PROSPECTUS
SUPPLEMENT
(To Prospectus dated October 3,
2006)
11,994,469
Shares
and
Warrants to Purchase 6,596,958 Shares
Common
Shares
We are
offering up to 11,994,469 common shares and warrants to purchase up to 6,596,958
common shares in this offering (and the common shares issuable from time to time
upon exercise of these warrants). The common shares and warrants will be sold in
units, with each unit consisting of one common share and one warrant to purchase
0.55 of a common share at an exercise price of $1.00 per common share. Each unit
will be sold at a negotiated price of $1.17 per unit. Each purchaser
of our common shares will receive one warrant to purchase 0.55 common
shares, exercisable for seven years at an exercise price of $1.00 per share, for
each common share they purchase in this offering. 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 May 21, 2009, the last reported sale price of our common shares was
$1.35 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 (“SEC”) or any state securities commission nor has the SEC or any
state securities commission passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus. Any representation to the
contrary is a criminal offense.
In
connection with this offering, we have engaged Lazard Capital Markets, LLC as
the placement agent.
|
Per Unit
|
Maximum
Offering Amount
|
|||||||
|
Public
offering price
|
$ | 1.17 | $ | 14,033,529 | ||||
|
Placement agent's
fee1
|
$ | 0.08 | $ | 982,347 | ||||
|
Proceeds,
before expenses, to Altair
|
$ | 1.09 | $ | 13,051,182 | ||||
We
estimate the total expenses of this offering, excluding the placement agent's
fee, will be approximately $215,000. 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 offering these common shares and warrants to purchase
common shares on a best efforts basis primarily to institutional investors. We
have retained Lazard Capital Markets LLC to act as the exclusive placement agent
in connection with this offering. 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.
___________________
1 See
"Plan of Distribution" beginning on page S-16 of this prospectus supplement.
LAZARD
CAPITAL MARKETS
Prospectus
Supplement dated May 22, 2009
TABLE
OF CONTENTS
|
PROSPECTUS
SUPPLEMENT
|
Page
|
PROSPECTUS
|
Page
|
|
|
About
this Prospectus Supplement
|
S-1
|
Overview
|
3
|
|
|
Business
Overview
|
S-2
|
About
this Prospectus
|
4
|
|
|
The
Offering
|
S-3
|
Risk
Factors
|
5
|
|
|
Risk
Factors
|
S-4
|
Forward-Looking
Statements
|
12
|
|
|
Forward-Looking
Statements
|
S-13
|
Use
of Proceeds
|
13
|
|
|
Use
of Proceeds
|
S-13
|
The
Securities We May Offer
|
13
|
|
|
Dilution
|
S-14
|
Plan
of Distribution
|
18
|
|
|
Description
of Units
|
S-15
|
Incorporation
of Certain Information by Reference
|
20
|
|
|
Plan
of Distribution
|
S-17
|
Where
You Can Find More Information
|
21
|
|
|
Investor
Suitability Standards
|
S-18
|
Legal
Matters
|
21
|
|
|
Incorporation
of Certain Information by Reference
|
S-19
|
Experts
|
21
|
|
|
Where
You Can Find More Information
|
S-20
|
Disclosure
of Commission Position on
|
||
|
Legal
Matters
|
S-20
|
Indemnification
for Securities Act Liabilities
|
21
|
|
|
Experts
|
S-20
|
|||
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
S-20
|
________________________
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, and the placement agent has 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. Persons outside the United States who come into possession
of this prospectus must inform themselves about, and observe any restrictions
relating to, the offering of the common shares and warrants to purchase common
shares and the distribution of this prospectus outside the United
States.
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
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.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is the prospectus supplement, which
describes the specific terms of the securities we are offering and also adds to
and updates information contained in the accompanying prospectus and the
documents incorporated by reference into the accompanying prospectus. The second
part, the accompanying prospectus, including the documents incorporated by
reference, provides more general information. Generally, when we refer to this
prospectus, we are referring to both parts of this document
combined. 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 described in the
following paragraph. 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.
The shelf
registration statement originally registered an aggregate of $50,000,000 in
securities. An amount of $24,999,999.30 of the common shares offered
under this shelf registration process were sold prior to the date
hereof. An additional $6,248,309.60 of common shares were issued upon
the exercise of warrants offered under this shelf registration process,
resulting in an aggregate prior “take down” of $31,248,309.60. The
remaining $18,751,690.40 has been increased by $3,750,338.08 pursuant
Registration Statement of Form S-3MEF filed pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, resulting in a the total maximum dollar
amount of $22,502,028.48 remaining under the shelf registration for this
offering and any subsequent offerings.
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 corporation, with principal assets and operations in the United States,
whose primary business is developing and commercializing nanomaterial and
titanium dioxide pigment technologies. We are organized into two divisions, a
Power and Energy Group, and all other operations, which consists of the
remaining portions of the previous Life Sciences and Performance Materials
groups. Management completed a thorough review of operations and
strategies and determined that it was in the best interests of the shareholders
for the Company to focus primarily on the Power and Energy Group. As
a result of this assessment resources devoted to the Performance Materials Group
and Life Sciences Group were significantly reduced and no new development is
being done in those areas.
Our
research, development, production and marketing efforts are currently directed
toward one primary market, the Power and Energy Storage market, with efforts in
other areas being directed at supporting existing initiatives rather than
developing any new products. We are still, however, engaged in the
following ongoing development and production efforts:
Power and
Energy Group
|
·
|
The
design, development, and production of our nano-lithium Titanate battery
cells, batteries, and battery packs as well as related design and test
services for use in a variety of energy
applications.
|
|
·
|
The
development, production and sale for testing purposes of electrode
materials for use in a new class of high performance lithium ion batteries
called nano-lithium Titanate
batteries.
|
All Other
Operations
|
·
|
Continuing
support for AlSher Titania, in evaluating strategic alternatives to
develop and produce high quality titanium dioxide pigment for use in paint
and coatings, and nano titanium dioxide materials for use in a variety of
applications including those related to removing contaminants from air and
water.
|
|
·
|
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 human patients undergoing kidney
dialysis.
|
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
revenues have been, and we expect them to continue to be, generated by license
fees, product sales, commercial collaborations and contracts and
grants. We currently have agreements in place to (1) provide research
to further develop battery electrode materials, nanosensors, and nanomaterials
characterization, (2) participate in a joint venture combining the technologies
of the partners in order to develop and produce titanium dioxide pigment for use
in a variety of applications, (3) develop a suite of energy storage solutions
for the stationary power market (4) develop battery backup power systems for
Naval applications and (5) develop power and energy systems for other military
applications. In addition, we have entered into a licensing agreement
for RenaZorb, our pharmaceutical candidate for treatment of chronic renal
failure in humans. We have made product sales consisting principally
of battery packs and nano lithium titanate. Future revenues will
depend on the success of our contracted projects, the results of our other
research and development work, the success of the RenaZorb application licensee
in obtaining regulatory approval for the drugs, or other products, and the
success of our marketing efforts with respect to both product sales and
technology licenses.
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
|
11,994,469
shares
|
|
Warrants
to purchase common shares offered by us
|
6,596,958 shares
|
|
Common
shares to be outstanding after this offering
|
105,147,740
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.
|
|
Risk
Factors
|
See
“Risk Factors” beginning on page S-4 for a discussion of factors you
should consider carefully when making an investment decision.
|
|
Warrant
terms
|
The
warrants will be exercisable beginning at closing through May 28,
2016 and will be exercisable at a price of $1.00 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 93,153,271 shares outstanding as of May 22, 2009 and
excludes:
|
·
|
4,973,135common
shares issuable upon exercise of options outstanding under our equity
incentive plans as of May
22, 2009, at a weighted-average exercise price of $2.4913 per
share;
|
|
·
|
431,482
common shares issuable upon exercise of warrants outstanding as of May 22,
2009, at a weighted-average exercise price of $3.4978 per
share;
|
|
·
|
4,160,916
common shares reserved for future grants under our equity incentive plans
as of May 22, 2009; and
|
|
·
|
6,596,958
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 May 22, 2009;
and
|
|
|
·
|
no
issuance of additional options to purchase common shares under our
existing equity incentive plans since May 22,
2009.
|
S-3
RISK
FACTORS
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.
If you
purchase common shares and warrants to purchase common shares in this offering,
you will incur an immediate and substantial dilution in net tangible book value
of $0.69 per share, after giving effect to the sale by us of 11,994,469 units in
this offering at the public offering price of $1.17 per unit. In the past, we
have issued options to acquire common shares at prices significantly below this
offering price. To the extent these outstanding options are ultimately
exercised, you will incur additional dilution.
Our management
will have broad discretion over the use of the net proceeds from this offering,
you may not agree with how we use the proceeds and the proceeds may not be
invested successfully.
Our
management will have broad discretion as to the use of the net proceeds from any
offering by us and could use them for purposes other than those contemplated at
the time of this offering. Accordingly, you will be relying on the judgment of
our management with regard to the use of these net proceeds, and you will not
have the opportunity as part of your investment decision to assess whether the
proceeds are being used appropriately. It is possible that the proceeds will be
invested in a way that does not yield a favorable, or any, return for our
company.
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 $30.1 million in 2008, and $6.4 million for the three months
ended March 31, 2009. Even if we do generate operating income in one or more
quarters in the future, subsequent developments in the economy, 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
operating losses. We may never become profitable.
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;
|
|
·
|
additions
of new customers or losses of existing
customers;
|
|
·
|
positive
or negative business or financial developments announced by our key
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;
|
|
·
|
technology
and intellectual property issues associated with our products;
and
|
|
·
|
general
political, social, geopolitical and economic trends and
events.
|
S-4
A
majority of our revenue has historically been generated from low-margin contract
research and development services; if we cannot expand revenues from other
products and services, our business will fail.
Historically,
a majority of our revenue has come from contract research and development
services for businesses and government agencies. During the years ended December
31, 2008, 2007 and 2006, contract service revenues comprised 87%, 55% and 67%
respectively, of our operating revenues. Contract services revenue is low
margin, or has negative margins, and is unlikely to grow at a rapid pace. Our
business plan anticipates revenues from product sales and licensing, both of
which have potential for 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, or if we are forced to accept low or
negative margins in order to achieve revenue growth, we may fail to reach
profitability in the future.
We
may not be able to raise sufficient capital to meet future
obligations.
As of
March 31, 2009, we had approximately $21.9 million in cash and cash
equivalents. As we take additional steps to enhance our
commercialization and marketing efforts, or respond to acquisition and joint
venture opportunities or potential adverse events, our use of working capital
may increase. 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,
including recent increases or decreases in major stock market indexes, the
stability of the banking and investment banking systems and general
economic stability or instability;
|
|
·
|
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. If we are unable to obtain
sufficient capital in the long run, we may be forced to curtail or discontinue
operations.
Adverse
economic conditions and government initiatives could reduce or delay the demand
for our products.
The
current financial markets and general economic environment are substantially
weaker at present than they have been in past years. Our products are
targeted primarily at large power producers, the U.S. and British military,
military contractors and, to a lesser extent, automobile
manufacturers. Due to declining revenues and concerns about
liquidity, companies and branches of the military in our target market have
reduced, delayed or eliminated many research and development initiatives,
including those related to energy storage. This reduction or delay in
development spending is harming our development and productions efforts and will
continue to harm such efforts until development spending increases to prior
levels.
In
addition, certain of our customers or potential customers who have the liquidity
to fund development projects have deferred orders in anticipation of qualifying
for funds dispensed in accordance with the American Recovery and Reinvestment
Act of 2009. We are likely to experienced reduced product
demand until companies seeking funding under these energy initiatives within the
American Recovery and Reinvestment Act of 2009 receive funding and/or learn that
they will not receive funding.
S-5
We
depend upon several sole-source third-party suppliers.
We rely
on certain suppliers as the sole-source of certain services, raw materials and
other components of our products. We do not have long-term supply or
service agreements with any such suppliers. As a result, the
providers of such services and components could terminate or alter the terms of
service or supply with little or no advance notice. If our
arrangements with any sole-source supplier were terminated or such a supplier
failed to provide essential services or deliver essential components on a timely
basis or introduced unacceptable price increases, our production schedule would
be delayed, possibly by as long as six months. Any such delay in our
production schedule would result in delayed product delivery and may also result
in additional production costs, customer losses and litigation.
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 technology, as critical to our success. We have received various
patents, and filed other patent applications, for various applications and
aspects of our nanomaterials 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.
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 nano-structure LTO electrode 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:
S-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 characteristics necessary
for the success of the project, may dedicate only limited resources to,
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 be in the early stages of development and may not
have sufficient liquidity to invest in joint development projects, expand
their businesses and purchase our products as expected or honor
contractual commitments;
|
|
·
|
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.
Interest
in our nano-structured LTO battery materials and batteries is affected by energy
supply and pricing, political events, popular consciousness and other factors
over which we have no control.
Currently,
our marketing and development efforts for our batteries and battery materials
are focused primarily on transportation, military and stationary power
applications. In the transportation and military markets, batteries
containing our nano-structured LTO materials are designed to replace or
supplement gasoline and diesel engines. In the stationary power
applications, our batteries are designed to conserve and regulate the stable
supply of electricity, including from renewable sources. The interest
of our potential customers and business partners in our products and services is
affected by a number of factors beyond our control, including:
|
·
|
economic
conditions and capital financing and liquidity
constraints;
|
|
·
|
short-term
and long-term trends in the supply and price of gasoline, diesel, coal and
other fuels;
|
|
·
|
the
anticipated or actual granting or elimination by governments of tax and
other financial incentives favoring electric or hybrid electric vehicles
and renewable energy production;
|
|
·
|
the
anticipated or actual funding, or elimination of funding, for programs
that support renewable energy programs, electric grid improvements,
certain military electric vehicle initiatives and related
programs;
|
|
·
|
changes
in public and investor interest, for financial and/or environmental
reasons, in supporting or adopting alternatives to gasoline and diesel for
transportation and other purposes;
|
|
·
|
the
overall economic environment and the availability of credit to assist
customers in purchasing our large battery
systems;
|
|
·
|
the
expansion or contraction of private and public research and development
budgets as a result of global and U.S. economic trends;
and
|
S-7
|
·
|
the
speed of incorporation of renewable energy generating sources into the
electric grid.
|
Our
nano-structured LTO battery materials and battery business is currently
dependent upon a few customers and potential customers, which presents various
risks.
Our
nano-structure LTO battery materials and battery business has historically been
dependent upon a few customers, including the U.S. government, affiliates of AES
Corporation and smaller companies developing electric or hybrid electric cars
and buses. In addition, most of these customers are development
partners, who are subsidizing the research and development of products for which
they may be the sole, or one of a few, potential purchasers. As a
result of the small number of potential customers and partners, our existing
customers and partners may have significant leverage on pricing terms,
exclusivity terms and other economic and noneconomic terms. This may
harm our attempts to sell products at prices that reflect desired gross
margins. In addition, the decision by a single customer to abandon
use or development of a product, or budget cutbacks and other events harming the
ability of a single customer to continue to purchase products or continue
development, may significantly harm both our financial results and the
development track of one or more 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 conducting diligence on, evaluating,
purchasing or 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. To the extent we
issue shares of capital stock or other rights to purchase capital stock,
including options and warrants, existing shareholders would 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 several years, we have increased our research and development
expenditures in an attempt to accelerate the commercialization of certain
products, particularly our nano-structured LTO electrode materials and battery
systems. Our business plan anticipates continued expenditure on development,
manufacturing and other growth initiatives. We may fail to achieve significant
growth despite such expenditures. 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.
S-8
Our
competitors have more resources than we do, and may be supported by more
prominent partners, 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. In
addition, certain of our early stage competitors may be partnered with,
associated with or supported by larger business or financial
partners. This may increase their ability to raise capital, attract
media attention, develop products and attract customers despite their short
operating history and small size. Because of their size, resources,
reputation and history (or that of their business and financial partners)
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 may enter into
similar agreements with respect the other 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 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
licensees 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; in this regard,
we note that Spectrum Pharmaceuticals, Inc., the licensee of RenaZorb, has
been significantly delayed in testing on RenaZorb;
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 efforts, which would adversely affect our overall business, operations
and financial condition.
We
and Sherwin-Williams may be unable to find a new investor to participate in
AlSher, and consequently terminate the joint venture disposing of its remaining
assets.
We are
currently working with Sherwin-Williams to identify an interested third party to
invest in AlSher and undertake the next phase in the proposed development of our
titanium dioxide pigment manufacturing process, which is the construction of an
approximately 5,000 ton per year demonstration plant. Neither
Sherwin-Williams nor Altair has indicated a willingness to fund this next phase
of development. Should the parties be unable to find an acceptable
third party investor, the AlSher joint venture will in all likelihood be
terminated and its remaining assets sold. If this joint venture is
terminated, it is unlikely that we will realize any material revenue from its
titanium dioxide pigment production process.
S-9
If
manufacturing becomes a larger part of our operations, we will become exposed to
accompanying risks and liabilities.
We have
not produced any products using our nanomaterials and titanium dioxide pigment
technology and equipment on a sustained commercial basis. In-house or outsourced
manufacturing is expected to become an increasingly significant part of our
business over the next few years. As a result, we expect to 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
be required to repair or replace defective products and 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
|
|
·
|
As
our manufacturing operations expand, we expect that a significant portion
of our manufacturing will be done overseas, either by third-party
contractors or in a plant owned by the company. Any
manufacturing done overseas presents risks associated with quality
control, currency exchange rates, foreign laws and customs, timing and
loss risks associated with overseas transportation and potential adverse
changes in the political, legal and social environment in the host county;
and
|
|
·
|
We
may have made, 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 harm our
business, operations and financial condition.
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 or Dubai 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. A
fourth director is a resident of Dubai. 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 or Dubai 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 our
executive management team and certain key scientists and engineers. We do not
have key man insurance on any of these individuals. Nor do we have agreements
requiring any of our key personnel to remain with our company. The
loss or unavailability of any or all of these individuals could harm our ability
to execute our business plan, maintain important business relationships and
complete certain product development initiatives, which would harm our
business.
S-10
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
shareholders. In addition, we have various stock option plans that have
potential for diluting the ownership interests of our shareholders. The issuance
of any additional common shares would further dilute the percentage ownership of
our company held by existing shareholders.
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 is 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 our 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.
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 conditions, investor distrust or a financial
crisis.
|
We
may be delisted from the NASDAQ Capital Market if the price of our common shares
does not remain above $1.00 per share.
Under
NASDAQ rules, a stock listed on NASDAQ Capital Market must maintain a minimum
bid price of at least $1.00 per share. During late 2008 and early
2009, the minimum bid price for our common shares has fallen below $1.00 on
several occasions. As a matter of practice, NASDAQ generally gives a
company a notice of delisting if its common shares trades below $1.00 for 30
consecutive trading days. After receiving the notice, the company will generally
be delisted if the trading price for its common shares has not exceeded $1.00
for 10 consecutive days within 90 days of the date of the
notice. NASDAQ has temporarily suspended its minimum bid price
requirements until July 2009 in light of recent declines in the value of equity
securities overall. NASDAQ is not, however, required to extend this
rule suspension or give a company any grace period and may delist a company's
stock immediately after violation of an applicable rule. Accordingly,
if the price of our common shares trades below $1.00 for a sustained period of
time, or if NASDAQ decides to delist our common shares based upon a one-time
violation of the bid-price rule or any other rule, we may be delisted from the
NASDAQ Capital Market.
Following
any such delisting, our common shares would likely be eligible for quotation on
the OTC Bulletin Board or other quotation service. Nonetheless, even if our
common shares are quoted on an alternative quotation service, the fact of being
delisted from the NASDAQ Capital Market will likely harm the price and trading
volume for our common shares. Once delisted, our common shares would not be
eligible for relisting until, among other things, our common shares traded at or
above $4.00 per share.
S-11
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.
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. We may also be subject to lawsuits as a result of
alleged violation of the securities laws or governing corporate laws. Any
charge or allegation, 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.
A
large shareholder has certain registration, board appointment and other rights
that may permit the shareholder to exercise significant influence on management
or obtain certain benefits.
Al
Yousuf, LLC, which is controlled by Eqbal Al Yousuf, a member of our board of
directors, owns approximately 20% of our issued and outstanding common
shares. In addition, Al Yousuf, LLC has the contractual right
to appoint two directors to our board of directors, the contractual right to
cause one such director to serve on our Compensation, Nomination and Corporate
Governance Committee and a right of first offer permitting it to purchase a
percentage of the common shares offered in certain future offerings equal to its
percentage ownership of our common shares. (Such right of first offer
has been waived with respect to this offering). In addition, we have executed a
registration rights agreement with Al Yousuf, LLC pursuant to which we are
required to cause a registration statement registering the re-sale of its shares
to be effective by December 2009 and pursuant to which it has the right to
demand a one-time underwritten registration of its shares at any time during a
six-year period beginning in December 2009. As a result of these
agreements, Al Yousuf, LLC and Mr. Al Yousuf may have a disproportionate
influence on management, which influence may be used in a manner that benefits
Al Yousuf, LLC more than the shareholders as a whole, and may be able to extract
certain benefits or rights from the company.
S-12
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.
USE
OF PROCEEDS
The
estimated net proceeds we will receive from this offering will be approximately
$12.84 million after deducting the placement agent's fee and the estimated
offering expenses assuming the maximum number of shares and warrants are sold in
the offering. We will not receive any proceeds from the sale of common shares
issuable upon exercise of the warrants unless and until such warrants are
exercised. If the warrants were fully exercised for cash, we would receive
additional proceeds of up to approximately $6.60 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.
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 March 31, 2009 was $37.14
million, or $0.40 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 11,994,469 common shares and warrants to purchase 6,596,958
common shares in this offering at the public offering price of $1.17 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 March 31, 2009 would
have been $49.98 million, or $0.48 per common share. This amount represents an
immediate increase in net tangible book value of $.08 per share to our existing
shareholders and an immediate dilution in net tangible book value of
$0.69 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
|
$
|
1.17
|
|||||
|
Net
tangible book value per share as of March 31,
2009
|
$
|
0.40
|
|||||
|
Increase
in net tangible book value per share attributable to this
offering
|
$
|
0.08
|
|||||
|
As
adjusted net tangible book value per share after this
offering
|
$
|
0.48
|
|||||
|
Dilution
per share to new
investors
|
$
|
0.69
|
The above
discussion and table are based on 93,153, 271common shares issued and
outstanding as of May 22, 2009 and exclude:
|
·
|
4,973,185
common shares issuable upon exercise of options outstanding under our
equity incentive plans as of May 22, 2009, at a weighted-average exercise
price of $2.4913 per share
|
|
·
|
431,482
common shares issuable upon exercise of warrants outstanding as of May 22,
2009 at a weighted-average exercise price of $3.4978 per
share;
|
|
·
|
up
to 6,596,958 warrants to be issued in this offering at an exercise price
of $1.00 per share; and
|
|
·
|
4,160,916
common shares reserved as of May 22, 2009 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 UNITS
In this
offering, we are offering a maximum of 11,994,469 units, consisting of
11,994,469 common shares and warrants to purchase up to 6,596,958 common shares.
Each unit consists of one common share and warrants to purchase 0.55 common
shares at an initial exercise price of $1.00 per share. This prospectus also
relates to the offering of our common shares upon exercise, if any, of the
warrants. Units will not be issued or certificated. The common shares and
warrants are immediately separable and will be issued separately.
The units
offered in this offering will be issued pursuant to a subscription agreement
between each of the purchasers and us. You should review a copy of the form of
subscription agreement and the form of warrant, each of which have been filed by
us as an exhibit to a Current Report on Form 8-K filed with the Securities and
Exchange Commission in connection with this offering, for a complete description
of the terms and conditions applicable to the units. This description of the
units in this prospectus supplement is qualified in its entirety by reference to
the warrants and subscription agreement.
Common
Shares
The
material terms and provisions of our common shares and each other class of our
securities which qualifies or limits our common shares are described under the
caption “The Securities We May Offer” starting on page 13 of the accompanying
prospectus.
Warrants
Exercisability. The warrants
are exercisable beginning on the date of original issuance and at any time up to
the date that is seven years after such date. The warrants will be exercisable,
at the option of each holder, in whole or in part by delivering to us a duly
executed exercise notice accompanied by payment in full for the number of common
shares purchased upon such exercise (except in the case of a cashless exercise
as discussed below). Unless otherwise specified in the warrant, except upon at
least 61 days’ prior notice from the holder to us, the holder will not have
the right to exercise any portion of the warrant if the holder (together with
its affiliates) would beneficially own in excess of 4.99% or 9.99%, as
applicable, of the number of common shares outstanding immediately after giving
effect to the exercise, as such percentage ownership is determined in accordance
with the terms of the warrants.
Cashless Exercise. In the
event that a registration statement covering common shares underlying the
warrants, or an exemption from registration, is not available for the issuance
or resale of such common shares underlying the warrants, the holder may, in its
sole discretion, exercise the warrant in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to us upon such exercise in
payment of the aggregate exercise price, elect instead to receive upon such
exercise the net number of common shares determined according to the formula set
forth in the warrant.
Exercise Price. The exercise
price per common share purchasable upon exercise of the warrants is $1.00 per
common share being purchased. The exercise price is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock
splits, stock combinations, reclassifications or similar events affecting our
common shares and also upon any distributions of assets, including cash, stock
or other property to our shareholders. The exercise price per share will also be
subject to adjustment on a weighted average basis for certain dilutive issuances
of equity securities.
Fractional
Shares. 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.
Transferability. Subject to
applicable laws, the warrants may be offered for sale, sold, transferred or
assigned without our consent.
Exchange Listing. We do not
plan on making an application to list the warrants on the Nasdaq Capital Market,
any other national securities exchange or other nationally recognized trading
system.
Fundamental Transactions. We
will not enter into or be party to a fundamental transaction, which is a merger
or other change of control transaction, as described in the warrants, unless the
successor entity, as described in the warrants, assumes the warrants and
delivers new warrants that are substantially similar. If we enter into, or are a
party to, a fundamental transaction pursuant to which our shareholders are
entitled or required to receive securities issued by another company or cash or
other assets in exchange for common shares, which we refer to as a fundamental
transaction, a holder of a warrant will have the right to receive, upon an
exercise of the warrant, consideration as if the holder had exercised its
warrant immediately prior to such fundamental transaction. In the event of a
fundamental transaction, at the request of a holder of a warrant delivered
before the 15th day after such fundamental transaction, we (or the successor
entity) will purchase the warrant by paying to the holder, cash in an amount
equal to the Black-Scholes value, as described in the warrant, of the remaining
unexercised portion of the warrant on the date of consummation of such
fundamental transaction.
S-15
Restrictions on Market-Based
Convertible Securities and Rights. In the subscription
agreement, we agree that, for so long as any warrants remain outstanding, we
will not issue or sell any rights, warrants or options to subscribe for or
purchase common shares, or directly or indirectly convertible into or
exchangeable for common shares at a price which resets as a function of market
price of the common shares, unless the conversion, exchange or exercise price of
any such security cannot be less than the then exercise price of the warrants
(other than as a result in the ordinary course of business of the issuance of
common stocks under our stock plans or employee stock purchase
plans).
Rights as a Stockholder.
Except as otherwise provided in the warrants or by virtue of such holder’s
ownership of common shares, the holder of a warrant does not have the rights or
privileges of a holder of our common shares, including any voting rights, until
the holder exercises the warrant.
Waivers and Amendments.
Subject to the 61-day prior notice requirement with respect to certain
ownership limitations, any term of the warrants may be amended or waived with
our written consent and the written consent of the holders of
warrants.
S-16
PLAN
OF DISTRIBUTION
We are
offering units through a placement agent, with each unit consisting of one
common share and warrants to purchase 0.55 of a common share. 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 May 22, 2009,
Lazard Capital Markets LLC has agreed to act as the placement agent for the sale
of up to an aggregate of 11,994,469 units. The placement agent is not purchasing
or selling any units by this prospectus supplement or the accompanying
prospectus, nor is it required to arrange for the purchase or sale of any
specific number or dollar amount of units, but has agreed to use reasonable
efforts to arrange for the sale of all of the units.
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
customary legal opinions, letters and certificates.
Confirmations
and definitive prospectuses will be distributed to all investors who agree to
purchase the units, informing investors of the closing date as to such units. We
currently anticipate that closing of the sale of the units will take place on or
about May 28, 2009. Investors will also be informed of the date and manner in
which they must transmit the purchase price for their units. On the scheduled
closing date, the following will occur:
|
·
|
we
will receive funds in the amount of the aggregate purchase price;
and
|
|
·
|
Lazard
Capital Markets 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 7.0% of the gross proceeds in the
offering. We may also reimburse the placement agent for certain legal
expenses incurred by it in connection with this offering not to exceed 1% of the
gross offering proceeds. 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 gross proceeds of
this offering. In addition, the maximum commission or discount to be
received by a FINRA member of independent broker/dealer will not be greater than
8.0% for the sale of any securities being registered pursuant to SEC Rule 415
and sold under this shelf registration statement. 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 $982,347, are approximately $215,000,
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 approximately $12,836,181. If
all of the warrants offered hereby are exercised for cash, we would receive
additional proceeds of up to a maximum of approximately $6,596,958.
Lazard
Frères & Co. LLC referred this transaction to Lazard Capital Markets LLC and
will receive a referral fee from Lazard Capital Markets LLC in connection
therewith.
We have
agreed to indemnify the placement agent and Lazard Frères & Co. LLC 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 and Lazard Frères & Co. LLC 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 and other securities
convertible into or exercisable or exchangeable for 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-17
INVESTOR
SUITABILITY STANDARDS
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 not domiciled 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 received or executed in
Canada.
|
S-18
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, 2008, filed
with the SEC on March 16, 2009.
|
|
·
|
Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed
with the SEC on May 8, 2009.
|
|
·
|
Our
Current Reports on Form 8-K filed with the SEC on March 4, 2009, April 1,
2009, and April 24, 2009.
|
|
·
|
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 John Fallini, Chief Financial
Officer, at our corporate headquarters, located at 204 Edison Way, Reno, Nevada
89502, telephone
number (775) 858-3750.
S-19
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 has been passed upon for us by Cassels
Brock & Blackwell, LLP, of Toronto, Ontario, Canada. Additional legal
matters are being passed upon for us by Parr Brown Gee & Loveless, PC, of
Salt Lake City, Utah. Proskauer Rose LLP, of New York, New
York, is acting as counsel to the placement agent in connection with this
offering.
EXPERTS
The
consolidated financial statements as of December 31, 2008 and 2007 and for the
years ended December 31, 2008, 2007 and 2006 incorporated in this prospectus
supplement by reference from our Annual Report on Form 10-K for the year ended
December 31, 2008 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 also 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,
2008. 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.
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-20
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
|
|
4
|
|
Risk
Factors
|
|
5
|
|
Forward-Looking
Statements
|
|
12
|
|
Use
of Proceeds
|
|
13
|
|
The
Securities We May Offer
|
|
13
|
|
Plan
of Distribution
|
|
18
|
|
Incorporation
of Certain Information by Reference
|
|
20
|
|
Where
You Can Find More Information
|
|
21
|
|
Legal
Matters
|
|
21
|
|
Experts
|
|
21
|
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
|
21
|
2
OVERVIEW
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.
3
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.
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
RISK
FACTORS
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 risk factors in this section are forward-looking
statements.
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 $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.
5
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 assignment 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 assignment 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.
|
7
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.
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, we 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.
|
8
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.
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.
9
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 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.
10
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:
|
·
|
Intentional
manipulation of our stock price by existing or future stockholders 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.
11
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.
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.
12
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
stockholders. 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 stockholders. 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 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
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.
13
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;
14
(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.
15
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.
|
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.
16
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.
|
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.
17
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.
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.
18
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.
|
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.
19
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.
|
|
·
|
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.
20
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.
LEGAL
MATTERS
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.
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
11,994,469 Shares
and
Warrants to Purchase 6,596,958 Shares
Common
Shares
PROSPECTUS
SUPPLEMENT
LAZARD
CAPITAL MARKETS
May 22,
2009