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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 MARCH 31, 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.
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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
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 March 31, 1998, the registrant had 14,787,180 shares of Common
Stock outstanding.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
<CAPTION>
March 31, December 31,
1998 1997
(unaudited) (audited)
------------------ ----------------
ASSETS
Current
<S> <C> <C>
Cash and short-term investments $ 7,718,442 $ 8,161,770
Advances and accounts receivable 22,390 31,193
------------------ ----------------
7,740,832 8,192,963
Capital
Office equipment, vehicles, testing and mining
equipment. (Cost, net of amortization) 366,343 397,723
Centrifugal jig patents and related expenditures
(Cost, net of amortization) 3,824,465 3,918,378
Mineral properties and related deferred
exploration expenditures 732,998 606,551
Goodwill, net 10,189 10,189
------------------ ----------------
Total Assets $ 12,674,827 $ 13,125,804
================== ================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 259,232 $ 227,439
Current portion of notes payable 52,903 253,890
Current portion of convertible debentures-liability
element 231,481 231,481
------------------ ----------------
543,616 712,810
Notes payable -- 5,901
Convertible debentures--liability element 613,110 596,550
------------------ ----------------
Total Liabilities 1,156,726 1,315,261
------------------ ----------------
SHAREHOLDERS' EQUITY
Capital stock issued
14,787,180 common shares at March 31, 1998;
15,492,745 shares at December 31, 1997 14,056,117 13,942,453
------------------ ----------------
Convertible Debentures--equity element 613,110 596,550
------------------ ----------------
Deficit
Balance, beginning of period (6,303,879) (3,956,564)
Accretion of equity element of convertible
debentures (73,503) --
Convertible debenture issuance costs (22,702) (515,844)
Net loss for period (383,404) (1,831,471)
------------------ ----------------
Balance, end of period (6,783,488) (6,303,879)
------------------ ----------------
Total Shareholders' Equity 11,518,101 11,810,543
------------------ ----------------
Total Shareholders' Equity and Liabilities $ 12,674,827 $ 13,125,804
================== ================
</TABLE>
ii
<PAGE>
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expresses in United States Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss for the period $ (383,404) $ (413,147)
Adjustments to reconcile net loss for the period to
net cash (used):
Amortization 152,725 154,873
------------ ------------
(230,679) (258,274)
Changes in assets and liabilities:
Prepaid expenses, Advances, and accounts receivable 8,803 (8,261)
Accounts payable and accrued liabilities 31,790 8,310
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES (190,086) (258,225)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of mineral properties and related
deferred exploration expenditures (126,447) (44,011)
Purchase of capital assets -- (84,948)
Purchase of Centrifugal Jig patents and related expenditures (27,429) (4,723)
------------ -----------
NET CASH (USED IN) INVESTING ACTIVITIES (153,876) (133,682)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares for cash 113,664 989,534
(Decrease) in notes payable (206,888) (159,836)
Increase in convertible debentures 16,560 -
Convertible debenture issuance costs (22,702) -
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (99,366) 829,698
------------ ------------
NET INCREASE (DECREASES) IN CASH AND SHORT-TERM INVESTMENTS ( 443,328) 437,791
CASH AND SHORT-TERM INVESTMENTS, beginning of period 8,161,770 3,270,161
------------ ------------
CASH AND SHORT-TERM INVESTMENTS, end of period $ 7,718,442 $ 3,707,952
============ ============
</TABLE>
iii
<PAGE>
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Expressed in United States Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------
1998 1997
------------------- --------------------
------------------- --------------------
Expenses:
<S> <C> <C>
Professional fees $ 39,615 $ 83,152
Wages and administration 27,770 45,898
Testing, research and development 67,050 27,394
General and office 15,867 18,066
Shareholders' meetings and reports 23,889 18,151
Public relations 22,896 23,983
Occupancy costs 16,551 7,522
Travel 12,087 14,945
Transfer agent's fees 1,521 2,799
Insurance 15,694 2,522
Accounting and corporate services 2,115 1,788
Government fees and taxes 2,906 1,186
Stock exchange fees 78,974 882
Bank charges 712 283
Loss (gain) on foreign exchange 6,471 36,965
Loss on disposal of fixed assets 4,417 --
Amortization 152,725 154,873
------------------- --------------------
491,260 440,409
Interest on notes payable 11,816 4,330
Interest and miscellaneous income $ (119,672) (31,592)
------------------- --------------------
Net (income) loss for period $ 383,404 $ 413,147
=================== ====================
Net (income) loss per share $ 0.02 $ 0.03
=================== ====================
</TABLE>
iv
<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.
The Company is a Canadian 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 principals 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 period ended March 31,
1998 are not necessarily indicative of the results to be expected for the full
year.
Note 2. Development Stage Company
As of March 31, 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:
<TABLE>
<CAPTION>
Accumulated
deficit during the
development stage
------------------
<S> <C>
Professional Fees $ 1,555,278
Salaries and wages 1,648,202
Shareholders' expenses 881,230
Office and general 999,274
Loss on sale of mining claims 101,047
Amortization 1,134,651
Interest on long-term debt 74,686
Write-off of mineral properties and related deferred exploration expenditures 1,292,354
Write-off of organization costs 8,563
------------------
7,295,285
Less: Interest Income
(231,244)
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 6,110,882
Convertible debenture costs 612,049
Share issue costs 60,557
------------------
Accumulated deficit, March 31, 1998 $ 6,783,488
==================
</TABLE>
v
<PAGE>
Note 3. Equity Transactions.
During 1996, the Company acquired the rights to Campbell Centrifugal
Jig, altered and improved to become the Altair Centrifugal Jig (the "CJ"),
through a merger (the "TMI Merger") involving the Company, Fine Gold Recovery
Systems, Inc., a wholly owned subsidiary of the Company, and Trans Mar, Inc.
("TMI"), a Washington corporation. In the TMI Merger, all shares of the capital
stock of TMI were converted into and exchanged for 1,919,957 shares of the
Company's common stock ("Common Shares"), which were issued and deposited into
escrow pursuant to the terms of two escrow agreements. Of the 1,919,957 Common
Shares initially deposited into escrow, 266,170 Common Shares remian subject to
a Perormance Escrow Agreement dated February 29, 1996 (the "Escrow Agreement"),
which provides for release based on the cash flow of the Company, and 749,957
Common Shares have been released pursuant to the terms of the governing
agreements. The remaining 903,830 Common Shares initially deposited into escrow
were subject to the terms of the Performance Escrow Agreement. However, on March
19, 1998, the Alberta Stock Exchange approved (and thereby made effective) a
settlement agreement (the "Settlement") with respect to such 903,830 shares.
Pursuant to the Settlement, 180,765 of the affected 903,830 shares were released
to the beneficial owners effective March 19, 1998 (subject to certain resale
restriction) and the remaining 723,065 shares subject to the Settlement were
canceled.
During the first quarter of 1998, options to purchase 120,000 Common
Shares were issued to employees of the Company at prices equal to the market
price on the Alberta Stock Exchange on the day prior to the date of issuance.
During the same period, options to purchase 17,500 Common Shares were exercised,
from which the Company recieved $113,664. As of March 31, 1998, 1,065,000
options to purchase Common Shares were outstanding.
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-month periods ended
March 31, 1998 and March 31, 1997 (each such period hereinafter referred to as
the "first quarter"). 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
ending December 31, 1997.
Results of Operations
The Company has earned no operating revenues to date. Net losses
totaled $383,404 ($.02 per share) during the first quarter of 1998 and $413,147
($.03 per share) during the first quarter of 1997. Principal factors
contributing to the losses during these periods were the absence of revenue
together with the continuing incurrence of operating expenses.
Operating expenses for the first quarter of 1998 increased by $50,851
over the first quarter of 1997 to $491,260. Included in this amount is an
increase in stock exchange fees of $78,092 representing costs incurred to list
the Company's stock on the NASDAQ National Market System beginning in January
1998. Testing, research and development expenses increased from $27,394 for the
first quarter of 1997 to $67,050 for the first quarter of 1998, principally due
to the shift of labor expense from administration expense to testing, research
and development of a high-capacity jig. This shift in the attribution of labor
costs had the corresponding effect of reducing the amount of labor included in
administration expenses. Other increases in expense 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. These
increases in expense were partially offset by a decrease in professional fees of
$43,537. Both legal expenses and consulting fees were lower during the first
quarter of 1998 than the first quarter of 1997 because 1997 fees included the
costs associated with initially registering the Common Shares under the
Securities Act of 1934, as amended. In addition, the Company's foreign exchange
losses in the first quarter of 1998 were $30,494 less than the first quarter of
1997.
Interest and miscellaneous income for the first quarter of 1998
increased by $88,080, from $31,592 for the first quarter of 1997 to $119,64 for
the first quarter of 1998, primarily due to interest income earned on temporary
investments.
Liquidity and Capital Resources
The Company has financed its operations since inception primarily by
the issuance of equity securities (Common Shares, convertible debentures, and
options and warrants to purchase Common Shares) with aggregate net proceeds of
$19,056,117 as of March 31, 1998. The Company received cash proceeds of $113,664
from the exercise of options to acquire Common Shares during the first quarter
of 1998.
The Company has earned no revenues to date and has incurred recurring
losses. At December 31, 1997 the Company's accumulated deficit was $6,303,879.
The deficit increased by $479,609 to $6,783,488 during the first quarter of 1998
due to operating losses and costs associated with the issuance of the
convertible subordinated debentures.
The Company currently maintains working capital which management
believes will be sufficient for the Company's needs through the end of the 1998
vi
<PAGE>
fiscal year; however, there can be no assurance that the Company will be able to
continue to raise capital to fund the Company's long-term capital requirements.
At March 31, 1998, the Company had $7,718,442 in cash and short-term investments
available to meet its near-term development and operating needs. In addition,
the Company has the option to compel the purchasers of the convertible
debentures issued December 29, 1997 to purchase an additional $5,000,000 in
convertible debentures.
The Company continues to use its working capital to invest in the
testing and development of the CJ and to invest in the exploration of mineral
properties to assess their viability for development and processing with the CJ.
During the first three months of 1998, the Company invested $119,047 in its
Camden, Tennessee mineral property (the "Tennessee Property") and made
investments for exploration of additional mineral properties and production of
its equipment with 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 CJ to prove
economically attractive to end users, the development of a substitute for the CJ
by a competitor, the need for an unforeseen amount of capital to complete
testing and development of the Tennessee Property and the CJ, and other
unanticipated factors. Risk factors, cautionary statements, and other conditions
that could cause actual results to differ are contained in the 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.
PART II - OTHER INFORMATION
Item 5. Other Information.
In Canada, the Common Shares were traded under the symbol "AIL" on the
Alberta Stock Exchange (the "ASE") up through April 23, 1998. The Company
voluntarily delisted from the ASE on that date due to increased focus on
operations in the United States and diminished trading volume on the ASE.
Item 6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index attached hereto.
(b) The Company filed a Current Report on Form 8-K on January 13,
1998, as amended by Amendment No. 1 to Current Report on Form
8-K/A, filed on January 21, 1998, in which the Company reported
the private placement of $5,000,000 worth of 5% convertible
subordinated debentures.
vii
<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.
May 15, 1998 By: /s/ William Long
------------ -------------------------------------
Date William Long, President
May 15, 1998 By: /s/ Patrick Costin
------------ -------------------------------------
Date Patrick Costin, Vice-President
and Principal Financial Officer
viii
<PAGE>
ALTAIR INTERNATIONAL INC.
EXHIBIT INDEX
Regulation S-K
Exhibit No. Description
- --------------------- ---------------------------------------------------
3(i) Articles of Incorporation, as amended
(incorporated by reference to the Company's
Registration Statement on Form 10-SB filed with
the Commission on November 25, 1996).
3(ii) Bylaws (incorporated by reference to the
Company's Registration Statement on Form 10-SB
filed with the Commission on November 25, 1996).
27 Financial Data Schedule
ix
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7718442
<SECURITIES> 0
<RECEIVABLES> 22740
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7740832
<PP&E> 513258
<DEPRECIATION> 146915
<TOTAL-ASSETS> 12674827
<CURRENT-LIABILITIES> 543616
<BONDS> 613110
0
0
<COMMON> 14056117
<OTHER-SE> (2538016)
<TOTAL-LIABILITY-AND-EQUITY> 12674827
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 371588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11816
<INCOME-PRETAX> 383404
<INCOME-TAX> 0
<INCOME-CONTINUING> 383404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383404
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0 <F1>
<FN>
<F1> FULLY DILUTED EPS NOT COMPUTED ON LOSS
</FN>
</TABLE>
