Before
you invest in our common shares that may be offered pursuant to this prospectus,
you should be aware that such investment involves the assumption of various
risks. You should consider carefully the risk factors described below and
in any
filings incorporated herein by reference, together with all of the other
information included in, or incorporated by reference into, this prospectus
before you decide to purchase any our common shares. If
any of the adverse events described in the following risk factors actually
occur
or we do not accomplish necessary events or objectives described in the risk
factors, our business, financial condition and operating results could be
materially and adversely affected, the trading price of our common shares
could
decline and stockholders could lose all or part of their investments.
We
may continue to experience significant losses from
operations.
We
have
experienced a net loss in every fiscal year since our inception. Our losses
from
operations were $10,481,853 in 2005 and $12,812,885 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:
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fluctuations
in the size and timing of customer orders from one quarter to the
next;
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timing
of delivery of our services and products;
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addition
of new customers or loss of existing customers;
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our
ability to commercialize and obtain orders for products we are
developing;
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costs
associated with developing our manufacturing capabilities;
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new
product announcements or introductions by our competitors or potential
competitors;
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the
effect of variations in the market price of our common shares on
our
equity-based compensation expenses;
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acquisitions
of businesses or customers;
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technology
and intellectual property issues associated with our products;
and
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general
economic trends, including changes in energy prices, or geopolitical
events such as war or incidents of terrorism.
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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 have
higher
margins 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.
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:
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Our
pending patent applications may not be granted for various reasons,
including the existence of conflicting patents or defects in our
applications;
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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;
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Parties
to the confidentiality and invention agreements may have such agreements
declared unenforceable or, even if the agreements are enforceable,
may
breach such agreements;
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The
costs associated with enforcing patents, confidentiality and invention
agreements or other intellectual property rights may make aggressive
enforcement cost prohibitive;
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Even
if we enforce our rights aggressively, injunctions, fines and other
penalties may be insufficient to deter violations of our intellectual
property rights; and
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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.
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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 would 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.
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 end-user products manufactured by third parties.
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.
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:
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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;
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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;
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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;
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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
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even
if the commercialization and marketing of jointly developed products
is
successful, our revenue share may be small and may not exceed our
associated development and operating
costs.
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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:
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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;
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we
may have difficulty integrating the assets, technologies, operations
or
personnel of an acquired company, or retaining the key personnel
of the
acquired company;
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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;
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we
may encounter difficulty entering and competing in new product
or
geographic markets or increased competition, including price competition
or intellectual property litigation; and
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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.
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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. If we issue
shares of capital stock or other rights to purchase capital stock, including
options and warrants, existing stockholders will 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. Such additional
spending may not lead to significant growth in our revenue. If achieved,
significant revenue 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. 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. 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 revenue being generated from the sale of end products.
There are substantial risks associated with licensing arrangements, including
the following:
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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;
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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
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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.
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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:
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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;
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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;
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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
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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.
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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.
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 as needed in the future
We
continue to experience net losses, and negative cash flow, from operations.
Our
spending has increased during the past year as part of a program designed
to
accelerate the commercialization of our products. We also consider from time
to
time various acquisition opportunities that, if consummated, would use
additional working capital. We also may experience unexpected litigation
or
other adverse event. Unless we experience a significant increase in revenue
and
become profitable in the near future, 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:
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market
factors affecting the availability and cost of capital
generally;
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the
price, volatility and trading volume of our common
shares;
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our
financial results, particularly the amount of revenue we are generating
from operations;
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the
amount of our capital needs;
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the
market’s perception of companies in one or more of our lines of
business;
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the
economics of projects being pursued;
and
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the
market’s perception of our ability to execute our business plan and any
specific projects identified as uses of
proceeds.
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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 or related 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 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 and Dr. Bruce Sabacky, our Chief Technology Officer.
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:
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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;
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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;
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The
interest of the market in our business sector, without regard to
our
financial condition, results of operations or business
prospects;
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Positive
or negative statements or projections about our company or our
industry,
by analysts, stock gurus and other
persons;
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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
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Economic
and other external market factors, such as a general decline in
market
prices due to poor economic indicators or investor
distrust.
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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 tax, 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.
Because
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.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains various forward-looking statements. Such statements can
be
identified by the use of the forward-looking words “anticipate,” “estimate,”
“project,” “likely,” “believe,” “intend,” “expect” or similar words. These
statements discuss future expectations, contain projections regarding future
developments, operations, or financial conditions, or state other
forward-looking information. When considering such forward-looking statements,
you should keep in mind the risk factors noted in the previous section and
other
cautionary statements throughout this prospectus and our periodic filings
with
the SEC that are incorporated herein by reference. You should also keep in
mind
that all forward-looking statements are based on management’s existing beliefs
about present and future events outside of management’s control and on
assumptions that may prove to be incorrect. If one or more risks identified
in
this prospectus or any applicable filings materializes, or any other underlying
assumptions prove incorrect, our actual results may vary materially from
those
anticipated, estimated, projected, or intended.
Among
the key factors that may have a direct bearing on our operating results are
risks and uncertainties described under “Risk Factors” above, including, without
limitation, those attributable to the absence of profits, uncertainties
regarding the future demand for our products and services and the competitive
advantages of companies that compete, or may compete, in our
market.
USE
OF PROCEEDS
The
aggregate proceeds to the selling stockholders from the sale of the common
shares offered by them will be the purchase price of the common shares, less
any
applicable discounts or commissions. We will not receive any of the proceeds
from this offering.
DETERMINATION
OF OFFERING PRICE
The
offering price of the common shares offered by this prospectus is being
determined by each of the selling stockholders on a transaction-by-transaction
basis based upon factors that such selling stockholder considers appropriate.
The offering prices determined by the selling stockholders may, or may not,
relate to a current market price but should not, in any case, be considered
an
indication of the actual value of the common shares. We do not have any
influence over the price at which selling stockholders offer or sell the
common
shares offered by this prospectus.
DILUTION
If
you
invest in our common shares in this offering, your ownership interest will
be
immediately diluted to the extent of the difference between the public offering
price per share and the net tangible book value per share of our common shares.
Our historical net tangible book value as of September 30, 2006 was $17,622,512
million, or $0.29 per common share ($0.59 as adjusted for a recently closed
offering). 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.
The
above
discussion is based on 59,647,386 common shares issued and outstanding as
of
September 30, 2006 and excludes:
|
|
·
|
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 awards
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.
SELLING
STOCKHOLDERS
All
of
the offered shares are to be sold by existing security holders upon the exercise
of outstanding warrants to purchase common shares. The
selling stockholders, which are identified in the table
below, acquired their warrants to purchase the common shares that may be
offered and sold hereby in connection with (i) an offering completed December
18, 2006 in which we issued to Cowen and Company, LLC, as placement agent,
a
warrant to purchase 231,482 common shares, and (ii) an offering completed
February 15, 2005 in which we issued to Maxim Group LLC, as placement agent,
a
warrant to purchase 250,000 common shares.
The
table
below sets forth, as of January 1, 2007:
| |
·
|
the
name of each selling stockholder;
|
| |
·
|
certain
beneficial ownership information with respect to the selling
stockholders;
|
| |
·
|
the
number of shares that may be sold from time to time by each selling
stockholder pursuant to this prospectus;
and
|
| |
·
|
the
amount (and, if 1% or more, the percentage) of common shares to
be owned
by each selling stockholder if all offered shares are
sold.
|
Beneficial
ownership is determined in accordance with SEC rules and generally includes
voting or investment power with respect to securities. Common shares that
are
issuable upon the exercise of outstanding options, warrants or other purchase
rights held by a selling stockholder, to the extent exercisable within 60
days
of January 1, 2007, are treated as outstanding for purposes of computing
each
selling stockholder’s ownership of outstanding common shares and percentage
ownership (but not the percentage ownership of other selling
stockholders).
We
believe that voting and investment power with respect to shares shown as
beneficially owned by selling stockholders resides with the entities and
individuals identified in the footnotes to the table below. There can be
no
assurance that any of the shares offered hereby will be sold.
| |
|
Beneficial
Ownership
Before
Offering
|
|
|
|
Beneficial
Ownership
upon
Completion of the
Offering(1)
|
|
Beneficial
Owner
|
|
Number
of
Shares
|
|
Percent
|
|
Number
of Shares Being Offered
|
|
Number
of
Shares
|
|
Percent
|
|
Cowen
and Company, LLC(2)
|
|
231,482
|
|
*
|
|
231,482
|
|
0
|
|
N/A
|
|
Maxim
Partners LLC(3)
|
|
250,000
|
|
*
|
|
250,000
|
|
0
|
|
N/A
|
_____________________
*
Represents
less than 1% of the outstanding common shares.
|
(1)
|
Assumes
the sale by each selling stockholder of all of the shares offered
hereunder by such selling stockholder. There can be no assurance
that any
of the shares offered hereby will be
sold.
|
|
(2)
|
Represents
a warrant to purchase 231,482 common shares. Graham Powis, in his
capacity as Head of Equity Capital Markets, has voting control
and
investment discretion over the securities owned by Cowen and Company,
LLC.
Mr. Powis disclaims beneficial ownership of such
securities.
|
|
(3)
|
Represents
a warrant to purchase 250,000 common shares. MJR Holdings LLC owns
74% of
Maxim Partners LLC. Michael Rabinowitz is the sole manager of MJR
Holdings
and has principal voting and dispositive power with respect to
securities
owned by Maxim Partners LLC.
|
Private
Placement of Shares
All
of
the offered shares are to be sold by entities that are existing security
holders. The offered shares are issuable upon the exercise of the warrants
to
purchase common shares described below.
February
2005 Placement Agent Warrant
On
February 15, 2005, we issued to Maxim Group LLC warrants to purchase 250,000
common shares as part of a placement agency fee upon the closing of a registered
offering on that date. Such warrants were subsequently distributed to Maxim
Partners LLC. The warrants have an exercise price of $5.265 per share and
are
exercisable during a 4-year period commencing on the issue date. The warrants
include standard antidilution provisions under which the exercise price and
number of shares are adjusted proportionately in connection with a stock
split,
stock dividend, reverse stock split, reclassification or similar transaction.
The warrants do not include a net exercise provision but include demand and
piggy-back registration rights related to the registration of the common
shares
issuable upon the exercise of the warrants under the Securities Act
December
2006 Placement Agent Warrant
On
December 18, 2006, we issued to Cowen and Company, LLC warrants to purchase
231,482 common shares as part of a placement agency fee upon the closing
of a
registered offering on that date. The warrants have an exercise price of
$3.375
per share and are exercisable during a 5-year period commencing on the issue
date. The warrants include standard antidilution provisions under which the
exercise price and number of shares are adjusted proportionately in connection
with a stock split, stock dividend, reverse stock split, reclassification
or
similar transaction. The warrants include a net exercise provision and require
that we register the resale of the common shares issuable upon the exercise
of
the warrants under the Securities Act.
Broker-Dealers
Maxim
Partners LLC is an affiliate of Maxim Group LLC, a registered broker-dealer.
Cowen and Company, LLC is a registered broker-dealer. Each selling stockholder
represented to us that it acquired the common shares that may be offered
pursuant to this prospectus, and any common shares issuable upon the exercise
of
related warrants, for its own account and not in the ordinary course of business
or subject to any agreements or understandings, directly or indirectly, with
any
person to distribute the securities.
PLAN
OF DISTRIBUTION
General
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling common shares or interests
in common shares received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer,
may,
from time to time, sell, transfer or otherwise dispose of any or all of their
common shares or interests in common shares on any stock exchange, market
or
trading facility on which the shares are traded or in private transactions.
These dispositions may be at fixed prices, at prevailing market prices at
the
time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale, or at negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
| |
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| |
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| |
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
|
| |
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| |
·
|
privately
negotiated transactions;
|
| |
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
| |
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| |
·
|
a
combination of any such methods of sale;
and
|
| |
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the common shares owned by them and, if they default in
the
performance of their secured obligations, the pledgees or secured parties
may
offer and sell the common shares, from time to time, under this prospectus,
or
under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling stockholders
to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders may also transfer
the common shares in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
The
selling stockholders may also sell shares by means of short sales to the
extent
permitted by United States securities laws. Short sales involve the sale
by a
selling stockholder, usually with a future delivery date, of common shares
that
the seller does not own. Covered short sales are sales made in an amount
not
greater than the number of shares subject to the short seller’s warrant,
exchange right or other right to acquire common shares. A selling stockholder
may close out any covered short position by either exercising its warrants
or
exchange rights to acquire common shares or purchasing shares in the open
market. In determining the source of shares to close out the covered short
position, a selling stockholder will likely consider, among other things,
the
price of common shares available for purchase in the open market as compared
to
the price at which it may purchase common shares pursuant to its warrants
or
exchange rights.
Naked
short sales are any sales in excess of the number of shares subject to the
short
seller’s warrant, exchange right or other right to acquire common shares. A
selling stockholder must close out any naked position by purchasing shares.
A
naked short position is more likely to be created if a selling stockholder
is
concerned that there may be downward pressure on the price of the common
shares
in the open market.
The
existence of a significant number of short sales generally causes the price
of
the common shares to decline, in part because it indicates that a number
of
market participants are taking a position that will be profitable only if
the
price of the common shares declines. Purchases to cover naked short sales
may,
however, increase the demand for the common shares and have the effect of
raising or maintaining the price of the common shares.
The
selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or
more
derivative securities that require the delivery to such broker-dealer or
other
financial institution of shares offered by this prospectus, which shares
such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common shares or interests therein may be
“underwriters” within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of
the
shares may be underwriting discounts and commissions under the Securities
Act.
Selling stockholders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements
of
the Securities Act.
To
the
extent required, the common shares to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices,
the
names of any agents, dealers or underwriters, and any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
Expenses,
Indemnification and Registration Obligations
We
are
paying the expenses incurred in connection with preparing and filing this
prospectus and the registration statement to which it relates, other than
selling commissions. We have not retained any underwriter, broker or dealer
to
facilitate the offer or sale of the shares offered hereby. We will pay no
underwriting commissions or discounts in connection therewith.
We
have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating
to the
registration of the shares offered by this prospectus. The selling stockholders
may indemnify any broker-dealers that participate in transactions involving
the
sale of the shares against certain liabilities, including liabilities arising
under the Securities Act.
Passive
Market Making
We
have
advised the selling stockholders that while they are engaged in a distribution
of the shares offered pursuant to this prospectus, they are required to comply
with Regulation M promulgated under the Securities Exchange Act of 1934,
as
amended. With certain exceptions, Regulation M precludes the selling
stockholders, any affiliate purchasers and any broker-dealers or other persons
who participate in the distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase, any security that
is
subject to the distribution until the entire distribution is complete.
Regulation M also restricts bids or purchases made in order to stabilize
the
price of a security in connection with the distribution of that security.
We do
not intend to engage in any passive market making or stabilization transactions
during the course of the distribution described in this prospectus. All of
the
foregoing may affect the marketability of the shares offered pursuant to
this
prospectus.
Limitations
We
have
advised the selling stockholders that the offered securities may not be offered
or sold in any state unless they have been registered or qualified for sale
in
the applicable state or an exemption from the registration or qualification
requirement is available with respect to such offers or sales. In addition,
we
have advised the selling stockholders that, to the extent necessary to comply
with governing state securities laws, the offered securities should be offered
and sold in such jurisdictions only through registered or licensed brokers
or
dealers.
DESCRIPTION
OF OUR COMMON SHARES
Our
Common Shares
We
are
authorized to issue an unlimited number of common shares, which do not have
par
value. As of January 12, 2007, there were 69,079,270 common shares issued
and
outstanding and held by approximately 450 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.
As
of
January 12, 2007, we had issued and outstanding options to acquire 3,276,347
common shares issued pursuant to our stock incentive plans, had issued and
outstanding warrants to purchase 3,256,525 common shares issued in various
series and had 1,642,904 shares reserved for future grants 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;
(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.
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.
EXPERTS
AND LEGAL MATTERS
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 each of
the
two years in the period 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.
The
validity of the offered common shares has been passed upon for us by Goodman
and
Carr, LLP.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
As
permitted by SEC rules, this prospectus does not contain all of the information
in the registration statement of which this prospectus 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. The information
incorporated by reference is deemed to be part of this prospectus, except
as
superseded or modified by information contained directly in this prospectus
or
in a subsequently filed document that also is (or is deemed to be) incorporated
into this prospectus by reference.
This
prospectus incorporates by reference the documents set forth below that we
(File
No. 001-12497) have previously filed with the SEC pursuant to the Exchange
Act.
These documents contain important information about the Company and its
financial condition.
(a) Our
Annual Report on Form 10-K for the year ended December 31, 2005, filed with
the
SEC on March 16, 2006.
(b) Our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June
30,
2006, and September 30, 2006 filed with the SEC on May 10, 2006, August 8,
2006,
and November 8, 2006 respectively.
(c) Our
Current Reports on Form 8-K filed with the SEC on February, 21, 2006, February
24, 2006, May 9, 2006, June 7, 2006, November 8, 2006, December 12, 2006,
December 14, 2006, December 18, 2006 and January 12, 2007.
(b) 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.
We
hereby
incorporate by reference all reports and other documents filed by us pursuant
to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this
prospectus and prior to the termination of this offering.
Statements
contained in this prospectus regarding the contents of any agreement or other
document filed as an exhibit to the registration statement or a document
incorporated by reference into the prospectus are not necessarily complete,
and
in each instance we qualify each of these statements in all respects by the
reference to the full agreement.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
reports and other information with the SEC. You may read and copy any document
that we file at the SEC’s public reference facilities at 100 F Street N.E., Room
1024, Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more
information about its public reference facilities. Our SEC filings are also
available to you free of charge at the SEC’s Website at http://www.sec.gov or
through the “SEC Filings” tab of the “Investors” section on our website at
http://www.altairnano.com.
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).
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
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.
| |
|
|
|
We
have not authorized any dealer, salesperson or other person to
give any
information or represent anything not contained in this prospectus.
This
prospectus does not offer to sell or buy any securities in any
jurisdiction where it is unlawful. The information in this prospectus
is
current only as of the date hereof.
_______________________
|
|
481,482
Common
Shares
ALTAIR
NANOTECHNOLOGIES INC.
_______________
Prospectus
_______________
January
19, 2007
|
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth the various expenses of the offering, sale and
distribution of the offered securities being registered pursuant to this
registration statement (the “Registration Statement”). All of the expenses
listed below will be borne by the Company. All of the amounts shown are
estimates except the SEC registration fees.
|
Item
|
|
Amount
|
|
|
SEC
Commission registration fees
|
|
$
|
140
|
|
|
Accounting
fees and expenses
|
|
|
20,000
|
|
|
Legal
fees and expenses
|
|
|
15,000
|
|
|
Miscellaneous
expenses
|
|
|
5,000
|
|
|
Total
|
|
$
|
40,140
|
|
Item
15. Indemnification of Directors and Officers.
Our
Bylaws
The
Registrant’s Bylaws provide that, to the maximum extent permitted by law, the
Registrant shall indemnify a director or officer of the Registrant, a former
director or officer of the Registrant, or another individual who acts or
acted
at the Registrant’s request as a director or officer, or an individual acting in
a similar capacity, of another entity, against all costs, charges and expenses,
including any amount paid to settle an action or satisfy a judgment, reasonably
incurred by the individual in respect of any civil, criminal, administrative,
investigative or other proceeding in which the individual is involved because
of
that association with the Registrant or other entity. In addition, the
Registrants Bylaws require the Registrant to advance monies to an indemnifiable
officer, director or similar person in connection with threatened or pending
litigation.
The
Canada Business Corporations Act
Section
124 of the Canada Business Corporations Act provides as follows with respect
to
the indemnification of directors and officers:
(1)
A
corporation may indemnify a director or officer of the corporation, a former
director or officer of the corporation or another individual who acts or
acted
at the corporation’s request as a director or officer, or an individual acting
in a similar capacity, of another entity, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by the individual in respect of any civil, criminal,
administrative, investigative or other proceeding in which the individual
is
involved because of that association with the corporation or other
entity.
(2)
A
corporation may advance moneys to a director, officer or other individual
for
the costs, charges and expenses of a proceeding referred to in subsection
(1).
The individual shall repay the moneys if the individual does not fulfill
the
conditions of subsection (3).
(3)
A
corporation may not indemnify an individual under subsection (1) unless the
individual
(a)
acted
honestly and in good faith with a view to the best interests of the corporation,
or, as the case may be, to the best interests of the other entity for which
the
individual acted as director or officer or in a similar capacity at the
corporation’s request; and
(b)
in
the case of a criminal or administrative action or proceeding that is enforced
by a monetary penalty, the individual had reasonable grounds for believing
that
the individual’s conduct was lawful.
(4)
A
corporation may with the approval of a court, indemnify an individual referred
to in subsection (1), or advance moneys under subsection (2), in respect
of an
action by or on behalf of the corporation or other entity to procure a judgment
in its favor, to which the individual is made a party because of the
individual’s association with the corporation or other entity as described in
subsection (1) against all costs, charges and expenses reasonably incurred
by
the individual in connection with such action, if the individual fulfills
the
conditions set out in subsection (3).
(5)
Despite subsection (1), an individual referred to in that subsection is entitled
to indemnity from the corporation in respect of all costs, charges and expenses
reasonably incurred by the individual in connection with the defense of any
civil, criminal, administrative, investigative or other proceeding to which
the
individual is subject because of the individual’s association with the
corporation or other entity as described in subsection (1), if the individual
seeking indemnity
(a)
was
not judged by the court or other competent authority to have committed any
fault
or omitted to do anything that the individual ought to have done;
and
(b)
fulfills the conditions set out in subsection (3).
(6)
A
corporation may purchase and maintain insurance for the benefit of an individual
referred to in subsection (1) against any liability incurred by the individual
(a)
in
the individual’s capacity as a director or officer of the corporation; or
(b)
in
the individual’s capacity as a director or officer, or similar capacity, of
another entity, if the individual acts or acted in that capacity at the
corporation’s request.
(7)
A
corporation, an individual or an entity referred to in subsection (1) may
apply
to a court for an order approving an indemnity under this section and the
court
may so order and make any further order that it sees fit.
(8)
An
applicant under subsection (7) shall give the Director notice of the application
and the Director is entitled to appear and be heard in person or by
counsel.
(9)
On an
application under subsection (7) the court may order notice to be given to
any
interested person and the person is entitled to appear and be heard in person
or
by counsel.
Other
Indemnification Information
Indemnification
may be granted pursuant to any other agreement, bylaw, or vote of shareholders
or directors. In addition to the foregoing, the Registrant maintains insurance
through a commercial carrier against certain liabilities which may be incurred
by its directors and officers. The foregoing description is necessarily general
and does not describe all details regarding the indemnification of officers,
directors or controlling persons of the Registrant.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In
the event that a claim for indemnification against such liabilities (other
than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
The
rights of indemnification described above are not exclusive of any other
rights
of indemnification to which the persons indemnified may be entitled under
any
bylaw, agreement, vote of stockholders or directors or otherwise.
Item
16. Exhibits.
|
3.1
|
Articles
of Continuance (1)
|
|
3.3
|
Bylaw
No. 1 (1)
|
|
4.1
|
Form
of Common Stock Purchase Warrant issued February 15, 2005 to Maxim
Group
LLC(2)
|
|
4.2
|
Form
of Placement Agent’s Warrant issued to Cowen and Company, LLC and dated
December 18, 2006(3)
|
|
4.3
|
Specimen
Stock Certificate of the registrant(4)
|
|
5.1
|
Opinion
of Goodman and Carr, LLP*
|
|
23.1
|
Consent
of Perry-Smith LLP*
|
|
23.2
|
Consent
of Deloitte & Touche LLP*
|
|
*
|
Filed
herewith.
|
|
(1)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on July 18, 2002, File No. 001-12497.
|
|
(2)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on February 22, 2005, File No. 001-12497.
|
|
(3)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on December 14, 2006, File No. 001-12497.
|
|
(4)
|
Incorporated
by reference to the Company’s Registration Statement on Form 10-SB filed
with the SEC on November 25, 1996, File No.
001-12497.
|
Item
17. Undertakings.
1. The
undersigned registrant hereby undertakes:
(1)
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of
1933;
(ii)
To
reflect in the prospectus any facts or events arising after the effective
date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
(iii)
To
include any material information with respect to the plan of distribution
not
previously disclosed in the registration statement or any material change
to
such information in the registration statement;
Provided,
however, That:
(A)
Paragraphs (1)(i) and (1)(ii) above do not apply if the registration statement
is on Form S-8, and the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished
to
the Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement; and
(B)
Paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the registration
statement is on Form S-3 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant
to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a form of
prospectus filed pursuant to Rule 424(b) that is part of the registration
statement.
(2)
That,
for the purpose of determining any liability under the Securities Act of
1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such
securities at that time shall be deemed to be the initial bona
fide
offering
thereof.
(3)
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
2. The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act
of 1934 (and, where applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is
incorporated by reference in the registration statement shall be deemed to
be a
new registration statement relating to the securities offered therein, and
the
offering of such securities at that time shall be deemed to be the initial
bona
fide
offering
thereof.
3. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company,
the
Company has been informed that in the opinion of the SEC such indemnification
is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer
or controlling person in connection with the securities being registered,
the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-3 and has duly caused this Registration Statement to be
signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of
Reno, Nevada on January 19, 2007.
| |
|
|
| |
ALTAIR
NANOTECHNOLOGIES INC. |
|
|
|
| |
By: |
/s/ Alan
J.
Gotcher |
| |
|
| |
Alan
J. Gotcher,
President
and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature to this Registration Statement appears
below hereby constitutes and appoints Alan J. Gotcher and Edward Dickinson,
and
each of them, as his true and lawful attorney-in-fact and agent, with full
power
of substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Registration Statement,
and any
and all instruments or documents filed as part of or in connection with this
Registration Statement or the amendments thereto and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent,
or his
substitutes, shall do or cause to be done by virtue hereof.
|
Signature
|
|
Title
|
|
Date
|
| |
|
|
|
|
|
/s/
Alan J. Gotcher
Alan
J. Gotcher
|
|
Chief
Executive Officer, President and Director
(Principal
Executive Officer)
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
Edward Dickinson
Edward
Dickinson
|
|
Chief
Financial Officer and Secretary
(Principal
Financial and Accounting Officer)
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
Michel Bazinet
Michel
Bazinet
|
|
Director
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
Jon N. Bengtson
Jon
N. Bengtson
|
|
Chairman
of the Board
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
James I. Golla
James
I. Golla
|
|
Director
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
George Hartman
George
Hartman
|
|
Director
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
Christopher E. Jones
Christopher
E. Jones
|
|
Director
|
|
January
19, 2007
|
| |
|
|
|
|
|
/s/
Pierre Lortie
Pierre
Lortie
|
|
Director
|
|
January
19, 2007
|
EXHIBIT
INDEX
|
3.1
|
Articles
of Continuance (1)
|
|
3.3
|
Bylaw
No. 1 (1)
|
|
4.1
|
Form
of Common Stock Purchase Warrant issued February 15, 2005 to Maxim
Group
LLC(2)
|
|
4.2
|
Form
of Placement Agent’s Warrant issued to Cowen and Company, LLC and dated
December 18, 2006(3)
|
|
4.3
|
Specimen
Stock Certificate of the registrant(4)
|
|
5.1
|
Opinion
of Goodman and Carr, LLP*
|
|
23.1
|
Consent
of Perry-Smith LLP*
|
|
23.2
|
Consent
of Deloitte & Touche LLP*
|
|
*
|
Filed
herewith.
|
|
(1)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on July 18, 2002, File No. 001-12497.
|
|
(2)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on February 22, 2005, File No. 001-12497.
|
|
(3)
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on December 14, 2006, File No. 001-12497.
|
|
(4)
|
Incorporated
by reference to the Company’s Registration Statement on Form 10-SB filed
with the SEC on November 25, 1996, File No.
001-12497.
|