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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_______________
ALTAIR INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Province of Ontario, Canada 1-12497 None
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (307) 587-8245
|_| Securities registered pursuant to Section 12(b) of the Act: None
|X| Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |_| NO |X|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
The aggregate market value of the Common Stock held by non-affiliates
of the Registrant on February 28, 1997, based upon the closing sale price of the
Common Stock on the Alberta Stock Exchange of $11.75 per share on February 27,
1997, was approximately $140,587,375. Shares of the Common Stock held by each
officer and director and by each person who may be deemed to be an affiliate of
the Registrant have been excluded.
As of February 28, 1997, the Registrant had 15,110,245 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<TABLE>
INDEX TO FORM 10-K
<CAPTION>
Page
<S> <C>
PART I ........................................................................................... 1
Item 1. Business................................................................................... 1
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General.................................................................................... 1
Target Markets............................................................................. 2
Technology and Proprietary Rights.......................................................... 3
Competition................................................................................ 4
Alternative Technologies............................................................ 4
Competing Products.................................................................. 4
Plan of Operation.......................................................................... 5
Business Development................................................................ 5
Research, Testing and Development................................................... 5
Subsidiaries............................................................................... 7
TMI Merger................................................................................. 7
Government Regulation and Environmental Concerns........................................... 8
Employees.................................................................................. 8
Glossary of Terms.......................................................................... 8
Item 2. Properties................................................................................. 9
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Item 3. Legal Proceedings.......................................................................... 9
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Item 4. Submission of Matters to a Vote of Security Holders........................................ 9
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PART II ........................................................................................... 10
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters................... 10
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Market Price............................................................................... 10
Dividends.................................................................................. 11
Restrictions on Transfer................................................................... 11
Transfer Agent and Registrar............................................................... 12
Canadian Taxation Considerations........................................................... 12
Recent Sales of Unregistered Securities.................................................... 12
Item 6. Selected Financial Data.................................................................... 13
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 14
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Overview................................................................................... 14
Results of Operations...................................................................... 15
Liquidity and Capital Resources............................................................ 16
Item 8. Financial Statements and Supplementary Data................................................ 17
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 17
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PART III ........................................................................................... 18
Item 10. Directors and Executive Officers of the Registrant......................................... 18
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Item 11. Executive Compensation..................................................................... 19
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Summary Compensation Table................................................................. 19
Option Grants in 1996...................................................................... 20
Options Exercised and Aggregate Remaining at Year-end...................................... 20
Compensation of Directors.................................................................. 21
Employment Agreements...................................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 21
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Item 13. Certain Relationships and Related Transactions............................................. 22
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PART IV ........................................................................................... 24
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 24
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(a) Documents Filed..................................................................... 24
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1. Financial Statements....................................................... 24
2. Financial Statement Schedule............................................... 24
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3. Exhibit List............................................................... 25
(b) Reports on Form 8-K................................................................. 26
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(c) Exhibits............................................................................ 26
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(d) Financial Statement Schedule........................................................ 26
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SIGNATURES ........................................................................................... 27
</TABLE>
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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-18
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 13 to the Financial Statements which appears on page
F-15 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.
<TABLE>
<CAPTION>
Year Ended December 31,
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1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
(US dollar per Canadian dollar)
<S> <C> <C> <C> <C> <C> <C>
High............................... .7513 .7527 .7632 .8046 .8757 .8926
Low................................ .7235 .7023 .7103 .7439 .7761 .8587
Average............................ .7329 .7305 .7299 .7729 .8235 .8726
Year End.......................... .7301 .7323 .7128 .7544 .7865 .8652
</TABLE>
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PART I
Item 1. Business
General
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, during 1996
the Company 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 "--TMI 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 30 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 half of 1997. See "--Plan of Operation." The volume of solids per
day that the Series 12 and Series 30 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.
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Demonstration tests conducted by the Company and TMI suggest economic
potential for the use of the CJ in a number of applications, including:
o Recovery of ultrafine gold from waste streams or former tailings
o Recovery of zircon, rutile, leucoxene, and other valuable
fractions from heavy mineral sand operations, especially from
finely sized waste piles
o Sulfur and ash removal from fine coal
o Recovery of iron ore fines from fine tailings
o Concentration of heavy minerals, such as anatase, aparite,
barite, cassiterite, chromite, columbite, industrial diamonds,
fluorite, various garnets, monazite, tantalite and wolframite
o 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 has confirmed
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 3,600 acres of land
containing fine heavy minerals near Camden, Tennessee. The Company has commenced
mineral deposit characterization studies. Work on the property has included
geologic mapping, sampling, and an initial series of four auger holes. Initial
test drilling has encountered high grades of various heavy minerals, including
zircon, rutile and ilmenite.
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The first drill holes were on 200 foot centers and intersected a 95 foot average
sand thickness. Samples were collected for each 5 foot drill interval, screened
to remove slimes (extremely fine particles) and heavy mineral content
determined. The full sand section contains concentrations of heavy minerals and
all holes cut a 15 to 25 foot thick sand bed in which heavy mineral content
exceeds 10 percent by weight. Select sample intervals were:
Weight %
Hole # Interval Feet (Total Heavy Minerals)
MR 101 25-90 ft 4.4%
MR 104 45-95 ft 5.8%
MR 103 40-70 ft 7.1%
As a point of reference, most heavy mineral sand operations today process 2 to 3
percent total heavy mineral feeds. 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 on the Company's leased
property, and believes the CJ is an appropriate technology for this site.
Verification testing with the CJ at the Company's test facility in Reno, Nevada
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 2. 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. In approximately
50 individual tests run to date, the CJ substantially reduced the amount of ash
and pyrite from the fine coals tested. Tests which emphasized combustible
recovery yielded combustible recoveries of 94% and 89%, ash rejections of 59%
and 71% and product ash at 7.3% and 5.4%, respectively. Tests which emphasized
machine throughput yielded combustible recoveries of 87% an 69%, ash rejections
of 64% and 77%, and product ash at 5.5% and 5.5%, respectively. 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
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<PAGE>
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. 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 spare parts, as well as maintenance and leasing
of the CJ. Currently, the Company has entered into an agreement with a full
service machine shop located in Marysville, California, to manufacture the
initial production models of the CJ. Under the terms of the agreement, the
machine shop has constructed four Series 12 CJs.
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. Application is underway for a
third patent, which is based on recent changes to the CJ which are being
developed by the Company.
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
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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.
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) Development of the Company's Camden, Tennessee heavy mineral
sand resource property.
(4) 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 marketing 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, development and commercialization 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 to construct, install and test a Series 30
CJ at a large heavy minerals sand processor located in
Northern Florida for recovery of zircon from dry mill tails.
The Series 30 CJ is designed to process 500 tons per day and
is considered to be commercial sized for this application.
Future testing will seek to verify increased CJ processing
capacity and improve other operating design parameters. Also,
sustained operational testing is intended to determine whether
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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 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.
(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 half of 1997. The
Company intends to test the ore amenability to processing by
the CJ at the Company's test facility located in Reno, Nevada.
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 has established a CJ testing facility near Reno,
Nevada to test samples supplied by mineral companies and other
geographically diverse users. The facility will allow
demonstrations of the CJ technology, will provide amenability
testing for a variety of mineral ores, and will serve as a
test site for on-going equipment design. The test facility is
equipped with the latest version of the Series 12 CJ and is
being placed in a "closed loop" circuit designed to take an
initial charge of solids (0.5 to 2.0 tons) which can be
continuously fed in slurry form to the centrifugal jig.
Concentrate and tails streams produced by the jig may be
accessed for sampling prior to recombination and return to the
feed circuit.
(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 30 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 the current manufacturer of the Series 12 CJ to
manufacture the Series 30 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 a large heavy minerals
sand processing facility located in Northern Florida.
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 capabilities 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.
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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 "--TMI 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 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.
MRS2 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.
TMI Merger
The Company's acquisition of TMI was effected through a merger of TMI
with and into Fine Gold (the "TMI Merger"). See "--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 580,000 Series E Warrants issued, 561,586 were exercised
prior to January 31, 1997; the remaining 18,414 have been cancelled. Of the
1,919,957 shares of the Common Stock deposited into escrow, 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.
- --------
1 The Company was incorporated in April 1973 under the name Diversified
Mines Limited which was subsequently changed to Tex-U.S. Oil & Gas Inc. in
February 1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold
Company Inc. in July 1988, to Altair International Gold Inc. in March 1994, and
to Altair International Inc. in November 1996.
2 MRS was formerly known as Carlin Gold Company. The name change was
effective in June 1996.
7
<PAGE>
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 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 its 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 11. 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 28 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.
8
<PAGE>
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.)
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. 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 3,600 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.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended December 31, 1996, a
special meeting of the shareholders of the Company was held on November 6, 1996,
to consider and vote upon changing the name of the Company from "Altair
International Gold Inc." to "Altair International Inc." The proposed name change
was approved by the shareholders, with 5,050,832 votes cast in favor, 5,366
votes cast against, zero abstentions and zero broker non- votes.
9
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
Market Price
The Common Stock is publicly traded under the symbol "AIL" 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 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
--------------- -----------------
Fiscal Year Ended
December 31, 1996:
1st Quarter................... 1.78 4.25
2nd Quarter................... 2.70 6.50
3rd Quarter................... 3.98 6.20
4th Quarter................... 5.30 11.40
Fiscal Year Ended
December 31, 1995:
1st Quarter................... .10 .48
2nd Quarter................... .195 .70
3rd Quarter................... .42 .87
4th Quarter................... .60 2.20
In the United States, as of March 24, 1997, the shares of Common Stock
were listed under the symbol ALTIF on the Nasdaq SmallCap Market. Previously the
shares of Common Stock were 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 each quarter 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
----------------- -----------------
Fiscal Year Ended
December 31, 1996:
1st Quarter................... 2.30 2.30
2nd Quarter................... 1.375 4.125
3rd Quarter................... 2.85 4.625
4th Quarter................... 3.89 3.31
As of February 28, 1997, there were 15,110,245 outstanding shares of
Common Stock, held by 360 holders of record. During the period from December 31,
1996, the date of the most recent financial statements, to February 28, 1997,
301,229 Series E warrants, 50,000 Series F warrants, and 40,000 options issued
pursuant to the Option Plan were exercised.
10
<PAGE>
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.
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. 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 the
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 December 31, 1996,
none of such 1,170,000 Performance Shares had been released from escrow. The
remaining 749,957 TMI Escrowed Shares (the "Principal Shares") are 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 December 31,
1996, approximately 542,202 of such 749,957 Principal Shares had been released
from escrow. 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.
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 December 31,
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.
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 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 will be
increased to 10%.
11
<PAGE>
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.
Canadian 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% if the beneficial owner of the dividends is a U.S.
corporation which owns at least 10% of the voting shares of the Company.
If the beneficial owner of the dividend carries on business in Canada
through a permanent establishment in Canada, or performs in Canada independent
personal services from a fixed base in Canada, and the shares of stock with
respect to which the dividends are paid is effectively connected with such
permanent establishment or fixed base, the dividends are taxable in Canada as
business profits at rates which may exceed the 5% or 15% rates applicable to
dividends that are not so connected with a Canadian permanent establishment or
fixed base. Under the provisions of the Treaty, Canada is permitted to apply its
domestic law rules for differentiating dividends from interest and other
disbursements.
A capital gain realized on the disposition of 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.
Recent Sales of Unregistered Securities
Following is a summary of all securities of the Company sold during the
fiscal year ended December 31, 1996 that were not registered under the
Securities Act of 1933, as amended (the "Securities Act"), other than
unregistered sales made in reliance on Regulation S. Unless otherwise indicated,
all amounts set forth below are stated in Canadian dollars.
On February 8, 1996, the Company entered into the TMI Merger Agreement,
pursuant to which 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.
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.
12
<PAGE>
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. Through December 31, 1996, 50,000 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 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. Through December 31, 1996, 239,337 additional
shares of Common Stock have been issued pursuant to the exercise of Series G
warrants. The placements were effected in reliance upon Section 4(2).
Item 6. 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 13 to the
consolidated 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 "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation," and
the consolidated financial statements and accompanying notes included herein.
The TMI Merger was consummated in February 1996, and treated as a purchase for
accounting purposes. Accordingly, the following selected financial data was
derived solely from the consolidated financial statements of the Company, which
were audited for the years 1992-1996 by McGovern, Hurley, Cunningham,
independent chartered accountants.
13
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- ---------- --------- ----------
Statements of Operations:
<S> <C> <C> <C> <C> <C>
Revenues from
Operations............... $ -0- $ -0- $ -0- $ -0- $ -0-
Operating Expenses......... 1,825,867 589,212 169,022 120,850 178,818
Interest Expense........... 26,415 -0- -0- -0- -0-
Interest Income............ 38,112 1,370 1,342 3,173 -0-
Net Loss................... 1,814,169 599,097 784,078 317,952 572,431
Loss per Common Share...... (0.16) (0.09) (0.17) (0.08) (0.15)
Cash Dividends declared
per Common Share......... -0- -0- -0- -0- -0-
Deficit, Beginning
of Year.................. 4,566,930 3,967,833 3,183,755 2,865,803 2,288,818
Net Loss................... 1,814,169 599,097 734,078 317,952 576,985
Other Expense
(Income) ................ (958,166) -0- -0- -0- -0-
Deficit, End of Year....... 5,422,933 4,566,930 3,967,833 3,183,755 2,865,803
Balance Sheet Data:
Working Capital ........... 4,077,469 429,682 (155,035) 28,591 175,323
Total Assets...............11,023,518 1,336,691 527,574 670,100 757,174
Long-term Obligations...... 369,630 -0- -0- -0- -0-
Current Liabilities........ 423,194 124,605 224,791 161,848 56,250
Net Stockholders'
Equity...................10,230,694 1,212,086 302,783 508,252 700,924
</TABLE>
Item 7. 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 March 1, 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
14
<PAGE>
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, 1994, 1995, and 1996
The Company has earned no revenues to date. Operating losses before
extraordinary items totaled $1,814,169 ($0.16 per share) for the year ending
December 31, 1996, $599,097 ($.09 per share) for 1995, and $784,078 ($0.17 per
share) for 1994. Principal factors contributing to the losses during these
periods were the absence of revenue, coupled with the incurrence of
operating expenses and the write-off of mineral exploration properties and
related mineral exploration expenses.
Aside from the write-off of mineral properties and related exploration
expenses, which are discussed in the following paragraph, operating expenses
increased from $169,022 during 1994 to $589,212 during 1995 and to $1,825,867
during 1996. Of the $1,825,867 total operating expenses incurred during 1996,
$523,617, representing 29% of the total operating expenses, was related to
amortization of the company's assets, as compared to amortization of $4,319 and
$1,408 during 1995 and 1994, respectively (less than 1% of total operating
expenses in each year). Increases in 1996 amortization are due primarily to
amortization of CJ patent and development costs acquired in the 1996 TMI merger.
Operating expenses, exclusive of amortization and mineral property write-offs,
increased from $167,614 in 1994 to $584,893 during 1995 and $1,302,250
in 1996 due to increased activity in acquiring, testing and developing
the CJ and its potential applications. In this regard, during 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 TMI purchase required increased levels of professional, accounting
and corporate services beyond the level of similar costs incurred during
earlier periods.
Write-offs of mineral properties reflect the Company's changed emphasis
during the period from mineral property exploration to development of mineral
property equipment. All of the Company's mineral properties and deferred
exploration expenditures were written off during the years ending December 31,
1993 through 1995, as follows:
<TABLE>
<CAPTION>
Ponte McEwen Others Total
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
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 0 200,275 200,275
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 11,254 11,254
Write-off during 1995 0 0 11,255 11,255
Balance, December 31, 1995 0 0 0 0
</TABLE>
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
15
<PAGE>
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.
As a result of the Company's acquisition of TMI, Fine Gold assumed all
of TMI's liabilities. During 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 of such forgiveness of debt was $958,166
and resulted in an extraordinary gain of $0.08 per share for 1996. There were
no extraordinary items during 1994 and 1995.
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 $15,653,627 as of December 31, 1996. The
Company received cash proceeds from the sale of Common Stock and the exercise of
options and warrants to acquire Common Stock of $180,000 in the year ending
December 31, 1994; $1,508,400 in 1995; and $9,874,611 in 1996, including
$3,692,053 deemed value of Common Shares issued for the acquisition of TMI
($6,182,558 without such deemed value).
The Company has earned no revenues and has incurred recurring losses in
operations. At December 31, 1996, the Company's accumulated deficit was
$5,422,933. However, due to proceeds from the issuance of common stock, the
Company has significantly increased its operating capital and improved its
financial condition and resources during the last three years. From a working
capital deficit of $155,035 at year end 1994, the Company's working capital
position improved to a positive $429,682 at year end 1995. This trend continued
in 1996 as working capital at December 31, 1996 rose to $4,077,469 and the
Company's cash position increased from $424,185 at December 31, 1995 to
$4,482,083 at December 31, 1996.
As of December 31, 1996, the Company had $4,482,083 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
December 26, 1997. Proceeds in the amount of $1,474,728 would be received by the
Company pursuant to the exercise of warrants, if all outstanding warrants were
exercised. 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 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 agreement 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
December 31, 1996 are expected to be adequate to continue current levels of
testing and staffing through approximately December 31, 1998. If the Company is
not successful in raising additional capital to fund its operations beyond
December 31, 1998, 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 December 31, 1998.
Currently, the Company is considering raising up to $10 million
additional capital through private placements of its Common Stock 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. Such funds would
likely 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 --
16
<PAGE>
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 8. Financial Statements and Supplementary Data
The financial statements required by this Item appears on pages F-1
through F-18 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
17
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information regarding the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
Held Position
Name Office Since
- -------------------------------- ------------------------------------------------------------- ------------------
<S> <C> <C>
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
George E. Hartman.............. Director 1997
</TABLE>
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, 50, 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,
18
<PAGE>
an industrial minerals corporation located in Canada. Mr. Proud has been
employed in the Canadian mining industry since 1967 in various capacities,
including geology, engineering and production.
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.
George E. Hartman, 48, was elected a director of the Company in March
1977. Since 1995, Mr. Hartman has served as President of Planvest Pacific
Financial Corporation ("Planvest Pacific"), a Vancouver-based financial planning
firm with over 250 representatives, 27,500 clients and $1 billion of assets
under management. Mr. Hartman also is on the Board of Directors of Planvest
Capital Corp., the parent of Planvest Pacific. In addition, Mr. Hartman
continues to serve as President of Hartman & Company, Inc., a firm founded by
Mr. Hartman in 1991 which provides consulting services to the financial services
industry. Mr. Hartman is the author of Risk is a Four-Letter Word--The Asset
Allocation Approach to Investing, a Canadian best-seller published in 1992 and
now in its fifth printing, and host of a weekly personal finance radio program,
"Money Matters," aired on AM 1040 in Vancouver, British Columbia.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors to file reports concerning
their ownership of the Common Stock of the Company with the Securities and
Exchange Commission and to furnish the Company with copies of such reports.
During the fiscal year ended December 31, 1996, the Company's officers and
directors were not yet subject to Section 16(a). Beginning January 24, with the
effectiveness of the Company registration of the Common Stock under Section
12(g) of the Exchange Act, the Company's officers and directors became subject
to Section 16(a).
Item 11. 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, 1996, 1995 and 1994 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, 1996 exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation (1) Long Term Compensation
-------------------------------------- --------------------------------------
Awards Payouts
--------------------------- ---------
Other Restricted
Fiscal Annual Stock Securities Under LTIP All Other
Name and Year Compensa- Awards Options Granted Payouts Compensa-
Title Ended Salary ($)(2) Bonus ($) tion ($) (3) ($) tion
- ----------- ------ ----------- ----------- ---------- --------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William 1996 90,000 9,120 -0- -0- 250,000 -0- -0-
P. Long 1995 91,200 9,120 -0- -0- 166,000 -0- -0-
1994 91,200 9,120 -0- -0- 221,000 (4) -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 1996, 1995, and 1994
were U.S. $60,000, $110,000 and U.S. $120,200, respectively. Such
payments include payment of earned but unpaid salary and bonus for 1992
of U.S. $16,720. At December 31, 1996 U.S. $115,360 remained
outstanding and payable to Dr. Long, including interest on unpaid
bonuses ($2,763).
(3) Options to purchase shares of Common Stock granted pursuant to the
Altair International Inc. Stock Option Plan (the "Option Plan").
19
<PAGE>
(4) These options were granted following the cancellation of 143,333
options granted in 1993. The 1993 options were canceled and new options
granted in 1994 in order that the exercise price of the options would
more closely reflect the then-current market price of the Common Stock.
Option Grants in 1996
The following table provides detailed information regarding options to
purchase shares of Common Stock granted to Dr. Long during the year ended
December 31, 1996:
<TABLE>
<CAPTION>
% of Total
Options Potential Realizable
Securities Granted to Value at Assumed
Underlying Employees Exercise Annual Rates of Stock
Options in Fiscal Price Expiration Price Appreciation for
Name Granted (#) Year ($/sh Date Option Term
- ---------------------------- ------------- ------------- --------- ------------ -----------------------
5% ($) 10% ($)
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William P. Long, 250,000 (1) 50% 4.00 (2) 5/27/01 276,282 610,510
President and Director
</TABLE>
- -------------------------
(1) Represents options granted on May 27, 1996 pursuant to the Option Plan.
The options become exercisable on May 27, 1997.
(2) The market value of the underlying shares of Common Stock as reported
by the Alberta Stock Exchange on May 26, 1996, the day prior to the
grant date, was $4.00.
Options Exercised and Aggregate Remaining at Year-end
The following table provides detailed information regarding options
held by Dr. Long as of December 31, 1996, and options exercised during the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Securities
Acquired Aggregate Number of Securities
on Value Underlying Unexercised Value of Unexercised In-the-
Exercise Realized Options at December 31, Money Options at
Name (#) ($) 1996 (#) December 31, 1996 ($) (1)
- ------------------- ---------- ------------ ------------------------------ --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William P. Long, 387,000 3,021,300 -0- 250,000 (2) -0- 1,850,000
President and
Director
</TABLE>
- -------------------------
(1) Based on the closing price of the Common Stock on December 31, 1996, as
reported by The Alberta Stock Exchange, of $11.40.
(2) Will be exercisable at $4.00 per share commencing May 27, 1997, until
5:00 p.m. (Toronto time) on May 1, 2001.
20
<PAGE>
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.
Directors also have been and currently are entitled to participate in
the Option Plan. As of December 31, 1996, the Company had outstanding options to
purchase 745,000 Common Shares pursuant to the Option Plan, 270,000 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Following is information with respect to beneficial ownership of shares
of the Common Stock as of February 28, 1997 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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
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 2,097,529 (3) 13.8%
57 Sunset Rim
Cody, Wyoming 82414
Common C. Patrick Costin 1,025,833 (4) 6.7%
1850 Aquila Avenue
Reno, Nevada 89509
Common James I. Golla 22,000 (5) *
829 Terlin Boulevard
Mississauga, Ontario L5H 1T1
21
<PAGE>
Common Christopher D. Proud 0 *
7225 Woodbine Avenue, Suite 115A
Markham, Ontario L3K 1A3
Common All Directors and Officers as a Group 3,145,362 (6) 20.5%
(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 15,110,245 shares outstanding as of February 28, 1997. 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 56,000 shares held by Dr. Long's minor daughter, 57,500 shares
held by Dr. Long's minor son, and 162,000 shares held by the MBRT
Trust, an irrevocable trust for the benefit of the minor children of
Dr. Long. Dr. Long disclaims any beneficial interest in such 275,500
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 February 28, 1997, none of
such shares had been released from escrow. See "Item 13. Certain
Relationships and Related Transactions". Also includes 185,000 shares
subject to presently exercisable options granted to Mr. Costin pursuant
to 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.
Item 13. Certain Relationships and Related Transactions
Included in accounts payable and accrued liabilities of the Company for
fiscal years 1996 and 1995 are approximately $115,360 and $64,000, 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 Dr. Long 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 12. 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 December 31,
22
<PAGE>
1996, none 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.
23
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents Filed
1. Financial Statements. The following Consolidated
Financial Statements of the Company and Auditor's
Report are filed as part of this Annual Report on
Form 10-K:
o Report of McGovern, Hurley, Cunningham, for
the years ended December 31, 1996 and 1995
o Consolidated Balance Sheets at December 31,
1996 and 1995
o Consolidated Statements of Operations and
Deficit for the years ended December 31,
1996 and 1995
o Consolidated Statements of Changes in
Financial Position for the years ended
December 31, 1996 and 1995
o Notes to Consolidated Financial Statements
2. Financial Statement Schedule. Not applicable.
24
<PAGE>
3. Exhibit List
<TABLE>
<CAPTION>
Exhibit Incorporated Filed
No. Exhibit by Reference Herewith
- ------- --------------------------------------------------------- ------------ --------
<S> <C> <C>
3.1.1 Articles of Incorporation of the Registrant (1)
3.1.2 Amendment to Articles of Incorporation of the
Registrant dated November 6, 1996 (2)
3.2 Bylaws of the Registrant (1)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Series D Warrant Certificate (1)
4.3 Form of Series E Warrant Certificate (1)
4.4 Form of Series F Warrant Certificate (1)
4.5 Form of Series G Warrant Certificate (1)
4.6 Form of Series H Warrant Certificate (1)
10.1 Articles of Merger of Mineral Recovery Systems, Inc.
with and into Fine Gold Recovery Systems Inc. dated
June 21, 1996, including Exhibit A thereto, Plan of
Merger and Merger Agreement (1)
10.2 Merger Agreement among Fine Gold Recovery Systems
Inc., Altair International Inc. and Trans Mar, Inc. dated
February 8, 1996, as amended February 22, 1996 (the
"TMI Merger Agreement") (1)
10.2.1 Exhibit 1.1(c) to the TMI Merger Agreement -- Articles
of Merger (1)
10.2.2 Exhibit 1.1(e)(1) to the TMI Merger Agreement --
Principal Escrow Agreement dated February 29, 1996 (1)
10.2.3 Exhibit 1.1(e)(2) to the TMI Merger Agreement --
Performance Escrow Agreement dated February 27,
1996 (1)
10.2.4 Exhibit 1.1(h) to the TMI Merger Agreement -- Warrant
Certificate (1)
10.2.5 Schedule 1.1(e)(ii) to the TMI Merger Agreement --
Principal Escrow Release Schedule (1)
10.2.6 Schedule 1.1(e)(iii) to the TMI Merger Agreement --
Performance Escrow Release Schedule (1)
10.3 Employment Agreement between Altair International
Inc. and William P. Long dated January 1, 1988 (1)
10.4 Employment Agreement between Fine Gold Recovery
Systems Inc. and C. Patrick Costin dated August 15,
1994 (1)
10.5 Altair International Inc. Stock Option Plan adopted by
shareholders May 10, 1996 (1)
10.6 Share Purchase Agreement between Altair International
Inc. and Fine Gold Recovery Systems, Inc. dated April
21, 1994 (1)
25
<PAGE>
10.7 Escrow Agreement among Altair International Inc.,
Equity Transfer Services Inc., Thomas P. Campbell and
C. Patrick Costin dated June 1, 1994 (1)
22 Subsidiaries of the Registrant (2)
27 Financial Data Schedule (3)
</TABLE>
- -----------------------
(1) Incorporated by reference to Registration Statement on Form 10-SB filed
with the Commission on November 25, 1996.
(2) Incorporated by reference to Amendment No. 1 to Registration Statement on
Form 10 filed with the Commission on December 23, 1996.
(3) Filed herewith and attached to this Annual Report on Form 10-K following
page F-18 hereof.
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the last
quarter of the fiscal year ended December 31, 1996.
(c) Exhibits
Exhibits to this Report are attached following page F-18
hereof.
(d) Financial Statement Schedule
Not applicable.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 31, 1997.
ALTAIR INTERNATIONAL INC.
By: /s/ William P. Long
William P. Long,
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ William P. Long
William P. Long President and Chief Executive March 31, 1997
Officer and Director (Principal
Executive Officer)
/s/ C. Parick Costin Vice President (Principal March 31, 1997
C. Patrick Costin Financial and Accounting
Officer)
/s/ James I. Golla Secretary and Director March 31, 1997
James I. Golla
/s/ Christopher D. Proud Director March 31, 1997
Christopher D. Proud
</TABLE>
================================================================================
27
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Altair International Inc.
We have audited the consolidated balance sheets of Altair International Inc. as
at December 31, 1996 and 1995 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, 1996
and 1995 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.
/S/ McGOVERN, HURLEY, CUNNINGHAM
Chartered Accountants
North York, Canada
March 18, 1997
F-1
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
1996 1995
(Expressed in Canadian Dollars) $ $
=====================================================================================================================
ASSETS
CURRENT
<S> <C> <C>
Cash and term deposits 4,482,083 424,185
Advances and accounts receivable 18,580 130,102
------------ -----------
4,500,663 554,287
CAPITAL (Note 3)
Office equipment, vehicles and mining equipment,
net of accumulated amortization 351,047 33,365
CENTRIFUGAL JIG (Note 4) 5,984,808 733,430
MINERAL PROPERTIES AND RELATED DEFERRED
EXPLORATION EXPENDITURES (Note 5) 172,213 -
GOODWILL, net 14,787 15,609
------------ -----------
<CAPTION>
11,023,518 1,336,691
========== ==========
LIABILITIES
CURRENT
<S> <C> <C> <C>
Accounts payable and accrued liabilities (Note 8) 213,443 124,605
Current portion of notes payable 209,751 -
----------- -----------
423,194 124,605
NOTES PAYABLE (Note 6) 369,630 -
----------- -----------
792,824 124,605
<CAPTION>
----------- -----------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 7)
Issued
<S> <C> <C>
14,686,296 Common shares (1995 - 8,497,849) 15,588,187 5,779,016
COMMON SHARES TO BE ISSUED (Note 7) 65,440 -
DEFICIT (5,422,933) (4,566,930)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 10,230,694 1,212,086
---------- ----------
11,023,518 1,336,691
========== =========
</TABLE>
APPROVED ON BEHALF OF THE BOARD:
"CHRISTOPHER J. PROUD" , Director
"WILLIAM P. LONG" , Director
F-2
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
1996 1995
(Expressed in Canadian Dollars) $ $
=====================================================================================================================
OPERATING EXPENSES
<S> <C> <C>
Professional fees 439,267 91,257
Wages and administration 305,406 141,494
Research and development 218,856 222,350
General and office 107,291 29,379
Shareholders' meetings 52,666 6,946
Public relations 48,336 28,812
Occupancy costs 37,005 -
Travel 31,991 1,027
Transfer agent's fees 19,161 9,378
Insurance 16,047 11,457
Patent maintenance 12,237 -
Accounting and corporate services 9,182 8,348
Government fees and taxes 5,763 2,650
Stock exchange fees 4,800 5,091
Bank charges 1,041 -
Loss (gain) on foreign exchange (6,799) 8,894
Financing fees - 17,810
Write-off of mineral properties and
related exploration expenditures - 11,255
Amortization 523,617 4,319
---------- ----------
1,825,867 600,467
Add: Interest on notes payable 26,415 -
Less: Interest income (38,113) (1,370)
----------- ------------
Loss from operations 1,814,169 599,097
Gain on forgiveness of debt (Note 11) (958,166) -
----------- -------------
NET LOSS for the year 856,003 599,097
DEFICIT, beginning of year 4,566,930 3,967,833
--------- ---------
DEFICIT, end of year 5,422,933 4,566,930
========= =========
Net loss per share from operations
Basic (Note 9) $(0.16) $(0.09)
===== =====
Net income per share from gain on
forgiveness of debt $0.08 $0.00
==== ====
</TABLE>
F-3
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
====================================================================================================================
1996 1995
(Expressed in Canadian Dollars) $ $
====================================================================================================================
CASH WAS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
<S> <C> <C>
Net loss for the year (856,003) (599,097)
Charges not involving cash:
Amortization 523,617 4,319
Write-off of mineral properties and
related exploration expenditures - 11,255
------------ ----------
(332,386) (583,523)
--------- ----------
Changes in noncash working capital balances:
Decrease (increase) in advances and
accounts receivable 111,522 (70,162)
Increase (decrease) in accounts payable and
accrued liabilities 88,838 (100,186)
----------- ----------
200,360 (170,348)
---------- ----------
(132,026) (753,871)
---------- ----------
FINANCING ACTIVITIES
Issuance of common shares for cash 305,000 -
Issuance of common shares pursuant to
a private placement 1,939,095 1,200,000
Issuance of common shares for shares of subsidiary 3,455,923 -
Common shares to be issued 65,440 -
Exercise of stock options 722,100 73,400
Exercise of warrants 3,387,053 235,000
Notes payable 579,381 -
----------- ----------
10,453,992 1,508,400
---------- ----------
INVESTING ACTIVITIES
Mineral properties and deferred exploration expenditures (172,213) (11,255)
Purchase of capital assets (349,104) (31,232)
Centrifugal Jig patents and related expenditures (5,742,751) (5,965)
Option agreement costs - (291,708)
-------------- ----------
(6,264,068) (340,160)
---------- ----------
Increase (decrease) in cash 4,057,898 414,369
Cash, beginning of year 424,185 9,816
----------- -----------
Cash and term deposits, end of year 4,482,083 424,185
========== ===========
</TABLE>
F-4
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD 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
subsidiaries, Mineral Recovery Systems, Inc. (MRS) (formerly Carlin
Gold Company) (100% owned), Intercontinental Development Corporation
(66% owned), Fine Gold Recovery Systems, Inc. (Fine Gold) (100% owned)
and 660250 Ontario Limited (100% owned). During 1996, Fine Gold merged
with the company previously known as MRS and Trans Mar, Inc. (TMI) (see
Note 2(b)) and continued under the name Fine Gold. Subsequent to the
merger, Carlin Gold Company changed its name to Mineral Recovery
Systems, Inc.
Nature of Operations:
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.
Mineral Properties and Related Deferred Exploration Expenditures: 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, as well as advance royalty payments, 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 related
deferred exploration costs are charged to operations in the current
year.
The company reviews 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 each 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. It is
reasonably possible, based on existing knowledge, that changes in
future conditions in the near term could require a change in the
determination of the need for and amount of any writedown.
Continued...
F-5
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
===========================================================-====================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Administrative Expenditures:
Administrative expenditures are charged to operations as incurred.
Capital Assets and Amortization:
Capital assets are stated at acquisition cost. Amortization is provided
based on the estimated useful life of the assets as follows:
Furniture and office equipment 20% declining balance
Mining equipment 20% declining balance
Vehicles 20% declining balance
Centrifugal Jig equipment 7 year straight line
Centrifugal Jig Patents and Related Expenditures:
The centrifugal jig patents are carried at acquisition cost and are
being amortized on a straight-line basis over their remaining lives.
The related expenditures are also being carried at acquisition costs
and the amortization policies are as follows:
Royalty agreement (Note 2(c)) - 15 year straight line
Licence agreement - No amortization as the
company intends to sell
the licence
Mineral recovery technology rights - Costs are deferred
until the jig
technology produces
revenue
Research and Development Expenditures:
Research and development expenditures are charged to operations as
incurred.
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. Goodwill is written down (to fair
value) when declines in value are considered other than temporary based
on expected future cash flows of the respective subsidiary.
Continued...
F-6
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
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.
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 Stock Exchange, with larger transactions subject to
arm's length discounting in order to arrive at fair market value.
2. ACQUISITIONS
(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, Inc. and (ii) the Republic of Costa Rica,
and certain areas in Mexico and Guiana, South America.
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,
1996, 650,000 common shares remain in escrow.
As at December 31, 1996, Fine Gold was still in the development
stage in that no operating revenues have been earned and no
operating expenses have been incurred. (See Note 4).
Continued...
F-7
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
2. ACQUISITIONS (Continued)
(b) Trans Mar, Inc. (TMI)
In March 1996, the company acquired 100% of the issued and
outstanding common stock of TMI for total consideration of 1,919,957
common shares at $1.80 each ($3,455,923) the assumption of
$1,659,770 of net liabilities, and 580,000 Series E share purchase
warrants (Note 7(v)).
TMI is incorporated in the State of Washington and is involved in
the development of the patented Campbell Centrifugal Jig. TMI holds
patent rights to the centrifugal jig technology (subject to a 10%
royalty - See Note 2(c)) in the United States, South Africa, United
Kingdom, Australia and Canada. This transaction has been accounted
for using the purchase method. The excess paid over the net book
value (which approximates fair value) of the assets acquired has
been allocated to the centrifugal jig patents. TMI was merged with
Fine Gold immediately after the acquisition.
The 1,919,957 common shares were deposited into escrow pursuant to
the terms of two escrow agreements as follows:
i) 1,170,000 shares are to be released dependent upon Altair
receiving revenues from the sale of the centrifugal jigs formerly
held by TMI. The basis of 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 cancelled by the
Alberta Stock Exchange.
ii)The remaining 749,957 shares 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 net value of the assets acquired is as follows:
Working capital deficiency $(1,710,980)
Capital assets, mining equipment 13,003
Centrifugal jig patent - expires December, 1998 685,750
Centrifugal jig patent - expires December, 2008 4,468,150
---------
Issuance of 1,919,957 common shares $3,455,923
=========
Continued...
F-8
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
2. ACQUISITIONS (Continued)
(c) Intercontinental Development Corporation (INDECO)
During 1996, the company purchased 66% of the issued and outstanding
shares of Indeco for total consideration of $437,096 (U.S.$319,298).
This acquisition has been accounted for using the purchase method.
Indeco is a dormant company whose sole asset is a royalty agreement
entitling the corporation to 10% of the cost of manufacturing any
centrifugal jigs which are placed in production, sold or exploited
for profit worldwide. The entire amount of the purchase price has
been allocated to the centrifugal jig royalty agreement.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
Accumulated Net Net
Cost Amortization 1996 1995
-------- ------------ -------- ------
$ $ $ $
<S> <C> <C> <C> <C>
Furniture and office equipment 46,513 9,607 36,906 3,702
Vehicles 101,087 14,487 86,600 29,662
Mining equipment 13,003 1,300 11,703 -
Centrifugal jig equipment 228,533 12,692 215,838 -
------- ------- ------- ------
389,136 38,086 351,047 33,365
======= ======= ======= =======
</TABLE>
4. CENTRIFUGAL JIG PATENTS AND RELATED EXPENDITURES
<TABLE>
<CAPTION>
<S> <C> <C>
Royalty Agreement (Note 2(c)) $ 437,096
Less: Accumulated amortization (14,511) $ 422,585
----------
Patents (Note 2(b)) 5,613,021
Less: Accumulated amortization (476,862) 5,136,159
----------
Mineral recovery technology rights (Note 2(a)) 336,069
License agreement 89,995
$5,984,808
</TABLE>
License Agreement
On June 10, 1996, the company entered into an agreement with RDR, Inc. to
acquire the entire right, title and interest in a license agreement
related to the centrifugal jig. The company agreed to purchase the right
for U.S$75,000 with an initial deposit of U.S.$5,000 and monthly payments
of U.S.$2,000 commencing July 1, 1996 over a 35- month period. The company
intends to resell the license.
Continued...
F-9
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
5. Mineral Properties and Related Deferred Exploration Expenditures The
company's subsidiary, Mineral Recovery Systems, Inc. (MRS), has entered
into various mineral leases for a 100% interest in approximately 3,600
acres of land in Benton County, State of Tennessee, United States for
U.S.$18,712 (U.S.$14,237 paid during the year) and minimum annual advance
royalty payments as follows:
1997 U.S.$18,712
1998 U.S.$18,712
1999 U.S.$32,348
2000 U.S.$36,423
2001 U.S.$36,423
2002 and each year thereafter U.S.$91,058
The mineral leases are subject to a 5% production royalty, however, MRS
will receive a credit for all advance royalties paid against production
royalties. The lessors can only terminate the leases upon the failure of
MRS to make the required minimum payments as required by the leases.
During the year approximately $150,000 was incurred on exploration.
6. NOTES PAYABLE
<TABLE>
<CAPTION>
1996 1995
---- ----
$ $
<S> <C> <C>
Notes payable to former shareholders of Trans Mar, Inc., interest payable
at 10% per anum, unsecured, principal
and interest due December 31, 1999 272,340 -
Notes payable to former shareholders of Trans Mar, Inc.,
non-interest bearing, unsecured, principal due
December 31, 1999 241,010 -
Note payable, interest payable at 10% per annum, blended
payments of U.S.$2,000 per month, due April 1, 1999 66,031 -
-------- -------
579,381 -
Less: Current portion 209,751 -
------- -------
Long-term portion of notes payable 369,630 -
======= =======
</TABLE>
Notes payable to former shareholders of Trans Mar, Inc. (TMI), are subject
to a repayment agreement with Altair dated March 3, 1996. Altair agreed to
retire U.S.$50,000 per month of the Trans Mar, Inc. debt assumed by Altair
in the purchase of TMI.
Continued...
F-10
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
<TABLE>
<CAPTION>
7. CAPITAL STOCK
The capital stock is as follows:
Authorized
Unlimited common shares
Issued
14,686,296 common shares $15,588,187
==========
Transactions during the years are as follows:
Shares Amount
# $
<S> <C> <C>
Balance, December 31, 1995 8,497,849 5,779,016
Private placements 554,027 1,939,095
Exercise of stock options 702,000 722,100
Exercise of warrants 2,912,463 3,387,053
Common shares issued for cash (Note 7(vi)) 100,000 305,000
Common shares issued for the acquisition of TMI
(Note 2(b)) 1,919,957 3,455,923
---------- ----------
Balance, December 31, 1996 14,686,296 15,588,187
========== ==========
Common shares to be issued from exercise
of Series E warrants (Note 7(v)) 32,720 65,440
=========== ===========
</TABLE>
Stock Options
As at December 31, 1996, 745,000 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, 1996 are as follows:
Number Price
of Shares $ Expiry Date
75,000 0.60 August 8, 1998
145,000 3.70 March 7, 2001
80,000 5.00 March 14, 1998
250,000 4.00 May 27, 2001
75,000 4.20 July 29, 2001
50,000 4.50 July 31, 2001
20,000 8.40 November 6, 2001
50,000 9.40 December 31, 2001
Continued...
F-11
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)
Warrants
i) Series A
Issued and outstanding, beginning of the year 1,000,000
Exercised during the year (1,000,000)
Issued and outstanding, end of year Nil
Total proceeds received $ 200,000
=========
ii)Series B
Issued and outstanding, beginning of the year 100,000
Exercised during the year (100,000)
Issued and outstanding, end of year Nil
Total proceeds received $ 75,000
=========
iiiSeries C
Issued and outstanding, beginning of the year 250,000
Exercised during the year (250,000)
Issued and outstanding, end of the year Nil
Total proceeds received $ 200,000
=========
iv) Series D
Issued and outstanding, beginning of the year 1,000,000
Exercised during the year (1,000,000)
Issued and outstanding, end of the year Nil
Total proceeds received $ 825,000
=========
Continued...
F-12
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)
<TABLE>
<CAPTION>
v) Series E
<S> <C>
Issued and outstanding, beginning of the year 580,000
Exercised during the year - common shares issued (227,636)
Exercised during the year - common shares to be issued (32,720)
---------
Issued and outstanding, end of the year 319,644
=========
Total proceeds received $ 520,712
=========
</TABLE>
See Note 2(b). Each warrant entitles the holder thereof to
purchase one common share at $2.00 per share on or before March 1,
1997. Subsequent to the year end, an additional 301,229 warrants
were exercised for total proceeds of $602,458.
<TABLE>
<CAPTION>
vi) Series F
<S> <C>
Issued and outstanding, beginning of the year 100,000
Exercised during the year (50,000)
Issued and outstanding, end of the year 50,000
=========
Total proceeds received $ 350,000
=========
</TABLE>
Pursuant to a subscription agreement, the company issued 100,000
units at $3.05 per unit for total proceeds of $305,000. 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 a price of $7.00 per share to
December 5, 1996 provided that only 50% of the warrants may be
exercised during the initial period, and at a price of $10 per
share to September 5, 1997 provided that the number of warrants
that may be exercised after December 5, 1996 may not exceed the
number of warrants exercised prior to December 5, 1996. Prior to
December 5, 1996, 50,000 warrants were exercised for total
proceeds of $350,000. Subsequent to the year end an additional
50,000 warrants were exercised for total proceeds of $500,000.
Continued...
F-13
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)
<TABLE>
<CAPTION>
vii) Series G
<S> <C>
Issued during the year 494,027
Exercised during the year (284,827)
Expired during the year (209,200)
----------
Issued and outstanding, end of year Nil
Total proceeds received $1,281,722
viii) Series H
Issued and outstanding, end of year 60,000
</TABLE>
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 common share
purchase warrant. Each Series H common share purchase warrant
entitles the holder to purchase one common share at a price of
$4.50 per share on or before December 26, 1997.
8. COMMITMENT
In the event of a takeover, merger or consolidation whereby voting control
of over 35% of the issued stock is acquired by an individual or a group of
individuals, then under the current compensation agreement the president
shall be given 200,000 shares of the company's common stock. Included in
accounts payable and accrued liabilities is U.S. $115,361 (1995 -
U.S.$64,385) owing to the president.
9. 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.
Continued...
F-14
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
10. INCOME TAXES
As at December 31, 1996, 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:
1997 $ 76,000
1998 138,000
1999 93,000
2000 44,000
2001 54,000
2002 76,000
2003 300,000
-------
$781,000
11. FORGIVENESS OF DEBT
During 1996, U.S.$868,493 of debt to former Trans Mar, Inc. shareholders
was retired with payments of U.S.$165,767. The remaining U.S.$702,726 due
was forgiven by the former Trans Mar, Inc. shareholders.
12. CONCENTRATION OF CREDIT RISK
As at December 31, 1996, MRS had U.S.$895,652 in cash deposits with
Western Bank of Cody in Wyoming, United States. This amount exceeds the
insurance limitation of U.S.$100,000 per banking institution.
13. 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.
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 two years ended December 31, 1996:
Continued...
F-15
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
<TABLE>
<CAPTION>
=====================================================================================================================
1996 1995
(Expressed in Canadian Dollars) $ $
=====================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss for the year (856,003) (599,097)
Adjustments to reconcile net loss for the
year to net cash (used):
Amortization 523,617 4,319
Write-off of mineral property and
related exploration expenditures - 11,255
Changes in assets and liabilities:
Advances and accounts receivable 111,522 (70,162)
Accounts payable and accrued liabilities 88,838 (100,186)
----------- ----------
NET CASH (USED IN) OPERATING ACTIVITIES (132,026) (753,871)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mineral properties and related
deferred exploration expenditures (172,213) (11,255)
Purchase of capital assets (349,104) (31,232)
Purchase of centrifugal Jig (5,742,751) (5,965)
Option agreement costs - (291,708)
------------ ----------
NET CASH (USED IN) INVESTING ACTIVITIES (6,264,068) (340,160)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares for cash 305,000 1,200,000
Proceeds from exercise of stock options 722,100 73,400
Proceeds from exercise of warrants 3,387,053 235,000
Notes payable 579,381 -
Issuance of common shares pursuant to a
private placement 1,939,095 -
Common shares to be issued 65,440 -
Issuance of common shares for shares
of subsidiary 3,455,923 -
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,453,992 1,508,400
---------- ----------
NET INCREASE (DECREASE) IN CASH 4,057,898 414,369
CASH, beginning of year 424,185 9,816
---------- ------------
CASH AND TERM DEPOSITS, end of year 4,482,083 424,185
========== ===========
</TABLE>
Continued...
F-16
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
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.
The cash and term deposits on hand as at December 31, 1996 represent cash
and term deposits with maturity dates of less than 30 days which are
considered cash equivalents under U.S. GAAP.
Development Stage Company
As of December 31, 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 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.
Continued...
F-17
<PAGE>
ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
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, 1996, the valuation allowance is 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, 1996, all
745,000 (1995 - 677,000) are currently exercisable. As at December 31,
1996, 723,630 (1995 - 172,785) common shares were available for granting
of options. The following summary sets out the activity in the stock
options.
1996 1995
---- ----
$ $
Outstanding at beginning of year 677,000 438,000
Granted 770,000 486,000
Exercised at an average price of
$1.03 (1995 - $0.30) (702,000) (247,000)
------- -------
Outstanding at end of year 745,000 677,000
======= =======
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, 1996 and 1995 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.
14. CHANGE OF NAME
Pursuant to articles of amendment dated November 5, 1996, the company
changed its name from Altair International Gold Inc. to Altair
International Inc.
F-18
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> CANADIAN
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4482083
<SECURITIES> 0
<RECEIVABLES> 18580
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4500663
<PP&E> 276029
<DEPRECIATION> 174443
<TOTAL-ASSETS> 10983392
<CURRENT-LIABILITIES> 382422
<BONDS> 579381
0
0
<COMMON> 15653627
<OTHER-SE> (5422287)
<TOTAL-LIABILITY-AND-EQUITY> 10983392
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1830069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26415
<INCOME-PRETAX> (1818372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1818372)
<DISCONTINUED> 0
<EXTRAORDINARY> 963015
<CHANGES> 0
<NET-INCOME> (855357)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
