Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-137099
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated October 3, 2006)
9,259,259
Shares
and
Warrants to Purchase 2,314,819 Shares
Common
Shares
We
are
offering up to 9,259,259 common shares and warrants to purchase up to 2,314,819
common shares in this offering (and the common shares issuable from time to
time
upon exercise of these warrants). Each purchaser of our common shares will
receive one warrant to purchase 0.25 common shares, exercisable for one
year at an exercise price of $2.70 per share, for each common share they
purchase in this offering. The common shares and warrants will be purchased
at
the negotiated price of $2.70 per unit. Units will not be issued or
certificated. The common shares and warrants are immediately separable and
will
be issued separately. Each common share includes an attached right arising
under
an Amended and Restated Shareholder Rights Plan Agreement dated October 15,
1999. Our common shares are listed on the NASDAQ Capital Market under the symbol
"ALTI." On December 12, 2006, the last reported sale price of our common shares
was $2.9864 per share.
Our
business and an investment in the securities offered by this prospectus
supplement and the accompanying prospectus involve significant risks. See
"Risk
Factors" beginning on page S-4 of this prospectus
supplement.
These
securities have not been approved or disapproved by the Securities and Exchange
Commission or any state securities commission nor has the Securities and
Exchange Commission or any state securities commission passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
We
are
offering these common shares and warrants only to institutional investors
pursuant to qualifications under, or exemptions from, the securities laws of
selected states. In connection with this offering, we have engaged Cowen and
Company, LLC as the placement agent.
|
|
Per Unit
|
Maximum
Offering Amount
|
||
|
Public
offering price
|
$ 2.70
|
$ 24,999,999.30
|
||
|
Placement
agent's fee1
|
$ .17
|
$ 1,549,999.96
|
||
|
Proceeds,
before expenses, to Altair
|
$ 2.53
|
$ 23,449,999.34
|
We
estimate the total expenses of this offering, excluding the placement agent's
fee, will be approximately $300,000. Because there is no minimum offering amount
required as a condition to closing this offering, the actual public offering
amount, placement agent's fee and net proceeds to us, if any, in this offering
are not presently determinable and may be less than the maximum offering amounts
set forth above. We are not required to sell any specific number or dollar
amount of the common shares and warrants to purchase common shares offered
in
this offering, but the placement agent will use its commercially reasonable
efforts to arrange for the sale of the common shares and warrants to purchase
common shares offered. Pursuant to an escrow agreement among us, the placement
agent and an escrow agent, a portion of the funds received in payment for the
common shares and warrants sold in this offering will be deposited into an
interest-bearing escrow account and held until we and the purchasers notify
the
escrow agent that the offering has closed, indicating the date on which the
shares and warrants are to be delivered to the purchasers and the proceeds
are
to be delivered to us.
___________________
1
See
"Plan of Distribution" beginning on page S-16 of this prospectus supplement.
Cowen
and Company
December
13, 2006
TABLE
OF CONTENTS
|
PROSPECTUS
SUPPLEMENT
|
Page
|
PROSPECTUS
|
Page
|
|
|
About
this Prospectus Supplement
|
S-1
|
Overview
|
3
|
|
|
Business
Overview
|
S-2
|
About
this Prospectus
|
3
|
|
|
The
Offering
|
S-3
|
Risk
Factors
|
5
|
|
|
Risk
Factors
|
S-4
|
Forward-Looking
Statements
|
12
|
|
|
Forward-Looking
Statements
|
S-12
|
Use
of Proceeds
|
12
|
|
|
Use
of Proceeds
|
S-13
|
The
Securities We May Offer
|
12
|
|
|
Dilution
|
S-14
|
Plan
of Distribution
|
17
|
|
|
Description
of Warrants
|
S-15
|
Incorporation
of Certain Information by Reference
|
19
|
|
|
Plan
of Distribution
|
S-16
|
Where
You Can Find More Information
|
20
|
|
|
Investor
Suitability Standards
|
S-17
|
Legal
Matters
|
20
|
|
|
Incorporation
of Certain Information by Reference
|
S-18
|
Experts
|
20
|
|
| Where You Can Find More Information |
S-19
|
Disclosure
of Commission Position on Indemnification
|
|
|
|
Legal
Matters
|
S-19
|
for
Securities Act Liabilities
|
21
|
|
|
Experts
|
S-19
|
|||
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
S-19
|
________________________
You
should rely only on the information contained in this prospectus supplement,
the
accompanying prospectus and the documents incorporated by reference herein
or
therein. We have not authorized any other person to provide you with different
or inconsistent information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in this prospectus
supplement and the accompanying prospectus is accurate only as of their
respective dates, regardless of the time of delivery of this prospectus
supplement and accompanying prospectus or of any sale of common shares and
warrants to purchase common shares. Our business, financial condition, results
of operations and prospects may have subsequently changed.
Unless
the context requires otherwise, in this prospectus supplement and the
accompanying prospectus, the terms "Altair," "we," "our" and "us" refer to
Altair Nanotechnologies Inc., and its subsidiaries as a combined entity, except
where it is made clear that the term only means the parent company or an
identified subsidiary.
THIS
OFFERING IS BEING QUALIFIED UNDER, OR BEING MADE PURSUANT TO EXEMPTIONS FROM
THE
QUALIFICATION REQUIREMENTS OF, THE SECURITIES LAWS OF SELECTED STATES. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER
TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES, IN CANADA OR IN ANY
STATE OTHER THAN NEW YORK, CALIFORNIA, NEVADA, MARYLAND, ILLINOIS, CONNECTICUT,
NEW JERSEY, FLORIDA, MASSACHUSETTS, MINNESOTA AND
TEXAS.
-i-
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying prospectus are part of a registration
statement on Form S-3 that we filed with the Securities and Exchange Commission,
or SEC, using a "shelf" registration process. Under this shelf registration
process, we may offer and sell from time to time any combination of securities
described in the accompanying prospectus in one or more offerings up to a
maximum dollar amount of $50,000,000. The accompanying prospectus provides
you
with a general description of the securities we may offer from time to time
under our shelf registration statement and provides general information about
us, some of which may not apply to this offering. Each time we use the
accompanying prospectus to offer securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in the prospectus. The shelf registration statement includes exhibits
that provide more detail on descriptions of the matters discussed in this
prospectus supplement and the accompanying prospectus. The shelf registration
statement was declared effective by the SEC on October 3, 2006. This prospectus
supplement describes the specific details regarding this offering, including
the
price, the number of common shares and warrants being offered, the plan of
distribution, the risks of investing in our common shares and warrants and
the
placement arrangements.
To
the extent that any statement that we make in this prospectus supplement is
inconsistent with statements in the accompanying prospectus, the statements
made
in this prospectus supplement will be deemed to modify or supersede those made
in the accompanying prospectus. You should carefully read this prospectus
supplement, the related exhibits filed with the SEC and the accompanying
prospectus together with additional information described under the headings
"Incorporation of Certain Information by Reference" and "Where You Can Find
More
Information."
S-1
We
are a
Canadian company, with principal assets and operations in the United States,
whose primary business is developing and commercializing nanomaterial and
titanium dioxide pigment technologies. We also provide contract research
services on select projects where we can utilize our resources to develop
intellectual property and/or new products and technology. Our research,
development, production, marketing and sales efforts are currently directed
toward six market applications that utilize our proprietary
technologies:
|
·
|
Advanced
Materials
|
|
o
|
The
marketing and licensing of titanium dioxide pigment production
technology.
|
|
o
|
The
marketing and production of nano-structured ceramic powders for thermal
spray applications.
|
|
o
|
The
development of nano-structured ceramic powders for nano-sensor
applications.
|
|
o
|
The
development of titanium dioxide electrode structures in connection
with
research programs aimed at developing a lower-cost process for producing
titanium metals and related alloys. Development of this product is
largely
inactive as we seek a business
partner.
|
|
·
|
Air
and Water Treatment
|
| o |
The
development, production and sale of photocatalytic materials for
air and
water cleansing.
|
|
o
|
The
marketing to potential retail partners of Nanocheck products for
phosphate
binding to prevent or reduce algae growth in recreational and industrial
water.
|
|
·
|
Alternative
Energy
|
|
o
|
The
development, production and sale of nano-structured lithium titanate
spinel, lithium cobaltate and lithium manganate spinel materials
for high
performance lithium ion batteries.
|
|
o
|
The
design and development of power lithium ion battery cells, batteries
and
battery packs as well as related design and test services.
|
|
o
|
The
development of materials for photovoltaics and transparent electrodes
for
research on hydrogen generation and fuel
cells.
|
|
·
|
Lanthanum
based Pharmaceutical Products
|
|
o
|
The
co-development of RenaZorb, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in patients undergoing kidney
dialysis.
|
|
o
|
The
co-development of Renalan, a test-stage active pharmaceutical ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in animals suffering from chronic renal
disease.
|
|
·
|
Chemical
Delivery Products
|
|
o
|
The
development of TiNano Spheres, which are rigid, hollow, porous, high
surface area ceramic micro structures that are derived from Altair's
proprietary process technology for the delivery of chemicals, drugs
and
biocides.
|
|
·
|
Biocompatible
Materials
|
| o |
The
development of nanomaterials for use in various products for dental
implants, dental fillings and dental products, as well as biocompatible
coatings on implants.
|
We
also
provide contract research services on select projects where we can utilize
our
resources to develop intellectual property and/or new products and technology.
In the near term, as we continue to develop and market our products and
technology, contract services will continue to be a substantial component of
our
operating revenues. During the years ended December 31, 2005, 2004 and 2003,
contract services revenues comprised 70%, 99% and 88%, respectively, of our
operating revenues,
and
during the first nine months of 2006, contract service revenues comprised 83%
of
our revenues.
Our
principal executive offices are located at 204 Edison Way, Reno, Nevada 89502,
and our phone number is (775) 856-2500. Our website is www.altairnano.com.
Information contained on our website is not a part of this or any other
prospectus supplement or the accompanying prospectus.
S-2
THE
OFFERING
|
Common
shares offered by us
|
9,259,259 shares
|
|
Warrants
to purchase common shares offered by us
|
2,314,819 shares
|
|
Common
shares to be outstanding after this offering
|
68,909,770 shares
|
|
Use
of proceeds
|
Proceeds
from the offering will be added to our general corporate funds and
be used
for working capital and general corporate purposes. See "Use of Proceeds"
on page S-13.
|
|
Warrant
terms
|
The
warrants will be exercisable beginning December 18, 2006 and
through December 18, 2007 and will be exercisable at a price of $2.70
per common share. See "Description of Warrants" on page
S-15.
|
|
NASDAQ
Capital Market symbol
|
ALTI
|
The
number of common shares to be outstanding after the closing of this offering
is
based on 59,650,511 shares outstanding as of December 12, 2006 and excludes:
|
·
|
3,358,222
common shares issuable upon exercise of options outstanding under
our
equity incentive plans as of December 12, 2006, at a weighted-average
exercise price of $3.04 per share;
|
|
·
|
960,224
common shares issuable upon exercise of warrants outstanding as of
December 12, 2006, at a weighted-average exercise price of $2.80
per
share;
|
|
·
|
1,641,029
common shares reserved for future grants under our equity incentive
plans
as of December 12, 2006; and
|
|
·
|
231,482 common
shares issuable upon exercise of the placement agent's warrant and
2,314,819 common shares issuable upon the exercise of the warrants
offered
in this offering.
|
Unless
otherwise indicated, all information in this prospectus supplement assumes:
|
·
|
no
exercise or forfeiture of options or warrants since December 12,
2006; and
|
|
·
|
no
issuance of additional options to purchase common shares under our
existing equity incentive plans since December 12, 2006.
|
S-3
An
investment in our common shares and warrants involves significant risks. You
should carefully consider the risks described in this prospectus supplement
and
the accompanying prospectus, in addition to the other information contained
or
incorporated by reference in this prospectus supplement and the accompanying
prospectus before making an investment decision. Any of these risks could
materially and adversely affect our business, financial condition or results
of
operations. In such case, you may lose all or part of your investment. Some
factors in this section are forward-looking statements.
We
have
experienced a net loss in every fiscal year since our inception. Our losses
from
operations were $10,481,853 in 2005 and $12,403,769 in the nine months ended
September 30, 2006. Even if we do generate net income in one or more quarters
in
the future, subsequent developments in our industry, customer base, business
or
cost structure, or an event such as significant litigation or a significant
transaction, may cause us to again experience net losses. We may never become
profitable for the long-term, or even for any quarter.
Our
quarterly operating results have fluctuated significantly in the past and will
continue to fluctuate in the future, which could cause our stock price to
decline.
Our
quarterly operating results have fluctuated significantly in the past, and
we
believe that they will continue to fluctuate in the future, due to a number
of
factors, many of which are beyond our control. If in future periods our
operating results do not meet the expectations of investors or analysts who
choose to follow our company, our stock price may fall. Factors that may affect
our quarterly operating results include the following:
|
·
|
fluctuations
in the size and timing of customer orders from one quarter to the
next;
|
|
·
|
timing
of delivery of our services and products;
|
|
·
|
addition
of new customers or loss of existing customers;
|
|
·
|
our
ability to commercialize and obtain orders for products we are
developing;
|
|
·
|
costs
associated with developing our manufacturing capabilities;
|
|
·
|
new
product announcements or introductions by our competitors or potential
competitors;
|
|
·
|
the
effect of variations in the market price of our common shares on
our
equity-based compensation expenses;
|
|
·
|
acquisitions
of businesses or customers;
|
|
·
|
technology
and intellectual property issues associated with our products; and
|
|
·
|
general
economic trends, including changes in energy prices, or geopolitical
events such as war or incidents of terrorism.
|
Our
revenues have historically been generated from low-margin contract research
services; if we cannot expand revenues from other products and services, our
business will fail.
Historically,
a significant portion of our revenues has come from contract research services
for businesses and government agencies. During the years ended December 31,
2005, 2004 and 2003, contract services revenues comprised 70%, 99% and 88%,
respectively, of our operating revenues, and during the first nine months of
2006, contract service revenues comprised 83% of our revenues. Contract services
revenue is low margin and unlikely to grow at a rapid pace. Our business plan
anticipates revenues from product sales and licensing, both of which are higher
margin than contract services and have potential for rapid growth, increasing
in
coming years. If we are not successful in significantly expanding our revenues
from higher margin products and services, our revenue growth will be slow,
and
it is unlikely that we will achieve profitability.
S-4
Our
patents and other protective measures may not adequately protect our proprietary
intellectual property, and we may be infringing on the rights of others.
We
regard
our intellectual property, particularly our proprietary rights in our
nanomaterials and titanium dioxide pigment technology, as critical to our
success. We have received various patents, and filed other patent applications,
for various applications and aspects of our nanomaterials and titanium dioxide
pigment technology and other intellectual property. In addition, we generally
enter into confidentiality and invention agreements with our employees and
consultants. Such patents and agreements and various other measures we take
to
protect our intellectual property from use by others may not be effective for
various reasons, including the following:
|
·
|
Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
|
|
·
|
The
patents we have been granted may be challenged, invalidated or
circumvented because of the pre-existence of similar patented or
unpatented intellectual property rights or for other
reasons;
|
|
·
|
Parties
to the confidentiality and invention agreements may have such agreements
declared unenforceable or, even if the agreements are enforceable,
may
breach such agreements;
|
|
·
|
The
costs associated with enforcing patents, confidentiality and invention
agreements or other intellectual property rights may make aggressive
enforcement cost prohibitive;
|
|
·
|
Even
if we enforce our rights aggressively, injunctions, fines and other
penalties may be insufficient to deter violations of our intellectual
property rights; and
|
|
·
|
Other
persons may independently develop proprietary information and techniques
that, although functionally equivalent or superior to our intellectual
proprietary information and techniques, do not breach our patented
or
unpatented proprietary rights.
|
Because
the value of our company and common shares is rooted primarily in our
proprietary intellectual property rights, our inability to protect our
proprietary intellectual property rights or gain a competitive advantage from
such rights could harm our ability to generate revenues and, as a result, our
business and operations.
In
addition, we may inadvertently be infringing on the proprietary rights of other
persons and may be required to obtain licenses to certain intellectual property
or other proprietary rights from third parties. Such licenses or proprietary
rights may not be made available under acceptable terms, if at all. If we do
not
obtain required licenses or proprietary rights, we could encounter delays in
product development or find that the development or sale of products requiring
such licenses is foreclosed.
Because
our products are generally components of end products, the viability of many
or
our products is tied to the success of third parties' existing and potential
end
products.
Few
of
the existing or potential products being developed with our nanomaterials and
titanium dioxide pigment technology are designed for direct use by the ultimate
end user. Phrased differently, most of our products are components of other
products. For example, our lithium titanate spinel battery materials and
batteries are designed for use in end-user products such as electric vehicles,
hybrid electric vehicles and other potential products. Other potential products
and processes we and our partners are developing using our technology, such
as
titanium dioxide pigments, life science materials, air and water treatment
products, and coatings, are similarly expected to be components of third-party
products. As a result, the market for our products is dependent upon third
parties creating or expanding markets for their end-user products that utilize
our products. If such end-user products are not developed, or the market for
such end-user products contracts or fails to develop, the market for our
component products would be expected to similarly contract or collapse. This
would limit our ability to generate revenues and would harm our business and
operations.
S-5
The
commercialization of many of our technologies is dependent upon the efforts
of
commercial partners and other third parties over which we have no or little
control.
We
do not
have the expertise or resources to commercialize all potential applications
of
our nanomaterials and titanium dioxide pigment technology. For example, we
do
not have the resources necessary to complete the testing of, and obtain FDA
approval for, Renazorb and other potential life sciences products or to
construct a commercial facility to use our titanium dioxide pigment production
technology. Other potential applications of our technology, such as those
related to our lithium titanate spinel battery materials, coating materials
and
dental materials, are likely to be developed in collaboration with third
parties, if at all. With respect to these and substantially all other
applications of our technology, the commercialization of a potential application
of our technology is dependent, in part, upon the expertise, resources and
efforts of our commercial partners. This presents certain risks, including
the
following:
|
·
|
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources, technology
and expertise on reasonable terms or at
all;
|
|
·
|
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other characteristic necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons, including reasons,
such as
a shift in corporate focus, unrelated to its
merits;
|
|
·
|
our
commercial partners may terminate joint testing, development or marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
|
·
|
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
|
·
|
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed our
associated development and operating
costs.
|
As
a
result of the actions or omissions of our commercial partners, or our inability
to identify and enter into suitable arrangements with qualified commercial
partners, we may be unable to commercialize apparently viable products on a
timely and cost-effective basis, or at all. Our business is not dependent upon
a
single application of our technology; however, we will not become profitable
and
be able to sustain operations in the long run if we fail to commercialize
several of our potential products.
If
we acquire or invest in other companies, assets or technologies and we are
not
able to integrate them with our business, or we do not realize the anticipated
financial and strategic goals for any of these transactions, our financial
performance may be impaired.
As
part
of our growth strategy, we routinely consider acquiring or making investments
in
companies, assets or technologies that we believe are strategic to our business.
We do not have extensive experience in integrating new businesses or
technologies, and if we do succeed in acquiring or investing in a company or
technology, we will be exposed to a number of risks, including:
|
·
|
we
may find that the acquired company or technology does not further
our
business strategy, that we overpaid for the company or technology
or that
the economic conditions underlying our acquisition decision have
changed;
|
|
·
|
we
may have difficulty integrating the assets, technologies, operations
or
personnel of an acquired company, or retaining the key personnel
of the
acquired company;
|
S-6
|
·
|
our
ongoing business and management's attention may be disrupted or diverted
by transition or integration issues and the complexity of managing
geographically or culturally diverse enterprises;
|
|
·
|
we
may encounter difficulty entering and competing in new product or
geographic markets or increased competition, including price competition
or intellectual property litigation; and
|
|
·
|
we
may experience significant problems or liabilities associated with
product
quality, technology and legal contingencies relating to the acquired
business or technology, such as intellectual property or employment
matters.
|
In
addition, from time to time we may enter into negotiations for acquisitions
or
investments that are not ultimately consummated. These negotiations could result
in significant diversion of management time, as well as substantial
out-of-pocket costs. If we were to proceed with one or more significant
acquisitions or investments in which the consideration included cash, we could
be required to use a substantial portion of our available cash. To the extent
we
issue shares of capital stock or other rights to purchase capital stock,
including options and warrants, existing stockholders might be diluted. In
addition, acquisitions and investments may result in the incurrence of debt,
large one-time write-offs, such as acquired in-process research and development
costs, and restructuring charges.
We
intend to expand our operations and increase our expenditures in an effort
to
grow our business. If we are unable to achieve or manage significant growth
and
expansion, or if our business does not grow as we expect, our operating results
may suffer.
During
the past year, we have significantly increased our research and development
expenditures in an attempt to accelerate the commercialization of certain
products, particularly our lithium titanate spinel battery materials and battery
systems. Our business plan anticipates continued additional expenditure on
development, manufacturing and other growth initiatives. We may not achieve
significant growth. If achieved, significant growth would place increased
demands on our management, accounting systems, network infrastructure and
systems of financial and internal controls. We may be unable to expand
associated resources and refine associated systems fast enough to keep pace
with
expansion, especially as we expand into multiple facilities at distant
locations. If we fail to ensure that our management, control and other systems
keep pace with growth, we may experience a decline in the effectiveness and
focus of our management team, problems with timely or accurate reporting, issues
with costs and quality controls and other problems associated with a failure
to
manage rapid growth, all of which would harm our results of operations.
Our
competitors have more resources than we do, which may give them a competitive
advantage.
We
have
limited financial, personnel and other resources and, because of our early
stage
of development, have limited access to capital. We compete or may compete
against entities that are much larger than we are, have more extensive resources
than we do and have an established reputation and operating history. Because
of
their size, resources, reputation, history and other factors, certain of our
competitors may be able to exploit acquisition, development and joint venture
opportunities more rapidly, easily or thoroughly than we can. In addition,
potential customers may choose to do business with our more established
competitors, without regard to the comparative quality of our products, because
of their perception that our competitors are more stable, are more likely to
complete various projects, are more likely to continue as a going concern and
lend greater credibility to any joint venture.
The
applications, amounts, and timing of the expenditure of the net proceeds from
this offering may vary significantly.
The
amounts and timing of the expenditure of the net proceeds from this offering
may
vary significantly, based on the expenses of our operations and depending on
numerous factors, including the success of our commercialization activities
with
third parties, the scope and amount of our research and development activities
and whether we engage in future acquisition transactions, among other things.
Accordingly, our management will have broad discretion in the application of
the
net proceeds and investors will be relying on the judgment of our management
regarding the application of the proceeds of this offering. We reserve the
right
to change the use of these proceeds as a result of certain contingencies such
as
the results of our research and development and third-party commercialization
activities, competitive developments, opportunities to acquire technologies
or
businesses and other factors.
S-7
We
will not generate substantial revenues from our life science products unless
proposed products receive FDA approval and achieve substantial market
penetration.
We
have
entered into development and license agreements with respect to RenaZorb, a
potential drug candidate for humans with kidney disease, and other life science
products, and expect to enter into additional licensing and/or supply agreements
in the future. Most of the potential life sciences applications of our
technologies are subject to regulation by the FDA and similar regulatory bodies.
In general, license agreements in the life sciences area call for milestone
payments as certain milestones related to the development of the products and
the obtaining of regulatory approval are met; however, the receipt by the
licensor of substantial recurring revenues is generally tied to the receipt
of
marketing approval from the FDA and the amount of revenue generated from the
sale of end products. There are substantial risks associated with licensing
arrangements, including the following:
|
·
|
Further
testing of potential life science products using our technology may
indicate that such products are less effective than existing products,
unsafe, have significant side effects or are otherwise not
viable;
|
|
·
|
The
licensee may be unable to obtain FDA or other regulatory approval
for
technical, political or other reasons or, even if it obtains such
approval, may not obtain such approval on a timely basis; and
|
|
·
|
End
products for which FDA approval is obtained, if any, may fail to
obtain
significant market share for various reasons, including questions
about
efficacy, need, safety and side effects or because of poor marketing
by
the licensee.
|
If
any of
the foregoing risks, or other risks associated with our life science products
were to occur, we would not receive substantial, recurring revenue from our
life
science division, which would adversely affect our overall business, operations
and financial condition.
As
manufacturing becomes a larger part of our operations, we will become exposed
to
accompanying risks and liabilities.
We
have
not produced any pigments, nanoparticles or other products using our
nanomaterials and titanium dioxide pigment technology and equipment on a
sustained commercial basis. In-house or outsourced manufacturing is becoming
an
increasingly significant part of our business. If and as manufacturing becomes
a
larger part of our business, we will become increasingly subject to various
risks associated with the manufacturing and supply of products, including the
following:
|
·
|
If
we fail to supply products in accordance with contractual terms,
including
terms related to time of delivery and performance specifications,
we may
become liable for direct, special, consequential and other damages,
even
if manufacturing or delivery was
outsourced;
|
|
·
|
Raw
materials used in the manufacturing process, labor and other key
inputs
may become scarce and expensive, causing our costs to exceed cost
projections and associated
revenues;
|
|
·
|
Manufacturing
processes typically involve large machinery, fuels and chemicals,
any or
all of which may lead to accidents involving bodily harm, destruction
of
facilities and environmental contamination and associated liabilities;
and
|
|
·
|
We
may have, and may be required to, make representations as to our
right to
supply and/or license intellectual property and to our compliance
with
laws. Such representations are usually supported by indemnification
provisions requiring us to defend our customers and otherwise make
them
whole if we license or supply products that infringe on third-party
technologies or violate government
regulations.
|
Any
failure to adequately manage risks associated with the manufacture and supply
of
materials and products could lead to losses (or small gross profits) from that
segment of our business and/or significant liabilities, which would adversely
affect our business, operations and financial condition.
S-8
We
have issued a $3,000,000 note to secure the purchase of the land and the
building where our nanomaterials and titanium dioxide pigment assets are
located.
In
August
2002, we entered into a purchase and sale agreement with BHP Minerals
International Inc. to purchase the land, building and fixtures in Reno, Nevada
where our nanomaterials and titanium dioxide pigment assets are located. In
connection with this transaction, we issued to BHP a note in the amount of
$3,000,000, at an interest rate of 7%, secured by the property we acquired.
The
first payment of $600,000 of principal plus accrued interest was due and paid
February 8, 2006. Additional payments of $600,000 plus accrued interest are
due
annually on February 8, 2007 through 2010. If we fail to make the required
payments on the note, BHP has the right to foreclose and take the property.
If
this should occur, we would be required to relocate our primary operating assets
and offices, causing a significant disruption in our business.
We
may not be able to raise sufficient capital to meet future obligations.
As
of
September 30, 2006, we had approximately $9.8 million in cash, cash equivalents
and short-term investments. Together with projected revenues, this is an amount
sufficient to fund our ongoing operations for approximately a year at current
levels. As we take additional steps to enhance our commercialization and
marketing efforts, or respond to acquisition opportunities or potential adverse
events, our use of working capital may increase significantly. In any such
event, absent a comparatively significant increase in revenue, we will need
to
raise additional capital in order to sustain our ongoing operations, continue
unfinished testing and additional development work and, if certain of our
products are commercialized, construct and operate facilities for the production
of those products.
We
may
not be able to obtain the amount of additional capital needed or may be forced
to pay an extremely high price for capital. Factors affecting the availability
and price of capital may include the following:
|
·
|
market
factors affecting the availability and cost of capital
generally;
|
|
·
|
the
price, volatility and trading volume of our common
shares;
|
|
·
|
our
financial results, particularly the amount of revenue we are generating
from operations;
|
|
·
|
the
amount of our capital needs;
|
|
·
|
the
market's perception of companies in one or more of our lines of
business;
|
|
·
|
the
economics of projects being pursued;
and
|
|
·
|
the
market's perception of our ability to execute our business plan and
any
specific projects identified as uses of
proceeds;
|
If
we are
unable to obtain sufficient capital or are forced to pay a high price for
capital, we may be unable to meet future obligations or adequately exploit
existing or future opportunities.
Our
past and future operations may lead to substantial environmental
liability.
Virtually
any prior or future use of our nanomaterials and titanium dioxide pigment
technology is subject to federal, state and local environmental laws. In
addition, we are in the process of reclaiming mineral property that we leased
in
Tennessee. Under applicable environmental laws, we may be jointly and severally
liable with prior property owners for the treatment, cleanup, remediation and/or
removal of any hazardous substances discovered at any property we use. In
addition, courts or government agencies may impose liability for, among other
things, the improper release, discharge, storage, use, disposal or
transportation of hazardous substances. If we incur any significant
environmental liabilities, our ability to execute our business plan and our
financial condition would be harmed.
S-9
Certain
of our experts and directors reside in Canada and may be able to avoid civil
liability.
We
are a
Canadian corporation, and three of our directors and our Canadian legal counsel
are residents of Canada. As a result, investors may be unable to effect service
of process upon such persons within the United States and may be unable to
enforce court judgments against such persons predicated upon civil liability
provisions of the U.S. securities laws. It is uncertain whether Canadian courts
would enforce judgments of U.S. courts obtained against us or such directors,
officers or experts predicated upon the civil liability provisions of U.S.
securities laws or impose liability in original actions against us or our
directors, officers or experts predicated upon U.S. securities
laws.
We
are dependent on key personnel.
Our
continued success will depend to a significant extent on the services of Dr.
Alan J. Gotcher, our Chief Executive Officer and President, Edward Dickinson,
our Chief Financial Officer, Dr. Bruce Sabacky, our Chief Technology Officer
and
Douglas Ellsworth and Roy Graham, our Senior Vice Presidents. We have key man
insurance on the lives of Dr. Gotcher and Dr. Sabacky. We do not have agreements
requiring any of our key personnel to remain with our company. The loss or
unavailability of any or all of these individuals would harm our ability to
execute our business plan, maintain important business relationships and
complete certain product development initiatives, which would harm our
business.
We
may issue substantial amounts of additional shares without stockholder
approval.
Our
articles of incorporation authorize the issuance of an unlimited number of
common shares that may be issued without any action or approval by our
stockholders. In addition, we have various stock option plans that have
potential for diluting the ownership interests of our stockholders. The issuance
of any additional common shares would further dilute the percentage ownership
of
our company held by existing stockholders.
The
market price of our common shares is highly volatile and may increase or
decrease dramatically at any time.
The
market price of our common shares may be highly volatile. Our stock price may
change dramatically as the result of announcements of product developments,
new
products or innovations by us or our competitors, uncertainty regarding the
viability of the nanomaterials and titanium dioxide pigment technology or any
of
our product initiatives, significant customer contracts, significant litigation
or other factors or events that would be expected to affect our business,
financial condition, results of operations and future prospects. In addition,
the market price for our common shares may be affected by various factors not
directly related to our business or future prospects, including the following:
|
·
|
Intentional
manipulation of our stock price by existing or future shareholders
or a
reaction by investors to trends in our stock rather than the fundamentals
of our business;
|
|
·
|
A
single acquisition or disposition, or several related acquisitions
or
dispositions, of a large number of our shares, including by short
sellers
covering their position;
|
|
·
|
The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
|
|
·
|
Positive
or negative statements or projections about our company or our industry,
by analysts, stock gurus and other
persons;
|
|
·
|
The
adoption of governmental regulations or government grant programs
and
similar developments in the United States or abroad that may enhance
or
detract from our ability to offer our products and services or affect
our
cost structure; and
|
|
·
|
Economic
and other external market factors, such as a general decline in market
prices due to poor economic indicators or investor
distrust.
|
S-10
We
have never declared a cash dividend and do not intend to declare a cash dividend
in the foreseeable future.
We
have
never declared or paid cash dividends on our common shares. We currently intend
to retain any future earnings, if any, for use in our business and, therefore,
do not anticipate paying dividends on our common shares in the foreseeable
future.
We
are subject to various regulatory regimes, and may be adversely affected by
inquiries, investigations and allegations that we have not complied with
governing rules and laws.
In
light
of our status as a public company and our lines of business, we are subject
to a
variety of laws and regulatory regimes in addition to those applicable to all
businesses generally. For example, we are subject to the reporting
requirements applicable to Canadian and United States reporting issuers, such
as
the Sarbanes-Oxley Act of 2002, the rules of the NASDAQ Capital Market and
certain state and provincial securities laws. We are also subject to state
and
federal environmental, health and safety laws, and rules governing department
of
defense contracts. Such laws and rules change frequently and are often
complex. In connection with such laws, we are subject to periodic audits,
inquiries and investigations. Any such audits, inquiries and
investigations may divert considerable financial and human resources and
adversely affect the execution of our business plan.
For
example, on March 30, 2005, we received a letter of inquiry from the SEC
requesting information relating to a press release we issued on February 10,
2005, in which we announced developments in a rechargeable battery technology
that incorporates our lithium titanate battery materials. After providing the
requested information, we received a follow up letter of inquiry dated August
2,
2005 requesting additional information related to our battery programs, emails
of certain affiliates, certain transactions and recent earnings calls. We
provided the information to the SEC in a series of letters sent during September
and October 2005. We have not been contacted by the SEC since providing all
requested information in October 2005 or been notified of any ongoing activity
or pending proceeding. The absence of any additional letters of inquiry related
to the matter for an approximately one-year period suggests to us that the
inquiry may be completed; however, we have received no notice from the SEC
with
respect to the status of the inquiry and are uncertain as to its status. Based
upon advice of counsel that the SEC frequently does not apprise a company
whether an inquiry has been terminated or is ongoing, we expect to remain
uncertain in the foreseeable future. Our response to the SEC inquiry diverted
considerable financial and human resources, which harmed our ability to execute
our business plan for a time, and leaves a level of uncertainty going forward,
which may harm our ability to enter into business relationships, recruit
qualified officers and employees and raise capital.
Through
such audits, inquiries and investigations, we or a regulator may determine
that
we are out of compliance with one or more governing rules or laws.
Remedying such non-compliance diverts additional financial and human
resources. In addition, in the future, we may be subject to a formal
charge or determination that we have materially violated a governing law, rule
or regulation. Any charge, and particularly any determination, that we had
materially violated a governing law would harm our ability to enter into
business relationships, recruit qualified officers and employees and raise
capital.
S-11
FORWARD-LOOKING
STATEMENTS
This
prospectus supplement and the accompanying prospectus contain and incorporate
by
reference certain 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, regarding our anticipated financial condition,
results of operations and businesses in the future, including management's
beliefs, projections and assumptions concerning future results and events.
These
forward-looking statements generally are in the future tense and may, but do
not
necessarily, include words such as "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "may," "will," "should," "could," "predicts,"
"potential," "continue" or similar expressions. Forward-looking statements
are
not guarantees. They involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Our future results
may
differ materially from those expressed in these forward-looking statements.
Some
of the factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, but are not limited
to,
those identified under "Risk Factors" above and in the annual and quarterly
reports we file with the SEC.
Given
these risks and uncertainties, you are cautioned not to place undue reliance
on
any forward-looking statements, which speak only as of the date of the document
in which they are contained. We do not undertake any obligation to update any
forward-looking statement or to publicly announce any revision of any
forward-looking statement to reflect the occurrence of any future developments
or events, unless required by law.
S-12
USE
OF PROCEEDS
The
net
proceeds we will receive from this offering will be approximately $23.15 million
after deducting the placement agent's fee and the estimated offering expenses.
We will not receive any proceeds from the sale of common shares issuable upon
exercise of the warrants we are offering unless and until such warrants are
exercised. If the warrants were fully exercised for cash, we would receive
additional proceeds of up to approximately $6.25 million. The net proceeds
from
this offering will be added to our general corporate funds to be used for
working capital and general corporate purposes. Pending these uses, the net
proceeds will be invested in short-term marketable securities in accordance
with
our investment policy.
The
amounts and timing of the expenditure of the net proceeds from this offering
may
vary significantly, based on the expenses of our operations and depending on
numerous factors, including the success of our commercialization activities
with
third parties, the scope and amount of our research and development activities,
among other things. Accordingly, our management will have broad discretion
in
the application of the net proceeds and investors will be relying on the
judgment of our management regarding the application of the proceeds of this
offering. We reserve the right to change the use of these proceeds as a result
of certain contingencies such as the results of our research and development
and
third-party commercialization activities, competitive developments,
opportunities to acquire technologies or businesses and other
factors.
S-13
DILUTION
If
you
invest in our common shares and warrants in this offering, your ownership
interest will be immediately diluted to the extent of the difference between
the
public offering price per unit and the net tangible book value per share of
our
common shares as adjusted to give effect to our sale of the units offered
hereby. Our historical net tangible book value as of September 30, 2006 was
$17,622,512 million, or $0.29 per common share. Historical net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, divided by the number of outstanding common shares.
Dilution
in net tangible book value per share represents the difference between the
amount per unit paid by purchasers of our common shares and warrants to purchase
common shares in this offering and the as adjusted net tangible book value
per
common share immediately after completion of this offering. After giving effect
to our sale of 9,259,259 common shares and warrants to purchase 2,314,819
common shares in this offering at the public offering price of $2.70 per unit,
and after deducting the placement agent's fee and estimated offering expenses
payable by us, our as adjusted net tangible book value at September 30, 2006
would have been $40,772,511, or $0.59 per common share . This amount represents
an immediate increase in net tangible book value of $0.30 per share to our
existing stockholders and an immediate dilution in net tangible book value
of
$2.11 per share to purchasers of shares and warrants in this offering.
Our
net
tangible book value calculation assumes no exercise of the warrants offered
hereby.
The
following table illustrates this dilution on a per share basis:
|
Public
offering price per unit
|
$
|
2.70
|
|||||
|
Net
tangible book value per share as of September 30, 2006
|
$
|
0.29
|
|||||
|
Increase
in net tangible book value per share attributable to this
offering
|
$
|
0.30
|
|||||
|
As
adjusted net tangible book value per share after this
offering
|
$
|
0.59
|
|||||
|
Dilution
per share to new investors
|
$
|
2.11
|
The
above
discussion and table are based on 59,647,386 common shares issued and
outstanding as of September 30, 2006 and exclude:
|
·
|
3,473,894
common shares issuable upon exercise of options outstanding under
our
equity incentive plans as of September 30, 2006, at a weighted-average
exercise price of $3.06 per share;
|
|
·
|
960,224
common shares issuable upon exercise of warrants outstanding as of
September 30, 2006, at a weighted-average exercise price of $2.80
per
share;
|
|
·
|
1,558,482
common shares reserved as of September 30, 2006 for future grants
under
our equity incentive plans.
|
To
the
extent that outstanding options or warrants are exercised, you will experience
further dilution. In addition, we may choose to raise additional capital due
to
market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution
to
our shareholders.
S-14
DESCRIPTION
OF WARRANTS
Each
warrant represents the right to purchase up to 0.25 common shares at an exercise
price equal to $2.70 per share, subject to adjustment as described below. Each
warrant may be exercised on or after December 18, 2006 through and including
December 18, 2007. The warrants also include a "net exercise" provision, if
there is no registration statement permitting the resale of the shares issuable
upon exercise of the warrants.
The
exercise price and the number of shares underlying the warrants are subject
to
appropriate adjustment in the event of stock splits, stock dividends on our
common shares, stock combinations or similar events affecting our common shares.
In addition, if we consummate any merger, consolidation, sale or other
reorganization event in which our common shares are converted into or exchanged
for securities, cash or other property, then following such event, the holders
of the warrants will be entitled to receive upon exercise of the warrants the
kind and amount of securities, cash or other property which the holders would
have received had they exercised the warrants immediately prior to such
reorganization event.
The
number of common shares that a warrant holder may acquire upon exercise of
warrants is limited, to the extent necessary, such that the total number of
our
common shares held by such holder and its affiliates, following such exercise,
does not exceed 4.999% of our total issued and outstanding common shares. Our
obligation to issue common shares issuable upon exercise of warrants that exceed
the foregoing percentage shall be suspended until such time that our common
shares may be issued in accordance with the warrants, but in no event later
than
the expiration date of the warrants. Individual holders of warrants may waive
the application of this warrant provision, or modify the applicable percentage
set forth above, subject to certain timing limitations.
No
fractional common shares will be issued in connection with the exercise of
a
warrant. In lieu of fractional shares, we will pay the holder an amount in
cash
equal to the fractional amount multiplied by the exercise price of the
warrant.
A
warrant
may be transferred by a holder without our consent by the holder executing
an
assignment in the form attached to the warrant and upon payment of any necessary
tax or other governmental charge imposed upon such transfer.
The
warrants will not be listed on any securities exchange or automated quotation
system, and we do not intend to arrange for any exchange or quotation system
to
list or quote the warrants.
The
above
summary of certain terms and provisions of the warrants is qualified in its
entirety by reference to the detailed provisions of the warrants, the form
of
which will be filed as an exhibit to a current report on Form 8-K that will
be incorporated by reference herein.
S-15
PLAN
OF DISTRIBUTION
We
are
offering our common shares and warrants to purchase common shares through a
placement agent. Each common share includes an attached right arising under
an
Amended and Restated Shareholder Rights Plan Agreement dated October 15, 1999.
Subject to the terms and conditions contained in the placement agent agreement,
dated December 13, 2006, Cowen and Company, LLC has agreed to act as the
placement agent for the sale of up to 9,259,259 common shares and warrants
to
purchase up to 2,314,819 common shares. The placement agent is not purchasing
or
selling any shares or warrants by this prospectus supplement or accompanying
prospectus, nor is it required to arrange for the purchase or sale of any
specific number or dollar amount of shares or warrants, but has agreed to use
reasonable efforts to arrange for the sale of all 9,259,259 common shares and
warrants to purchase up to 2,314,819 common shares.
The
placement agent agreement provides that the obligations of the placement agent
and the investors are subject to certain conditions precedent, including the
absence of any material adverse change in our business and the receipt of
certain opinions, letters and certificates.
Confirmations
and prospectuses will be distributed to all investors who agree to purchase
the
common shares and warrants, informing investors of the closing date as to such
shares and warrants. We currently anticipate that closing of the sale of
9,259,259 common shares and warrants to purchase 2,314,819 common shares will
take place on or about December 18, 2006. Investors will also be informed of
the
date and manner in which they must transmit the purchase price for their shares
and warrants. On the scheduled closing date, the following will occur:
|
·
|
we
will receive funds in the amount of the aggregate purchase price;
and
|
|
·
|
Cowen
and
Company, LLC will receive the placement agent's fee in accordance
with the
terms of the placement agent agreement.
|
We
will
pay the placement agent a commission equal to 6.25% of the gross proceeds up
to
$20 million from the sale of common shares and warrants in the offering and
a
commission equal to 6% of the gross proceeds above $20 million from the sale
of
common shares and warrants in the offering. In addition, we have agreed to
issue
the placement agent a warrant to purchase a number of common shares equal to
2%
of the sum of the number of (i) common shares and (ii) common shares issuable
upon the exercise of all of the warrants sold in the offering. This
placement agent's warrant will have a five-year term, an exercise price equal
to
one hundred and twenty five percent (125%) of the price per unit sold in the
offering, or $3.375 per share, cashless exercise provisions, customary
anti-dilution provisions and such other terms, conditions, rights and
preferences as the common shares sold in the offering. The placement agent's
warrant also includes a covenant to register the re-sale of the common shares
issuable upon the exercise of the warrant.
We
may
also reimburse the placement agent for certain legal expenses incurred by it.
In
no event will the total amount of compensation paid to the placement agent
and
other securities brokers and dealers upon completion of this offering exceed
8.0% of the maximum gross proceeds of the offering. The placement agent will
not
receive any commission with respect to the common shares issuable upon exercise
of the warrants. The estimated offering expenses payable by us, in addition
to
the placement agent's fee of approximately $1,550,000, are approximately
$300,000, which includes legal, accounting and printing costs and various other
fees associated with registering and listing the common shares. After deducting
certain fees due to the placement agent and our estimated offering expenses,
we
expect the net proceeds from this offering to be up to approximately
$23,150,000. If all of the warrants offered hereby are exercised for cash,
we
would receive additional proceeds of up to a maximum of approximately
$6,250,000.
We
have
agreed to indemnify the placement agent against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and liabilities
arising from breaches of representations and warranties contained in the
placement agent agreement. We have also agreed to contribute to payments the
placement agent may be required to make in respect of such liabilities. The
placement agent agreement is included as an exhibit to our Current Report on
Form 8-K that will be filed with the SEC in connection with the consummation
of
this offering.
We,
along
with our executive officers and directors have agreed to certain lock-up
provisions with regard to future sales of our common shares for a period of
ninety (90) days after the offering as set forth in the placement agent
agreement.
The
transfer agent for our common shares is Equity Transfer Services, Inc., located
in Ontario, Canada. Our common shares are listed on the NASDAQ Capital Market
under the symbol "ALTI."
S-16
INVESTOR
SUITABILITY STANDARDS
This
offering is being qualified under, or being made pursuant to exemptions from
the
qualification requirements of, the securities laws of selected states. This
prospectus shall not constitute an offer to sell or the solicitation of an
offer
to buy, nor shall there be any sale of these securities to any person that
is
not an institutional investor or to any person not domiciled in New York,
California, Nevada, Maryland, Illinois, Connecticut, New Jersey, Florida,
Massachusetts, Minnesota or Texas.
In
order
to comply with certain exemptions from the qualification requirements of the
securities laws of certain states, in addition to standard representations
and
covenants for an offering of this type, each investor will be required to
represent and warrant to us in the subscription documents that it is an
“institutional investor,” in that it is an entity which is in the business of
purchasing and selling securities for its own account with net assets in excess
of $15,000,000 and was not formed for the purpose of making an investment
pursuant to this offering.
In
addition, in order to permit us to avoid registration of this offering in
Canada, each investor will be required to represent and warrant that:
|
·
|
it
is domiciled in one
of the eligible states for this offering and not in Canada;
|
|
·
|
it
is not purchasing
the securities for the account or benefit of any resident of any
province or territory of
Canada;
|
|
·
|
it
is not purchasing the securities with a view to resell into
Canada;
|
|
·
|
the
securities were not
offered to the investor in Canada; and
|
|
·
|
the
subscription
agreement was not signed in Canada.
|
S-17
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
As
permitted by SEC rules, this prospectus supplement and the accompanying
prospectus do not contain all of the information that prospective investors
can
find in the registration statement of which it is a part or the exhibits to
the
registration statement. The SEC permits us to incorporate by reference, into
this prospectus supplement and the accompanying prospectus, information filed
separately with the SEC.
This
prospectus supplement incorporates by reference the documents set forth below
that we previously have filed with the SEC pursuant to the Securities Exchange
Act of 1934, as amended (File no. 001-12497). These documents contain important
information about us and our financial condition.
|
·
|
Our
Annual Report on Form 10-K for the year ended December 31, 2005,
filed
with the SEC on March 16, 2006.
|
|
·
|
Our
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2006,
filed
with the SEC on May 10, 2006, for the quarter ended June 30, 2006
filed
with the SEC on August 8, 2006 and for the quarter ended September
30,
2006 filed with the SEC on November 8, 2006.
|
|
·
|
Our
Current Reports on Form 8-K filed with the SEC on February 21, 2006,
February 24, 2006, June 7, 2006 and December 12,
2006.
|
|
·
|
The
description of our common shares contained in our Registration Statement
on Form 10-SB, SEC File No. 1-12497 filed with the SEC pursuant to
the
Securities Exchange Act, including any amendment or report filed
under the
Securities Exchange Act for the purpose of updating such
description.
|
All
documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act after the date of this registration statement, and
prior
to the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which de-registers all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
registration statement to the extent that a statement contained herein or in
any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement or the accompanying
prospectus.
Upon
written or oral request, we will provide without charge to each person to whom
a
copy of this prospectus supplement or the accompanying prospectus is delivered,
including any beneficial owner, a copy of the information that has been or
may
be incorporated by reference in this prospectus supplement or the accompanying
prospectus. Direct any request for copies to Ed Dickinson, Chief Financial
Officer, at our corporate headquarters, located at 204 Edison Way, Reno, Nevada
89502, telephone
number (775) 858-3750.
S-18
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, information statements and other
information with the SEC. You may read and copy any reports, statements or
other
information that we file at the SEC's public reference rooms at 100 F Street,
N.E., Washington, D.C. 20549. You may also obtain copies of this information
by
mail from the Public Reference Section of the SEC, 100 F Street, N.E.,
Washington, DC 20549 at prescribed rates. Please call the SEC at 1
(800) SEC-0330 for further information on the public reference rooms. The
SEC also maintains a web site at http://www.sec.gov, at which reports, proxy
and
information statements and other information regarding our company are
available.
The
validity of the securities offered by us will be passed upon for us by Goodman
and Carr, LLP, of Toronto, Ontario, Canada. Additional legal matters are being
passed upon for us by Parr Waddoups Brown Gee & Loveless, PC, of Salt Lake
City, Utah. Thelen
Reid Brown Raysman & Steiner LLP, of New York, New York, is acting as
counsel to the placement agent in connection with this
offering.
EXPERTS
The
consolidated financial statements for periods ended December 31, 2005
incorporated in this prospectus supplement by reference from our Annual Report
on Form 10-K for the year ended December 31, 2005 have been audited by
Perry-Smith LLP, independent registered public accounting firm, as set forth
in
its report thereon, included therein, and incorporated herein by reference.
Perry-Smith
LLP issued an attestation report on management's assessment of internal control
over financial reporting contained in our Annual Report on Form 10-K for the
year ended December 31, 2005. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firm as experts in
accounting and auditing.
The
consolidated financial statements as of December 31, 2004 and for the two years
ended December 31, 2004 incorporated in this prospectus supplement by reference
from our Annual Report on Form 10-K for the year ended December 31, 2004 have
been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended, may be permitted to directors, officers or persons controlling the
registrant, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
of
1933, and is, therefore, unenforceable.
S-19
PROSPECTUS
ALTAIR
NANOTECHNOLOGIES, INC.
COMMON
SHARES
WARRANTS
We
may from time to time offer in one or more series, together or
separately:
|
·
|
common
shares
|
|
·
|
warrants
to purchase common shares and
|
|
·
|
units
of warrants and common
shares.
|
We
will set forth the amounts, prices and terms of these securities in supplements
to this prospectus. Each common share includes an attached right arising
under
an Amended and Restated Shareholder Rights Plan Agreement dated October 15,
1999.
This
prospectus describes the general terms that may apply to these securities.
The
specific terms of any such securities to be offered and the plan of distribution
for that offering will be described in supplements to this prospectus. The
prospectus supplements also may add, update or change information in this
prospectus. You should read this prospectus and any applicable prospectus
supplement before you make your investment decision.
This
prospectus may not be used to offer or sell any securities unless accompanied
by
a prospectus supplement.
We
may offer and sell these securities through one or more underwriters, dealers
and agents, securities through underwriting syndicates managed or co-managed
by
one or more underwriters, or directly to purchasers, on a continuous basis
or a
delayed basis. If any underwriters, dealers or agents are involved, their
names
and information about any commissions and discounts will be set forth in
a
prospectus supplement.
Our
common shares are listed on the Nasdaq Capital Market under the symbol “ALTI.”
On September 21, 2006, the last reported sale price of our common shares
was
$3.50 per share.
Investing
in the securities offered by this prospectus and the accompanying prospectus
supplement involves risks. See “Risk
Factors” beginning on page 5.
These
securities have not been approved or disapproved by the Securities and Exchange
Commission or any state securities commission nor has the Securities and
Exchange Commission or any state securities commission passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is October 3, 2006
1
TABLE
OF CONTENTS
|
|
|
|
|
|
|
Page
|
|
Overview
|
|
3
|
|
About
this Prospectus
|
|
3
|
|
Risk
Factors
|
|
5
|
|
Forward-Looking
Statements
|
|
12
|
|
Use
of Proceeds
|
|
12
|
|
The
Securities We May Offer
|
|
12
|
|
Plan
of Distribution
|
|
17
|
|
Incorporation
of Certain Information by Reference
|
|
19
|
|
Where
You Can Find More Information
|
|
20
|
|
Legal
Matters
|
|
20
|
|
Experts
|
|
20
|
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
|
21
|
2
We
are a Canadian company, with principal assets and operations in the United
States, whose primary business is developing and commercializing nanomaterial
and titanium dioxide pigment technologies. We also provide contract research
services on select projects where we can utilize our resources to develop
intellectual property and/or new products and technology. Our research,
development, production, marketing and sales efforts are currently directed
toward six market applications that utilize our proprietary
technologies:
| · |
Advanced
Materials
|
| o |
The
marketing and licensing of titanium dioxide pigment production
technology.
|
| o |
The
marketing and production of nano-structured ceramic powders for
thermal
spray applications.
|
| o |
The
development of nano-structured ceramic powders for nano-sensor
applications.
|
| o |
The
development of titanium dioxide electrode structures in connection
with
research programs aimed at developing a lower-cost process for
producing
titanium metals and related alloys. Development of this product
is largely
inactive as we seek a business
partner.
|
| · |
Air
and Water Treatment
|
| o |
The
development, production and sale of photocatalytic materials for
air and
water cleansing.
|
| o |
The
marketing of
Nanocheck products for phosphate binding to prevent or reduce algae
growth
in recreational and industrial
water.
|
| · |
Alternative
Energy
|
| o |
The
development, production and sale of nano-structured lithium titanate
spinel, lithium cobaltate and lithium manganate spinel materials
for high
performance lithium ion batteries.
|
| o |
The
design and development of power lithium ion battery cells, batteries
and
battery packs as well as related design and test services.
|
| o |
The
development of materials for photovoltaics and transparent electrodes
for
hydrogen generation and fuel cells.
|
| · |
Lanthanum
based Pharmaceutical Products
|
| o |
The
co-development of RenaZorb, a test-stage active pharmaceutical
ingredient,
which is designed to be useful in the treatment of elevated serum
phosphate levels in patients undergoing kidney
dialysis.
|
| o |
Renalan,
a test-stage active pharmaceutical ingredient, which is designed
to be
useful in the treatment of elevated serum phosphate levels in companion
animals suffering from chronic renal
disease.
|
| · |
Chemical
Delivery Products
|
| o |
The
development of TiNano Spheres, which are rigid, hollow, porous,
high
surface area ceramic micro structures that are derived from Altair’s
proprietary process technology for the delivery of chemicals, drugs
and
biocides.
|
| · |
Biocompatible
Materials
|
| o |
The
development of nanomaterials for use in various products for dental
implants, dental fillings and dental products, as well as biocompatible
coatings on implants.
|
We
also provide contract research services on select projects where we can utilize
our resources to develop intellectual property and/or new products and
technology. In the near term, as we continue to develop and market our products
and technology, contract services will continue to be a substantial component
of
our operating revenues. During the years ended December 31, 2005, 2004 and
2003,
contract services revenues comprised 70%, 99% and 88%, respectively, of our
operating revenues.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the SEC
using
a “shelf” registration, or continuous offering process.
Each
time that we sell any securities under this prospectus, we will provide a
prospectus supplement that will contain specific information about the terms
of
that offering and certain other offering-specific information. The prospectus
supplement also may add, update or change information contained in this
prospectus. Any statement that we make in this prospectus will be modified
or
superseded by any inconsistent statement made by us in a prospectus
supplement.
3
The
registration statement we filed with the SEC includes exhibits that provide
more
detail on descriptions of the matters discussed in this prospectus. You should
carefully read this prospectus, the related exhibits filed with the SEC and
the
applicable prospectus supplement together with the additional information
described under the heading “Where You Can Find More Information” on page 18 of
this prospectus. You should not assume that the information in this prospectus,
the prospectus supplements or any documents incorporated by reference is
accurate as of any date other than the date of the applicable
document.
You
should rely only on the information incorporated by reference or provided
in
this prospectus and any prospectus supplement. We have authorized no one
to
provide you with different information.
Unless
we indicate otherwise, the terms “Altair,” “we,” “our” and “us” as used in this
prospectus refers to Altair Nanotechnologies Inc. and its subsidiaries as
a
combined entity, except where it is made clear that the term only means the
parent company or an identified subsidiary. Our principal executive offices
are
located at 204 Edison Way, Reno, NV, and our phone number is (775) 856-2500.
Our
website is www.altairnano.com. Information contained on our website is not
a
part of this prospectus or any prospectus supplement.
4
You
should carefully consider the risks described in this prospectus and the
accompanying prospectus supplement, in addition to the other information
contained or incorporated by reference in this prospectus and the accompanying
prospectus supplement before making an investment decision. Any of these
risks
could materially and adversely affect our business, financial condition or
results of operations. In such case, you may lose all or part of your
investment. Some factors in this section are forward-looking
statements.
We
have
experienced a net loss in every fiscal year since our inception. Our losses
from
operations were $10,481,853 in 2005 and $8,654,102 in the six month ended
June
30, 2006. Even if we do generate net income in one or more quarters in the
future, subsequent developments in our industry, customer base, business
or cost
structure or expenses associated with our operations, or due to an event
such as
significant litigation or a significant transaction may cause us to again
experience net losses. We may never become profitable for the long-term,
or even
for any quarter.
Our
quarterly operating results have fluctuated significantly in the past and
will
continue to fluctuate in the future, which could cause our stock price to
decline.
Our
quarterly operating results have fluctuated significantly in the past, and
we
believe that they will continue to fluctuate in the future, due to a number
of
factors, many of which are beyond our control. If in future periods our
operating results do not meet the expectations of investors or analysts who
choose to follow our company, our stock price may fall. Factors that may
affect
our quarterly operating results include the following:
|
·
|
fluctuations
in the size and timing of customer service orders from one quarter
to the
next;
|
|
·
|
timing
of delivery of our services and products;
|
|
·
|
addition
of new customers or loss of existing customers;
|
|
·
|
our
ability to commercialize and obtain orders for products we are
developing;
|
|
·
|
costs
associated with developing our manufacturing capabilities;
|
|
·
|
new
product announcements or introductions by our competitors or
potential
competitors;
|
|
·
|
the
effect of variations in the market price of our common shares
on our
equity-based compensation expenses;
|
|
·
|
acquisitions
of businesses or customers;
|
|
·
|
technology
and intellectual property issues associated with our products;
and
|
|
·
|
general
economic trends, including changes energy prices or geopolitical
events
such as war or incidents of terrorism.
|
Our
revenues have historically been generated from low-margin contract research
services; if we cannot expand revenues from other products and services,
our
business will fail.
Historically,
a significant portion of our revenues has come from contract research services
for businesses and government agencies. During the years ended December 31,
2005, 2004 and 2003, contract services revenues comprised 70%, 99% and 88%,
respectively, of our operating revenues. During the first six months of 2006,
contract revenues comprised 77% of our revenues. Contract services revenue
is
low margin and unlikely to grow at a rapid pace. Our business plan anticipates
revenues from product sales and licensing, both of which are higher margin
than
contract services and have potential for rapid growth, increasing in coming
years. If we are not successful in significantly expanding our revenues from
higher margin products and services, our revenue growth will be slow, it
is
unlikely that we will achieve profitability and our business will fail.
Our
patents and other protective measures may not adequately protect our proprietary
intellectual property, and we may be infringing on the rights of others.
We
regard
our intellectual property, particularly our proprietary rights in our
nanomaterials and titanium dioxide pigment technology, as critical to our
success. We have received various patents, and filed other patent applications,
for various applications and aspects of our nanomaterials and titanium dioxide
pigment technology and other intellectual property. In addition, we generally
enter into confidentiality and invention agreements with our employees and
consultants. Such patents and agreements and various other measures we take
to
protect our intellectual property from use by others may not be effective
for
various reasons, including the following:
5
| · |
Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
|
| · |
The
patents we have been granted may be challenged, invalidated or
circumvented because of the pre-existence of similar patented or
unpatented intellectual property rights or for other
reasons;
|
| · |
Parties
to the confidentiality and invention agreements may have such agreements
declared unenforceable or, even if the agreements are enforceable,
may
breach such agreements;
|
| · |
The
costs associated with enforcing patents, confidentiality and invention
agreements or other intellectual property rights may make aggressive
enforcement cost prohibitive;
|
| · |
Even
if we enforce our rights aggressively, injunctions, fines and other
penalties may be insufficient to deter violations of our intellectual
property rights; and
|
| · |
Other
persons may independently develop proprietary information and techniques
that, although functionally equivalent or superior to our intellectual
proprietary information and techniques, do not breach our patented
or
unpatented proprietary rights.
|
Because
the value of our company and common shares is rooted primarily in our
proprietary intellectual property rights, our inability to protect our
proprietary intellectual property rights or gain a competitive advantage
from
such rights could harm our ability to generate revenues and, as a result,
our
business and operations.
In
addition, we may inadvertently be infringing on the proprietary rights of
other
persons and may be required to obtain licenses to certain intellectual property
or other proprietary rights from third parties. Such licenses or proprietary
rights may not be made available under acceptable terms, if at all. If we
do not
obtain required licenses or proprietary rights, we could encounter delays
in
product development or find that the development or sale of products requiring
such licenses is foreclosed.
Because
our products are generally components of end products, the viability of many
or
our products is tied to the success of third parties’ existing and potential end
products.
None
of
the existing or potential products being developed with our nanomaterials
and
titanium dioxide pigment technology is designed for direct use by the ultimate
end user. Phrased differently, all of our products are components of other
products. For example, our lithium titanate spinel battery materials and
batteries are designed for use in end-user products such as electric vehicles,
hybrid electric vehicles and other potential products. Other potential products
and processes we and our partners are developing using our technology, such
as
titanium dioxide pigments, life science materials, air and water treatment
products, and coatings, are similarly expected to be components of third-party
products. As a result, the market for our products is dependent upon third
parties creating or expanding markets for their end-user products that utilize
our products. If such end-user products are not developed, or the market
for
such end-user products contracts or collapses, the market for our component
products would be expected to similarly contract or collapse. This would
limit
our ability to generate revenues and harm our business and
operations.
The
commercialization of many of our technologies is dependent upon the efforts
of
commercial partners and other third parties over which we have no or little
control.
We
do not
have the expertise or resources to commercialize all potential applications
of
our nanomaterials and titanium dioxide pigment technology. For example, we
do
not have the resources necessary to complete the testing of, and obtain FDA
approval for, Renazorb and other potential life sciences products or to
construct a commercial facility to use our titanium dioxide pigment production
technology. Other potential applications of our technology, such as those
related to our lithium titanate spinel battery materials, coating materials
and
dental materials, are likely to be developed in collaboration with third
parties, if at all. With respect to these and substantially all other
applications of our technology, the commercialization of a potential application
of our technology is dependent, in part, upon the expertise, resources and
efforts of our commercial partners. This presents certain risks, including
the
following:
6
| · |
we
may not be able to enter into development, licensing, supply and
other
agreements with commercial partners with appropriate resources,
technology
and expertise on reasonable terms or at
all;
|
| · |
our
commercial partners may not place the same priority on a project
as we do,
may fail to honor contractual commitments, may not have the level
of
resources, expertise, market strength or other characteristic necessary
for the success of the project, may dedicate only limited resources
and/or
may abandon a development project for reasons (such as a shift
in
corporate focus) unrelated to its
merits;
|
| · |
our
commercial partners may terminate joint testing, development or
marketing
projects on the merits of the projects for various reasons, including
determinations that a project is not feasible, cost-effective or
likely to
lead to a marketable end product;
|
| · |
at
various stages in the testing, development, marketing or production
process, we may have disputes with our commercial partners, which
may
inhibit development, lead to an abandonment of the project or have
other
negative consequences; and
|
| · |
even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be limited and may not exceed
our
associated development and operating
costs.
|
As
a
result of the actions or omissions of our commercial partners, or our inability
to identify and enter into suitable arrangements with qualified commercial
partners, we may be unable to commercialize apparently viable products on
a
timely and cost-effective basis, or at all. Our business is not dependent
upon a
single application of our technology; however, a failure to commercialize
several of our potential products would harm our business, operations and
financial condition.
If
we acquire or invest in other companies, assets or technologies and we are
not
able to integrate them with our business, or we do not realize the anticipated
financial and strategic goals for any of these transactions, our financial
performance may be impaired.
As
part
of our growth strategy, we routinely consider acquiring or making investments
in
companies, assets or technologies that we believe are strategic to our business.
We do not have extensive experience in integrating new businesses or
technologies, and if we do succeed in acquiring or investing in a company
or
technology, we will be exposed to a number of risks, including:
|
·
|
we
may find that the acquired company or technology does not further
our
business strategy, that we overpaid for the company or technology
or that
the economic conditions underlying our acquisition decision have
changed;
|
|
·
|
we
may have difficulty integrating the assets, technologies, operations
or
personnel of an acquired company, or retaining the key personnel
of the
acquired company;
|
|
·
|
our
ongoing business and management’s attention may be disrupted or diverted
by transition or integration issues and the complexity of managing
geographically or culturally diverse enterprises;
|
|
·
|
we
may encounter difficulty entering and competing in new product
or
geographic markets or increased competition, including price
competition
or intellectual property litigation; and
|
|
·
|
we
may experience significant problems or liabilities associated
with product
quality, technology and legal contingencies relating to the acquired
business or technology, such as intellectual property or employment
matters.
|
In
addition, from time to time we may enter into negotiations for acquisitions
or
investments that are not ultimately consummated. These negotiations could
result
in significant diversion of management time, as well as substantial
out-of-pocket costs. If we were to proceed with one or more significant
acquisitions or investments in which the consideration included cash, we
could
be required to use a substantial portion of our available cash, including
any
proceeds from this offering. To the extent we issue shares of capital stock
or
other rights to purchase capital stock, including options and warrants, existing
stockholders might be diluted and earnings per share might decrease. In
addition, acquisitions and investments may result in the incurrence of debt,
large one-time write-offs, such as acquired in-process research and development
costs, and restructuring charges.
7
We
intend to expand our operations and increase our expenditures in an effort
to
grow our business. If we are unable to achieve or manage significant growth
and
expansion, or if our business does not grow as we expect, our operating results
may suffer.
During
the past year, we have significantly increased our research and development
expenditures in an attempt to accelerate the commercialization of certain
products, particularly our lithium titanate spinel battery materials and
battery
systems. Our business plan anticipates continued additional expenditure on
development, manufacturing and other growth initiatives. We may not achieve
significant growth. If achieved, significant growth would place increased
demands on our management, accounting systems, network infrastructure and
systems of financial and internal controls. We may be unable to expand
associated resources and refine associated systems fast enough to keep pace
with
expansion, especially as we expand into multiple facilities at distant
locations. If we fail to ensure that our management, control and other systems
keep pace with growth, we may experience a decline in the effectiveness and
focus of our management team, problems with timely or accurate reporting,
issues
with costs and quality controls and other problems associated with a failure
to
manage rapid growth, all of which would harm our results of operations.
Our
competitors have more resources than we do, which may give them a competitive
advantage.
We
have
limited financial, personnel and other resources and, because of our early
stage
of development, have limited access to capital. We compete or may compete
against entities that are much larger than we are, have more extensive resources
than we do and have an established reputation and operating history. Because
of
their size, resources, reputation, history and other factors, certain of
our
competitors may be able to exploit acquisition, development and joint venture
opportunities more rapidly, easily or thoroughly than we can. In addition,
potential customers may choose to do business with our more established
competitors, without regard to the comparative quality of our products, because
of their perception that our competitors are more stable, are more likely
to
complete various projects, are more likely to continue as a going concern
and
lend greater credibility to any joint venture.
We
will not generate substantial revenues from our life science products unless
proposed products receive FDA approval and achieve substantial market
penetration.
We
have
entered into development and license agreements with respect to RenaZorb,
a
potential drug candidate for humans with kidney disease, and other life science
products, and expect to enter into additional licensing and/or supply agreements
in the future. Most of the potential life sciences applications of our
technologies are subject to regulation by the FDA and similar regulatory
bodies.
In general, license agreements in the life sciences area call for milestone
payments as certain milestones related to the development of the products
and
the obtaining of regulatory approval are met; however, the receipt by the
licensor of substantial recurring revenues is generally tied to the receipt
of
marketing approval from the FDA and the amount of revenue generated from
the
sale of end products. There are substantial risks associated with licensing
arrangements, including the following:
| · |
Further
testing of potential life science products using our technology
may
indicate that such products are less effective than existing products,
unsafe, have significant side effects or are otherwise not
viable;
|
| · |
The
licensee may be unable to obtain FDA or other regulatory approval
for
technical, political or other reasons or, even if it obtains such
approval, may not obtain such approval on a timely basis; and
|
| · |
End
products for which FDA approval is obtained, if any, may fail to
obtain
significant market share for various reasons, including questions
about
efficacy, need, safety and side effects or because of poor marketing
by
the licensee.
|
If
any of
the foregoing risks, or other risks associated with our life science products
were to occur, we would not receive substantial, recurring revenue from our
life
science division, which would adversely affect our overall business, operations
and financial condition.
As
manufacturing becomes a larger part of our operations, we will become exposed
to
accompanying risks and liabilities.
We
have
not produced any pigments, nanoparticles or other products using our
nanomaterials and titanium dioxide pigment technology and equipment on a
sustained commercial basis. In-house or outsourced manufacturing is becoming
an
increasingly significant part of our business. If and as manufacturing becomes
a
larger part of our business, we will become increasingly subject to various
risks associated with the manufacturing and supply of products, including
the
following:
8
| · |
If
we fail to supply products in accordance with contractual terms,
including
terms related to time of delivery and performance specifications,
we may
become liable for direct, special, consequential and other damages,
even
if manufacturing or delivery was
outsourced;
|
| · |
Raw
materials used in the manufacturing process, labor and other key
inputs
may become scarce and expensive, causing our costs to exceed cost
projections and associated
revenues;
|
| · |
Manufacturing
processes typically involve large machinery, fuels and chemicals,
any or
all of which may lead to accidents involving bodily harm, destruction
of
facilities and environmental contamination and associated liabilities;
and
|
| · |
We
may have, and may be required to, make representations as to our
right to
supply and/or license intellectual property and to our compliance
with
laws. Such representations are usually supported by indemnification
provisions, requiring us to defend our customers and otherwise
make them
whole if we license or supply products that infringe on third-party
technologies or violate government
regulations.
|
Any
failure to adequately manage risks associated with the manufacture and supply
of
materials and products could lead to losses (or small gross profits) from
that
segment of our business and/or significant liabilities, which would adversely
affect our business, operations and financial condition.
We
have issued a $3,000,000 note to secure the purchase of the land and the
building where our nanomaterials and titanium dioxide pigment assets are
located, and if we default on the note, we will experience a significant
disruption in our business.
In
August
2002, we entered into a purchase and sale agreement with BHP Minerals
International Inc. to purchase the land, building and fixtures in Reno, Nevada
where our nanomaterials and titanium dioxide pigment assets are located.
In
connection with this transaction, we issued to BHP a note in the amount of
$3,000,000, at an interest rate of 7%, secured by the property we acquired.
The
first payment of $600,000 of principal plus accrued interest was due and
paid
February 8, 2006. Additional payments of $600,000 plus accrued interest are
due
annually on February 8, 2007 through 2010. If we fail to make the required
payments on the note, BHP has the right to foreclose and take the property.
If
this should occur, we would be required to relocate our primary operating
assets
and offices, causing a significant disruption in our business.
We
may not be able to raise sufficient capital to meet future obligations.
As
of
June 30, 2006, we had approximately $14.4 million in cash, cash equivalents
and
short-term investments. In the last few quarters, our recurring expenses
have
increased significantly, and we have made significant capital commitments
related to our business development plan. As we take additional steps to
enhance
our commercialization and marketing efforts, or respond to acquisition
opportunities or potential adverse events, our use of working capital may
increase significantly. In any such event, we will need to raise additional
capital in order to sustain our ongoing operations, continue unfinished testing
and additional development work and, if certain of our products are
commercialized, construct and operate facilities for the production of those
products.
We
may
not be able to obtain the amount of additional capital needed or may be forced
to pay an extremely high price for capital. Factors affecting the availability
and price of capital may include the following:
| · |
market
factors affecting the availability and cost of capital
generally;
|
| · |
the
price, volatility and trading volume of our common
shares;
|
| · |
our
financial results, particularly the amount of revenue we are generating
from operations;
|
| · |
the
amount of our capital needs;
|
9
| · |
the
market’s perception of nanotechnology and/or chemical
stocks;
|
| · |
the
economics of projects being pursued;
and
|
| · |
the
market’s perception of our ability to execute our business plan and any
specific projects identified as uses of
proceeds;
|
If
we are
unable to obtain sufficient capital or are forced to pay a high price for
capital, we may be unable to meet future obligations or adequately exploit
existing or future opportunities.
Our
past and future operations may lead to substantial environmental
liability.
Virtually
any prior or future use of our nanomaterials and titanium dioxide pigment
technology is subject to federal, state and local environmental laws. In
addition, we are in the process of reclaiming mineral property that we leased
in
Tennessee. Under applicable environmental laws, we may be jointly and severally
liable with prior property owners for the treatment, cleanup, remediation
and/or
removal of any hazardous substances discovered at any property we use. In
addition, courts or government agencies may impose liability for, among other
things, the improper release, discharge, storage, use, disposal or
transportation of hazardous substances. If we incur any significant
environmental liabilities, our ability to execute our business plan and our
financial condition would be harmed.
Certain
of our experts and directors reside in Canada and may be able to avoid civil
liability.
We
are a
Canadian corporation, and three of our directors and our Canadian legal counsel
are residents of Canada. As a result, investors may be unable to effect service
of process upon such persons within the United States and may be unable to
enforce court judgments against such persons predicated upon civil liability
provisions of the U.S. securities laws. It is uncertain whether Canadian
courts
would (i) enforce judgments of U.S. courts obtained against us or such
directors, officers or experts predicated upon the civil liability provisions
of
U.S. securities laws or (ii) impose liability in original actions against
us or
our directors, officers or experts predicated upon U.S. securities
laws.
We
are dependent on key personnel.
Our
continued success will depend to a significant extent on the services of
Dr.
Alan J. Gotcher, our Chief Executive Officer and President, Edward Dickinson,
our Chief Financial Officer, Dr. Bruce Sabacky, our Chief Technology Officer,
Douglas Ellsworth and Roy Graham, our Senior Vice Presidents. We have key
man
insurance on the lives of Dr. Gotcher and Dr. Sabacky. We do not have agreements
requiring any of our key personnel to remain with our company. The loss or
unavailability of any or all of these individuals would harm our ability
to
execute our business plan, maintain important business relationships and
complete certain product development initiatives, which would harm our
business.
We
may issue substantial amounts of additional shares without stockholder
approval.
Our
articles of incorporation authorize the issuance of an unlimited number of
common shares that may be issued without any action or approval by our
stockholders. In addition, we have various stock option plans that have
potential for diluting the ownership interests of our stockholders. The issuance
of any additional common shares would further dilute the percentage ownership
of
our company held by existing stockholders.
The
market price of our common shares is highly volatile and may increase or
decrease dramatically at any time.
The
market price of our common shares may be highly volatile. Our stock price
may
change dramatically as the result of announcements of product developments,
new
products or innovations by us or our competitors, uncertainty regarding the
viability of the nanomaterials and titanium dioxide pigment technology or
any of
our product initiatives, significant customer contracts, significant litigation
or other factors or events that would be expected to affect our business,
financial condition, results of operations and future prospects. In addition,
the market price for our common shares may be affected by various factors
not
directly related to our business or future prospects, including the following:
10
| · |
Intentional
manipulation of our stock price by existing or future shareholders
or a
reaction by investors to trends in our stock rather than the fundamentals
of our business;
|
| · |
A
single acquisition or disposition, or several related acquisitions
or
dispositions, of a large number of our shares, including by short
sellers
covering their position;
|
| · |
The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
|
| · |
Positive
or negative statements or projections about our company or our
industry,
by analysts, stock gurus and other
persons;
|
| · |
The
adoption of governmental regulations or government grant programs
and
similar developments in the United States or abroad that may enhance
or
detract from our ability to offer our products and services or
affect our
cost structure; and
|
| · |
Economic
and other external market factors, such as a general decline in
market
prices due to poor economic indicators or investor
distrust.
|
We
have never declared a cash dividend and do not intend to declare a cash dividend
in the foreseeable future.
We
have
never declared or paid cash dividends on our common shares. We currently
intend
to retain any future earnings, if any, for use in our business and, therefore,
do not anticipate paying dividends on our common shares in the foreseeable
future.
We
are subject to various regulatory regimes, and may be adversely affected
by
inquiries, investigations and allegations that we have not complied with
governing rules and laws.
In
light
of our status as a public company and our lines of business, we are subject
to a
variety of laws and regulatory regimes in addition to those applicable to
all
businesses generally. For example, we are subject to the reporting
requirements applicable to Canadian and United States reporting issuers,
such as
the Sarbanes-Oxley Act of 2002, the rules of the Nasdaq Capital Market and
certain state and provincial securities laws. We are also subject to state
and
federal environmental, health and safety laws, and rules governing department
of
defense contracts. Such laws and rules change frequently and are often
complex. In connection with such laws, we are subject to periodic audits,
inquiries and investigations. Any such audits, inquiries and
investigations may divert considerable financial and human resources and
adversely affect the execution of our business plan.
For
example, on March 30, 2005, we received a letter of inquiry from the SEC
requesting information relating to a press release we issued on February
10,
2005, in which we announced developments in a rechargeable battery technology
that incorporates our lithium titanate battery materials. After providing
the
requested information, we received a follow up letter of inquiry dated August
2,
2005 requesting additional information related to our battery programs, emails
of certain affiliates, certain transactions and recent earnings calls. We
provided the information to the SEC in a series of letters sent during September
and October 2005. We have not been contacted by the SEC since providing all
requested information in October 2005 or been notified of any ongoing activity
or pending proceeding. The absence of any additional letters of inquiry related
to the matter for this period suggests to us that the SEC’s inquiry may be
completed; however, we have received no notice from the SEC with respect
to the
status of the inquiry and are uncertain as to its status. Based upon advice
of
counsel that the SEC frequently does not apprise a company whether an inquiry
has been terminated or is ongoing, we expect to remain uncertain in the
foreseeable future. Our response to the SEC inquiry diverted considerable
financial and human resources, which harmed our ability to execute our business
plan for a time, and leaves a level of uncertainty going forward. This may
harm
our ability to enter into business relationships, recruit qualified officers
and
employees and raise capital.
Through
such audits, inquiries and investigations, we or a regulator may determine
that
we are out of compliance with one or more governing rules or laws.
Remedying such non-compliance diverts additional financial and human
resources. In addition, in the future, we may be subject to a formal
charge or determination that we have materially violated a governing law,
rule
or regulation. Any charge, and particularly any determination, that we had
materially violated a governing law would harm our ability to enter into
business relationships, recruit qualified officers and employees and raise
capital.
11
FORWARD-LOOKING
STATEMENTS
This
prospectus contains and incorporates by reference certain forward-looking
statements regarding our anticipated financial condition, results of operations
and businesses in the future, including management’s beliefs, projections and
assumptions concerning future results and events. These forward-looking
statements generally are in the future tense and may, but do not necessarily,
include words such as “believes,” “expects,” “anticipates,” “intends,” “plans,”
“estimates,” “may,” “will,” “should,” “could,” “predicts,” “potential,”
“continue” or similar expressions. Forward-looking statements are not
guarantees. They involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Our future results
may
differ materially from those expressed in these forward-looking statements.
Some
of the factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, but are not limited
to,
those identified under “Risk Factors” above and in the annual and quarterly
reports we file with the SEC:
Given
these risks and uncertainties, you are cautioned not to place undue reliance
on
any forward-looking statements, which speak only as of the date of the document
in which they are contained. We do not undertake any obligation to update
any
forward-looking statement or to publicly announce any revision of any
forward-looking statement to reflect the occurrence of any future developments
or events.
USE
OF PROCEEDS
Unless
the applicable prospectus supplement states otherwise, the net proceeds from
the
securities sold by us will be added to our general corporate funds and be
used
for working capital and general corporate purposes. Until the net proceeds
have
been used, they will be invested in short-term marketable securities in
accordance with our investment policy. If we elect at the time of the issuance
of the securities to make different or more specific use of proceeds other
than
as described in this prospectus, the change in use of proceeds will be described
in the applicable prospectus supplement.
When
we issue a particular series of securities, we will describe in the applicable
prospectus supplement the intended use of proceeds from the sale of those
securities.
THE
SECURITIES WE MAY OFFER
We
may use this prospectus to offer common shares, warrants to purchase common
shares and units of common shares and warrants in any combination.
The
following briefly summarizes the general terms and provisions of the securities
that we may offer. A prospectus supplement will describe the specific types,
amounts, prices and detailed terms of any of these offered securities. You
should read the particular terms of the securities as described in any
prospectus supplement, together with the provisions of our articles of
continuance, bylaws and any relevant instrument and agreement relating to
such
securities. The specific terms of the securities offered may differ from
the
terms discussed below and you should always read the entire instruments and
agreements defining the terms of the securities before you make an investment
decision with respect to such securities.
Description
of Common Shares
We
are
authorized to issue an unlimited number of common shares, which do not have
par
value. As of September 21, 2006, there were 59,588,061 common shares issued
and
outstanding and held by approximately 440 registered holders. Holders of
common
shares are entitled to one vote per share on all matters to be voted on by
our
shareholders. There is no cumulative voting with respect to the election
of
directors. The holders of common shares are entitled to receive dividends,
if
any, as may be declared from time to time by our Board of Directors in its
discretion from funds legally available therefor. Upon liquidation, dissolution
or winding up of the company, the holders of common shares are entitled to
receive ratably any assets available for distribution to shareholders. The
common shares have no preemptive or other subscription rights, and there
are no
conversion rights or redemption or sinking fund provisions with respect to
such
shares. All of the outstanding common shares are fully paid and nonassessable.
Each
common share includes an attached right arising under, and subject to the
terms
described in, the Amended and Restated Shareholder Rights Plan Agreement
dated
October 15, 1999 between us and and Equity Transfer Services, Inc., as the
Rights Agent The terms of such rights are summarized in “Change
of Control Provisions Applicable to Our Common Shares”
below.
12
As
of
September 21, 2006, we issued and outstanding options to acquire 3,495,719
common shares issued pursuant to our stock incentive plans, had issued and
outstanding warrants to purchase 960,222 common shares issued in various
series
and had 1,637,232 shares reserved for future issuance under our stock incentive
plans.
Change
of Control Provisions Applicable to Our Common Shares
Neither
our articles of continuance nor our bylaws contain any provision that would
delay, defer or prevent a change in control of the company. We have, however,
adopted a Shareholders Rights Plan Agreement dated November 27, 1998, amended
and restated by the Amended and Restated Shareholder Rights Plan Agreement
dated
October 15, 1999 with Equity Transfer Services, Inc., as the Rights
Agent.
Pursuant
to the Rights Agreement, on November 27, 1998, which is the record date,
our
Board of Directors authorized and declared a distribution of one right with
respect to each common share issued and outstanding as of the record date
and
each common share issued thereafter prior to the expiration time (as defined
below). The rights are subject to the terms and conditions of the Rights
Agreement, a copy of which is attached as an Exhibit 10.1 to the Current
Report
on Form 8-K filed with the SEC on November 18, 1999. A copy of the Rights
Agreement is also available upon written request to us. Because it is a summary,
the following description of the rights and the Rights Agreement necessarily
omits certain terms, exceptions, or qualifications to the affirmative statements
made therein. The reader is advised to review the entire Rights Agreement
prior
to making any investment decision.
Certain
Key Terms of the Rights Prior to Flip-In Date.
Prior
to
the date a transaction or event occurs by which a person, called an acquiring
person, becomes the owner of 15% or more of the outstanding common shares
and
other shares entitled to vote for the election of directors, which event
is a
Flip-in Event, each right entitles the holder thereof to purchase one-half
common share for the price of $20 (which exercise price and number are subject
to adjustment as set forth in the Rights Agreement). Notwithstanding the
foregoing, no Right shall be exercisable prior to the commencement date.
The
commencement date is the close of business on the eighth business day after
the
earlier of (a) the date of a public announcement or disclosure by the company
or
an acquiring person of facts indicating that a person has become an acquiring
person, or (b) the date of commencement of, or first public announcement
of, the
intent of any person to commence a bid for a number of voting shares that
would
give the bidder beneficial ownership of 15% of more of the issued and
outstanding voting shares, referred to as a Take-over Bid.
Certain
Key Terms of the Rights Following Flip-In Date.
Section
3.1 of the Rights Agreement includes a provision, referred to as a conversion
provisions, which provides that, subject to certain exceptions, upon the
occurrence of a Flip-in Event, each right shall be a adjusted so as to
constitute a right to purchase from us for the $20, as adjusted, a number
of
common shares having an aggregate market price of four times $20 (as adjusted).
The market price is determined by averaging the closing price of the common
shares on the primary exchange for the common shares for the 20 trading days
preceding the date of determination. In addition, upon the occurrence of
any
Flip-in Event (which is not subsequently deemed not to have occurred under
the
Rights Agreement), any rights owned by the acquiring person, its affiliates,
or
certain assignees become null and void. Any rights certificate subsequently
issued upon transfer, exchange, replacement, adjustment, or otherwise with
respect to common shares owned by any of the foregoing persons shall bear
a
legend indicating the extent to which such rights are void. Rights held by
us or
our subsidiaries are also void.
Exceptions,
Redemption and Waiver.
The
definitions of Flip-in Event and certain related terms are subject to
exceptions, certain of which are summarized below. Nevertheless, to understand
each such exception and how they may interrelate, the reader is advised to
review the Rights Agreement. Despite a person's acquisition of 15% or more
of
our voting shares, a Flip-in Event shall be deemed not to have occurred or
shall
have no effect if:
(1)
the
acquiring person is the company or an entity controlled by the
company;
13
(2)
the
acquiring person is an underwriter who becomes the beneficial owner of 15%
or
more voting shares in connection with a distribution of securities pursuant
to
an underwriting agreement with us;
(3)
the
transaction by which the person becomes an acquiring person is a voting share
reduction, which is an acquisition or redemption of voting shares by us which,
by reducing the number of outstanding common shares, has the incidental effect
of increasing the acquiring person's ownership percentage;
(4)
the
transaction by which the person becomes an acquiring person is an acquisition
with respect to which our Board of Directors has waived the conversion provision
because:
(a)
our
Board of Directors has determined prior to the commencement date that a person
became an acquiring person by inadvertence and, within 10 days of such
determination, such person has reduced its beneficial ownership of common
shares
so as not to be an acquiring person;
(b)
our
Board of Directors acting in good faith has determined, prior to the occurrence
of a Flip-in Event, to waive application of the conversion provision, referred
to as a discretionary waiver;
(c)
our
Board of Directors determines within a specified time period to waive
application of the conversion provision to a Flip-in Event, provided that
the
acquiring person has reduced, or agreed to reduce, its beneficial ownership
of
voting shares to less than 15% of the outstanding issue of voting shares,
referred to as a waiver following withdrawal.
(5)
the
acquisition by which the person becomes an acquiring person is an acquisition
pursuant to (a) a dividend reinvestment plan or share purchase plan made
available to all holders of voting shares; (b) a stock dividend, stock split
or
similar event pursuant to which the acquiring person receives common shares
on
pro rata basis with all members of the same class or series; (c) the acquisition
or exercise of rights to purchase voting shares distributed to all holders
of
voting shares; (d) a distribution of voting shares or securities convertible
into voting shares offered pursuant to a prospectus or by way of a private
placement, provided the acquiring person does not thereby acquire a greater
percentage of the voting shares or convertible securities offered than the
person's percentage of voting shares beneficially owned immediately prior
to
such acquisition.
In
addition, (i) when a Take-over Bid is withdrawn or otherwise terminated after
the commencement date has occurred, but prior to the occurrence of a Flip-in
Date, or (ii) if the Board of the Directors grants a waiver following
withdrawal, our Board of Directors may elect to redeem all outstanding rights
at
the price of Cdn. $.0000001 per right (as adjusted). Upon the rights being
redeemed pursuant to the foregoing provision, all provisions of the Rights
Agreement shall continue to apply as if the commencement date had not occurred,
and we shall be deemed to have issued replacement rights to the holders of
its
then outstanding common shares.
In
addition, our Board of Directors may, at any time prior to the first date
of
public announcement or disclosure by us or an acquiring person of facts
indicating that a person has become an acquiring person, or announcement
date,
elect to redeem all, but not less than all, of the then outstanding rights
at
the $.0000001 per share (as adjusted). Moreover, in the event a person acquires
voting shares pursuant to a discretionary waiver, our Board of Directors
shall
be deemed to have elected to redeem the rights at $.0000002 per share (as
adjusted). Within 10 days after our Board of Directors elects, or is deemed
to
have elected, to redeem the rights, our Board of Directors shall give notice
of
redemption to the holders of the then outstanding rights and, in such notice,
described the method of payment by which the redemption price will be paid.
The
rights of any person under the Rights Agreement or any right, except rights
to
receive cash or other property that have already accrued, shall terminate
at the
expiration time, which is the date of a discretionary redemption or a deemed
redemption described in this paragraph.
Exercise
of the Rights.
The rights shall not be exercisable prior to the commencement date. Until
the
commencement date, each right shall be evidenced by the certificate for the
associated common share and will be transferable only together with, and
will be
transferred by the transfer of, its associated common share. New common share
certificates issued after the effective date of the Rights Agreement will
contain a legend incorporating the Rights Agreement by reference. Certificates
issued and outstanding at the effective date of the Rights Agreement shall
evidence one right for each common share evidenced thereby, notwithstanding
the
absence of a legend incorporating the Rights Agreement, until the earlier
of the
commencement date or the expiration time. Each common share issued for new
value
after the effective date of the Rights Agreement, but prior to the expiration
time, shall automatically have one new right associated with it and shall
bear
the appropriate legend.
14
From and after the commencement date, the rights may be exercised, and the
registration and transfer of the rights shall be separate from and independent
of the common shares. Following the commencement date, we shall mail to each
holder of common shares as of the commencement date, or such holder's nominee,
a
rights certificate representing the number of rights held by such holder
at the
commencement date and a disclosure statement describing the rights.
Rights may be exercised in whole or in part on any business day after the
commencement date and prior to the expiration time by submitting to the rights
certificate, an election to exercise, and payment of the sum equal to $.0000001
per share (as adjusted) multiplied by the number of rights being exercised.
Upon
receipt of such materials, the Rights Agent will promptly deliver certificates
representing the appropriate number of common shares to the registered holder
of
the relevant rights certificate and, if not all rights were exercised, issue
a
new rights certificate evidencing the remaining unexercised rights.
The foregoing descriptions do not purport to be complete and are qualified
by
reference to the definitive Rights Agreement.
Description
of Warrants
We
may issue warrants to purchase common shares. We may issue warrants
independently or together with the common shares offered, and the warrants
may
be attached to or separate from these securities. We may issue warrants in
such
amounts or in as many distinct series as we wish. The warrants will be issued
under warrant agreements to be entered into between us and a warrant agent
as
detailed in the prospectus supplement relating to the warrants being
offered.
Specific
Terms of the Warrants
The
applicable prospectus supplement will describe the following terms, where
applicable, of the warrants in respect of which this prospectus is being
delivered:
| · |
the
title of the warrants;
|
| · |
the
aggregate number of the warrants;
|
| · |
the
price or prices at which the warrants will be
issued;
|
| · |
the
designation, amount, and terms of the common shares purchasable
upon
exercise of the warrants;
|
| · |
if
applicable, the date on and after which the warrants and the common
shares
purchasable upon exercise of the warrants will be separately
transferable;
|
| · |
the
price or prices at which the common shares purchasable upon exercise
of
the warrants may be purchased;
|
| · |
the
date on which the right to exercise the warrants shall commence
and the
date on which the right shall
expire;
|
| · |
the
minimum or maximum amount of the warrants which may be exercised
at any
one time;
|
| · |
information
with respect to book-entry procedures, if
any;
|
| · |
in
the case of warrants to purchase our common shares, any provisions
for
adjustment of the number or amount of shares of our common shares
receivable upon exercise of the warrants or the exercise price
of the
warrants;
|
| · |
a
discussion of any federal income tax considerations;
and
|
| · |
any
other material terms of the warrants, including terms, procedures,
and
limitations relating to the exchange and exercise of the
warrants.
|
15
Exercise
of Warrants
Each
warrant will entitle the holder of the warrant to purchase the common shares
at
the exercise price as shall be set forth in or be determinable as set forth
in,
the prospectus supplement relating to the warrants. Warrants may be exercised
at
any time up to the close of business on the expiration date set forth in
the
applicable prospectus supplement. After the close of business on the expiration
date, unexercised warrants will become void.
Upon
receipt of payment and the warrant certificate properly completed and duly
executed at the office indicated in the prospectus supplement, we will, as
soon
as practicable, forward the securities purchased upon such exercise. If less
than all of the warrants represented by a warrant certificate are exercised,
a
new warrant certificate will be issued for the remaining warrants.
Prior
to the exercise of any warrants, holders of the warrants will not have any
of
the rights of holders of the securities purchasable upon exercise, including
the
right to vote or to receive any payments of dividends on the preferred or
common
shares purchasable upon exercise.
Certificates
for warrants to purchase securities will be exchangeable for new warrant
certificates of different denominations.
Description
of Units
The
following description, together with the additional information we may include
in any applicable prospectus supplement, summarizes the material terms and
provisions of the units that we may offer under this prospectus. While the
terms
we have summarized
below
will apply generally to any units that we may offer under this prospectus,
we
will describe the particular terms of any series of units in more detail
in the
applicable prospectus supplement. The terms of any units offered under a
prospectus supplement may differ from the terms described below.
We
will
file as exhibits to the registration statement of which this prospectus is
a
part, or will incorporate by reference from a current report on Form 8-K
that we
file with the SEC, the form of unit agreement that describes the terms
of the
series of units we are offering, and any supplemental agreements, before
the
issuance of the related series of units. The following summaries of material
terms and provisions of the units are subject to, and qualified in their
entirety by reference to, all the provisions of the unit agreement and any
supplemental agreements applicable to a particular series of units. We urge
you
to read the applicable prospectus supplements related to the particular series
of units that we sell under this prospectus, as well as the complete unit
agreement and any supplemental agreements that contain the terms of the units.
General
We
may
issue units comprised of one or more common shares and warrants in any
combination. Each unit will be issued so that the holder of the unit is also
the
holder of each security included in the unit. Thus, the holder of a unit
will
have the rights and obligations of a holder of each included security. The
unit
agreement under which a unit is issued may provide that the securities included
in the unit may not be held or transferred separately, at any time or at
any
time before a specified date.
We
will
describe in the applicable prospectus supplement the terms of the series
of
units, including:
| · |
the
designation and terms of the units and of the securities comprising
the
units, including whether and under what circumstances
those securities may be held or transferred separately;
|
| · |
any
provisions of the governing unit agreement that differ from those
described below; and
|
| · |
any
provisions for the issuance, payment, settlement, transfer or exchange
of
the units or of the securities comprising the units.
|
16
The
provisions described in this section, as well as those described under
“Description of Common Shares” and “Description of Warrants” will apply to each
unit and to any common shares or warrants included in each unit, respectively.
Issuance
in Series
We
may
issue units in such amounts and in such numerous distinct series as we
determine.
Enforceability
of Rights by Holders of Units
Each
unit
agent will act solely as our agent under the applicable unit agreement and
will
not assume any obligation or relationship of agency or trust with any holder
of
any unit. A single bank or trust company may act as unit agent for more than
one
series of units. A unit agent will have no duty or responsibility in case
of any
default by us under the applicable unit agreement or unit, including any
duty or
responsibility to initiate any proceedings at law or otherwise, or to make
any
demand upon us. Any holder of a unit may, without the consent of the related
unit agent or the holder of any other unit, enforce by appropriate legal
action
its rights as holder under any security included in the unit.
Title
We,
the
unit agents and any of their agents may treat the registered holder of any
unit
certificate as an absolute owner of the units evidenced by that certificate
for
any purpose and as the person entitled to exercise the rights attaching to
the
units so requested, despite any notice to the contrary.
PLAN
OF DISTRIBUTION
We
may sell the securities offered under this prospectus:
| · |
through
underwriters;
|
| · |
through
dealers;
|
| · |
through
agents; or
|
| · |
directly
to purchasers.
|
Each
prospectus supplement relating to an offering of securities will state the
terms
of the offering, including:
| · |
the
names of any underwriters, dealers, or
agents;
|
| · |
the
public offering or purchase price of the offered securities and
the net
proceeds that we will receive from the
sale;
|
| · |
any
underwriting discounts and commissions or other items constituting
underwriters’ compensation;
|
| · |
any
discounts, commissions, or fees allowed or paid to dealers or agents;
and
|
| · |
any
securities exchange or market on which the offered securities may
be
listed.
|
With
respect to any offering under this prospectus, the aggregate of all underwriting
discounts, commissions and other compensation and any discounts, commissions
or
fees allowed or paid to dealers or agent shall not exceed 15% of the gross
proceeds of such offering.
17
Distribution
Through Underwriters
We
may offer and sell securities from time to time to one or more underwriters
who
would purchase the securities as principal for resale to the public, either
on a
firm commitment or best efforts basis. If we sell securities to underwriters,
we
will execute an underwriting agreement with the underwriters at the time
of the
sale and will name them in the applicable prospectus supplement. In connection
with these sales, the underwriters may be deemed to have received compensation
from us in the form of underwriting discounts and commissions. The underwriters
also may receive commissions from purchasers of securities for whom they
may act
as agent. Unless we specify otherwise in the applicable prospectus supplement,
the underwriters will not be obligated to purchase the securities unless
the
conditions set forth in the underwriting agreement are satisfied, and if
the
underwriters purchase any of the securities, they will be required to purchase
all of the offered securities. The underwriters may acquire the securities
for
their own account and may resell the securities from time to time in one
or more
transactions, including negotiated transactions, at a fixed public offering
price or varying prices determined at the time of sale. The underwriters
may
sell the offered securities to or through dealers, and those dealers may
receive
discounts, concessions, or commissions from the underwriters as well as from
the
purchasers for whom they may act as agent. Any initial public offering price
and
any discounts or concessions allowed or reallowed or paid to dealers may
be
changed from time to time.
Distribution
Through Dealers
We
may offer and sell securities from time to time to one or more dealers who
would
purchase the securities as principal. The dealers then may resell the offered
securities to the public at fixed or varying prices to be determined by those
dealers at the time of resale. We will set forth the names of the dealers and
the terms of the transaction in the applicable prospectus
supplement.
Distribution
Through Agents
We
may offer and sell securities on a continuous basis through agents that become
parties to an underwriting or distribution agreement. We will name any
agent involved in the offer and sale and describe any commissions payable
by us
in the applicable prospectus supplement. Unless we specify otherwise in the
applicable prospectus supplement, the agent will be acting on a best efforts
basis during the appointment period.
Direct
Sales
We
may sell directly to, and solicit offers from, institutional investors or
others
who may be deemed to be underwriters, as defined in the Securities Act of
1933
for any resale of the securities. We will describe the terms of any sales
of
this kind in the applicable prospectus supplement.
General
Information
Underwriters,
dealers, or agents participating in an offering of securities may be deemed
to
be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the offered securities for whom they
act as
agent, may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
We
may sell securities at a fixed price or prices, which may be changed, at
market
prices prevailing at the time of sale, at prices relating to the prevailing
market prices or at negotiated prices. The distribution of the securities
may be
effected from time to time in one or more transactions, by means of one or
more
of the following transactions, which may include:
| · |
block
trades;
|
| · |
at-the-market
offerings;
|
| · |
negotiated
transactions;
|
| · |
put
or call option transactions relating to the
securities;
|
| · |
under
delayed delivery contracts or other contractual commitments;
|
| · |
a
combination of such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable law.
|
18
Only
underwriters named in the prospectus supplement are underwriters of the
securities offered by the prospectus supplement.
In
connection with an underwritten offering of securities, the underwriters
may
engage in over-allotment, stabilizing transactions, and syndicate covering
transactions in accordance with Regulation M under the Exchange Act.
Over-allotment involves sales in excess of the offering size, which creates
a
short position for the underwriters. The underwriters may enter bids for,
and
purchase, securities in the open market in order to stabilize the price of
the
securities. Syndicate covering transactions involve purchases of the securities
in the open market after the distribution has been completed in order to
cover
short positions. In addition, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the
securities in the offering if the syndicate repurchases previously distributed
securities in transactions to cover syndicate short positions, in stabilization
transactions, or otherwise. These activities may cause the price of the
securities to be higher than it would otherwise be. Those activities, if
commenced, may be discontinued at any time.
Ordinarily,
each issue of securities will be a new issue, and there will be no established
trading market for any security other than our common shares prior to its
original issue date. We may not list any particular series of securities
on a
securities exchange or quotation system. Any underwriters to whom or agents
through whom the offered securities are sold for offering and sale may make
a
market in the offered securities. However, any underwriters or agents that
make
a market will not be obligated to do so and may stop doing so at any time
without notice. We cannot assure you that there will be a liquid trading
market
for the offered securities.
Under
agreements entered into with us, underwriters and agents may be entitled
to
indemnification by us against certain civil liabilities, including liabilities
under the Securities Act, or to contribution for payments the underwriters
or
agents may be required to make.
Although
we expect that delivery of securities generally will be made against payment
on
or about the third business day following the date of any contract for sale,
we
may specify a longer settlement cycle in the applicable prospectus supplement.
Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the parties to a trade
expressly agree otherwise. Accordingly, if we have specified a longer settlement
cycle in the applicable prospectus supplement for an offering of securities,
purchasers who wish to trade those securities on the date of the contract
for
sale, or on one or more of the next succeeding business days as we will specify
in the applicable prospectus supplement, will be required, by virtue of the
fact
that those securities will settle in more than T+3, to specify an alternative
settlement cycle at the time of the trade to prevent a failed settlement
and
should consult their own advisors in connection with that election.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
As
permitted by SEC rules, this prospectus does not contain all of the information
that prospective investors can find in the registration statement of which
it is
a part or the exhibits to the registration statement. The SEC permits us
to
incorporate by reference, into this prospectus, information filed separately
with the SEC.
This
prospectus incorporates by reference the documents set forth below that we
previously have filed with the SEC pursuant to the Securities Exchange Act
of
1934 (file no. 001-12497). These documents contain important information
about
us and our financial condition.
| · |
Our
Current Report on Form 8-K filed with the SEC on February 21,
2006.
|
| · |
Our
Current Report on Form 8-K filed with the SEC on February 24,
2006.
|
| · |
Our
Annual Report on Form 10-K for the year ended December 31, 2005,
filed
with the SEC on March 16, 2006.
|
| · |
Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006,
filed
with the SEC on May 10, 2006.
|
| · |
Our
Current Report on Form 8-K filed on June 7, 2006.
|
19
| · |
Our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
filed
with the SEC on August 8, 2006.
|
| · |
The
description of our common shares contained in our Registration
Statement
on Form 10-SB, SEC File No. 1-12497 filed with the SEC pursuant
to the
Securities Exchange Act of 1934, including any amendment or report
filed
under the Securities Exchange Act of 1934 for the purpose of updating
such
description.
|
All
documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the
Exchange Act after the date of this registration statement, and prior to
the
filing of a post-effective amendment which indicates that all securities
offered
hereby have been sold or which de-registers all securities then remaining
unsold, shall be deemed to be incorporated by reference in this registration
statement and to be a part hereof from the date of filing of such documents.
Any
statement contained in a document incorporated by reference herein shall
be
deemed to be modified or superseded for purposes of this registration statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part
of this prospectus.
Upon
written or oral request, we will provide without charge to each person to
whom a
copy of this prospectus is delivered, including any beneficial owner, a copy
of
the information that has been or may be incorporated by reference in this
prospectus. Direct any request for copies to Ed Dickinson, Chief Financial
Officer, at our corporate headquarters, located at 204 Edison Way, Reno,
NV
89502 (telephone
number (775) 858-3750).
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, information statements and other
information with the SEC. You may read and copy any reports, statements or
other
information that we file at the SEC’s public reference rooms at 100 F Street,
N.E., Washington, D.C. 20549. You may also obtain copies of this information
by
mail from the Public Reference Section of the SEC, 100 F Street, N.E.,
Washington, DC 20549 at prescribed rates. Please call the SEC at 1
(800) SEC-0330 for further information on the public reference rooms. The
SEC also maintains a web site at http://www.sec.gov, at which reports, proxy
and
information statements and other information regarding our company are
available.
Unless
otherwise indicated in the applicable prospectus supplement, the validity
of the
offered securities of us will be passed upon for us by Goodman & Carr, LLP.
Additional legal matters may be passed on for us, or any underwriters, dealers
or agents, by counsel that we will name in the applicable prospectus
supplement.
EXPERTS
The
consolidated financial statements for periods ended December 31, 2005
incorporated in this prospectus by reference from our Annual Report on Form
10-K
for the year ended December 31, 2005 have been audited by Perry-Smith LLP,
independent registered public accounting firm, as set forth in its report
thereon, included therein, and incorporated herein by reference. Perry-Smith
LLP issued an attestation report on management’s assessment of internal control
over financial reporting contained in our Annual Report on Form 10-K for
the
year ended December 31, 2005. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firm as experts
in
accounting and auditing.
The
consolidated financial statements as of December 31, 2004 and for two years
ended December 31, 2004 incorporated in this prospectus by reference from
our
Annual Report on Form 10-K for the year ended December 31, 2005 have been
audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report, which is incorporated herein
by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
20
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the registrant, we
have
been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
21
9,259,259 Shares
and
Warrants to Purchase 2,314,819 Shares
Common
Shares
PROSPECTUS
SUPPLEMENT
Cowen
and Company
December
13, 2006