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 JUNE 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 June 30, 1998, the registrant had 15,039,763 Common
Shares outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(unaudited) (audited)
----------- ---------
ASSETS
<S> <C> <C>
Current
Cash and short-term investments $ 7,069,601 $ 8,161,770
Other current assets 8,881 31,193
------------------ -----------------
7,078,482 8,192,963
Capital
Office equipment, vehicles, testing and mining
equipment (Cost, net of amortization) 349,100 397,723
Centrifugal jig patents and related expenditures
(Cost, net of amortization) 3,706,990 3,918,378
Mineral properties and related deferred exploration
expenditures 902,410 606,551
Goodwill, net 5,094 10,189
------------------ -----------------
Total Assets $ 12,042,076 $ 13,125,804
================== =================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 146,483 $ 227,439
Current portion of notes payable 52,903 253,890
Current portion of convertible debentures - liability
element 126,385 231,481
------------------ -----------------
325,771 712,810
Notes payable --- 5,901
Convertible debentures - liability element 433,364 596,550
------------------ -----------------
Total Liabilities 759,135 1,315,261
------------------ -----------------
SHAREHOLDERS' EQUITY
Capital stock issued
15,039,763 common shares at June 30, 1998; 15,492,745
shares at December 31, 1997 16,001,543 13,942,453
------------------ -----------------
Convertible debentures - equity element 2,807,334 4,171,969
------------------ -----------------
Deficit
Balance, beginning of period (6,303,879) (3,956,564)
Accretion of equity element of convertible debentures (121,280) ---
Premium on conversion of convertible debentures (155,634) ---
Convertible debenture issuance costs (22,702) (515,844)
Net loss for the period (922,441) (1,831,471)
------------------ -----------------
Balance, end of period (7,525,936) (6,303,879)
------------------ -----------------
Total Shareholders' Equity 11,282,941 11,810,543
------------------ -----------------
Total Liabilities and Shareholders' Equity $ 12,042,076 $ 13,125,804
================== =================
</TABLE>
2
<PAGE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------- ------------- ------------- -------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating Expenses
Professional fees $ 93,529 $ 90,743 $ 133,144 $ 173,895
Wages and administration 54,491 62,109 82,261 108,007
Testing, research and development 66,641 34,740 133,691 62,134
General and office 27,310 23,729 43,177 41,795
Shareholders' meetings and reports 84,883 63,734 108,772 81,885
Shareholder relations 41,946 31,043 64,842 55,026
Occupancy costs 18,001 12,921 34,552 20,443
Travel 21,959 26,607 34,046 41,552
Transfer agent's fees 3,184 6,371 4,705 9,170
Insurance 19,881 3,834 35,575 6,356
Accounting and corporate services 3,129 1,885 5,244 3,673
Government fees and taxes 20,132 1,906 23,038 3,092
Stock exchange fees (299) 757 78,675 1,639
Bank charges 613 305 1,325 588
Loss (Gain) on foreign exchange 1,251 (17,601) 7,722 19,364
Loss on disposal of fixed assets - - 4,417 -
Amortization 166,652 159,626 319,377 314,499
------------- ------------- ------------- -------------
623,303 502,709 1,114,563 943,118
Interest on notes payable 14,720 4,330 26,536 8,660
Interest income (98,986) (16,962) (218,658) (48,554)
------------- ------------- ------------- -------------
Net loss for the period $ 539,037 $ 490,077 $ 922,441 $ 903,224
============= ============= ============= =============
Basic net loss per share $ 0.04 $ 0.03 $ 0.06 $ 0.06
============= ============= ============= =============
</TABLE>
3
<PAGE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (922,441) $ (903,224)
Adjustment to reconcile net loss for the period
to net cash (used):
Amortization 319,377 314,499
Interest on convertible debentures 35,594 -
Loss on disposal of fixed assets 4,417 -
-------------- --------------
(563,053) (588,725)
Changes in assets and liabilities:
Other current assets 22,312 (5,847)
Accounts payable and accrued liabilities (80,953) (139,708)
-------------- --------------
Net cash used in operating activities (621,694) (734,280)
-------------- --------------
Cash flows from investing activities
Purchase of mineral properties and related
deferred exploration expenditures (295,859) (157,078)
Purchase of capital assets (18,593) (137,236)
Purchase of centrifugal jig patents and related
expenditures (40,097) (7,907)
-------------- --------------
Net cash used in investing activities (354,549) (302,221)
-------------- --------------
Cash flows from financing activities
Issuance of common shares for cash 113,664 1,354,325
Notes payable (206,888) (10,471)
Convertible debenture issuance costs (22,702) -
-------------- --------------
Net cash provided by (used in) financing activities (115,926) 1,343,854
-------------- --------------
Net increase (decrease) in cash and short-term investments (1,092,169) 307,353
Cash and short-term investments, beginning of period 8,161,770 3,270,161
-------------- --------------
Cash and short-term investments, end of period $ 7,069,601 $ 3,577,514
============== ==============
</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 six-month periods ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full year.
Note 2. Convertible Debentures
During the three-month period ended June 30, 1998, holders of the
convertible debentures elected to convert $1,750,000 principal amount of the
debentures and $39,792 of accrued interest. The conversions were made at a
conversion rate equal to 92% of the average price of the common shares 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 252,583 Common Shares.
Note 3. Capital Stock
During the three months ended June 30, 1998, 465,000 options to purchase
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 June 30,
1998, 1,530,000 options to purchase Common Shares were outstanding.
Note 4. Non-Cash Investing and Financing Activities
As discussed in Note 2, during the three-month period ended June 30, 1998,
convertible debentures having a principal amount of $1,750,000 and accrued
interest of $39,792 were converted into 252,583 Common Shares. These
transactions had the effect of increasing capital stock, causing an accretion of
the equity element of convertible debentures and premium on conversion of
convertible debentures, and reducing the current portion of convertible
debentures - liability element, convertible debentures - liability element, and
convertible debentures - equity element.
5
<PAGE>
Note 5. Development Stage Company
As of June 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 $ 1,248,807
Salaries and wages 1,702,693
Shareholders' expenses 968,998
Office and general 1,220,137
Loss on sale of mining claims 101,047
Amortization 1,301,303
Interest on long-term debt 89,406
Write off of mineral properties and related
deferred exploration expenditures 1,292,354
Write off of organization costs 8,563
--------------
7,933,308
Less:
Interest income (330,230)
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 6,649,919
Convertible debenture costs 538,546
Share issue costs 60,557
Accretion of equity element of convertible debentures 121,280
Premium on conversion of convertible debentures 155,634
--------------
Accumulated deficit, June 30, 1998 $ 7,525,936
==============
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 six-month
periods ended June 30, 1998 and 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 $922,441 ($.06 per share) during the first six months of 1998 and
$903,224 ($.06 per share) during the same period of 1997. For the three months
ended June 30, 1998 and 1997, net losses were $539,037 ($.04 per share) and
6
<PAGE>
$490,077 ($.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.
Operating expenses for the six months ended June 30, 1998 increased by
$171,445 over the comparable period of 1997. Testing, research and development
increased by $71,557 for the six months ended June 30, 1998 over the same period
in 1997 principally due to internal labor costs associated with the testing of a
high-capacity centrifugal jig. This shift in labor had the corresponding effect
of reducing the amount of labor included in wages and administration. 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 have increased over the prior year. Other increases in expenses during
the six months ended June 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. Changes in operating
expenses between the second quarter of 1997 and the second quarter of 1998 do
not differ materially from changes in the year to date operating expenses
outlined in the preceding discussion.
Interest and miscellaneous income for the three- and six-month periods
ended June 30, 1998 increased over the same periods in 1997, 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 June 30, 1998. The Company received cash proceeds of $113,664
from the exercise of options to acquire Common Shares during the first six
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 $1,222,057 to $7,525,936 during the first six months of 1998 due
primarily to operating losses and costs associated with the issuance 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 1998 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 June 30, 1998, the Company had $7,069,601 in cash and short-term investments
available to meet its near-term development and operating needs. In addition,
the Company has an option to sell up to $5,000,000 of additional convertible
debentures.
The Company continues to use its working capital to invest in the testing
and development of the Altair Centrifugal Jig (the "CJ") and to invest in
mineral properties suitable for development and processing with the CJ. During
the first six months of 1998, the Company invested $295,859 in its Camden,
Tennessee mineral property and made investments for exploration of 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
7
<PAGE>
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, as amended on Form
10-K/A filed on May 18, 1998.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
A Registration Statement on Form S-3, file no. 333-45511 (the "Registration
Statement") was declared effective on May 18, 1998, with respect to 924,973
Common Shares (the "Shares"), as estimated pursuant to Rule 416 of the
Securities Act of 1933 (the "Securities Act"). All of the Shares were registered
on behalf of existing security holders and are to be offered on a continuous
basis until all of the Shares are sold or the effectiveness of the Registration
Statement is otherwise terminated. The aggregate offering price of the Shares,
as estimated as of April 6, 1998 pursuant to Rule 457 of the Securities Act, was
$7,977,892. The Company has not received any proceeds from the offering, and
between May 18, 1998 and June 30, 1998, the Company incurred no expenses for
underwriting discounts, commissions, finders' fees, expenses paid to
underwriters and similar expenses in connection with the issuance and
distribution of the Shares. Inasmuch as the Shares are not being offered and
sold by the Company, the Company does not have accurate information with regard
to the number of Shares sold to date or the aggregate offer price of such
shares.
Item 4. Submission of Matters to a Vote for Security Holders.
The Company held an Annual and Special Meeting of Shareholders on June 11,
1997 at which the Company's shareholders considered and voted as follows on the
items described below:
1. The shareholders of the Company considered whether to elect the
following persons as directors of the Company, each to serve until the next
annual meeting of shareholders of the Company and until his respective successor
shall have been duly elected and shall qualify:
Name of Nominee Votes For Votes Broker Non-Votes
Withheld/Abstentions
William Long 9,903,851 73,244 -0-
James Golla 9,903,851 73,244 -0-
George Hartman 9,903,851 73,244 -0-
Robert Sheldon 9,903,851 73,244 -0-
2. The shareholders of the Company considered whether to appoint
McGovern, Hurley, Cunningham, as auditors of the Company and authorize the Board
of Directors to fix their remuneration. There were 9,924,741 votes cast in
favor, 20,289 votes cast against, 32,005 abstentions, and no broker non-votes.
3. The Shareholders of the Company considered a resolution approving the
1998 Altair International Inc. Stock Option Plan and the reservation of
2,000,000 Common Shares for issuance upon the exercise
8
<PAGE>
of options granted pursuant to such plan. There were 2,901,900 cast in
favor, 644, 033 cast against, 120,369 abstentions and no broker
non-votes.
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 removed the Common Shares from the ASE on that date due to increased
focus on operations in the United States and diminishing trading volume on the
ASE.
In connection with recent revisions to Rule 14a-8 and related rules
promulgated under the Securities Exchange Act of 1934, as amended, the Company
has elected to provide the following information regarding discretionary proxy
voting at the Company's 1999 annual meeting of shareholders (the "1999
Meeting"). If a shareholder desiring to advance a proposal for consideration at
the Company's 1999 Meeting fails to notify the Company of the proposal at least
45 days prior to the month and day of mailing the Company's proxy statement
relating to the 1999 annual meeting of shareholders (Est. March 30), then
management proxies will be allowed to use their discretionary voting authority
when the proposal is raised at the 1999 meeting, without any discussion of the
matter in the Company's proxy statement.
The Company has conducted a preliminary examination of the potential impact
of Year 2000 issues on its operations. Based on this preliminary examination,
the Company does not believe the Year 2000 issue will have a significant impact
on the Company's internal operations. The Company is in an early stage of
development and does not presently have any customer or supplier relationships
that management believes are material to its operations. Accordingly, the
Company has not taken steps to verify the Year 2000 readiness of any third
parties with which it conducts or may conduct business. The Company intends,
however, to investigate the Year 2000 readiness of third parties as its
relationship with any such party becomes material to the operations of the
Company. Despite the Company's examination of its own operations and intent to
investigate the Year 2000 readiness of essential suppliers, customers, and
service providers, there can be no assurance that the Company will not
experience interruptions of operations or become involved in disputes with third
parties because of direct or indirect Year 2000 problems. Such Year 2000
problems could require the Company to incur unanticipated ecpenses, and such
expenses could have a material adverse effect upon the Company's business,
financial condition and results or operations.
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 second quarter of 1997.
9
<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.
August 12, 1998 By: /s/ William P. Long
--------------- -----------------------
Date William P. Long, President
August 12, 1998 By: /s/ C. Patrick Costin
--------------- -------------------------
Date C. Patrick Costin, Vice-President (Principal Financial
or Accounting Officer)
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Incorporated Filed
No. Exhibit by Reference Herewith
- --------- ---------------------------------------------------------- ------------ --------
<S> <C> <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)
4.2 Form of Series 5% Convertible Debenture (3)
4.3 Form of Warrant (3)
27 Financial Data Schedule (4)
- -----------------------
</TABLE>
(1) Incorporated by reference to Registration Statement on Form 10BSB 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) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on January 13, 1998, as amended by Amendment No. 1 to
Current Report on Form 8-K/A, filed on January 21, 1998.
(4) Filed herewith.
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 7069601
<SECURITIES> 0
<RECEIVABLES> 8881
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7078482
<PP&E> 531851
<DEPRECIATION> (182751)
<TOTAL-ASSETS> 12042076
<CURRENT-LIABILITIES> 325771
<BONDS> 433364
0
0
<COMMON> 16001543
<OTHER-SE> (4718602)
<TOTAL-LIABILITY-AND-EQUITY> 12042076
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 524317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14720
<INCOME-PRETAX> (539037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (539037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (539037)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0 <F1>
<FN>
<F1> Fully diluted EPS not computed on loss
</FN>
</TABLE>
