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, 1999
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, 1999, the registrant had
15,424,915 Common Shares outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
<CAPTION>
September 30, December 31,
1999 1998
(unaudited) (audited)
------------ ------------
ASSETS
<S> <C> <C>
Current
Cash and short-term investments $ 2,881,625 $ 3,100,577
Other current assets 86,684 130,642
------------ ------------
2,968,309 3,231,219
Capital
Office equipment, vehicles, jigs and testing
equipment (Cost, net of amortization) 638,627 462,417
Centrifugal jig patents and related expenditures
(Cost, net of amortization) 3,366,729 3,609,024
Mineral properties and related deferred exploration
expenditures 1,884,940 1,399,802
Goodwill, net 9,135 9,590
------------ ------------
Total Assets $ 8,867,740 $ 8,712,052
============ ============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 14,648 $ 165,979
Current portion of notes payable 67,442 73,533
------------ ------------
Total Liabilities 82,090 239,512
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock issued
15,424,915 common shares at September 30, 1999; 15,174,915
shares at December 31, 1998 18,212,463 16,462,463
------------ ------------
Contributed Surplus 655,098 655,098
------------ ------------
Deficit
Balance, beginning of period (8,645,021) (6,303,879)
Accretion of equity element of convertible debentures -- (144,801)
Premium on conversion of convertible debentures -- (244,915)
Convertible debenture issuance costs -- (21,887)
Capital stock issuance costs (87,500) --
Net loss for the period (1,349,390) (1,929,539)
------------ ------------
Balance, end of period (10,081,911) (8,645,021)
------------ ------------
Total Shareholders' Equity 8,785,650 8,472,540
------------ ------------
Total Liabilities and Shareholders' Equity $ 8,867,740 $ 8,712,052
============ ============
</TABLE>
2
<PAGE>
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
Operating Expenses
<S> <C> <C> <C> <C>
Testing, research and development $ 25,349 $ 101,526 $ 167,445 $ 235,217
Wages and administration 64,896 83,048 280,598 165,309
Professional fees 98,908 54,908 154,432 188,052
Shareholder relations 52,914 34,202 167,001 99,044
Shareholders' meetings and reports 5,701 6,831 86,071 115,603
General and office 15,585 30,025 91,188 73,202
Travel 12,922 34,342 66,799 68,388
Occupancy costs 17,451 17,343 52,153 51,895
Stock exchange fees -- (16,498) 18,505 62,177
Insurance 13,024 9,563 42,316 45,138
Government fees and taxes 95 -- 14,211 23,038
Loss (Gain) on foreign exchange 3,192 7,510 (183) 15,232
Transfer agent's fees 1,872 8,294 3,195 12,999
Corporate services 3,873 2,081 8,102 7,325
Bank charges 316 543 903 1,868
Loss on disposal of fixed assets -- (2,472) -- 1,945
Amortization 105,346 141,976 309,528 461,353
----------- ----------- ----------- -----------
421,444 513,222 1,462,264 1,627,785
Interest expense -- 5,629 1,966 32,165
Interest income (38,993) (99,834) (114,840) (318,492)
Premium on redemption of convertible
debentures -- 193,256 -- 193,256
----------- ----------- ----------- -----------
Net loss for the period $ 382,451 $ 612,273 $ 1,349,390 $ 1,534,714
=========== =========== =========== ============
Basic loss per share $ 0.03 $ 0.04 $ 0.09 $ 0.10
=========== =========== =========== ============
</TABLE>
3
<PAGE>
<TABLE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
----------- ------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $(1,349,390) $(1,534,714)
Adjustment to reconcile net loss for the period
to net cash used:
Amortization 309,528 461,353
Loss on disposal of fixed assets -- 1,945
----------- ------------
(1,039,862) (1,071,416)
Changes in assets and liabilities:
Other current assets 43,958 (102,902)
Accounts payable and accrued liabilities (151,331) (95,746)
----------- ------------
Net cash used in operating activities (1,147,235) (1,270,064)
----------- ------------
Cash flows from investing activities
Purchase of mineral properties and related
deferred exploration expenditures (485,138) (531,889)
Purchase of capital assets (241,141) (28,833)
Purchase of centrifugal jig patents and related
expenditures (1,847) (38,822)
----------- ------------
Net cash used in investing activities (728,126) (599,544)
----------- ------------
Cash flows from financing activities
Issuance of common shares for cash 1,750,000 113,664
Payment of notes payable (6,091) (206,700)
Convertible debenture issuance costs -- (22,702)
Capital stock issuance costs (87,500) --
Redemption of convertible debentures -- (2,357,682)
----------- ------------
Net cash provided by (used in) financing activities 1,656,409 (2,473,420)
----------- ------------
Net decrease in cash and short-term investments (218,952) (4,343,028)
Cash and short-term investments, beginning of period 3,100,577 8,161,770
----------- ------------
Cash and short-term investments, end of period $ 2,881,625 $ 3,818,742
=========== ===========
</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, 1998 filed with the
Commission on March 18, 1999.
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 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, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note 2. Capital Stock
During the three months ended September 30, 1999, options to purchase
50,000 common shares of the Company ("Common Shares") were issued to service
providers 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, 1999, options to purchase 2,315,000 Common Shares
were outstanding.
5
<PAGE>
Note 3. Development Stage Company
As of September 30, 1999, 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 $ 1,506,645
Salaries and wages 2,152,827
Shareholders' expenses 1,079,681
Office and general 2,268,366
Loss on sale of mining claims 101,047
Amortization 1,847,080
Interest on long-term debt 97,001
Write off of mineral properties and related
deferred exploration expenditures 1,292,354
Write off of organization costs 8,563
-----------------
10,353,564
Less:
Interest income (561,449)
Gain on sale of marketable securities (35,773)
Lease payments (143,754)
Gain on forgiveness of debt (728,531)
Option payments (70,906)
-----------------
Total accumulated loss 8,813,151
Convertible debenture costs 537,731
Share issue costs 148,057
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, 1999 $ 10,081,911
=================
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion summarizes the material changes in the
Company's financial condition between December 31, 1998 and September 30, 1999
and the material changes in the results of operations and financial condition of
the Company between the three- and nine-month periods ended September 30, 1999
and September 30, 1998. 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, 1998.
Results of Operations
The Company has earned no operating revenues to date. Basic net losses
totaled $1,349,390 ($.09 per share) for the nine months ended September 30, 1999
and $1,534,714 ($.10 per share) during the same period of 1998. 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, 1999 and 1998. Operating
expenses for the nine months ended September 30, 1999 decreased by $165,521 from
the nine-month period ended September 30, 1998. Included in this amount is a
decrease in amortization expense of $151,825 which resulted from a two-year
extension in the life of the centrifugal jig patents. Amortization expense has
been reduced to account for the longer lives of the patents. Testing, research
and development decreased by $67,772, principally due to a decrease in funds
expended on testing and development of the centrifugal jig. Although these
efforts are continuing at a reduced level, the Company is concentrating its
resources on the development of its Tennessee mineral properties and these costs
are largely recorded on the Consolidated Balance Sheets as "Mineral properties
and related deferred exploration expenditures." Stock exchange fees decreased by
$43,672 from the same period in 1998. In January 1998, the Company's common
shares were initially listed on the Nasdaq National Market System and certain
initial listing fees were incurred. Similar fees were not incurred during the
nine months ended September 30, 1999. In addition to this, professional fees
declined by $33,620, principally due to a decrease in legal fees associated with
external financing and regulatory compliance, and a decrease in consulting fees
related to external financing.
These decreases in expense were partially offset by increases in other
expense categories. Wages and administration expense increased by $115,289 over
the same period in 1998 due to the addition of five new employees in the Reno
office which occurred in February, April and July, 1998 and May 1999.
Shareholder relations expenses increased by $67,957 over the same period in
1998, as the Company has increased its efforts to develop and maintain investor
contacts.
Interest income for the nine-month period ended September 30, 1999
decreased by $203,652 from the same period in 1998 due to a decrease in the
amount of cash invested in temporary investments following the redemption of the
Company's convertible debentures in August 1998.
Three-Month Periods Ended September 30, 1999 and 1998. Operating
expenses for the three months ended September 30, 1999 decreased by $91,778 from
the comparable period of 1998. This decrease was primarily the result of a
decrease in testing, research and development expense of $76,177, which decrease
was principally due to a reduction of funds expended on testing and development
of the centrifugal jig. In addition, the Company experienced a decrease in
amortization of $36,630 caused by a two-year extension in the life of the
centrifugal jig patents.
These decreases in expense between the three-month period ended
September 30, 1999 and the three-month period ended September 30, 1998 were
partially offset by increases in other expense categories, principally
professional fees, which increased by $44,000 over the same period in 1998. This
increase was due to an increase in legal fees incurred to enforce certain
provisions of a services agreement the Company entered into with another
corporation.
7
<PAGE>
Interest income for the three-month period ended September 30, 1999
decreased by $60,841 from the same period in 1998 due to a decrease in the
amount of cash invested in temporary investments following the redemption of the
Company's convertible debentures in August 1998.
Liquidity and Capital Resources
The Company has earned no revenues to date and has incurred recurring
losses. At December 31, 1998 the Company's accumulated deficit was $8,645,021.
The deficit increased by $1,436,890 to $10,081,911 during the first nine months
of 1999, due to the net loss for the period of $1,349,390 and capital stock
issuance costs of $87,500.
On September 23, 1999, the Company entered into a Letter Agreement with
respect to a proposed acquisition by the Company of certain proprietary titanium
processing technology and related equipment from a major international mineral
processing group. The Company believes that the technology has economic
potential in its own right, but may also complement the Company's development of
its Tennessee mineral property. The Company is negotiating a definitive purchase
agreement and related documents with respect to its proposed purchase of such
titanium processing technology and related equipment. The Company can provide no
assurance that any such definitive purchase agreement will be executed;
nevertheless, the Company is optimistic that a definitive purchase agreement
regarding its purchase of such titanium processing technology may be completed
and signed in mid-November 1999.
The Company also continues to use its working capital to invest its
mineral properties located in or around Benton County, Tennessee and near Ione,
California and in the testing and development of the Altair Centrifugal Jig (the
"Jig"). The Company is proceeding with the development of the Tennessee mineral
property and intends to complete a final feasibility study (the "Feasibility
Study") by the end of 2000 at a cost of approximately $5.5 million. During the
first nine months of 1999, the Company invested $485,138 in the exploration of
its Tennessee and California mineral properties. The Company has built three
Series 30 Jigs to be used for bulk sample testing at the Company's Tennessee
mineral property or for potential commercial installation. During the first nine
months of 1999, the Company invested $97,423 in development of the Jig and
$188,458 in construction of additional Jigs.
The Company currently maintains working capital which management
believes will be sufficient to complete the first phase of the Feasibility Study
and fund the current level of operations through the second quarter of the 2000
fiscal year. However, additional capital resources in the estimated amount of $5
million will be required to complete the Feasibility Study. Moreover, if a
definitive purchase agreement regarding the Company's acquisition of certain
titanium processing technology is finalized and executed, additional capital
resources will likely be required in connection with such acquisition.
Management intends to access equity and/or debt financing sources to meet these
requirements but can provide no assurance that the Company will be able to raise
adequate amounts of capital on acceptable terms in order to fund its long-term
capital requirements.
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
cumulative aggregate net proceeds of $18,867,561 as of September 30, 1999. The
Company received cash proceeds of $1,662,500 from sales of common shares and
warrants during the first nine months of 1999. At September 30, 1999, the
Company had $2,881,625 in cash and short-term investments available to meet its
near-term development and operating needs.
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 sufficiency of the Company's working capital, plans to
raise additional capital, development of the Jig or any mineral properties, the
value of the titanium processing technology the Company proposes to purchase 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 unforeseen
need for and/or inability to raise capital for: (i) testing and development of
8
<PAGE>
the Tennessee mineral property and the Jig, (iii) funding the purchase of
mineral processing equipment or technologies, including the titanium processing
technology being considered by the Company, or (iii) investing in other ongoing
or new projects. In addition, the Company's proposed acquisition of titanium
processing technology and assets may not be finalized or, even if finalized, the
acquired technology and assets may be ineffective or otherwise valueless. Such
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, 1998.
9
<PAGE>
PART II - OTHER INFORMATION
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
1999.
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 12, 1999 By: /s/ William P. Long
----------------- --------------------
Date William P. Long, President
November 12, 1999 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
--- ------- ------------ --------
<S> <C> <C> <C>
3.1 Articles of Incorporation of the Registrant (1)
3.2 Amendment to Articles of Incorporation of the (2)
3.3 Bylaws of the Registrant (1)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Warrant related to Covertible Debentures (3)
4.3 Form of Series J Warrant (4)
27 Financial Data Schedule (5)
</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) Incorporated by reference to the 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) Incorporated by reference to the Quarterly Report on Form 10-Q filed with
the Commission on May 5, 1999.
(5) Filed herewith.
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 2881625
<SECURITIES> 0
<RECEIVABLES> 86684
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2968309
<PP&E> 900613
<DEPRECIATION> (261986)
<TOTAL-ASSETS> 8867740
<CURRENT-LIABILITIES> 82090
<BONDS> 0
0
0
<COMMON> 18212463
<OTHER-SE> (9426813)
<TOTAL-LIABILITY-AND-EQUITY> 8867740
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 421444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (382451)
<INCOME-TAX> 0
<INCOME-CONTINUING> (382451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (382451)
<EPS-BASIC> (.03)
<EPS-DILUTED> 0 <F1>
<FN>
<F1> Fully diluted EPS not computed on loss.
</FN>
</TABLE>
