UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] 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.
-------------------------
(Exact name of registrant as specified in its charter)
Province of
Ontario,
Canada 1-12497 None
---------- ----------- --------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
-------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (307) 587-8245
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ].
As of September 30, 1998, the registrant had 15,174,915 Common
Shares outstanding.
1
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
September 30, December 31,
1998 1997
(unaudited) (audited)
------------ ------------
ASSETS
<S> <C> <C>
Current
Cash and short-term investments $ 3,818,742 $ 8,161,770
Other current assets 134,095 31,193
------------ ------------
3,952,837 8,192,963
Capital
Office equipment, vehicles, testing and mining
equipment (Cost, net of amortization) 343,997 397,723
Centrifugal jig patents and related expenditures
(Cost, net of amortization) 3,578,229 3,918,378
Mineral properties and related deferred
exploration expenditures 1,138,439 606,551
Goodwill, net 9,740 10,189
------------ ------------
Total Assets $ 9,023,242 $13,125,804
============ ============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 131,693 $ 227,439
Current portion of notes payable 25,000 253,890
Current portion of convertible debentures - liability element - 231,481
------------ ------------
156,693 712,810
Notes payable - 5,901
Convertible debentures - liability element - 596,550
------------ ------------
Total Liabilities 156,693 1,315,261
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock issued
15,174,915 common shares at September 30, 1998; 15,492,745
shares at December 31, 1997 17,117,560 13,942,453
------------ ------------
Convertible debentures - equity element - 4,171,969
------------ ------------
Deficit
Balance, beginning of period (6,303,879) (3,956,564)
Accretion of equity element of convertible debentures (144,801) -
Premium on conversion of convertible debentures (244,915) -
Convertible debenture issuance costs (22,702) (515,844)
Net loss for the period (1,534,714) (1,831,471)
------------ ------------
Balance, end of period (8,251,011) (6,303,879)
------------ ------------
Total Shareholders' Equity 8,866,549 11,810,543
------------ ------------
Total Liabilities and Shareholders' Equity $ 9,023,242 $ 13,125,804
============ ============
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Expenses
Professional fees $ 54,908 $ 66,022 $ 188,052 $ 239,917
Wages and administration 83,048 41,582 165,309 149,589
Testing, research and development 101,526 54,197 235,217 116,331
General and office 30,025 20,778 73,202 62,573
Shareholders' meetings and reports 6,831 7,098 115,603 88,983
Shareholder relations 34,202 27,427 99,044 82,453
Occupancy costs 17,343 9,743 51,895 30,186
Travel 34,342 4,788 68,388 46,340
Transfer agent's fees 8,294 2,526 12,999 11,696
Insurance 9,563 26,015 45,138 32,371
Accounting and corporate services 2,081 2,233 7,325 5,906
Government fees and taxes - 8,157 23,038 11,249
Stock exchange fees (16,498) 5,700 62,177 7,339
Bank charges 543 558 1,868 1,146
Loss (Gain) on foreign exchange 7,510 20,323 15,232 39,687
Loss (gain) on disposal of fixed assets (2,472) - 1,945 -
Amortization 141,976 152,441 461,353 466,940
--------- --------- --------- ---------
513,222 449,588 1,627,785 1,392,706
Interest expense 5,629 4,330 32,165 12,990
Interest income (99,834) (17,994) (318,492) (66,548)
Premium on redemption of convertible
debentures 193,256 - 193,256 -
--------- --------- --------- ---------
Net loss for the period $ 612,273 $ 435,924 $ 1,534,714 $ 1,339,148
========= ========= ========= =========
Basic loss per share $ 0.04 $ 0.03 $ 0.10 $ 0.09
========= ========= ========= =========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (1,534,714) $ (1,339,148)
Adjustment to reconcile net loss for the period
to net cash (used):
Amortization 461,353 466,940
Loss on disposal of fixed assets 1,945 -
------------- -------------
(1,071,416) (872,208)
Changes in assets and liabilities:
Other current assets (102,902) (46,468)
Accounts payable and accrued liabilities (95,746) (145,992)
------------- -------------
Net cash used in operating activities (1,270,064) (1,064,668)
------------- -------------
Cash flows from investing activities
Purchase of mineral properties and related
deferred exploration expenditures (531,889) (329,902)
Purchase of capital assets (28,833) (223,530)
Purchase of centrifugal jig patents and related
expenditures (38,822) (44,928)
------------- -------------
Net cash used in investing activities (599,544) (598,360)
------------- -------------
Cash flows from financing activities
Redemption of convertible debentures (2,357,682) -
Issuance of common shares for cash 113,664 1,358,249
Decrease in notes payable (206,700) (12,141)
Convertible debenture issuance costs (22,702) -
------------- -------------
Net cash provided by (used in) financing activities (2,473,420) 1,346,108
------------- -------------
Net decrease in cash and short-term investments (4,343,028) (316,920)
Cash and short-term investments, beginning of period 8,161,770 3,270,161
------------- -------------
Cash and short-term investments, end of period $ 3,818,742 $ 2,953,241
============= =============
</TABLE>
4
<PAGE>
ALTAIR INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Preparation of Financial Statements
These unaudited interim financial statements of Altair International
Inc. and its subsidiaries (collectively, the "Company") have been prepared in
accordance with the rules and regulations of the United States Securities and
Exchange Commission (the "Commission"). Such rules and regulations allow the
omission of certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles, so long as the statements are not misleading. In the opinion of
Company management, these financial statements and accompanying notes contain
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the periods
shown. These interim financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's Annual
Report filed on Form 10-K for the year ended December 31, 1997 filed with the
Commission on March 31, 1998, as amended by Amendment No. 1 to the Company's
Annual Report on Form 10-K/A filed with the Commission on May 18, 1998.
The Company is an Ontario corporation and, in the past, has prepared its
interim and year-end financial statements in accordance with generally accepted
accounting principles in Canada ("Canadian GAAP"). Because the Company's
operations are now centered in the United States, the Company determined
effective January 1, 1997 that its functional currency is the U.S. Dollar and
determined effective January 1, 1998 to prepare its interim financial statements
in accordance with accounting principles generally accepted in the United States
("U.S. GAAP"). Accordingly, the foregoing unaudited interim financial statements
are denominated in U.S. Dollars and presented in accordance with U.S. GAAP.
The results of operations for the three-month and nine-month periods
ended September 30, 1998 are not necessarily indicative of the results to be
expected for the full year.
Note 2. Convertible Debentures
During the period July 1, 1998 through August 27, 1998, holders of
certain of the $5,000,000 in 5% convertible subordinated debentures placed by
the Company on December 29, 1997 (the "Convertible Debentures") elected to
convert $1,000,000 principal amount of the Convertible Debentures and $26,736 of
accrued interest. The conversions were made at a conversion rate equal to 92% of
the average price of the common shares, no par value, of the Company (the
"Common Shares") for the five trading days prior to the submission of the notice
of conversion by the holders. These conversions resulted in the issuance of
135,152 Common Shares. At the completion of these conversions, the outstanding
principal amount of the Convertible Debentures was $2,250,000.
On August 28, 1998, the Company elected to redeem the remaining
$2,250,000 of Convertible Debentures using cash previously invested in
short-term instruments. The total cash required to redeem the Convertible
Debentures, including the 10% redemption premium and accrued interest, was
$2,550,938.
Note 3. Capital Stock
During the three months ended September 30, 1998, options to purchase
380,000 Common Shares were issued to employees and directors at prices equal to
the market price on the Nasdaq Stock Market on the day prior to the date of
issuance. During the same period, no options were exercised. As of September 30,
1998, options to purchase 1,910,000 Common Shares were outstanding.
5
<PAGE>
Note 4. Non-Cash Investing and Financing Activities
As discussed in Note 2, during the three-month period ended September
30, 1998, Convertible Debentures having a principal amount of $1,000,000 and
accrued interest of $26,736 were converted into 135,152 Common Shares. These
transactions had the effect of increasing the number of Common Shares
outstanding, causing an accretion of the equity element of convertible
debentures and premium on conversion of convertible debentures, and decreasing
the current portion of convertible debentures - liability element and
convertible debentures - equity element.
Note 5. Development Stage Company
As of September 30, 1998, the Company would be characterized as a
development stage enterprise under Statement of Financial Accounting Standards
No. 7 ("SFAS 7"). The following is a summary of the deficit accumulated during
the development stage prepared in accordance with SFAS 7:
Accumulated deficit
during the
development stage
-----------------
Professional fees $ 1,303,715
Salaries and wages 1,785,741
Shareholders' expenses 967,625
Office and general 1,454,800
Loss on sale of mining claims 101,047
Amortization 1,443,279
Interest on long-term debt 95,035
Write off of mineral properties and related
deferred exploration expenditures 1,292,354
Write off of organization costs 8,563
-----------------
8,452,159
Less:
Interest income (430,064)
Gain on sale of marketable securities (35,773)
Lease payments (143,754)
Gain on forgiveness of debt (702,726)
Option payments (70,906)
-----------------
Total accumulated loss 7,068,936
Convertible debenture costs 538,546
Share issue costs 60,557
Accretion of equity element of convertible debentures 144,801
Premium on conversion of convertible debentures 244,915
Premium on redemption of convertible debentures 193,256
-----------------
Accumulated deficit, September 30, 1998 $ 8,251,011
=================
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion summarizes the results of operations of the
Company and changes in its financial condition for the three- and nine-month
periods ended September 30, 1998 and September 30, 1997. This discussion should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, as amended by Amendment No. 1 to
the Company's Annual Report on Form 10-K/A filed with the Commission on May 18,
1998.
Results of Operations
The Company has earned no operating revenues to date. Basic net
losses totaled $1,534,714 ($.10 per share) during the first nine months of 1998
and $1,339,148 ($.09 per share) during the same period of 1997. For the three
months ended September 30, 1998 and 1997, net losses were $612,273 ($.04 per
share) and $435,924 ($.03 per share), respectively. Principal factors
contributing to the losses during these periods were the absence of revenue
together with the incurrence of operating expenses.
Nine Month Periods Ended September 30, 1998 and 1997. Operating
expenses for the nine months ended September 30, 1998 increased by $235,079 over
the comparable period of 1997. Testing, research and development increased by
$118,886 for the nine months ended September 30, 1998 over the same period in
1997. This increase was principally due to internal labor costs associated with
the testing of a high-capacity version of the Altair Centrifugal Jig (the "Jig")
and costs incurred in evaluating the Jig for coal washing applications. Wages
and administration expense increased by $15,720 for the nine months ended
September 30, 1998 over the same period of 1997 due primarily to staff increases
in business development, engineering and administration which occurred in April
and July 1998.
In January 1998, the Common Shares began trading on the Nasdaq National
Market System. As a result of the expanded market for the Common Shares, the
expenses associated with stock exchange fees, shareholders' meetings and
reports, and shareholder relations increased from $178,775 during the first nine
months of 1997 to $276,824 during the first nine months of 1998. Travel expense
increased by $22,048 in the nine months ended September 30, 1998 over the same
period of 1997 due principally to staff increases and increased business
development activity.
Other increases in expenses during the nine months ended September 30,
1998 were incurred for insurance as a result of increased coverages and for
occupancy costs due to additional office space that was leased in Reno, Nevada
beginning in January 1998. Interest income for the nine-month period ended
September 30, 1998 increased over the same period in 1997 primarily due to an
increase in the amount of cash invested in temporary investments following the
issuance of the Convertible Debentures. Interest expense increased during this
same period as a result of interest expense on the Convertible Debentures.
Three Month Periods Ended September 30, 1998 and 1997. With certain
exceptions that are noted below, changes in operating expenses between the third
quarter of 1997 and the third quarter of 1998 do not differ materially from
changes in the year to date operating expenses outlined in the preceding
discussion. Stock exchange fees for the three months ended September 30, 1998
were a credit of $16,498 due to the receipt of a fee refund from Nasdaq. This
refund resulted from the adjustment of the initial listing fees for the
Company's Common Shares from an estimated amount to actual. In addition, the
increases in wages and administration expenses and travel expenses are reflected
more prominently in the quarterly data because the Company's increases in
7
<PAGE>
business development and engineering staffing occurred during the third quarter
of 1998, and the Company has significantly increased its business development
activities during the third quarter of 1998.
Liquidity and Capital Resources
The Company has financed its operations since inception primarily by the
issuance of equity securities and convertible debt (Common Shares, Convertible
Debentures, and options and warrants to purchase Common Shares) with aggregate
net proceeds of $19,056,117 as of September 30, 1998. The Company received cash
proceeds of $113,664 from the exercise of options to acquire Common Shares
during the first nine months of 1998.
The Company has earned no revenues and has incurred recurring losses. At
December 31, 1997 the Company's accumulated deficit was $6,303,879. The deficit
increased by $1,947,132 to $8,251,011 during the first nine months of 1998, due
primarily to the net loss for the period of $1,534,714 and $412,418 in costs
associated with the issuance and conversion of the Convertible Debentures.
Between May and July 1998, holders of the Convertible Debentures
elected to convert $2,750,000 principal amount of the Convertible Debentures and
accrued interest. On August 28, 1998, the Company used $2,550,938 of the
proceeds from the initial issuance of the Convertible Debentures to redeem the
remaining $2,250,000 principal amount (plus interest) of the Convertible
Debentures. Although this redemption resulted in a substantial decrease in the
Company's working capital, the Company believes that, because of the apparent
downward pressure the existence of the Convertible Debentures was placing on the
price of the Common Shares, the Company's long-term ability to raise money for
working and expansion capital was enhanced by the redemption of the Convertible
Debentures.
The Company currently maintains working capital which management
believes will be sufficient for the Company's needs through the end of the 1999
fiscal year at the current level of operations. However, the Company's
exploration and development program may result in business opportunities that
require additional capital resources for development of mineral properties and
construction of Jigs. When and if such capital resources are required, the
Company intends to assess equity and/or debt financing sources. Nevertheless,
there can be no assurance that the Company will be able to continue to raise
capital to fund its long-term capital requirements. At September 30, 1998, the
Company had $3,818,742 in cash and short-term investments available to meet its
near-term development and operating needs.
The Company continues to use its working capital to invest in the
testing and development of the Jig and to invest in mineral properties suitable
for development and processing with the Jig. During the first nine months of
1998, the Company invested $198,620 in development of the Jig and $531,889 in
the exploration of its Camden, Tennessee mineral property and additional mineral
properties and patents.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Statements in
this report regarding the expansion of the Company's operations and any future
acquisition activities are forward-looking statements. Words such as "expects",
"intends", "believes", "anticipates" and "likely" also identify forward-looking
statements. Actual results could differ materially from those anticipated for a
number of reasons, including, among others, the failure of the Jig to prove
economically attractive to end users, the development of a substitute for the
Jig by a competitor, the unforeseen need for and/or inability to raise capital
to complete testing and development of the Tennessee Property, the Jig, or other
ongoing or new projects. Risk factors, cautionary statements and other
conditions that could cause actual results to differ are contained in the
8
<PAGE>
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended by Amendment No. 1 to the Company's Annual Report on Form 10-K/A filed
on May 18, 1998.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
On December 29, 1997, pursuant to a Securities Purchase Agreement and
related transaction documents (the "Securities Agreement"), the Company
completed a private placement to certain institutional investors of $5,000,000
principal amount of the Convertible Debentures and warrants to purchase 180,000
Common Shares on or before December 29, 1999 at a price of $16.7188 per share
(the "Warrants"). As required by the Securities Agreement, the Company filed a
Registration Statement on Form S-3 (the "Registration Statement") with respect
to the Common Shares issuable upon conversion of the Convertible Debentures, the
Common Shares issuable upon exercise of the Warrants, and 100,000 Common Shares
held by an existing shareholder (the "Registered Shares"). The Registration
Statement was declared effective on May 18, 1998. The Registered Shares are
being offered by their respective holders on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended. The Company is not selling any
of the Registered Shares, has not engaged any underwriters in connection with
the offering of the Registered Shares, and is not receiving any proceeds from
the sale of the Registered Shares.
Between May 20, 1998 and July 31, 1998, holders of certain of the
Convertible Debentures elected to convert $2,750,000 in principal amount of the
Convertible Debentures and $66,528 in accrued interest. As required by the terms
of the Convertible Debentures, the Convertible Debentures were converted into a
number of Common Shares equal to the quotient of (a) the sum of the principal
amount of such Convertible Debentures and all accrued but unpaid interest and
charges, divided by (b) an amount equal to 92% of the average market price of
the Common Shares for the five preceding trading days. In total, such
conversions resulted in the issuance of 387,735 Common Shares to the holders of
the Convertible Debentures at prices (i.e. the amount of debt and interest
converted per Commons Share) ranging from $6.75 to $8.15 per Common Share.
On August 28, 1998, the Company elected to redeem all of the remaining
$2,250,000 of Convertible Debentures using cash previously invested in
short-term instruments. The total cash required to redeem such Convertible
Debentures, including the 10% redemption premium and accrued interest, was
$2,550,938. As of September 30, 1998, none of the Warrants had been exercised.
The original issuance of $5,000,000 principal amount of Convertible
Debentures less the redemption of $2,250,000 resulted in total gross proceeds of
$2,750,000. Issuance expenses and other costs incurred in connection with the
Convertible Debentures and Warrants consisted of invcstement banking fees
($500,000), legal fees and expenses ($33,598), SEC/NASD registration fees
($4,300) and other miscellaneous expenses ($17,040). Total interest paid on the
Convertible Debentures was $75,938 and the redemption premium was $225,000.
After deducting the aforementioned expenses, the net proceeds from the
Convertible Debentures was $1,894,124.
The net proceeds from the Convertible Debentures have been incorporated
into the Company's working capital. During the three and nine-month periods
ended September 30, 1998, the Company's working capital was invested primarily
in the testing and development of the Jig and mineral properties, including the
Tennessee minerals property, suitable for development and processing with the
Jig.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index attached hereto.
(b) No reports on Form 8-K have been filed during the third quarter of
1998.
10
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Altair International Inc.
November 13, 1998 By: /s/ William P. Long
----------------- -------------------
Date William P. Long, President
November 13, 1998 By: /s/ C. Patrick Costin
----------------- ---------------------
Date C. Patrick Costin, Vice-President (Principal
Financial or Accounting Officer)
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Incorporated Filed
No. Exhibit by Reference Herewith
---------- ----------------------------------------------------------- ------------- ----------
<C> <S> <C> <C>
3.1.1 Articles of Incorporation of the Registrant (1)
3.1.2 Amendment to Articles of Incorporation of the Registrant (2)
dated November 6, 1996
3.2 Bylaws of the Registrant (1)
4.1 Form of Common Stock Certificate (1)
10 Employment Agreement dated July 6, 1998 between the (3)
Company and John W. Parsons
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.
12
Exhibit 10
----------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of July 6, 1998 (the "Effective Date"), by and between ALTAIR
INTERNATIONAL, INC., an Ontario corporation whose executive offices are located
at 1725 Sheridan Avenue, Suite 140, Cody, Wyoming 82414 ("Altair"), and JOHN W.
PARSONS, an individual ("Employee") who resides at 738 Mohawk Street, Columbus,
Ohio 43206.
BACKGROUND
----------
Altair is engaged in the acquisition and development of mineral
processing equipment and the exploration of mineral properties. Altair desires
to employ Employee on the terms and subject to the conditions set forth below
and Employee desires to be employed by Altair for the consideration set forth in
this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of Altair's offer of employment, of
the mutual promises and covenants set forth herein, and for other good and
valuable consideration, the receipt, adequacy and legal sufficiency of which are
hereby acknowledged, Altair and Employee mutually agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have
the following definitions:
1.01 Altair Client. "Altair Client" shall mean any Entity (A) for whom
Altair has provided products or services related to the Minerals Business prior
to the Termination Date or (B) for whom Altair is contractually obligated, on or
before the Termination Date, to provide products or services related to the
Minerals Business after the Termination Date.
1.02 Change in Control. "Change in Control" shall mean and shall be
deemed to have occurred if Altair shall be merged or consolidated with another
Entity and as a result of such merger or consolidation less than seventy five
percent (75%) of the outstanding voting securities of the surviving or resulting
Entity shall be owned in the aggregate by the former shareholders of Altair.
1.03 Competing Entity. "Competing Entity" shall mean any Entity that
is engaged or has specific plans to engage, directly orindirectly, in the
Minerals Business in the Territory.
1.04 Confidential Information. "Confidential Information" shall mean
any information relating to Altair's business or operations provided or
available to Employee, or to which Employee has access or which he compiles,
while associated with Altair as an employee or otherwise, and which information
or compilations of information are confidential, proprietary, unique, not
generally known in the mineral processing, exploration and development
industries or significantly enhance Altair's goodwill, including: the whole or
any portion or phase of any scientific or technical information, design,
process, procedure, formula, pattern, compilation, program, device, method,
technique or improvement, or any business information or plans, financial
information or listing of names, addresses or telephone numbers; provided,
however, that in order to constitute "Confidential Information," such
information must satisfy both of the following: (A) it derives independent
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, Entities who can obtain economic
value from its disclosure or use; and (B) it is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Notwithstanding the
foregoing, "Confidential Information" shall not include (I) information which
becomes generally known to the public other than as a result of a disclosure by
Employee, or (II) information legally obtained from a source independent of
Altair or its agents, provided that such source is not known by Employee to be
bound by a confidentiality agreement with Altair.
1
<PAGE>
1.05 Covenant Period. "Covenant Period" shall mean the period
beginning on the Effective Date and continuing for twenty-four (24) months after
the Termination Date.
1.06 Effective Date. "Effective Date" shall mean the date specified in
the first sentence of this Agreement.
1.07 Entity. "Entity" shall mean any individual, corporation,
partnership, limited liability company, association or other enterprise, and
shall include all subsidiaries and affiliates of any of the foregoing. For these
purposes, an affiliate shall mean any Entity which is controlled directly or
indirectly by the owners, members, managers, shareholders, partners, associates,
beneficiaries, or the like, as the case may be, of any of the foregoing; and
control shall mean the ownership directly or indirectly of any equity interest
equal to or greater than ten percent in an Entity.
1.08 For Cause. "For Cause" shall mean (A) a material breach by
Employee of the terms of this Agreement, not cured within twenty (20) days after
Altair's notice of Employee of such breach, (B) Employee?s wrongful
misappropriation of any money, assets or other property of the Company, (C)
Employee?s conviction for any felony or a crime involving moral turpitude, (D)
Employee?s chronic alcoholism or chronic drug addiction, or (E) Employee?s gross
negligence or willful misconduct in connection with the performance of his
obligations under this Agreement.
1.09 Minerals Business. "Minerals Business" shall mean the businesses
of developing, manufacturing or marketing fine particle mineral processing
equipment.
1.10 Restricted Client. "Restricted Client" shall mean any Altair
Client to whom Employee has made one or more sales calls during the one-year
period ending on the Termination Date. Notwithstanding the foregoing, the
following Entities are specifically excluded from the definition of the term
"Restricted Client" ? (A) Elk Creek, LLC and its affiliates and (B) Alabama Fuel
Products, LLC and its affiliates.
1.11 Termination Date. "Termination Date" means the last day of
Employee's employment with Altair.
1.12 Term. "Term" shall mean the Term of Employee's employment, as
specified in Section 2.04 of this Agreement. -----
1.13 Territory. "Territory" shall mean those States of the United
States and those foreign countries in which Altair has conducted the Minerals
Business on or before the Termination Date.
1.14 Transition Period. "Transition Period" shall have the meaning
specified in Section 2.03.
2. Employment and Duties of Employee.
----------------------------------
2.01 Scope of Duties. Altair hereby employs Employee during the Term in
an executive capacity as Vice President of Business Development. Employee also
may be directed during the Term to perform services for Altair or any of its
subsidiaries as the Board of Directors of Altair (the "Altair Board") shall
determine; and Employee hereby accepts such employment with Altair or any of its
subsidiaries, to render services solely for the benefit, and on behalf, of
Altair, as directed by the Altair Board or the President of Altair. The Altair
Board shall have the power to determine the general and specific executive
duties to be performed by Employee consistent with the responsibilities and
authority associated with such position and the means and the manner by which
those duties shall be performed.
2.02 Exclusive Service and Professional Standards. During the Term,
Employee shall perform his duties in a professional and diligent manner in
2
<PAGE>
accordance with the standards reasonably established by Altair from time to
time; shall not engage in activities which are or could be detrimental to the
existing or future business of Altair or damage the name of Altair or the
goodwill pertaining thereto; and shall observe and conform to all laws, customs
and standards of business ethics and honest business practices. Subject to the
provisions of Section 2.03 below, Employee shall be required, and does hereby
agree, to devote his full working time and attention to the duties required
under this Agreement. In no event, however, shall Employee's pursuit of personal
investment opportunities be deemed a breach of this Agreement, provided that
such pursuit does not interfere with the services required to be rendered to
Altair hereunder, is consistent with Altair's policies regarding conflicts of
interest, and does not in any way violate or infringe the covenants set forth in
Article 8 below.
2.03 Transition Period. Notwithstanding the foregoing provisions of
this Article 2, from the Effective Date through December 31, 1998 or such
earlier date selected by the mutual consent of Altair and the Employee (the
"Transition Period"), Altair shall permit Employee to continue to provide
services to Startec, Inc.; provided, however, that Employee shall devote not
less than twenty (20) hours per week to performing the services required under
this Agreement.
2.04 Term of Employment. The term of Employee's employment under this
Agreement (the "Term") shall begin on the Effective Date and shall continue
until December 31, 2003, unless such employment is terminated as described below
in this Section 2.04. Employee's employment can be terminated:
(A) by either party giving written notice to the other party of the
terminating party's intention to terminate Employee's employment under this
Agreement, in which case, the effective date of such termination shall be the
sixty first (61st) day after the date on which the terminating party delivers
such written notice to the other party; or
(B) by Altair, immediately, by giving written notice to Employee of
Altair's termination of Employee's employment under this Agreement For Cause,
which notice shall specify the cause for such termination, and a summary of the
facts supporting Altair's conclusion that the termination is For Cause.
3. Compensation.
-------------
3.01 Salary. Subject to the provisions of Section 3.05 below, for all
services rendered by Employee under this Agreement, Altair shall pay Employee a
monthly base salary equal to Ten Thousand Dollars ($10,000), commencing on the
Effective Date. Employee's salary shall be payable in accordance with Altair's
customary payment policies and periods and the amount thereof may be changed at
any time and from time to time by mutual agreement of the parties.
3.02 Bonuses. Employee may be entitled, but shall have no vested right,
to participate (as determined by the Altair Board) in any bonus that may be
declared from time to time by the Altair Board.
3.03 Stock Options.
A. Grant of Options. As further consideration for Employee's
performance of his obligations under this Agreement, Altair does hereby agree to
grant to Employee, subject to the terms and conditions set forth in the Altair
International Inc. Stock Option Plan, the 1998 Altair International Inc. Stock
Option Plan (the "1998 Option Plan") and to be established by the Altair Board,
the following options (collectively, the "Options") to purchase Common Shares,
no par value, of Altair (the "Common Shares") in accordance with the following
terms and conditions:
(i) An option to purchase 100,000 Common Shares at an exercise
price equal to $8.375 per share, which shall vest and become
3
<PAGE>
exercisable in the event Employee remains employed by Altair on the
second anniversary of the "Commencement Date," which, for purposes of
this Agreement, shall be the date upon which the Transition Period ends
and Employee becomes a full-time employee of Altair;
(ii) An option to purchase 100,000 Common Shares at an
exercise price equal to the fair market value of the Common Shares (as
determined by the Altair Board) on June 15, 1998, which shall vest and
become exercisable in the event Employee remains employed by Altair on
the first anniversary of the Commencement Date; provided, however, that
such grant is expressly conditioned upon the approval by Altair's
shareholders of a proposal to be submitted at Altair's Annual and
Special Meeting of Shareholders to be held on June 11, 1998 for the
purpose of adopting the 1998 Option Plan, which approval management of
Altair shall recommend to Altair's shareholders; and
(iii) An option to purchase 200,000 Common Shares at an
exercise price equal to the fair market value of the Common Shares (as
determined by the Altair Board) on the later of June 15, 1998 and the
Commencement Date, which shall vest and become exercisable on the
Commencement Date; provided, however, that such grant is expressly
conditioned upon the adoption of the 1998 Option Plan by Altair's
shareholders.
B. Early Vesting of Options. Notwithstanding the provisions of Section
3.03A, the Options shall vest and Employee shall immediately have the right to
exercise all Options for Common Shares upon the date on which there is Change in
Control.
C. Share Transactions. In the event of any change affecting the Common
Shares by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other corporate
change, or any distribution to common shareholders of the Company other than
cash dividends, Altair shall make such substitution or adjustment in the
aggregate number or class of shares which may be issued upon the exercise of the
Options and in the number, class and option price or other price of shares
subject to the outstanding Options granted under this Agreement and the Option
Plan as determined necessary by the Altair Board in order to maintain the
purpose of the original grant of such Option.
D. Cooperation. In connection with the grant of the Options, Employee
agrees to execute and deliver to Altair all agreements, certificates and
instruments reasonably requested by Altair to accomplish any grant or exercise
of the Options or any issuance of any Common Shares associated therewith.
3.04 Fringe Benefits. Employee shall be entitled to receive any and all
employee benefits or perquisites as are provided to officers of Altair from time
to time during the Term. Subject to the eligibility and participation
requirements set forth in any such plan, Employee shall also be entitled to
participate in any and all employee benefit plans or programs sponsored by
Altair from time to time including pension and/or profit sharing plans, group
life insurance plans, disability income insurance plans, medical, health and
dental insurance plans.
3.05 Transition Period. During the Transition Period, the Altair Board,
in its reasonable discretion, shall determine (A) the amount of the base monthly
salary to be paid to Employee, which amount shall not be less than a monthly
base salary of Five Thousand Dollars ($5,000), and (B) the level of fringe
benefits, if any, to be provided to Employee in consideration of Employee's
reduced obligations under this Agreement. Notwithstanding the foregoing,
Employee acknowledges and agrees that no Options shall vest, and Employee shall
acquire no right in connection therewith, during the Transition Period.
4. Reimbursement of Business Expenses.
-----------------------------------
4
<PAGE>
4.01 Reimbursement of Business Expenses. Employee may incur reasonable,
ordinary and necessary business expenses for promoting Altair's business,
including expenditures for travel and lodging. Altair shall reimburse Employee
for such business expenses incurred during the Term if the expenses are incurred
by Employee in accordance with Altair's business expense reimbursement policy as
established by Altair from time to time and Employee provides Altair with a
record of (i) the amount, time, place and nature of the expense, (ii) the
business reason for the expense, and (iii) the names and other data concerning
individuals entertained sufficient to establish their business relationship to
Altair. Altair shall not be obligated to reimburse Employee for any expense
which is not substantiated as provided in this Article 4, or is not authorized
or incurred in accordance with Altair's policies as they exists on the date of
such incurrence.
4.02 Moving Expenses. If Employee provides Altair with a record of the
amount, time, place and nature of the expense, Altair shall also reimburse
Employee for the expense of relocating Employee to Reno, Nevada (including the
expense of transportation of household goods, travel expenses, lodging and meals
during such travel) and temporary housing expenses at the new location for a
period of not greater than thirty (30) days. Altair shall not be obligated to
reimburse Employee for any expense which is not substantiated as provided in
Section 4.01 above.
5. Records and Files. Upon the termination of Employee's employment by Altair,
Employee shall have no right to keep or use and shall promptly return to Altair
(A) all Confidential Information and all documents, records, procedures, books,
notebooks and other documentation (and all copies thereof) containing any
Confidential Information then in Employee's direct or indirect possession or
control irrespective of whether such documentation was prepared or compiled by
Employee or any other Entity; and (B) all equipment and property of Altair
entrusted to Employee by Altair or otherwise in Employee's direct or indirect
possession or control. Employee acknowledges that all such documentation,
equipment and property is and shall remain the sole and exclusive property of
Altair.
6. Representations and Warranties of Employee. With the intent that they be
relied upon by Altair and the knowledge that Altair has relied and will rely on
the following representation and warranty in executing this Agreement, Employee
represents and warrants to Altair that Employee has not violated, is not
currently in violation of, and at no time during his employment with Altair will
Employee violate, the terms, conditions or obligations of Employee under any
agreement with any third party, including, without limitation, any former
employer.
7. Indemnification. Altair agrees to and hereby assumes all liability for and
indemnifies, protects, saves and holds Employee harmless from and against any
and all losses, costs, expenses, attorneys' fees, claims, demands, liabilities,
suits and actions of every kind and character which may be imposed upon or
incurred by Employee on account of, arising directly or indirectly from, or in
any way connected with or related to Employee's activities as an officer and
member of the Board of Directors of the Company, except as arise as a result of
the fraud, felonious conduct, gross negligence or acts of gross moral turpitude
on the part of Employee.
8. Covenants of Employee. As a material term of this Agreement and in order to
protect the Confidential Information and the goodwill and existing and future
business of Altair, Employee covenants and agrees that:
8.01 Preservation of Relationships and Business. During the Covenant
Period, Employee shall use his best efforts to (A) persuade Altair's employees
and independent contractors to maintain and continue their association with
Altair, (B) preserve Altair's business organization intact and (C) preserve for
Altair its relationships with the Altair Clients and all suppliers, licensees,
distributors, customers and others having business relationships with Altair.
5
<PAGE>
8.02 Covenants. Notwithstanding the provisions of Section 2.03 above,
Employee shall strictly comply with the following:
A. Covenant as to Nondisclosure or Use of Confidential
Information. Employee acknowledges that in the course of his performance of
services under this Agreement, he will become knowledgeable and familiar with
the Confidential Information. Employee therefore agrees that he shall not under
any circumstances, without the express, prior written consent of Altair, (A)
ever directly or indirectly, intentionally or unintentionally, reveal, disclose
or disseminate to any Entity (other than another Altair employee who is subject
to a similar nondisclosure covenant) any Confidential Information or other
non-public matters concerning the business affairs of Altair, or (B) ever use or
exploit any Confidential Information for the financial gain of Employee or any
other Entity; provided, however, that Employee may disclose such Confidential
Information as is required by a valid order or subpoena issued by a court or
administrative agency of competent jurisdiction. In such latter event, Employee
shall promptly notify Altair of such order or subpoena in order to provide
Altair the opportunity to protect its interests in such Confidential
Information.
B. Covenant Restricting Solicitation. Employee agrees that,
during the Covenant Period, Employee shall not, either individually or on behalf
of any Competing Entity or other Entity, (i) solicit or otherwise deal with any
Restricted Client in any manner designed to or that could take business away
from or otherwise damage Altair in any way; or (ii) solicit or otherwise induce
any employee or independent contractor of Altair to terminate their employment
or association with Altair.
C. Covenant Against Competition. Employee agrees that, during
the Covenant Period, Employee shall not, directly or indirectly, either
individually or on behalf or any Competing Entity or other Entity: (A) compete
against Altair or engage in the Minerals Business anywhere within the Territory;
(B) undertake to plan or organize any Competing Entity, nor shall Employee
consult with, or discuss the possibility of employment with, any Competing
Entity; or (C) own, manage, operate, control, join, be employed by, render
services to, consult with, participate in, or be associated or connected in any
way with the ownership, management, operation or control of any Competing
Entity.
D. Post-Employment Cooperation. During the Covenant Period,
Employee agrees that, upon Altair's reasonable request, Employee in good faith
and using diligent efforts shall cooperate and assist Altair in any dispute,
controversy or litigation in which Altair may be involved including, without
limitation, Employee's participation in any court or arbitration proceedings,
the giving of testimony, the signing of affidavits or such other personal
cooperation as Altair or its counsel may reasonably request. Employee will be
reasonably compensated for such assistance and will receive reimbursement for
expenses incurred i providing such assistance.
8.03 Company Ownership of Confidential Information and Proprietary
Documents. Employee acknowledges and agrees that the Confidential Information is
and shall remain the exclusive proprietary property of Altair. Employee hereby
renounces any existing or future right, title, claim or interest in or to the
Confidential Information. Without limiting the foregoing, and to the fullest
extent permitted by law, Employee agrees (A) to assign to Altair any
Confidential Information conceived, created or discovered by Employee during the
period of his employment with Altair, alone or with others, whether or not
conceived, created or discovered during regular working hours, and (B) to obtain
or maintain suitable protection upon all Confidential Information, including
without limitation, the execution of all patent or copyright applications,
letters patent and any divisions, continuations, continuations-in-part,
extensions, reissues or assignments thereof and any other instruments in writing
which Altair may reasonably deem necessary to accomplish the purposes of this
Agreement.
8.04 Reformation. Altair intends to restrict Employee's activities
under this Article 8 only to the extent necessary for the protection of Altair's
6
<PAGE>
legitimate business interests. In the event that the provisions of this Article
8 should ever be deemed or adjudged by a court of competent jurisdiction to
exceed the time or geographical limitations permitted by applicable law, then
such provisions shall nevertheless be valid and enforceable to the extent
necessary for such protection as determined by such court, and such provisions
will be reformed to the maximum time or geographic limitations as determined by
such court.
9. Remedies.
---------
9.01 Injunction. In the event of Employee's actual or threatened breach
of any one or more provisions of Articles 5, or 8 above, Employee specifically
acknowledges that Altair will incur incalculable and irreparable damage and that
Altair has no adequate remedy at law for such threatened or continuing breach.
Therefore, Altair shall be entitled to injunctive relief immediately and
permanently restraining Employee from such continuing or threatened breach, in
addition to all other remedies available to Altair at law or in equity.
9.02 Non-exclusivity of Remedies. Except as specifically provided
herein, the rights and remedies of the parties hereto shall not be mutually
exclusive, and the exercise of one or more of the provisions of this Agreement
shall not preclude the exercise of any other provision. Each of the parties
confirms that damages at law may be an inadequate remedy for a breach or
threatened breach of any of the provisions hereof. The respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to or shall
limit or affect any rights at law or by statute or otherwise of any party hereto
as against the other party for a breach or threatened breach of any provision
hereof.
10. Miscellaneous.
--------------
10.01 Attorney's Fees. If any action or proceeding is brought for
enforcement of this Agreement because of an alleged dispute, breach, default or
misrepresentation in connection with any provision of this Agreement, the party
which prevails by enforcing the terms of this Agreement shall be entitled to
recover reasonable attorneys' fees and costs incurred, in addition to any other
relief to which that party may be entitled.
10.02 Entire Agreement. This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and the relationship between the parties hereto and supersedes all
negotiations, representations, prior discussions and preliminary agreements
between the parties hereto relating to such subject matter and relationship.
10.03 Successors; Non-assignment. This Agreement shall inure to and
bind the heirs, executors, administrators, representatives, successors and
assigns of the respective parties hereto; provided, however, that nothing herein
shall be construed to permit the transfer or assignment of Employee's interest
and/or obligations hereunder to any third party. Employee covenants and agrees
that he shall not and may not transfer or assign any of his rights or delegate
any of his duties or obligations hereunder.
10.04 Governing Law.This Agreement shall be interpreted, construed and
enforced according to the laws of the State of Utah, without giving effect to
any conflict of laws provisions, and each party hereby expressly submits itself
to the exclusive, personal jurisdiction of the courts situate in Salt Lake
County, State of Utah, with respect to any and all claims, demands or causes of
action asserted or filed by either party relating to, or arising out of, the
subject matter of this Agreement.
10.05 Notices. Except when actual receipt is expressly required by the
terms hereof, notice is considered given either (A) when delivered in person to
the recipient named as below, or (B) after deposit in the United States mail,
either registered or certified mail, return receipt requested, postage prepaid,
addressed to the party or person intended at the address set forth on the first
page hereof.
7
<PAGE>
10.06 Modification and Waiver. This Agreement may not be modified
except by a written instrument signed by all the parties hereto. Any waiver by
any party hereto of any breach of any kind or character whatsoever by any other
party, whether such waiver be direct or implied, shall not be construed as a
continuing waiver of, or consent to, any subsequent breach of this Agreement on
the part of the other party or parties.
10.07 Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such void, voidable or unenforceable provision shall not affect
or invalidate any other provision of this Agreement, which shall continue to
govern the relative rights and duties of the parties as though the void,
voidable or unenforceable provision were not a part hereof. In addition, it is
the intention and agreement of the parties that all of the terms and conditions
hereof be enforced to the fullest extent permitted by law.
10.08 Survival. The provisions set forth in Articles 4, 5, 6, 7, 8 and
9 hereof shall survive the expiration of the Term and the termination of this
Agreement and shall, notwithstanding the expiration of the Term or the
termination of this Agreement, continue in full force and effect.
10.09 Acknowledgement. In executing this Agreement, Employee does not
rely on any inducement, promise or representation of Altair, other than the
terms and conditions specifically set forth in this Agreement. Employee hereby
further acknowledges that Employee has read and understands all of the terms of
this Agreement; Altair's offer of employment constitutes adequate consideration
for the covenants set forth in Section 8 above; during his employment, Employee
will render services to Altair that are personal, special, unique and
extraordinary; Employee's personality, courtesy, honesty, etc. will all
contribute to and enhance the goodwill of Altair; Employee has the means to
support himself and his dependents other than by engaging in the Minerals
Business and the provisions of Section 8 above will not unreasonably impair such
means and ability; Employee has been advised to consult with independent counsel
and has had an opportunity to consult with independent counsel with respect to
the advisability of executing this Agreement; and Employee has made such
investigation of the facts pertaining to this Agreement and of all the matters
pertaining hereto as he deems necessary.
IN WITNESS WHEREOF the parties have duly executed and delivered this
Agreement as of the date first written above.
"ALTAIR":
Altair International Inc.,
an Ontario corporation
By: /s/ William P. Long
--------------------
Its: President
-------------
"EMPLOYEE":
/s/ John W. Parsons
-------------------
John W. Parsons
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 3818742
<SECURITIES> 0
<RECEIVABLES> 134095
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3952837
<PP&E> 545885
<DEPRECIATION> (201888)
<TOTAL-ASSETS> 9023242
<CURRENT-LIABILITIES> 156693
<BONDS> 0
0
0
<COMMON> 17117560
<OTHER-SE> (8251011)
<TOTAL-LIABILITY-AND-EQUITY> 9023242
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 606644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5629
<INCOME-PRETAX> (612273)
<INCOME-TAX> 0
<INCOME-CONTINUING> (612273)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (612273)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0<F1>
<FN>
<F1>
Fully diluted EPS not computed on loss.
</FN>
</TABLE>
