one year
thereafter, then the president shall be paid U.S.$250,000 and given 200,000
shares of the company's common stock.
Continued...
F-13
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
6. RELATED PARTY TRANSACTIONS (Continued)
Included in accounts payable and accrued liabilities is U.S.$64,384
(1994; U.S.$85,843, 1993; U.S.$54,336) owing to the president. Included
in advances and accounts receivable is U.S.$45,000 (1994; $Nil, 1993; Nil)
owing from the president.
7. NET LOSS PER SHARE
The existence of stock options affects the calculation of loss per share
on a fully diluted basis. As the effect of this dilution is to reduce the
reported loss per share, the fully diluted loss per share has not been
calculated.
8. INCOME TAXES
As at December 31, 1995, the company has approximate non-capital losses
carried forward for income tax purposes which are available to reduce
certain future year's income for tax purposes as follows:
1996 $ 53,000
1997 76,000
1998 138,000
1999 93,000
2000 44,000
2001 54,000
2002 76,000
--------
$534,000
--------
--------
9. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The company prepares its accounts in accordance with accounting
principles generally accepted in Canada, ("Canadian GAAP") which conform,
in all material respects, with accounting principles generally accepted
in the United States ("U.S. GAAP"), except as described below:
Continued...
F-14
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
9. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
STATEMENT OF CHANGES IN FINANCIAL POSITION
The U.S. Financial Accounting Standards Board (FASB) issued its
Statement of Financial Accounting Standards No. 95 (SFAS No. 95)
effective for years ending after July 15, 1988. SFAS No. 95, which is
entitled "Statement of Cash Flows", established standards for cash flow
reporting with its primary purpose being to provide information about
the cash receipts and cash payments of an entity during the period.
Canadian Generally Accepted Accounting Principles (GAAP) dealing with
the statement of changes in financial position is based on a broad
concept, embracing all changes in financial position. The following are
the Statements of Cash Flow prepared in accordance with U.S. GAAP for
each of the three years ended December 31, 1995:
1995 1994 1993
(Expressed in Canadian Dollars) $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the year (599,097) (784,078) (317,952)
Adjustments to reconcile net loss for
the year to net cash (used):
Amortization 4,319 1,408 1,759
Royalties - 46,109 -
Incorporation costs - 1,444 -
Write-off of mineral property and
related exploration expenditures 11,255 616,398 200,275
Changes in assets and liabilities:
Advances and accounts receivable (70,162) 5,351 (61,446)
Accounts payable and accrued
liabilities (100,186) 62,943 105,598
-------- -------- --------
NET CASH (USED IN) OPERATING ACTIVITIES (753,871) (50,425) (71,766)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mineral properties and
related deferred exploration
expenditures (11,255) (144,625) (71,897)
Purchase of capital assets (31,232) - (8,797)
Purchase of centrifugal jig (5,965) (18,412) -
Option agreement costs (291,708) (81,398) -
Payment of net liabilities of
subsidiary on acquisition - (472) -
-------- -------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (340,160) (244,907) (80,694)
-------- -------- --------
Continued...
F-15
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(EXPRESSED IN CANADIAN DOLLARS)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
9. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
1995 1994 1993
(Expressed in Canadian Dollars) $ $ $
NET CASH (USED IN) INVESTING ACTIVITIES (340,160) (244,907) (80,694)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common shares for cash 1,200,000 180,000 49,880
Proceeds from exercise of stock
options 73,400 - -
Proceeds from exercise of warrants 235,000 - -
--------- -------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,508,400 180,000 49,880
--------- -------- --------
NET INCREASE (DECREASE) IN CASH 414,369 (115,332) (102,580)
CASH, beginning of year 9,816 125,148 227,728
--------- -------- --------
CASH, end of year 424,185 9,816 125,148
--------- -------- --------
--------- -------- --------
Under Canadian GAAP, there is no requirement to disclose the Company's
policy for determining which items are treated as cash equivalents. Under
U.S. GAAP cash equivalents are short term, highly liquid investments that
are readily converted to known amounts of cash and are so near their
maturities that they present an insignificant risk of change in value
because of changes in interest rates.
DEVELOPMENT STAGE COMPANY
As of December 31, 1995, the Company would be characterized as a
"development stage enterprise" under U.S. GAAP due to Statement of
Financial Accounting Standards No. 7 ("SFAS 7"). Under Canadian
GAAP, there are no requirements for the indication or reporting of
development stage entities.
FOREIGN CURRENCY TRANSLATION
In Canada and the United States, a distinction is made between the
measurement and accounting for an enterprise's own transactions in a
foreign currency. In the U.S. an integrated subsidiary would remeasure
its books and records into the functional currency prior to translation
into the reporting currency. The U.S. subsidiaries maintain their books
and records in U.S. dollars, however, their functional currency is
Canadian dollars due to the dependency on the Canadian parent. The
remeasurement of the U.S. subsidiaries financials according to U.S. GAAP
would not change the results of the consolidated financial statements
prepared in accordance with Canadian GAAP.
INCOME TAXES
Under Canadian GAAP, income taxes are accounted for under the deferred
method. Under U.S. GAAP, companies must follow the requirements of
Statement of Financial Accounting Standards No. 109 (SFAS 109) which
required the use of the asset/liability method for measurement of tax
liabilities, wherein deferred tax assets are recognized as well as
deferred tax liabilities.
The company has significant non-capital loss carryforwards (Note 8).
SFAS 109 would require the recognition of a long-term tax asset for the
future benefit expected from the application of these carryforwards to
future profitable years. If it is expected that the entire amount of
non-capital loss carryforwards will not be utilized, then a valuation
allowance is applied to the asset to reasonably state the asset at its
expected value. Under SFAS 109, disclosure of the amount of valuation
allowance is required. As at December 31, 1995, the valuation allowance
would be equal to 100% of the deferred tax asset. Changes in the value
of the deferred asset are recognized each year as income tax expense.
STOCK OPTIONS
Of the common share stock options outstanding at December 31, 1995, all
677,000 (1994 - 438,000; 1993 - 883,776) are currently exercisable. As
at December 31, 1995, 172,785 (1994 - 82,085; 1993 - 246,453) common
shares were available for granting of options. The following summary
sets out the activity in the stock options.
1995 1994 1993
---- ---- ----
$ $ $
Outstanding at beginning of year 438,000 883,776 942,776
--------
Share consolidation (3 for 1,
adjusted for rounding) - 294,589 -
Granted 486,000 443,000 325,000
Exercised at an average price of
$0.30 (1994 - $Nil; 1993 - $0.36) (247,000) - (144,000)
Cancelled - (299,589) (240,000)
-------- -------- --------
Outstanding at end of year 677,000 438,000 883,776
-------- -------- --------
Under Canadian GAAP, there is no requirement to record compensation on
the issue of stock options to employees or directors. Under U.S. GAAP,
compensation would be accrued at the date of granting of the options
calculated as the difference between the market price and exercise
price at the date of grant.
For the fiscal years ended December 31, 1995, 1994 and 1993 the
exercise price of all stock options granted has been equal to or
greater than the market price on the date of the grant and therefore
the compensation cost under U.S. GAAP would be $Nil.
OTHER
There are no other material differences between Canadian GAAP and
U.S. GAAP.
10. SUBSEQUENT EVENT
Subsequent to the year end, the company reached an agreement in principle
to acquire 100% of the issued and outstanding common shares of Trans Mar,
Inc. (TMI) as referred to in Note 3, for total consideration of 1,920,000
common shares with a deemed value of $1.80 per share ($3,456,000) and
580,000 share purchase warrants. Each share purchase warrant will entitle
the holder to purchase one common share at $2.00 per share to January 31,
1997.
The vendors of TMI have agreed to warrant in the definitive agreement
that TMI has no short-term debt and the total long-term debt does not
exceed U.S.$1,300,000.
F-16
<PAGE>
INTERIM FINANCIAL STATEMENTS
F-17
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
September 30, December 31, December 31,
1996 1995 1994
------------- ------------ ------------
(Unaudited) (Audited) (Audited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,267,808 $ 424,185 $ 9,816
Advances and accounts receivable 52,703 130,102 59,940
----------- ----------- -----------
2,320,511 554,287 69,756
----------- ----------- -----------
INVESTMENTS 382,961 - -
MINERAL PROPERTIES AND DEFERRED
EXPLORATION EXPENDITURES 20,777 - 1
PROPERTY AND EQUIPMENT
Office, automotive and mining equipment,
net of accumulated amortization 62,961 33,365 5,630
OTHER
Centrifugal jig patents and development cost, net of
accumulated amortization 6,036,398 359,475 353,509
Option agreement costs - 373,955 82,247
Goodwill, net 15,609 15,609 16,431
----------- ----------- -----------
6,052,007 749,039 452,187
----------- ----------- -----------
$ 8,839,217 $ 1,336,691 $ 527,574
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 876,935 $ 124,605 $ 224,791
----------- ----------- -----------
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Issued
13,331,558, 8,497,849 and 5,220,849 common
shares, respectively 12,744,379 5,779,016 4,270,616
ACCUMULATED DEFICIT (4,782,097) (4,566,930) (3,967,833)
----------- ----------- -----------
7,962,282 1,212,086 302,783
----------- ----------- -----------
$ 8,839,217 $ 1,336,691 $ 527,574
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-18
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
Nine Months Ended Years Ended
----------------------------- ------------------------------------------
September 30, September 30, December 31, December 31, December 31,
1996 1995 1995 1994 1993
------------- ------------- ------------ ------------ ------------
(Unaudited) (Unaudited) (Audited) (Audited) (Audited)
<S> <C> <C> <C> <C> <C>
ADMINISTRATIVE & GENERAL EXPENSES
General exploration $ - $ - $ 222,350 $ - $ -
Wages and administration 338,193 155,917 141,494 3,402 3,609
Professional fees 124,144 15,680 91,257 31,711 43,091
General and office 49,643 13,984 29,379 20,781 14,566
Public relations 29,711 23,328 28,812 21,148 29,082
Financing fees - - 17,810 - -
Insurance 13,900 9,807 11,457 6,520 5,480
Transfer agent's fees 14,618 8,364 9,378 7,991 3,702
Loss (gain) on foreign exchange 14,101 20,796 8,894 5,621 (4,381)
Accounting and corporate services 71,841 18,408 8,348 8,120 8,088
Shareholders' meeting 45,370 6,783 6,946 9,768 6,767
Stock exchange fees 4,500 3,300 5,091 3,100 1,300
Government fees and taxes 40,045 6,585 2,650 3,343 4,886
Travel 12,389 1,031 1,027 - 2,901
Royalties - - - 46,109 -
Rent 26,094 1,598 - - -
Interest expense 4,399 942 - - -
Write-off mineral properties and
related exploration expenditures - 258,892 11,255 616,398 200,275
Amortization 340,736 1,372 4,319 1,408 1,759
---------- ---------- ---------- ---------- ----------
1,129,684 546,787 600,467 785,420 321,125
Less: Interest income (22,730) - (1,370) (1,342) (3,173)
---------- ---------- ---------- ---------- ----------
NET LOSS, before extraordinary item 1,106,954 546,787 599,097 784,078 317,952
EXTRAORDINARY ITEM
Debt Forgiveness (891,787) - - - -
---------- ---------- ---------- ---------- ----------
NET LOSS 215,167 546,787 599,097 784,078 317,952
DEFICIT, BEGINNING OF PERIOD 4,566,930 3,967,833 3,967,833 3,183,755 2,865,803
---------- ---------- ---------- ---------- ----------
DEFICIT, END OF PERIOD $4,782,097 $4,514,620 $4,566,930 $3,967,833 $3,183,755
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net income (loss) per share from operations $ (0.10) $ (0.07) $ (0.09) $ (0.17) $ (0.08)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net income per share from extraordinary
item; debt forgiveness $ 0.08 $ - $ - $ - $ -
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
F-19
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
Nine Months Ended Years Ended
----------------------------- ------------------------------------------
September 30, September 30, December 31, December 31, December 31,
1996 1995 1995 1994 1993
------------- ------------- ------------ ------------ ------------
(Unaudited) (Unaudited) (Audited) (Audited) (Audited)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED (USED IN):
OPERATING ACTIVITIES:
Net loss $ (215,167) $ (546,787) $ (599,097) $(784,078) $(317,952)
Charges not involving cash:
Write off of mineral property - 258,892 11,255 616,398 200,275
Amortization 340,736 1,372 4,319 1,408 1,759
----------- ---------- ---------- --------- ---------
125,569 (286,523) (583,523) (166,272) (115,918)
----------- ---------- ---------- --------- ---------
Changes in noncash working capital balances:
Decrease (increase) in advances and
accounts receivable 77,399 47,632 (70,162) 5,351 (61,446)
Increase (decrease) in accounts payable
and accrued liabilities 752,331 (122,950) (100,186) 62,943 105,598
----------- ---------- ---------- --------- ---------
829,730 (75,318) (170,348) 68,294 44,152
----------- ---------- ---------- --------- ---------
955,299 (361,841) (753,871) (97,978) (71,766)
----------- ---------- ---------- --------- ---------
FINANCING ACTIVITIES
Incorporation costs - (413) - - -
Issuance of common shares for cash 2,034,019 1,200,000 1,200,000 180,000 49,880
Issuance of common shares for mineral properties - - - - 75,400
Common shares issued for acquisition
of Trans Mar, Inc. 3,455,923 - - - -
Issuance of common shares for shares of
subsidiary - - - 352,500 -
Issuance of common shares for royalties owed - - - 46,109 -
Exercise of stock options 102,500 24,800 73,400 - -
Exercise of warrants 1,372,844 - 235,000 - -
----------- ---------- ---------- --------- ---------
6,965,286 1,224,387 1,508,400 578,609 125,280
----------- ---------- ---------- --------- ---------
INVESTING ACTIVITIES
Acquisition of Trans Mar jig (5,161,936) - - - -
Purchase of securities (382,961) - - - -
Mineral properties and deferred exploration
expenditures (20,777) (16,737) (11,255) (144,625) (147,297)
Purchase of capital assets (38,162) - (31,232) - (8,797)
Centrifugal jig - - (5,965) (353,509) -
Goodwill - - - (16,431) -
Option agreement costs (473,126) (319,938) (291,708) (81,398) -
----------- ---------- ---------- --------- ---------
(6,076,962) (336,675) (340,160) (595,963) (156,094)
----------- ---------- ---------- --------- ---------
Increase (decrease) in cash 1,843,623 525,871 414,369 (115,332) (102,580)
Cash, beginning of period 424,185 9,816 9,816 125,148 227,728
----------- ---------- ---------- --------- ---------
Cash, end of period $ 2,267,808 $ 535,687 $ 424,185 $ 9,816 $ 125,148
----------- ---------- ---------- --------- ---------
----------- ---------- ---------- --------- ---------
</TABLE>
F-20
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Altair International Gold Inc. (the
Company) are expressed in Canadian dollars, and have been prepared in
accordance with accounting principles generally accepted in Canada, which
differ in certain material respects from those generally accepted in the
United States (see Note 11).
CONSOLIDATION:
The financial statements include the accounts of the Company and its wholly
owned and majority-owned subsidiaries: Carlin Gold Company, Fine Gold
Recovery Systems, Inc., Mineral Recovery Systems, Inc. and 660250 Ontario
Limited.
NATURE OF OPERATIONS:
The Company is engaged in the business of acquiring, developing and testing
mineral processing equipment for use in the recovery of fine, heavy mineral
particles, including gold and environmental contaminants. Prior to 1994, the
Company's primary business was the acquisition and development of mineral
properties.
CAPITAL ASSETS AND AMORTIZATION:
Office equipment is stated at acquisition cost. Amortization is provided on
the diminishing balance basis at 20% per annum.
Centrifugal jig patent costs are carried at acquisition cost and are being
amortized on the straight-line method over their remaining lives, ranging
from five to seventeen years. Amortization expense for the nine months ended
September 30, 1996 is $340,736.
The Company reviews its long-lived assets on an annual basis to determine if
events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. In performing the
review for recoverability, the Company estimates the future cash flows
expected to result from the asset and its eventual disposition. If the sum
of the undiscounted, expected future cash flow is less than the carrying
value of the asset, an impairment loss is recognized.
INVESTMENTS:
Investments in unconsolidated subsidiaries and other investees in which the
Company has a 20% to 50% interest or otherwise exercises significant
influence are carried at cost, adjusted for the Company's proportionate share
of their undistributed earnings or losses.
F-21
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
MINERAL PROPERTIES:
Mineral properties are carried at cost until they are brought into production
at which time they are depleted on a unit-of-production method based on proven
and probable reserves. If a property is subsequently determined not to be
economic, the property and related deferred costs are written down to net
realizable value.
Exploration expenses relating to mineral properties in which the Company has
an interest are deferred until the properties are brought into production at
which time they are amortized on a unit-of-production basis. Other general
exploration expenses are charged to operations as incurred.
The cost of the mineral properties abandoned or sold and the deferred
exploration costs relating to properties abandoned or sold are charged to
operations in the current year. The recovery of the amounts shown for mineral
properties and deferred exploration expenditures is dependent upon the
confirmation of the Company's interest in the properties, the ability of the
Company and its subsidiaries to obtain necessary financing to complete the
development and future profitable production.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
ADMINISTRATIVE EXPENDITURES:
Administrative expenditures are charged to operations as incurred.
INTERIM FINANCIAL STATEMENTS:
The interim financial statements as of and for the nine months ended
September 30, 1996 and 1995, respectively, included herein have been prepared
by the Company, without audit. They reflect all adjustments which are, in the
opinion of management, necessary to present fairly the results of operations
for these periods. All such adjustments are normal recurring adjustments. The
results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full fiscal year.
GOODWILL:
Goodwill is the excess of the cost of investment in subsidiaries over the
estimated fair value of net assets acquired and is amortized on a straight-line
basis over 20 years.
TRANSACTIONS INVOLVING NON-CASH CONSIDERATION:
When exchanging its shares of common stock for non-cash consideration, the
Company values its exchanged shares at contemporaneous trade prices on the
Alberta Exchange, with larger transactions subject to arm's length
discounting in order to arrive at fair market value.
F-22
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
TRANSLATION OF FOREIGN CURRENCY:
The operations of the Company's subsidiaries are determined to be of an
integrated nature. The accounts of the U.S. subsidiaries are translated using
the temporal method, under which monetary assets and liabilities are
translated at the rate of exchange prevailing at the year end; capital assets
are translated at the rates prevailing at the acquisition dates; and, revenue
and expenses at average rates of exchange during the year, with the exception
of amortization, which is translated at historical exchange rates. Exchange
gains and losses are included in the consolidated statement of administrative
expenditures and deficit.
2. MINERAL PROPERTIES
Prior to 1994, the Company was primarily engaged in the acquisition and
exploration of mineral properties. In 1994, the Company shifted its primary
emphasis from minerals exploration to the acquisition and development of
technology and equipment for use in segregation and recovery of fine mineral
particles and contaminants.
NEAWANGANK LAKE:
The Company held a 100% interest in 17 unpatented claims in the Patricia
Portion, District of Kenora, Ontario, Canada subject to the reservation of a
10% net profit interest. The Company had the option to purchase the 10% net
profit interest for the issuance of 100,000 common shares. During 1995 the
claims were written off.
3. OPTION AGREEMENT COSTS
Pursuant to an option agreement dated November 15, 1994, the Company received
the option to acquire all of the shares of Trans Mar, Inc., a Washington
corporation (see Note 4). Trans Mar, Inc. was the owner of all patents and
other rights relating to the Campbell Centrifugal Jig (CJ).
At December 31, 1995, the Company had paid US $268,898 to Trans Mar, Inc., in
accordance with the agreement. In February 1996, the Company and Trans Mar,
Inc. agreed to replace the option agreement with a merger agreement (see Note
4).
F-23
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4. ACQUISITIONS
FINE GOLD RECOVERY SYSTEMS, INC. (FINE GOLD)
Pursuant to an agreement dated April 21, 1994, the Company issued 750,000
common shares, with a deemed value of $0.47 per share ($352,500) for all of
the outstanding common shares of Fine Gold, a corporation incorporated in the
State of Nevada and involved in the development of a "Centrifugal Jig"; an
apparatus designed to recover fine gold from mineral properties. Pursuant to
an agreement dated as of January 1, 1994, between Thomas P. Campbell, the
inventor of the Centrifugal Jig, and Fine Gold, Fine Gold acquired the rights
to develop and market applications for the Jig at specific target sites and
utilize the Jig in the exploitation of such sites, and obtained the agreement
of Mr. Campbell to provide certain services and assistance to Fine Gold in
doing so, during the term of the Agreement and throughout the world,
excepting (i) areas subject to patents held by Trans Mar, and (ii) the
Republic of Costa Rica, and certain areas in Mexico and Guiana, South
America. As at September 30, 1996, Fine Gold was still in the development
stage in that no operating revenues have been earned and no operating
expenses have been incurred. Costs relating to the acquisition and
development of the centrifugal jig have been capitalized. (See Note 1).
TRANS MAR, INC. (TRANS MAR)
In March 1996, the Company acquired all of the outstanding common stock of
Trans Mar, Inc., a corporation incorporated in the State of Washington and
involved in the development of its patented Campbell Centrifugal Jig. Trans
Mar holds patent rights to Centrifugal Jig technology in the United States,
South Africa, United Kingdom, Australia and Canada. In the acquisition,
Trans Mar was effectively merged into the Company's subsidiary, Fine Gold, in
a transaction accounted for as a purchase by the Company, which agreed to
issue to Trans Mar's shareholders 1,920,000 shares of Altair common stock and
580,000 warrants entitling the holder to purchase one common share of Altair
for $2.00 until January 31, 1997 (see Note 5).
In the acquisition, all shares of Trans Mar's common stock were converted
into and exchanged for 1,919,957 shares of Altair's common stock, which was
then issued and deposited into escrow pursuant to the terms of two escrow
agreements. Of the 1,919,957 shares, 1,170,000 are to be released dependent
upon Altair receiving revenues from the assets formerly held by Trans Mar.
The basis for the share release is one share of common stock for each $1.80
in cash flow received by Altair, provided that no more than one-third of the
original number of shares of common stock escrowed may be released in any one
year over the first three years of the escrow. Shares of common stock still
in escrow at the end of five years may be canceled by the Alberta Stock
Exchange. The remaining 749,957 shares of common stock will be released from
escrow to each former Trans Mar shareholder at a rate equal to the greater of
15,000 shares or 5% of such shareholder's total escrowed holdings each
calendar quarter. In addition, each former Trans Mar shareholder or warrant
holder is restricted from selling more than the greater of 15,000 shares or
10% of such holder's holdings in any calendar quarter.
F-24
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4. ACQUISITIONS (Continued)
At September 30, 1996, 1,919,557 shares had been issued in connection with
the transaction. At the time of acquisition, Trans Mar was a development
stage enterprise in that no operating revenues had been earned.
The purchase price of Trans Mar was $5,115,693. This consisted of $3,455,923
of stock issuance to Trans Mar shareholders (1,919,557 Altair shares with a
deemed value of $1.80 per share) and the absorption of Trans Mar's assets and
liabilities, with liabilities exceeding assets by $1,659,770 at February 29,
1996. The purchase price was allocated to centrifugal jig patents and
development costs. These incremental costs will be amortized over the
remaining life of the patents. It should be noted that the patented Campbell
Centrifugal Jig is subject to a royalty interest granted to Intercontinental
Development Corporation (hereinafter "Intercontinental"). Under the royalty
agreement, Intercontinental shall receive from Trans Mar ten percent (10%) of
the cost of manufacturing of any Campbell Centrifugal Jigs which are placed
in production, sold or exploited for profit worldwide. At September 30, 1996,
there were no royalties owed to Intercontinental under this agreement. (See
Note 8.)
At the time of its acquisition, Trans Mar's balance sheet consisted of the
following:
Total Assets $ 210,449
-----------
-----------
Liabilities $ 1,870,219
Common stock 39,195
Paid-in capital 503,137
Accumulated deficit (2,202,102)
-----------
Total Liabilities & Stockholders' Deficit $ 210,449
-----------
-----------
5. CAPITAL STOCK
The capital stock is as follows:
Authorized
Unlimited common shares
Issued
13,331,588 common shares $12,744,379
-----------
-----------
F-25
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
Transactions for the year ended 1995 and for the nine-month period ended
September 30, 1996 are as follows:
SHARES AMOUNT
---------- ----------
Balance, December 31, 1994 5,200,849 4,270,616
Common shares issued for cash 2,700,000 1,200,000
Exercise of stock options 247,000 73,400
Exercise of warrants 350,000 235,000
---------- ----------
Balance, December 31, 1995 8,497,849 5,779,016
---------- ----------
Common shares issued for cash 593,997 2,034,096
Common shares issued for Trans Mar
acquisition 1,919,957 3,455,923
Exercise of stock options 70,000 102,500
Exercise of warrants 2,249,755 1,372,844
---------- ----------
Balance, September 30, 1996 13,331,558 12,744,379
---------- ----------
---------- ----------
STOCK OPTIONS:
As at December 31, 1995, 677,000 common shares were reserved for issuance to
directors, officers and employees under the Company's stock option plan. The
exercise price and expiration dates of options outstanding as of December 31,
1995 were as follows:
NUMBER
OF SHARES PRICE EXPIRATION DATE
--------- ----- ---------------
271,000 $0.20 August 1, 1999
110,000 0.60 August 8, 1998
166,000 0.65 November 13, 2000
30,000 0.50 March 30, 2000
100,000 0.50 March 28, 2000
The Company approved a new stock option plan in May 1996 whereby a total of
2,000,000 common shares may be reserved for issuance to the Company's
directors, officers, and employees. Options granted under the former stock
plan will remain outstanding under the new stock plan and will constitute
part of the aforementioned 2,000,000 shares. The Altair stock option plan
does not allow issuance of option grants at less than prevailing market
price, and no options have been granted at less than market share price. At
September 30, 1996, the Company has 627,000 options outstanding under the
former stock plan and a total of 535,000 options have been granted under the
new stock plan.
F-26
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
The exercise price and expiration dates of options outstanding as of
September 30, 1996 are as follows:
NUMBER
OF SHARES PRICE EXPIRATION DATE
--------- ----- ---------------
160,000 $5,00 May 14, 1998
271,000 $0.20 August 1, 1999
75,000 0.60 August 8, 1998
166,000 0.65 November 13, 2000
15,000 0.50 March 30, 2000
100,000 0.50 March 28, 2000
145,000 3.70 March 7, 2001
250,000 4.00 May 27, 2001
75,000 4.20 July 29, 2001
50,000 4.50 July 31, 2001
WARRANTS:
i) Series A
Issued 1,000,000
Pursuant to a subscription agreement, the Company issued 1,000,000 units at
$0.20 per unit for total proceeds of $200,000. Each unit consisted of one
common share and one Series A share purchase warrant. Each Series A share
purchase warrant entitled the holder to purchase one common share at $0.20
per share to March 14, 1996.
In 1996 (prior to March 14), 1,000,000 warrants were exercised for total
proceeds of $200,000.
ii) Series B
Issued 200,000
Pursuant to a subscription agreement, the Company issued 200,000 units at
$0.50 per unit for total proceeds of $100,000. Each unit consists of one
common share and one Series B share purchase warrant. Each Series B share
purchase warrant entitles the holder to purchase one common share at $0.60
per share to November 15, 1995 provided that only 50% of the warrants may be
exercised during the initial period, and at a price of $0.75 per share to May
15, 1996 provided that the number of warrants that may be exercised after
November 15, 1995 may not exceed the number of warrants exercised prior to
November 15, 1995.
F-27
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
In 1995 (prior to November 15), 100,000 warrants were exercised for total
proceeds of $60,000. In 1996 (prior to May 15), the remaining 100,000 warrants
were exercised for total proceeds of $75,000.
iii) Series C
Issued 500,000
Pursuant to a subscription agreement, the Company issued 500,000 units at
$0.60 per unit for total proceeds of $300,000. Each unit consists of one
common share and one Series C share purchase warrant. Each Series C share
purchase warrant entitles the holder to purchase one common share at $0.70 per
share to December 21, 1995 provided that only 50% of the warrants may be
exercised during the initial period, and at a price of $0.80 per share to June
22, 1996 provided that the number of warrants that may be exercised after
December 22, 1995 may not exceed the number of warrants exercised prior to
December 22, 1995.
In 1995 (prior to December 22), 250,000 warrants were exercised for total
proceeds of $175,000. The remaining 250,000 warrants were exercised in 1996
(prior to June 22) for total proceeds of $200,000.
iv) Series D
Issued 1,000,000
Pursuant to a subscription agreement, the Company issued 1,000,000 units at
$0.60 per unit for total proceeds of $600,000. Each unit consists of one
common share and one Series D share purchase warrant. Each Series D share
purchase warrant entitles the holder to purchase one common share at $0.75 per
share to April 10, 1996 provided that only 50% of the warrants may be
exercised during the initial period, and at a price of $0.90 per share to
October 10, 1996 provided that the number of warrants that may be exercised
after April 10, 1996 may not exceed the number of warrants exercised prior to
April 10, 1996.
In the first quarter of 1996, 500,000 warrants were exercised for total
proceeds of $375,000. In the second quarter of 1996, 333,333 warrants were
exercised for a total of $300,000.
F-28
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
v) Series E
Issued 580,000
In connection with the acquisition of Trans Mar, Inc. in March 1996, the
Company issued 580,000 Series E Warrants to Trans Mar shareholders entitling
the holder to purchase on common share of Altair for $2.00 until January 31,
1997.
While warrants were exercised in the first two quarters of 1996 (see Note 4),
6,422 warrants were exercised in the third quarter of 1996 for total proceeds
of $12,844.
vi) Series F
Issued 100,000
Pursuant to a subscription agreement, the Company issued 100,000 units at
$3.50 per unit for total proceeds of $350,000. Each unit consists of one
common share and one Series F share purchase warrant. Each Series F share
purchase warrant entitles the holder to purchase one common share at $7.00 per
share to December 26, 1996 provided that only 50% of the warrants may be
exercised during the initial period, and at a price of $10.00 per share to
September 26, 1997 provided that the number of warrants that may be exercised
after December 25, 1996 may not exceed the number of warrants exercised prior
to December 26, 1996.
At September 30, 1996, none of the Series F warrants had been exercised.
vii) Series G
Issued 494,027
Pursuant to a subscription agreement, the Company issued 494,027 units at
$4.50 per unit for total proceeds of $1,729,095. Each unit consists of one
common share and one Series G share purchase warrant. Each Series G share
purchase warrant entitles the holder to purchase one common share at $4.50
share to June 28, 1998 provided that if the Company's common shares trade at
or in excess of $6.50 on five days, the Series G purchase warrants will expire
on the thirtieth day after the fifth day on which the shares trade at or above
$6.50.
At September 30, 1996, none of the Series G warrants had been exercised.
viii) Series H
Issued 60,000
F-29
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. CAPITAL STOCK (Continued)
Pursuant to a subscription agreement, the Company issued 60,000 units at $3.50
per unit for total proceeds of $210,000. Each unit consists of one common
share and one Series H share purchase warrant. Each Series H purchase warrant
entitles the holder to purchase one common share at $4.50 per share until
December 26, 1997.
At September 30, 1996, none of the Series H warrants had been exercised.
6. RELATED PARTY TRANSACTIONS
Pursuant to an employment agreement dated January 1, 1988 and as amended June
30, 1990 the Company hired the current president in accordance with the
following terms:
A minimum monthly salary of US$7,600 and an annual bonus to be determined by
the Board of Directors of not less than 10% of the annual compensation.
In the event of a takeover, merger or consolidation and if the voting control
of over 35% of the issued stock is acquired by an individual or a group of
individuals and this agreement is terminated by the Company within 180 days
before or one year thereafter, or by the president one year thereafter, then
the president shall be paid U.S.$250,000 and given 200,000 shares of the
Company's common stock.
Included in accounts payable and accrued liabilities is US$75,016 owing to the
president. Included in advances and accounts receivable is US$45,000 owing
from the president.
7. INCOME FROM FORGIVENESS OF DEBT
As a result of the Company's acquisition of Trans Mar, Inc., Fine Gold assumed
all of Trans Mar's liabilities, which were $1,870,219 at February 29, 1996.
(see Note 4.) During June 1996, Fine Gold entered into agreements
extinguishing certain of the Trans Mar accounts payable and notes payable at
less than the book amounts of such debt. The net amount of such forgiveness of
debt was $891,787, which resulted in reduced remaining indebtedness of
$978,432. The $891,787 of debt forgiveness resulted in an extraordinary gain
of $0.08 per share for the nine months ending September 30, 1996.
As of September 30, 1996, remaining liabilities assumed from Trans Mar totaled
$761,343, which was evidenced by notes payable. The notes payable are due
December 31, 1999; notes totaling $260,283 are subject to 10% annual interest,
the remainder do not bear interest. Altair has committed to use its best
efforts to pay $50,000 per month to retire the notes.
F-30
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
8. INVESTMENTS
In the second quarter of 1996, the Company acquired 203,817 shares of common
stock of International Development Corporation, a privately held American
company, at a cost of $382,961. This transaction, which is being accounted
for under the equity method, resulted in the purchase of 49.8% of
Intercontinental's outstanding common stock. Intercontinental is a dormant
company whose sole asset is a royalty interest in a patented centrifugal jig,
acquired by Altair in the Trans Mar acquisition (see Note 4). Intercontinental,
which had no activity in the nine months ending September 30, 1996, has no
assets which are not fully depreciated and has no liabilities.
The investment in Intercontinental serves to reduce a contingent liability
for royalties which may ultimately be paid. The purchase of Intercontinental
stock occurred after several Intercontinental shareholders approached
Altair's management.
At September 30, 1996, the Company's investment in Intercontinental exceeded
the Company's share of the underlying net assets of $382,961. Although the
life of the royalty interest is not contractually limited, management
estimates that for practical purposes the economic life of the royalty will
not exceed fifteen years. Accordingly, this asset is being amortized over a
fifteen year period.
In October 1996, the Company acquired an additional 9,800 shares of common
stock in Intercontinental which brought the Company's ownership to 52.2% of
Intercontinental's outstanding shares. Subsequent to the acquisition of a
majority ownership in Intercontinental, such ownership will be accounted for
on a consolidation basis.
9. LOSS PER SHARE
The existence of stock options and warrants affects the calculation of loss
per share on a fully diluted basis. As the effect of this dilution is to
reduce the reported loss per share, the fully diluted loss per share has not
been calculated.
10. INCOME TAXES
As at December 31, 1995, the Company has approximate non-capital losses
carried forward for income tax purposes which are available to reduce certain
future years' income for tax purposes as follows:
F-31
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
10. INCOME TAXES
1996 $ 53,000
1997 76,000
1998 138,000
1999 93,000
2000 44,000
2001 54,000
2002 76,000
---------
$ 534,000
---------
---------
No tax benefit has been reported in the financial statements as the Company
believes there is a 50% or greater chance that some portion of the loss
carryforwards will expire unused. Accordingly, the potential tax benefits of
the net operating loss carryforwards are offset by a valuation allowance of
the same amount.
11. DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP") which
differ in the following respects from those principles and practices that the
Company would have followed had its consolidated financial statements been
prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP").
(a) Under Canadian GAAP, there is no requirement to disclose concentrations
of credit and market risk. The Company maintains cash balances at several
banks. Accounts at each American institution are insured up to $100,000 by
the Federal Deposit Insurance Corporation. Large cash balances (those
exceeding the FDIC limit) at September 30, 1996 consisted of the following:
US$686,313 at Western Bank of Cody and $1,330,358 in Canadian dollars at
Royal Bank in Canada.
(b) Under Canadian GAAP, there is no requirement to disclose the Company's
policy for determining which items are treated as cash equivalents. Generally,
cash equivalents are short-term, highly liquid investments that are readily
converted to known amounts of cash and are so near their maturities that they
present an insignificant risk of change in value because of changes in
interest rates.
F-32
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
11. DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (Continued)
For purposes of the Statement of Financial Position, the Company considers
all highly liquid debt instruments purchased with a remaining maturity of
three months or less to be cash equivalents.
(c) Canadian GAAP requires the Statement of Financial Position. U.S. GAAP
requires the Statement of Cash Flows, which is included as Attachment A.
(d) Under Canadian GAAP, income taxes are accounted for under the deferred
method, which places emphasis on the matching of revenues and expenditures
and the recognition of income tax expense. Under U.S. GAAP, companies must
follow the requirements of Statement of Financial Accounting Standards No. 109
(SFAS 109) which requires the use of the asset/liability method for
measurement of tax liabilities, wherein deferred tax assets are recognized as
well as deferred tax liabilities.
The Company has significant net operating loss carryforwards (as discussed in
Note 8). SFAS 109 would require the recognition of a long-term tax asset for
the future benefit expected from the application of these carryforwards to
future profitable years. If it is expected that the entire amount of NOL
carryforwards will not be utilized, then a valuation adjustment is applied to
the asset to reasonably state the asset at its expected value. Under SFAS 109,
disclosure of the amount of valuation adjustment is required. Changes in the
value of the deferred asset are recognized each year as income tax expense.
As of September 30, 1996 the valuation allowance would be equal to 100% of
the deferred tax asset. Changes in the value of the deferred asset are
recognized each year as income tax expense.
(e) At September 30, 1996, the Company would be characterized as a
"development stage enterprise" under U.S. GAAP due to Statement of Financial
Accounting Standards No. 7 ("SFAS 7"). Under Canadian GAAP, there are no
requirements for the identification or reporting of development stage entities.
(f) There are certain other differences in the determination of net income
and per share calculations between Canadian and U.S. GAAP, none of which had
a material effect on any of the periods presented.
F-33
<PAGE>
ALTAIR INTERNATIONAL GOLD INV.
(FORMERLY CARLIN GOLD COMPANY INC.)
PRO FORMA COMBINED FINANCIAL INFORMATION
Effective March 1, 1996, Altair International Gold, Inc. (Altair) acquired
Trans Mar, Inc. (Trans Mar) in a transaction where Trans Mar was merged into
an Altair subsidiary. In this transaction, Altair issued to Trans Mar's
shareholders 1,919,557 shares of Altair common stock (with a deemed value of
$1.80 per share) and 580,000 warrants entitling the holder to purchase one
common share of Altair for $2.00 until January 1, 1997.
Pursuant to Regulation S-X, Article II, Rule 11-02, Registrant furnishes the
following pro forma combined statements of operations to reflect the combined
results of Altair and Trans Mar for the latest fiscal year (December 31, 1995)
and latest interim period (nine months ended September 30, 1996). The pro
forma combined financial information presents the following:
(1) the combination of calendar 1995 historical statements of operations
for Altair and Trans Mar, as adjusted for elimination of intercompany
income and expense; and,
(2) the combination of 1996 historical statements of operations for
Altair for the first nine months of 1996 and for Trans Mar for the first
two months of 1996, after which Trans Mar was acquired by Altair. As with
the 1995 pro forma information, the 1996 pro forma combined operating
statement is adjusted for elimination of intercompany income and expense.
The pro forma financial information is based on the purchase method of
accounting. The pro forma combined statements of operations assume the
acquisition occurred at the beginning of the periods presented in the
statements. For purposes of comparability, the weighted average number of
common shares outstanding for each company is based on the equivalent shares
of Altair International Gold Inc. for the respective periods.
The pro forma combined statements illustrate the change in Altair's historical
results of operations caused by the transaction after giving effect to the
elimination of intercompany transactions (i.e., Altair's payment of option
fees and reimbursement of expenses to Trans Mar.) Because the transaction is
already reflected in Altair's balance sheet at September 30, 1996, no pro
forma balance sheet is included.
Trans Mar's revenues and expenses, which are originally recorded in U.S.
dollars, are translated into Canadian dollars in the attached pro formas using
a weighted average of $1.37 for both 1995 and 1996.
The following are the adjustments shown in the pro forma statements of
operations:
A. Option fee income received by Trans Mar from Altair has been
eliminated. Because these payments were capitalized on Altair's books,
there was no offsetting expense elimination form Altair's statement of
operations.
F-34
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
PRO FORMA COMBINED FINANCIAL INFORMATION
B. Expense reimbursement received by Trans Mar from Altair has been
eliminated. Because these payments were capitalized on Altair's books,
there was no offsetting elimination from Altair's statement of operations.
These pro forma adjustments, computed assuming the acquisition transaction was
consummated at the beginning of each year presented, are adjustments directly
attributable to the transaction within the time frames shown.
The 1996 pro forma information does not reflect the effects of debt
forgiveness, which is considered an extraordinary item.
The pro forma combined financial statements do not purport to be indicative of
the financial positions and results of operations and cash flows which
actually would have been obtained if the acquisition had occurred on the date
indicated or the results which may be obtained in the future.
ALL DOLLAR AMOUNTS HEREIN ARE EXPRESSED IN CANADIAN DOLLARS. ALTAIR
INTERNATIONAL GOLD INC. PREPARES ITS CONSOLIDATED FINANCIAL STATEMENTS IN
ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
ROUTINELY REPORTS ITS FINANCIAL INFORMATION IN CANADIAN DOLLARS.
F-35
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
HISTORICAL PROFORMA
------------------------- ------------------------
Altair
International Trans Mar,
Gold Inc. Inc. Adjustments Combined
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ -
--------- --------- -----------
ADMINISTRATIVE AND GENERAL EXPENSES
General exploration 222,350 - - 222,350
Wages and administration 141,494 380,775 - 522,269
Professional fees 91,257 43,969 - 135,226
General and office 29,379 - - 29,379
Public relations 28,812 - - 28,812
Financing fees 17,810 - - 17,810
Insurance 11,457 - - 11,457
Transfer agent's fees 9,378 - - 9,378
Loss on foreign exchange 8,894 - - 8,894
Accounting and corporate services 8,348 - - 8,348
Shareholders' meeting 6,946 - - 6,946
Stock exchange fees 5,091 - - 5,091
Government fees and taxes 2,650 - - 2,650
Travel 1,027 - - 1,027
Research and development - 25,113 - 25,113
Amortization 4,319 22,458 - 26,777
--------- --------- -----------
(589,212) (472,315) (1,061,527)
--------- --------- -----------
OTHER INCOME (EXPENSE)
Option fee income - 274,000 (274,000) -
Expense reimbursement income - 21,920 (21,920) -
Interest income 1,370 1,906 - 3,276
Interest expense - (240,801) - (240,801)
Write-off of mineral properties (11,255) - - (11,255)
Contract research and grant income - 62,414 - 62,414
Miscellaneous other income - 455 - 455
--------- --------- --------- -----------
(9,885) 119,894 (295,920) (185,911)
--------- --------- --------- -----------
NET LOSS $(599,097) $(352,421) $(295,920 $(1,247,438)
--------- --------- --------- -----------
--------- --------- --------- -----------
LOSS PER COMMON SHARE $ (0.09) $ (0.18) $ (0.14)
--------- --------- -----------
--------- --------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,860,681 1,920,000 8,780,681
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-36
<PAGE>
ALTAIR INTERNATIONAL GOLD INC.
(FORMERLY CARLIN GOLD COMPANY INC.)
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
HISTORICAL PROFORMA
----------------------------------- --------------------------
Altair Trans Mar
International Inc.
Gold Inc. Two Months
Nine Months Ended
Ended February 29,
September 30, 1996 1996 Adjustments Combined
------------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ -
----------- --------- -----------
ADMINISTRATIVE AND GENERAL EXPENSES
General exploration - - - -
Wages and administration 338,193 79,902 - 418,095
Professional fees 124,144 65,091 - 189,235
General and office 49,643 - - 49,643
Public relations 29,711 - - 29,711
Insurance 13,900 - - 13,900
Transfer agent's fees 14,618 - - 14,618
Loss on foreign exchange 17,907 - - 17,907
Accounting and corporate services 71,841 - - 71,841
Shareholders' meeting 45,370 - - 45,370
Stock exchange fees 4,500 - - 4,500
Government fees and taxes 40,045 - - 40,045
Travel 12,389 - - 12,389
Rent 26,094 - - 26,094
Amortization 175,017 3,490 - 178,507
----------- --------- -----------
(963,372) (148,483) (1,111,855)
----------- --------- -----------
OTHER INCOME (EXPENSE)
Option fee income - 46,549 (46,549) -
Expense reimbursement income - 786 (786) -
Interest income 22,730 103 - 22,833
Interest expense (4,399) (5,050) - (9,449)
Miscellaneous other income - 10,410 - 10,410
----------- --------- --------- -----------
18,331 52,798 (47,335) 23,794
----------- --------- --------- -----------
NET INCOME (LOSS) $ (945,041) $ (95,685) $ (47,335) $(1,088,061)
----------- --------- --------- -----------
----------- --------- --------- -----------
INCOME (LOSS) PER COMMON SHARE $ (0.08) $ (0.22) $ (0.09)
----------- --------- -----------
----------- --------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 11,234,328 426,667 11,660,995
----------- --------- -----------
----------- --------- -----------
</TABLE>
F-37
