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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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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
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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 June 30, 2000, the registrant had 17,114,185 Common
Shares outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
June 30, December 31,
2000 1999
(unaudited) (audited)
------------------ --------------------
ASSETS
<S> <C> <C>
Current
Cash and short-term investments $ 1,852,115 $ 153,580
Other current assets 548,267 980,453
----------------- --------------------
2,400,382 1,134,033
Capital
Property and equipment (Cost, net of amortization) 2,402,205 2,507,878
Patents and related expenditures
(Cost, net of amortization) 9,620,818 10,001,967
Mineral properties and related deferred exploration
expenditures 2,388,757 2,021,052
Goodwill, net
8,663 8,978
----------------- --------------------
Total Assets $ 16,820,825 $ 15,673,908
================= ====================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 136,490 $ 199,676
Current portion of notes payable 2,239,125 7,363,600
----------------- --------------------
Total Liabilities 2,375,615 7,563,276
----------------- --------------------
SHAREHOLDERS' EQUITY
Capital stock issued
17,114,185 common shares at June 30, 2000; 15,474,915
shares at December 31, 1999 25,755,711 18,324,963
Contributed surplus 655,098 655,098
Deficit (11,965,599) (10,869,429)
----------------- --------------------
Total Shareholders' Equity 14,445,210 8,110,632
----------------- --------------------
Total Liabilities and Shareholders' Equity $ 16,820,825 $ 15,673,908
================= ====================
</TABLE>
See notes to financial statements.
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,
2000 1999 2000 1999
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating Expenses
Wages and administration $ 88,379 $ 132,655 $ 185,182 $ 215,702
Testing, research and development 233,511 62,159 473,682 142,096
Professional fees 111,250 29,192 172,686 55,524
Shareholder relations 45,846 72,820 75,448 114,087
General and office 62,179 46,209 90,995 75,603
Trave l27,528 36,659 47,820 53,877
Occupancy costs 62,880 17,451 125,772 34,702
Shareholders' meetings and reports 91,194 59,417 95,477 80,370
Insurance 19,375 14,092 37,272 29,292
Government fees and taxes 4,490 (6,564) 4,490 14,116
Stock exchange fees (1,500) - 17,005 18,505
Corporate services 7,577 2,133 8,352 4,229
Transfer agent's fees 3,505 805 4,217 1,323
Bank charges 575 410 1,086 587
Gain on foreign exchange (236,936) (2,270) (795,699) (3,375)
Amortization 258,922 105,341 517,967 204,182
----------- ------------ ------------ ------------
778,775 570,509 1,061,752 1,040,820
Interest on long-term debt 37,125 1,966 78,884 1,966
Interest income (43,113) (43,605) (44,466) (75,847)
----------- ------------ ------------ ------------
Net loss for the period $ 772,787 $ 528,870 $ 1,096,170 $ 966,939
=========== ============ ============ ============
Basic net loss per share $ 0.05 $ 0.03 $ 0.07 $ 0.06
=========== ============ ============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
ALTAIR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
------------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $ (1,096,170) $ (966,939)
------------- -----------
Items not involving cash:
Amortization 517,967 204,182
Unrealized gain on foreign exchange (220,875) -
------------- -----------
(799,078) (762,757)
Changes in non-cash working capital balances:
Other current assets 432,186 15,047
Accounts payable and accrued liabilities (63,186) (86,772)
Current portion of notes payable (4,903,600) -
------------- -----------
Net cash used in operating activities (5,333,678) (834,482)
------------- -----------
Cash flows from investing activities
Purchase of mineral properties and related
deferred exploration expenditures (367,705) (315,923)
Purchase of capital assets (33,781) (223,469)
Purchase of patents and related expenditures 2,951 (1,849)
------------- -----------
Net cash used in investing activities (398,535) (541,241)
------------- -----------
Cash flows from financing activities
Issuance of common shares for cash, net of share
issue costs 7,094,970 1,662,500
Proceeds from exercise of stock options 335,778 -
Payment of notes payable - (6,091)
------------- -----------
Net cash provided by financing activities 7,430,748 1,656,409
------------- -----------
Net increase in cash and short-term investments 1,698,535 280,686
Cash and short-term investments, beginning of period 153,580 3,100,577
------------- -----------
Cash and short-term investments, end of period $ 1,852,115 $ 3,381,263
============= ===========
</TABLE>
See notes to financial statements.
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 on Form 10-K for the year ended December 31, 1999 filed with the
Commission on April 12, 2000.
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- and six-month periods ended
June 30, 2000 are not necessarily indicative of the results to be expected for
the full year.
Note 2. Notes Payable
On May 12, 2000, the Company paid $4,328,025 principal and $78,885
interest to BHP Minerals International, Inc. ("BHP") in connection with the
Company's acquisition of a pigment production technology and assets from BHP. As
of June 30, 2000, the Company has one remaining payment of $2,239,125 due August
15, 2000.
5
<PAGE>
ALTAIR INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3. Development Stage Company
As of June 30, 2000, 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 $ 1,777,235
Salaries and wages 2,430,681
Shareholders' expenses 1,479,768
Office and general 2,547,832
Loss on sale of mining claims 101,047
Amortization 2,549,623
Interest on long-term debt 175,885
Write off of mineral properties and related
deferred exploration expenditures 1,385,997
Write off of organization costs 8,563
-------------------
12,456,631
Less:
Interest income (625,886)
Gain on sale of marketable securities (35,773)
Lease payments (143,754)
Gain on forgiveness of debt (795,973)
Option payments (70,906)
-------------------
Total accumulated loss 10,784,339
Convertible debenture costs 537,731
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, June 30, 2000 $ 11,965,599
===================
6
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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, 1999 and June 30, 2000 and
the material changes in the results of operations and financial condition of the
Company between the three- and six-month periods ended June 30, 2000 and June
30, 1999. 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, 1999.
Results of Operations
The Company has earned no operating revenues to date. Basic net losses
totaled $1,096,170 ($.07 per share) for the six months ended June 30, 2000 and
$966,939 ($.06 per share) during the same period of 1999. Principal factors
contributing to the losses during these periods were the absence of revenue
together with the incurrence of operating expenses.
In November 1999, the Company acquired all patents and technology
related to a hydrometallurgical process developed by BHP Minerals International,
Inc. ("BHP") primarily for the production of titanium dioxide ("TiO2") products
from titanium bearing ores or concentrates (i.e., the "Technology"), all
tangible equipment and other assets (i.e., the "Assets") used by BHP to develop
and implement the Technology, and the use for one year of the services of the
BHP personnel presently developing the Technology. Since acquiring the
Technology and Assets, the Company has focused its efforts on the production and
marketing of TiO2 nanoparticles. The acquisition of the Technology and Assets,
together with the Company's production and marketing efforts, has had a
significant effect on the Company's results of operations during the six months
ended June 30, 2000 as described below.
In connection with the acquisition, the Company entered into a services
agreement with BHP wherein BHP agreed to provide, through December 31, 2000,
certain services necessary to continue development and testing of the Technology
and operation of the Assets. The costs associated with this service agreement
are approximately $71,000 per month and are recorded as testing, research and
development expense for the three and six months ended June 30, 2000. The
Company incurred no comparable expense during the three and six months ended
June 30, 1999.
The Company also entered into a lease agreement with BHP to lease the
space occupied by the Assets at a BHP facility in Reno, Nevada. The lease cost
is $15,000 per month and is reflected as occupancy costs in the Consolidated
Statements of Operations. The Company did not experience comparable lease costs
in the three and six months ended June 30, 1999.
Professional fees increased during the three- and six-month periods
ended June 30, 2000 over the comparable periods of 1999 due to legal costs
associated with patent reviews and trademark filings related to the Technology,
and consulting costs for marketing and production management related to TiO2
nanoparticle products.
The Company is amortizing the costs of the Technology and Assets
acquired from BHP at approximately $53,000 per month. This amount (approximately
$318,000 for the six months ended June 30, 2000 and $159,000 for the three
months ended June 30, 2000) represents the increase in amortization expense for
the three and six months ended June 30, 2000 over the same periods in 1999.
The purchase price for the Technology and Assets was 15,000,000
Australian dollars ("AUD$") and was payable in four equal installments. The
first installment was paid at closing in November 1999, the second and third
installments were paid on May 12, 2000 and the remaining payment was paid on
August 1, 2000. Since the purchase price was payable in Australian dollars, the
liability to BHP was subject to exchange rate fluctuations. From December 31,
1999 to March 31, 2000, the American dollar strengthened significantly against
the Australian dollar, resulting in a gain on foreign exchange of approximately
$559,000. From April 1, 2000 through June 30, 2000, the American dollar
strengthened further, resulting in a gain on foreign exchange of approximately
$237,000.
7
<PAGE>
Interest on long-term debt increased in the three- and six-month periods
ended June 30, 2000 over the comparable periods of 1999 due to interest paid in
connection with the rescheduling of the second installment due BHP from February
15, 2000 to May 15, 2000.
Shareholder relations expenses decreased in the three- and six-month
periods ended June 30, 2000 from the comparable periods of 1999 due principally
to a reduction in investor relations consulting costs. The Company has reduced
the overall level of investor relations activities and is concentrating its
efforts on fewer programs.
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
$26,410,809 as of June 30, 2000. During the first six months of 2000, the
Company received cash proceeds of $7,094,970 from sales of 1,567,970 Common
Shares and 546,172 warrants, and received $335,778 from the exercise of stock
options.
The Company has earned no revenues and has incurred recurring losses. At
December 31, 1999 the Company's accumulated deficit was $10,869,429. The deficit
increased by $1,096,170 to $11,965,599 during the first six months of 2000, due
to the net loss for the period of $1,096,170.
On March 31, 2000, the Company entered into a common stock purchase
agreement and an equity line of credit agreement with an investor. Under the
terms of the stock purchase portion of the agreement, the Company issued to the
investor 1,251,303 Common Shares for $6 million. After the initial issuance,
additional shares may be issued through a reset provision that compares market
price in the reset period to an adjusted original issue price. The investor also
received warrants for 250,261 shares of Common Stock exercisable at $6.75 per
share through March 31, 2003.
Under the terms of the equity line of credit, the Company has the option
to cause the investor to purchase up to $10 million of the Company's Common
Stock during an 18-month period. The stock is to be issued at a discount to
market price with the timing and amounts of purchases at the discretion of the
Company (subject to the price of the Common Stock remaining in excess of $2 per
share and the average daily weighted dollar trading volume of the Common Stock
being at least 150% of the amount of the additional financing).
The Company used the initial $6 million of proceeds to pay $4,406,910 to
BHP for the second and third installments due on the purchase of the Technology
and Assets, fund certain costs incurred for the feasibility study on the
Tennessee Mineral Property, and provide working capital.
During the period July 8, 2000 through July 31, 2000, the Company sold,
through private placements, 195,000 Common Shares and 97,500 warrants for gross
proceeds of $610,000. These proceeds, together with existing working capital,
were used to pay the final installment of AUD$3,750,000 (US$2,170,125) to BHP on
August 1, 2000.
As of August 11, 2000, the Company has entered into private placement
subscription agreements with investors which provide for the sale of 500,000
Common Shares and 250,000 warrants of the Company for $1 million. This amount,
together with additional anticipated private placements, is sufficient to
provide working capital and fund certain capital costs associated with the
Technology and Assets and Tennessee Mineral Property through December 31, 2000.
The Company is assessing alternatives for financing its longer-term capital
needs.
8
<PAGE>
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. Such statements
can be identified by the use of the forward-looking words "anticipate,"
"estimate," "project," "likely," "believe," "intend," "expect," or similar
words. These statements discuss future expectations, contain projections
regarding future developments, operations, or financial conditions, or state
other forward-looking information. Statements in this report regarding the
sufficiency of the Company's working capital, development of the Technology and
Assets, Jig or any mineral properties, and any future acquisition activities are
forward-looking statements. You should keep in mind that all forward-looking
statements are based on management's existing beliefs about present and future
events outside of management's control and on assumptions that may prove to be
incorrect.
Among the key factors that may have a direct bearing on the Company's
operating results are various risks and uncertainties including, but not limited
to, those attributable to the absence of operating revenues or profits,
uncertainties regarding the development and commercialization of the Jig,
development risks associated with the Tennessee Mineral Property, risks related
to the Company's purchase and proposed development and exploitation of the
Technology and Assets and uncertainties regarding the Company's ability to
obtain capital sufficient to pursue its proposed business strategy. 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, 1999.
9
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Pursuant to a common stock purchase agreement dated March 31, 2000, on
April 7, 2000, the Company issued to a single investor 1,251,303 Common Shares
for $6 million. After the initial issuance, additional shares may be issued
through a reset provision that compares market price in the reset period to an
adjusted original issue price. The investor also received warrants for 250,261
shares of Common Stock exercisable at $6.75 per share through March 31, 2003.
The above-described Common Shares and Warrants was effected in reliance
upon the exemption for sales of securities not involving a public offering, as
set forth in Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), based upon the following: (a) the investor represented and
warranted to the Company that it was an "accredited investor," as defined in
Rule 501 of Regulation D promulgated under the Securities Act and had such
background, education, and experience in financial and business matters as to be
able to evaluate the merits and risks of an investment in the securities; (b)
there was no public offering or general solicitation with respect to the
offering, and the investor represented and warranted that it was acquiring the
securities for its own account and not with an intent to distribute such
securities; (c) the investor was provided with any and all other information
requested by the investor with respect to the Company, (d) the investor
acknowledged that all securities being purchased were "restricted securities"
for purposes of the Securities Act, and agreed to transfer such securities only
in a transaction registered with the SEC under the Securities Act or exempt from
registration under the Securities Act; and (e) a legend was placed on the
certificates and other documents representing each such security stating that it
was restricted and could only be transferred if subsequently registered under
the Securities Act or transferred in a transaction exempt from registration
under the Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held an Annual Meeting of Shareholders on June 1, 2000 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:
<TABLE>
<CAPTION>
Name of Nominee Votes For Votes Withheld/Abstentions Broker Non-Votes
<S> <C> <C> <C>
William Long 13,818,565 65,263 -0-
James Golla 13,830,122 53,706 -0-
George Hartman 13,829,322 54,506 -0-
Robert Sheldon 13,829,122 54,706 -0-
</TABLE>
2. The shareholders of the Company considered whether to appoint
McGovern, Hurley, Cunningham, LLP as auditors of the Company and authorize the
Board of Directors to fix their remuneration. There were 13,796,404 votes cast
in favor, no votes cast against, 87,424 votes withheld, and no broker non-votes.
3. The shareholders of the Company considered whether to approve a
proposed amendment to the 1998 Altair International Inc. Stock Option Plan to
increase the number of Common Shares subject to the plan from 2,000,000 Common
Shares to 4,100,000 Common Shares. There were 1,692,061 votes cast in favor,
518,372 votes cast against, 2,559,311 shares not eligible to vote, and 9,114,084
broker non-votes.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index attached hereto.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on April
24, 2000, together with all material transaction documents, in which it
reported that it (i) entered into a common stock purchase agreement
with a private equity fund (the "investor") for the sale of 1,251,303
common shares of the Company (plus any additional shares issuable
pursuant to applicable repricing provisions) for an aggregate purchase
price of $6 million, (ii) issued warrants covering 250,261 common
shares of the Company to the Investor and a warrant covering 75,078
common shares of the Company to the placement agent for the
transaction, (iii) executed a registration rights agreement with the
Investor, and (iv) entered into an equity line of credit agreement with
the Investor whereby the Investor agrees to purchase up to $10 million
in additional common shares of the Company over the course of the 18
months following the effective date of a registration statement
registering the shares.
On July 17, 2000, the Company filed Amendment No. 1 on
Form 8-K/A amending its Current Report on Form 8-K filed on April 24,
2000. The Company reported that it entered into a modification
agreement with the Investor in which sections of the common stock
purchase agreement related to repricing and subsequent issuances of
Common Shares were amended.
11
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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 14, 2000 By:/s/ William P. Long
--------------- --------------------------
Date William P. Long, President
August 14, 2000 By:/s/ Edward H. Dickinson
--------------- --------------------------------------------
Date Edward H. Dickinson, Chief Financial Officer
12
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<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) -
Registrant dated November 6, 1996
3.3 Bylaws of the Registrant (1) -
4.1 Common Stock Purchase Agreement (3) -
4.2 Form of Common Stock Purchase Warrant (Investor) (3) -
4.2 Registration Rights Agreement (3) -
10.1 Letter Agreement Regarding Equity Line of Credit, dated (3) -
March 31, 2000
27 Financial Data Schedule (4)
</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 April 24, 2000.
(4) Filed herewith.
