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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|X|  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE  ACT OF 1934 FOR THE  TRANSITION  PERIOD FROM  _______________  TO
     _______________


                            ALTAIR INTERNATIONAL INC.
 ------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Province of
        Ontario,
         Canada                         1-12497                    None
----------------------------     ---------------------     ---------------------
(State or other jurisdiction     (Commission File No.)         (IRS Employer
    of incorporation)                                       Identification No.)

                         1725 Sheridan Avenue, Suite 140
                               Cody, Wyoming 82414
 ------------------------------------------------------------------------------
          (Address of principal executive offices, including zip code)


       Registrant's telephone number, including area code: (307) 587-8245

|_|      Securities registered pursuant to Section 12(b) of the Act:  None

|X|      Securities registered pursuant to Section 12(g) of the Act:

Common Shares, no par value         Nasdaq Stock Market, Alberta Stock Exchange
---------------------------       ----------------------------------------------
     (Title of Class)               (Name of each exchange on which registered)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X NO

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. |_|

         The aggregate market value of the Common Shares held by  non-affiliates
of the Registrant on February 27, 1998, based upon the closing sale price of the
Common  Shares on the NASDAQ  Stock  Market of $13.438 per share on February 27,
1998,  was  approximately  $168,557,980.  Common Shares held by each officer and
director  and by each other  person who may be deemed to be an  affiliate of the
Registrant have been excluded.

         As of February 27, 1998, the  Registrant  had 15,510,245  Common Shares
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None.

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<PAGE>



                               INDEX TO FORM 10-K


PART I     ..................................................................  1
           Exchange Rate Information.........................................  1

Item 1.    Business..........................................................  1
           --------
           General...........................................................  1
           Target Markets....................................................  3
                  Heavy Minerals Recovery....................................  3
                  Coal Washing...............................................  3
                  Environmental Remediation..................................  4
                  Other Testing..............................................  4
           Tennessee Minerals Property.......................................  4
           Technology and Proprietary Rights.................................  5
           Competition.......................................................  6
                  Alternative Technologies...................................  6
                  Competing Products.........................................  6
           Plan of Operation.................................................  7
                  Business Development.......................................  7
                  Research, Testing and Development..........................  7
           Subsidiaries......................................................  9
           Government Regulation and Environmental Concerns.................. 10
                  Government Regulation...................................... 10
                  Environmental Regulation and Liability..................... 11
           Employees......................................................... 11
           Glossary of Terms................................................. 11
           Factors That May Affect Future Results............................ 12
                  Absence of Operating Revenues; Operating Losses............ 12
                  Product Development Risk................................... 13
                  Property Development Risk.................................. 13
                  Dependence on Third Party Manufacturers.................... 13
                  Sufficiency and Price of Capital........................... 13
                  Competing Products and Alternative Technologies............ 14
                  Dependence on Commodities Markets.......................... 14
                  Risk of Development, Construction and Mining Operations.... 14
                  Government Regulation; Environmental Permits and Liability. 14
                  Enforceability of Civil Liabilities Against Foreign Persons 15
                  Patents for the Centrifugal Jig............................ 15
                  Dependence on Key Personnel................................ 15
                  Acquisition Risks.......................................... 15
                  Possible Issuance of Substantial Amounts of Additional
                           Shares Without Stockholder Approval............... 16
                  Possible Volatility of Stock Price......................... 16
                  Shares Eligible for Future Sales........................... 16
                  Absence of Dividends....................................... 16

Item 2.    Properties........................................................ 16
           ----------

Item 3.    Legal Proceedings................................................. 17
           -----------------

Item 4.    Submission of Matters to a Vote of Security Holders............... 17
           ---------------------------------------------------

PART II    .................................................................. 17

Item 5.    Market for the Registrant's Common Stock and Related
           ----------------------------------------------------
           Shareholder Matters............................................... 17
           -------------------
           Market Price...................................................... 17
                  United States.............................................. 17
                  Canada   .................................................. 18
           Outstanding Shares and Number of Shareholders..................... 18
           Dividends......................................................... 19
           Transfer Agent and Registrar...................................... 19
           Canadian Taxation Considerations.................................. 19
           Recent Sales of Unregistered Securities........................... 19

Item 6.    Selected Financial Data........................................... 21
           -----------------------

Item 7.    Management's Discussion and Analysis of Financial Condition
           -----------------------------------------------------------
           and Results of Operations......................................... 21
           -------------------------


                                        i

<PAGE>



           Overview.......................................................... 21
           Results of Operations............................................. 22
                  Fiscal Years 1995, 1996, and 1997.......................... 22
           Liquidity and Capital Resources................................... 23

Item 8.    Financial Statements and Supplementary Data....................... 23
           -------------------------------------------

Item 9.    Changes in and Disagreements with Accountants on Accounting and
           ---------------------------------------------------------------
           Financial Disclosure.............................................. 23
           --------------------

PART III   .................................................................. 24

Item 10.   Directors and Executive Officers of the Registrant................ 24
           --------------------------------------------------
           Compliance with Section 16(a) of the Exchange Act................. 25

Item 11.   Executive Compensation............................................ 25
           ----------------------
           Summary Compensation Table........................................ 25
           Option Grants in 1997............................................. 26
           Aggregated Option Exercises and at Year-End Option Values......... 26
           Compensation of Directors......................................... 27
           Employment Agreements............................................. 27

Item 12.   Security Ownership of Certain Beneficial Owners and Management.... 27
           --------------------------------------------------------------

Item 13.   Certain Relationships and Related Transactions.................... 28
           ----------------------------------------------

PART IV    .................................................................. 29

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K... 29
           ---------------------------------------------------------------
           (a)    Documents Filed............................................ 29
                  ---------------
                  1.       Financial Statements.............................. 29
                  2.       Financial Statement Schedules..................... 29
                  3.       Exhibit List...................................... 30
           (b)    Reports on Form 8-K........................................ 31
                  -------------------
           (c)    Exhibits................................................... 31
                  --------
           (d)    Financial Statement Schedule............................... 31
                  ----------------------------

SIGNATURES .................................................................. 32



                                       ii

<PAGE>



                                     PART I


This Annual Report on Form 10-K for the year ended December 31, 1997 (this "Form
10-K) contains  "forward- looking  statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the  "Securities  Act"),  and Section
21E of the Exchange Act of 1934, as amended (the  "Exchange  Act"), that involve
risks and  uncertainties.  Purchasers of any of the common shares,  no par value
(the "Common Stock") of Altair  International  Inc.  ("Altair" or the "Company")
are  cautioned  that the  Company's  actual  results will differ (and may differ
significantly)  from the results  discussed in the  forward-looking  statements.
Factors that could cause or contribute to such differences include those factors
discussed herein under "Factors That May Affect Future Results" and elsewhere in
this Form 10-K  generally.  The reader is also encourage to review other filings
made  by  the  Company  with  the  Securities  and  Exchange   Commission   (the
"Commission")  describing  other factors that may affect  future  results of the
Company.

Exchange Rate Information

         The following exchange rates represent the noon buying rate in New York
City for cable transfers in Canadian dollars,  as certified for customs purposes
by the Federal  Reserve Bank of New York.  The following  table sets forth,  for
each of the years indicated,  the period end exchange rate, the average exchange
rate  (i.e.,  the  average of the  exchange  rates on the last day of each month
during the period),  and the high and low exchange  rates of the U.S.  dollar in
exchange for the Canadian  dollar for the years  indicated  below,  based on the
noon buying rates.


<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                    --------------------------------------------------------------------------------

                                       1997             1996             1995              1994             1993
                                    -----------      -----------      -----------      ------------      -----------

                                                             (Canadian dollar per US dollar)

<S>                                  <C>               <C>              <C>               <C>             <C>
High...............................  1.4398            1.3822           1.4238            1.4078          1.3443

Low................................  1.3392            1.3310           1.3285            1.3103          1.2428

Average............................  1.3849            1.3638           1.3725            1.3664          1.2902

Year End...........................  1.4288            1.3697           1.3655            1.4030          1.3255

</TABLE>


Item 1.  Business
         --------

General

         A glossary of technical terms used in the following  description of the
Company's business is set forth at the conclusion of this Item 1.

         The Company was incorporated under the laws of the Province of Ontario,
Canada  in April  1973 for the  purpose  of  acquiring  and  developing  mineral
properties.  Since 1994, the Company has increasingly  shifted its emphasis from
the  acquisition  and  development of mineral  properties to the development and
testing of mineral  processing  equipment for use in the recovery of fine, heavy
mineral  particles,   including   titanium,   zircon,   gold  and  environmental
contaminants.  The  Company is a  development  stage firm and has been since its
inception.  To date,  the Company has derived no revenues  from product sales or
otherwise and has  experienced an operating loss in every year of operation.  In
the fiscal year ended  December  31,  1997,  the Company  experienced  operating
losses of $1,831,471.

         During  1996,   the  Company   acquired  the  rights  to  the  Campbell
Centrifugal  Jig,  since  modified and renamed the Altair  Centrifugal  Jig (the
"CJ"), through a merger involving the Company, Fine Gold Recovery Systems, Inc.,
a wholly owned  subsidiary of the Company ("Fine Gold"),  and Trans Mar, Inc., a
Washington  corporation  ("TMI").  The  CJ  is  a  patented  device  capable  of
segregating  and recovering  extremely fine mineral  particles or  contaminants,
many of which are not economically recoverable utilizing conventional techniques



                                        1

<PAGE>



or processes.  See "--Technology and Proprietary  Rights." The Company views the
acquisition  of  and  development  of  the  CJ  as  strategically   significant.
Management  believes  the CJ can be  successfully  developed in order to recover
extremely  fine,  heavy  particulate  matter.  The CJ has added to the Company's
historical  minerals  acquisition and  exploration  operations an opportunity to
become a developer of unique minerals processing technology. Further, efforts to
develop and test CJ technology have led Altair to identify and lease rights to a
mineral   deposit  located  in  Camden,   Tennessee  (the  "Tennessee   Minerals
Property").  Management  believes that the Tennessee  Minerals  Property,  which
would not have been  economically  developed  without the CJ  technology,  might
feasibly  be  developed  and  mined  using  the CJ.  See  "--Tennessee  Minerals
Property."

         The CJ segregates  particles  based on  differences  in their  specific
gravity.  Such technology may be categorized as a "gravity  separation" process.
Gravity  separators are widely used in minerals  beneficiation  because of their
relative  simplicity,  low cost of operation and ability to  continuously  treat
large  tonnage   throughput.   Management  believes  the  CJ  will  be  able  to
economically  recover  smaller  particles  than  can be  presently  economically
recovered by competing  gravity  technologies.  While not yet confirmed  through
actual operations,  the cost to manufacture and operate the CJ is expected to be
similar to the cost to manufacture  and operate  competing  gravity  separators,
which efficiently process only particles larger than 150 mesh. In contrast,  the
Company's tests suggest that the CJ will be able to maintain relative efficiency
when  processing  feeds as  small as 400  mesh.  See  "--Competition."  In tests
conducted to date using the CJ to process relatively small particles, the CJ has
yielded product quality (grade and  contaminates)  equivalent to that yielded by
alternative technologies processing larger particles. See "--Target Markets" and
"--Competition."

         Several prototype and demonstration  jigs have been built and tested by
the Company and TMI.  Continued  field testing of the CJ is being  undertaken to
increase the volume  capacity,  identify any design  problems that may reside in
the CJ technology,  evaluate the CJ's ability to perform  sustained  operations,
determine  the potential for downtime  during such  operations  and estimate the
anticipated maintenance costs associated with continued operations. In addition,
field  testing is being  carried out to improve  operating  design for  specific
applications.  There  can be no  assurance  that  the  testing  program  will be
successful for all  applications  or that testing will  demonstrate the CJ to be
economically  attractive  to end users.  See  "--Factors  That May Affect Future
Results."

         During 1997,  the Company  focused much of its operations on testing of
its Series 12 CJ,  designed to be capable of  processing  120 tons of solids per
day.  Although the test results on the Series 12 CJ suggest that  commercial use
of the Series 12 CJ is  technically  feasible,  the Series 12 CJ is a test model
with limited capacity, and therefore,  use of the Series 12 CJ is not economical
for most intended  applications or target  markets,  excepting small placer gold
mines or similar operations.  During late 1997, the Company designed and built a
larger Series 30 CJ, designed to be capable of processing 500 tons of solids per
day,  which  intended  capacity  management  believes is sufficient for minerals
processing,  coal washing, and many other intended commercial applications.  See
"--Target Markets." The Series 30 CJ has been installed for testing at a mineral
recovery  plant  operated  by a large heavy  mineral  sand  producer  located in
northern Florida,  with testing  completion  planned for the first half of 1998.
See "--Plan of  Operation."  The volumes of solids per day that the Series 12 CJ
and  Series  30 CJ  are  actually  capable  of  processing  have  not  yet  been
established through testing;  however,  the Company expects that planned testing
over the next  twelve  months will  confirm  that the two models can process the
volumes they have been designed to process.  The Company  believes that CJ units
larger than the Series 30 CJ could be designed  and readily  constructed  in the
future. Also, multiple units might be used in series or parallel  configurations
to process high volume operations.

         Preliminary  demonstration  tests  conducted  by the  Company  and  TMI
suggest  that the CJ may be  commercially  viable in a number  of  applications,
including:

         o   Recovery of ultra fine gold from waste streams or former tailings;
         o   Recovery  of zircon,  rutile,  leucoxene,  and other  valuable
             fractions from heavy mineral sand operations,  especially from
             finely sized waste piles;
         o   Sulfur and ash removal from fine coal;
         o   Recovery of iron ore fines from fine tailings;
         o   Concentration  of heavy  minerals,  such as anatase,  aparite,
             barite, cassiterite, chromite, columbite, industrial diamonds,
             fluorite, various garnets, monazite, tantalite and wolframite;
         o   Remediation of nuclear waste.


                                        2

<PAGE>





Target Markets

         The Company's  present  focus is on developing  markets for the CJ that
have the greatest near-term profit potential. Although management of the Company
believes that, in the long run, the CJ may potentially be useful for a number of
applications, management believes that, the most promising markets for the CJ in
the short run are for use in (i)  processing  of heavy mineral sands in order to
recover heavy minerals,  particularly zircon and titanium,  (ii) washing of coal
fines in order to remove fine pyrite  particles  and ash,  and (iii) to a lesser
extent, environmental remediation.

         Heavy Minerals  Recovery.  In the minerals arena,  the Company seeks to
enter into royalty or limited  licensing  agreements  under which the CJ can add
value to the beneficiation  process,  especially the processing of heavy mineral
sands.  Verification  testing with the Series 12 CJ suggests the CJ's  potential
for  recovering  zircon from heavy  minerals sand dry mill tails in Florida.  In
Phase 1 and 2 trials conducted by the Company involving separation of commercial
grade zircon  products  from mineral  sands,  the Series 12 CJ withdrew a larger
portion  of  zircon  from  the  feed ore than  other  mineral  sands  processing
equipment in use today.  In tests on  zircon/contaminate  feeds conducted by the
Company,  the Series 12 CJ has yielded greater than 90% zircon  concentrates and
recovered up to 75% of the zircon fed to the unit.

         The primary  valuable  minerals  produced  from heavy mineral sands are
titanium and zircon. Titanium is used primarily as a basic component of pigments
which are used in the production of paints,  plastics, and paper. Zircon is used
primarily for foundry molds and in the manufacture of certain types of glass and
ceramics.  The Company believes the domestic and international  markets for both
of these products are  significant  and well  established.  Both are commodities
traded in bulk,  usually under long term contracts,  and are also sold in 50-100
lbs. bags, usually traded as a spot-priced product. The U.S. Geologic Survey has
reported that  production  of titanium  dioxide in the United States during 1997
was  approximately  1,330,000  metric  tons,  representing  a  market  value  of
approximately $2.73 billion.  The U.S. Geologic Survey does not report zirconium
production  for the  United  States;  however,  according  to the  1993  Mineral
Commodities Summaries prepared by the U.S. Department of the Interior, Bureau of
Mines,   consumption   of  zirconium  in  the  United  States  during  1992  was
approximately  75,000 metric tons,  representing a market value of approximately
$16.1 million.  There can be no assurance that testing will demonstrate that the
CJ can economically extract heavy minerals from heavy minerals sands or that the
CJ will prove attractive to end users.

         Coal  Washing.  During  1997,  the  Company  tested the Series 12 CJ to
evaluate its ability to remove fine pyrite particles and ash from coal fines, in
an attempt to create a saleable  product from material  currently  discharged as
mine  waste.  The tests were  carried  out at Southern  Illinois  University  in
conjunction  with a major coal producer.  Tests were conducted on a crushed coal
middlings  material  with  difficult  cleaning  characteristics.  The  following
conclusions,  have been provided the company by the Southern Illinois University
Department of Mining Engineering:

         "1.      For the 28 x 325 mesh  particle  size fraction of a Pittsburgh
                  No. 8 seam  coal,  the  Altair  Centrifugal  Jig was  found to
                  provide a reduction  in ash content  from an average of 30% to
                  10% while  recovering  86% of the  combustible  material.  The
                  corresponding reduction in total sulfur content was from 2.50%
                  to  1.40%.  This  separation  performance  resulted  in a  78%
                  rejection of ash-bearing material and 62.5% rejection of total
                  sulfur.   Considering  that  the  feed  material  contained  a
                  significant  amount  of  near-gravity   material  due  to  its
                  origination  from  the  middlings  stream  of a jig,  the high
                  separation  efficiency  value of  around  55% is a  remarkable
                  achievement for the Altair Jig.

         2.       Partition  curves  derived  from Altair Jig  washability  data
                  indicate  the  ability to achieve a  relatively  low  specific
                  gravity  cut point  (D50) of nearly  1.50 at a probable  error
                  value (Ep) of 0.10.  These  performance  values rank among the
                  best  of   those   reported   for   other   enhanced   gravity
                  concentrators.

         3.       The  separation  performance  achieved  on the  28 x 325  mesh
                  particle  size  fraction  by the  Altair  Jig was  found to be
                  superior to the results  obtained  from  advanced  washability
                  (release) analysis,  which represents the ultimate performance
                  achievable by any flotation technology.



                                        3

<PAGE>



         4.       The separation  performance  results obtained as a function of
                  particle  size  indicates  that  the  optimum  separation  was
                  achieved on the 100 x 200 mesh  particle size  fraction.  This
                  fact was  confirmed  by both  the  metallurgical  and  process
                  efficiency results.  For the coarsest particle size fractions,
                  the  ash-forming  material  was  found to have  difficulty  in
                  passing through the screen.  Thus, ash recovery to the product
                  is sufficiently higher than the finer material.  However,  the
                  excellent  separation  performances  achieved on the  particle
                  size   fractions   below  100  mesh  are   superior  to  other
                  commercially  available  enhanced gravity  technologies.  This
                  finding is  especially  unique due to the use of a  relatively
                  low centrifugal force of 45 g's.

         5.       A circuit  utilizing the Altair Jig to clean the 28 x 325 mesh
                  particle  size  fraction  and a flotation  column to treat the
                  -325 mesh  fraction was predicted to provide a 10% product ash
                  content while recovering 78% of the combustible  material.  In
                  comparison,  the use of a flotation column to treat the entire
                  -28  mesh  coal  would  only  recover  60% of the  combustible
                  material while  achieving the same product ash content.  Thus,
                  the use of the Altair Jig to treat the high middlings  content
                  coal used in this study would result in an overall increase in
                  recovery of 18% weight units.

         6.       A  complete   parametric   study  was  conducted  based  on  a
                  statistically  designed  test program and response  evaluation
                  software.   Empirical  equations  describing  the  effects  of
                  operating  parameters value on important  response  variables,
                  i.e.,   combustible  recovery,   ash  rejection,   and  sulfur
                  rejection,  have been  developed  and utilized to identify the
                  optimum test conditions."

         Based on these test results, and others, the Company believes utilities
in the  eastern  United  States may be able to use the CJ to remove  pyrite from
high sulphur eastern coals,  potentially  reducing the need to incur the expense
of transporting low-sulphur western coals. For example, the cost of transporting
coal from  Wyoming,  a large coal mining area, to the  midwestern  United States
typically  comprises 75% of the cost of the delivered coal product. In addition,
the  Company  believes  the CJ may be used to remove ash from coal,  which would
benefit  utilities  because ash  reduces  the  thermal  value of coal and causes
undesirable environmental impacts. Currently, the Company has established a coal
wash test program with  Kerr-McGee  Coal Corp.  and the  University  of Southern
Illinois.  The program is utilizing the Series 12 CJ in processing coal feeds in
an on-line coal wash plant  production  environment.  See "--Plan of Operation."
There  can  be no  assurance  that  testing  will  demonstrate  that  the CJ can
economically  remove  pyrite,  ash, or other  substances  or that the CJ will be
attractive to coal purchasers.

         Environmental Remediation.  Testing of the Series 12 CJ conducted under
a grant from the U. S.  Environmental  Protection  Agency at Montana  College of
Mineral  Science  and  Technology  during  1994  indicated  that  the  CJ may be
effective in removing heavy  minerals from old mine and mill tailing sites.  The
1994 tests  indicated that the CJ removed  approximately  64% of the fine pyrite
contained in mill  tailings in a single pass through the machine.  Nearly 80% of
the fine pyrite  content of such tailings was removed in two passes  through the
machine.  In 1995, the U.S.  Department of Energy (the "D.O.E.") sponsored tests
suggesting  that the CJ may be capable of removing dense nuclear  particles from
radioactive  waste.  The tests conducted by the D.O.E.  reported that the CJ was
able to remove up to 54% of the contained nuclear  contaminate in a single pass.
Company  management  is  currently   exploring  these  potential   environmental
remediation applications.

         Other Testing.  The Company has licensed a Series 12 CJ to BHP Minerals
International   Inc.  ("BHP")  for  installation  at  BHP's  worldwide   testing
laboratory  in Reno,  Nevada.  Under the terms of the  license,  in exchange for
nominal  consideration,  the Company has granted BHP a non-exclusive license for
use of the Series 12 CJ until September 1, 1998, subject to a one year extension
at the option of BHP.  BHP is not  restricted  in its choice of ores or minerals
for testing.  The Series 12 CJ has been delivered to BHP and is currently in the
process of being installed.  The Company has committed to train BHP personnel to
operate and conduct routine  maintenance,  and to provide limited  consulting to
BHP on an on-going basis. See "---Plan of Operation."

Tennessee Minerals Property

         The Tennessee  Minerals Property consists of approximately  4,300 acres
of land that the Company has leased (or has binding  commitments to lease) in or
near Camden,  Tennessee,  containing  fine,  heavy  minerals.  During 1997,  the
Company's  exploration  activities  on  the  Tennessee  Minerals  Property  have
included geologic  mapping,  sample  collection,  drilling of 72 auger holes and
preparation of geologic and deposit models.  The deposit model also incorporates
40 drill  holes  completed  by an earlier  exploration  company.  Deposit  model



                                        4

<PAGE>



estimates are consistent with deposit estimates  previously  determined by other
resource  companies.  The mineral deposit on the Tennessee Minerals Property has
not yet been proven to be a reserve (as defined in Item 802, Guide 7 promulgated
under the Exchange Act), and the Company's limited Regulation S-K operations and
proposed plan with respect to it are exploratory in nature.

         The  production of saleable  heavy minerals from heavy mineral sand ore
is a two-stage process. At the mine site, heavy mineral ore is treated in a "wet
mill"  where  a 90%  total  heavy  mineral  concentrate  is  prepared  typically
utilizing gravity separation equipment. This concentrate is then taken to a "dry
mill" where  individual  mineral  constituents  are extracted using magnetic and
high tension electrical separators.

         In order to assess the amenability of the Tennessee  Minerals  Property
ore to  processing  with the CJ, two bulk samples were  collected by the Company
from the Tennessee Minerals Property.  Test work completed by the Company on the
first sample during the spring of 1997 suggested the sands can be processed with
the CJ. Tests performed by the Company which emphasized recovery have yielded up
to 94% heavy mineral recovery with a six- to-one  concentration  ratio.  (Stated
differently,  after a single  pass  through  the CJ,  94% of the ore's value was
concentrated in about one-sixth of its original  volume,  and five sixths of the
sand  rendered a  non-valuable  discard.)  As is  typical of gravity  separation
processing,  several  passes  through the CJ will be  necessary to produce a 90%
total heavy mineral  concentrate.  Further,  in the event the Tennessee Minerals
Property is proven to contain  significant  heavy mineral  reserves the CJ would
likely be used in conjunction with  traditional  gravity  separators,  primarily
spirals,  to most  efficiently  process the sand ore in the "wet mill". A second
bulk  sample was  collected  during  late 1997.  Approximately  5,000  pounds of
representative  mineralized material was collected from an exposed sand horizon.
This sample is being  processed by an  independent  Florida heavy sands producer
and the Company  utilizing  both "wet mill" and "dry mill"  processes to produce
representative samples of saleable products.
See "--Plan of Operation."

         Management  believes  that  because the sands are  unconsolidated,  and
hence easily worked,  the Tennessee Minerals Property deposit may be amenable to
large-scale,  low-cost mining.  Initial  pre-feasibility  tests on the Tennessee
Minerals Property,  based on tonnage and grade features,  indicate the potential
for a large-scale  sand mining  operation with a multi-decade  life. In order to
better assess the  feasibility  of  economically  mining the Tennessee  Minerals
Property, the Company has retained an independent consulting group to commence a
technical  pre-feasibility study to be completed in late 1998. If the results of
the  pre-feasibility  study  suggest  that the  Tennessee  Minerals  Property is
amenable to large-scale,  low-cost mining, the Company will undertake a thorough
feasibility  study  beginning  late in the 1998 fiscal year.  Such a feasibility
study would involve the actual  design,  pricing,  and analysis of equipment and
facilities  that  would be used to mine the  Tennessee  Minerals  Property.  The
Company expects that  completion of a feasibility  study will take 12-18 months.
If the feasibility  study suggests that  cost-effective  mining of the Tennessee
Minerals  Property is  feasible,  mining could begin on the  Tennessee  Minerals
Property  within 24-36 months after  completion of the study,  subject to, among
other  things,  the price of, and demand for,  extractable  heavy metals and the
Company's  ability to obtain  necessary  financing,  permits,  and  governmental
approvals.   See  "--Plan  of  Operation"  and   "--Government   Regulation  and
Environmental Concerns."

Technology and Proprietary Rights

         In operation,  the CJ utilizes a combination of standard mechanical jig
and  centrifugal  technologies.  Without  having  tested  the  CJ in  sustained,
commercial  operations,  management  believes  production  models  of the CJ, if
completed,  will be capable of sustaining  high  reliability and low maintenance
costs in a  production  environment.  See "--Plan of  Operation."  Use of the CJ
requires no  chemical  additives.  The Series 12 CJ stands  about six feet tall,
requires  floor  space of about 25 square  feet and weighs  approximately  2,000
pounds.  Recently  constructed jigs have been mounted on metal frames along with
jig  auxiliary  equipment--pulse  water  pump and tank  and  control  panel--for
transport by truck and rapid on-site installation.

         A conventional jig separates a slurry of mineral  particles as it flows
across the top of a screen.  Water is periodically  pulsed up through the screen
to eliminate interparticle friction and allow differential settling according to
the variations in the net specific  gravities of the ore.  Heavier  minerals are
allowed to pass downward through the screen while lighter  materials flow across
the screen to a discharge point.  The CJ operates  according to conventional jig
principles  except  that the  screen  surface is  cylindrical  and is rotated to
subject the particles to centrifugal forces. As currently designed, materials to
be  processed  by the CJ are  introduced  into the top of the CJ in a slurry mix
with water.  The slurry is diffused across the top of the interior of a vertical



                                        5

<PAGE>



cylindrical  screen  which is  rotating.  Water is  pulsed  through  the  screen
allowing  differential  separation in the slurry material.  Heavy particles pass
through  the screen,  are  collected,  and exit the  machine in a  "concentrate"
stream.  Lighter particles flow down the screen interior, are collected and exit
out the bottom of the machine in a separate "tails" stream.

         The  Company  does  not  intend  to  establish  its  own  manufacturing
facility. Management is considering options for manufacture of the CJ, including
manufacturing  under  contract,  exclusive  licensing,  or a joint venture.  The
arrangement  could  eventually  include an  exclusive  license for  manufacture,
warehousing and  distribution of spare parts, as well as maintenance and leasing
of the CJ.  Currently,  the Company has entered into an agreement with a machine
shop located in Marysville, California, to manufacture the initial models of the
CJ.  Under the terms of the  agreement,  the machine shop has  constructed  four
Series 12 CJs and one Series 30 CJ.

         Initial patents on the CJ have been issued in the United States,  South
Africa, United Kingdom,  Australia,  and Canada. Patent applications are pending
in Germany,  France and Japan.  A series of second patents have been issued with
respect  to a critical  component  of the CJ in the  United  States,  Australia,
Canada,  Great  Britain,  and South Africa,  as well as under  General  European
procedures.  The Company filed an  application  in the United  States  seeking a
third  patent for a recently  developed  component of the CJ on May 15, 1997 and
intends to file applications in Canada and certain European nations.

         In two separate transactions in 1996 and 1997, the Company purchased an
aggregate  of  83%  of  the  capital  stock  of   Intercontinental   Development
Corporation  ("Indeco") for total  consideration of $355,835.  Indeco has as its
sole asset a royalty  agreement  entitling Indeco to 10% of the capital stock of
the cost of  manufacturing  any CJs which  are  placed  in  production,  sold or
exploited for profit worldwide.

Competition

         Alternative  Technologies.   Various  mineral  processing  technologies
perform  many  functions  similar  or  identical  to those  for  which the CJ is
designed.  See "Factors That May Affect Future Results - Competing  Products and
Alternative   Technologies."  Minerals  processing  technologies  are  generally
predicated on the physical and chemical  characteristics  of the materials being
processed.   Contrasts   in   size,   specific   gravity,   hardness,   magnetic
susceptibility,  and electrical  conductivity are physical  characteristics that
the  processor   exploits  to  selectively   extract  and  concentrate   mineral
constituents.  Variations in chemical reactivity and molecular affinity are also
used to selectively segregate feed components.

         The CJ competes in an arena in which particle  specific  gravity is the
primary  criteria for particle  segregation  and capture.  Spirals and cones are
mechanical gravity separation devices commercially used in the recovery of heavy
minerals from sand-sized  feeds and are generally most effective when feed sizes
are larger than 150 mesh.  Recovery  efficiency falls  dramatically with smaller
feeds.  In  contrast,  the  Company's  preliminary  tests  indicate  that the CJ
maintains  relative  efficiency when separating  particles sized from 100 to 400
mesh.

         Froth   floatation  is  a  minerals   beneficiation   process  used  to
selectively  separate  sulfide  particles by introducing  chemical  agents which
attach to certain  sulfides;  once  attached,  the  sulfides  are  separated  by
floatation.  This method may be  effective  on  particles  as small as 200 mesh.
Froth  floatation  requires  the use of  chemical  agents and does not  separate
particles  based on density as does the CJ. Froth  floatation  applications  are
limited  principally to certain sulfide particles and generally do not work on a
broad range of heavy minerals.

         Heavy media  separation  is a process in which a feed  containing  both
dense and light  particles  is fed into a  solution  whose  specific  gravity is
midway between the particles to be separated.  The light  particles float to the
surface of the solution,  while the heavy particles sink. Heavy media separation
is  effective  primarily  in the  removal  of ash from  coal and in small  scale
analytic laboratory applications. Its application elsewhere is limited, however,
because  the  process  is time  consuming  where  the media  required  is highly
viscous. Also, the cost of the media may limit the commercial usefulness of this
method.

         Competing  Products.  The Company  believes that the CJ currently faces
several forms of competition in the  commercial  segregation of dense  particles
contained  in feeds  between  150 and 400 mesh.  "See  "Factors  That May Affect
Future  Results - Competing  Products  and  Alternative  Technologies."  Another
centrifugal  jig  device,  the  Kelsey  jig,  has been  developed  in  Australia
subsequent  to the  invention of the CJ. The Kelsey jig is more  complicated  in
design  than the CJ,  which the  Company  believes  makes it more  expensive  to
manufacture,  operate and maintain in a production environment.  As of mid-1995,
according to the Kelsey jig's manufacturer,  Geologics Pty. Ltd., 36 Kelsey jigs




                                        6

<PAGE>



were in service at 28 sites worldwide, including two machines at one site in the
United States.  In addition,  there exists  another device that separates  dense
particles  from feeds  sized  between 50 and 400 mesh,  the  Knelsen  Bowl.  The
Knelsen unit is a batch  concentrator,  which management believes is best suited
to  small  volumes.   Knelsen  units  have  been  installed  in  various  mining
applications, primarily gold, throughout the world.

         The Company is a small player in an industry  comprised of major mining
companies   possessing   tremendous  capital   resources.   The  Company  is  an
insignificant  competitive  factor in the industry.  There is no assurance  that
competitors,  many of whom may have significant capital and resources,  will not
develop or are not now in the process of developing  competitive  equipment that
may be functionally or economically superior to the Company's equipment.

Plan of Operation

         Business  Development.   Testing  conducted  to  date  by  the  Company
indicates  the CJ may have economic  potential in a wide variety of  industries,
and  management  believes  the CJ can be used for finely  sized  heavy  minerals
recovery, coal cleaning and environmental  remediation.  See "--Target Markets".
During 1998,  the Company  plans to continue  developing  these target  markets,
which  may  have  near-term  profit  potential,  through  implementation  of the
following critical steps:

         (1)      Continued field testing and  demonstration of the Series 12 CJ
                  and  experimentation  with  design  manipulations  to  improve
                  effectiveness for certain specific applications.  In addition,
                  sustained  operational  testing is critical in  determining if
                  any material design  problems reside in the CJ technology,  if
                  the CJ is capable of sustained operation with little downtime,
                  and  if  its   maintenance   costs   are   satisfactory.   See
                  "--Research, Testing and Development."

         (2)      Initial  field  testing,   including   sustained   operational
                  testing,  of the larger volume,  more marketable Series 30 CJ.
                  See "--Research, Testing and Development."

         (3)      Development   of  royalty,   rental,   or  limited   licensing
                  agreements with prospective  industrial users and introduction
                  of the CJs into targeted markets.

         In addition, the Company plans to continue  pre-feasibility  testing of
the heavy  mineral sand deposits on the Tennessee  Minerals  Property.  Assuming
final pre-feasibility results are consistent with those the Company has received
to date,  the Company  intends to hire a consulting  firm to commence a complete
feasibility study with respect to the Tennessee Minerals Property. Completion of
such a  feasibility  study is expected to take 12-18  months.  Furthermore,  the
Company intends to explore acquisition of additional  undervalued proven mineral
deposits for which the  Company's  patented  technology  may provide an economic
means of recovery.

         The Company's  marketing efforts in the near future will continue to be
directed to  opportunities  within North  America,  with future  expansion  into
foreign  markets  developing  over time.  Because the Company does not intend to
engage in the actual  manufacture  of its own  products,  the  Company  does not
expect to purchase a  manufacturing  facility or any  significant  manufacturing
equipment.  Management does not anticipate that the number of Company  employees
will significantly  increase until the Company has sufficient sales and business
activity to warrant  additional  employees.  Management hopes that circumstances
will  warrant the  addition of as many as twelve new  employees  during the next
12-month period;  however,  the actual number of new employees hired will depend
on the  Company's  operating  results.  If hired,  such new  employees  would be
primarily  engineering and technical staff to support  testing,  development and
commercialization programs.

         Research, Testing and Development.  Field testing to date suggests that
the CJ possesses the ability to process continuous tonnage throughput in several
applications.  The CJ has multiple operating  parameters -- primarily rotational
speed, pulsing pressure, and screen characteristics -- which must be adjusted to
fit the processing  requirements  of the  particular  feed stream being treated.
Management  believes that more extensive  testing is needed to identify the most
efficient  operating  parameters  for  specifically   identified   applications.
Further,  demonstration of sustained operation is critical to marketing efforts.
To this end, the Company has installed or is in the process of installing the CJ
in several test sites.  Specifically designed research,  testing and development
efforts planned for the upcoming twelve months include the following:

         (1)      The Company has installed and commenced testing of a Series 30
                  CJ at a mineral  recovery  plant located in Northern  Florida.
                  The tests are intended to assess the unit's ability to recover



                                        7

<PAGE>



                  zircon  from dry mill  tails.  The Series 30 CJ is designed to
                  process 500 tons per day and is  considered  to be commercial-
                  sized for this application. Testing scheduled during the first
                  half of 1998 is intended to verify CJ processing  capacity and
                  improve other operating  design  parameters.  Also,  sustained
                  operational   testing  is  intended  to  determine   the  CJ's
                  capability for sustained  operations with limited downtime. To
                  this end, the high-volume  testing will be done on a stream in
                  the normal plant  operating  environment.  CJ concentrate  and
                  tailings products will be commingled with other plant outputs.
                  Access to the Florida test site is controlled by a large heavy
                  minerals  sand  producer  that  supplies  test  materials  for
                  processing.  On-site testing is being conducted by two Company
                  employees.   Additional  Company  employees  provide  periodic
                  testing  analysis  and  engineering  services  at the site.  A
                  Series  12 CJ  unit  has  also  been  installed  at  the  sand
                  processing  facility in Northern  Florida.  This unit is being
                  used to perform  testing on various  other plant  titanium and
                  zircon  feedstreams  and to test heavy mineral sand feeds from
                  other Florida locations. Testing utilizing the Series 12 CJ is
                  being performed by Company personnel.

         (2)      A joint coal wash test program with  Kerr-McGee Coal Corp. and
                  the  University of Southern  Illinois was  established  during
                  late  1997.  The  program  is  intended  to  test  the  CJ  in
                  processing  coal feeds in an on-line  production  environment.
                  For the  initial  stage of the test  program  the  Company has
                  installed  a  Series  12  CJ  in  Kerr-McGee's   Galatia  Coal
                  Preparation  Plant  near  Harrisburg,  Illinois.  Testing  has
                  commenced  with the CJ treating  feeds from the Galatia  Plant
                  coal  processing  streams to remove fine  particles of ash and
                  pyrite.  During the second  stage of  testing,  a Series 30 CJ
                  will be installed and tested in the Galatia Plant.  Testing is
                  being  performed  by two  Southern  Illinois  University  test
                  facility  employees with periodic reviews conducted by Company
                  employees. Altair management has planned the testing procedure
                  and monitors test  performance.  Completion of this testing is
                  scheduled to occur during the first half of 1998.

         (4)      The Company has  established a CJ testing  facility near Reno,
                  Nevada to test samples supplied by mineral companies and other
                  potential   users  of  the  CJ.  The   facility  is  used  for
                  demonstrations  of the  CJ  technology,  provides  amenability
                  testing  for a variety of mineral  ores,  and serves as a test
                  site for  on-going  equipment  design.  The test  facility  is
                  equipped  with a  Series  12 CJ,  placed  in a  "closed  loop"
                  circuit  designed to take an initial  charge of solids (0.5 to
                  2.0 tons) which can be continuously  fed in slurry form to the
                  CJ.  Concentrate  and tails streams  produced by the CJ may be
                  accessed for sampling prior to recombination and return to the
                  feed  circuit.  Amenability  testing  performed  at  the  test
                  facility  during 1997  included  heavy mineral sand feeds from
                  California  and from the Tennessee  Minerals  Property.  Other
                  amenability testing involved a chromite/nickel  tailings feed.
                  Operation of the CJ test facility is performed  exclusively by
                  Company personnel.

         (5)      Additional  testing of fine gold recovery in placer operations
                  is planned  during  1998.  The  Company  plans to use  Company
                  personnel,  located at operating mine sites,  to perform these
                  tests.

         (6)      The Company has commenced a project  pre-feasibility  study on
                  the Tennessee Minerals  Property.  The purpose of the study is
                  to  determine  mine and  processing  characteristics,  provide
                  initial  estimates  of mine  capital and  operating  costs and
                  define project  economics.  The study will also  independently
                  review the Company's  mineral deposit  estimates.  The Company
                  has engaged an independent  consulting group with expertise in
                  all aspects of the heavy mineral sand  industry.  The study is
                  designed  to  establish   mineral   product   characteristics,
                  determine mine and mineral  processing steps,  provide initial
                  estimates of mine  capital and  operating  cost and  initially
                  define project  economics.  The Company presently  anticipates
                  that the study  will be  completed  during  the first  half of
                  1998.

                  If the results of the  pre-feasibility  study suggest that the
                  Tennessee  Minerals  Property is amenable to large-scale  low-
                  cost mining, the Company will undertake a thorough feasibility
                  study beginning late in 1998.  Such a feasibility  study would
                  involve the actual design of  facilities  and  equipment,  the
                  solicitation of quotes from manufacturers and contractors, and
                  other  steps  designed  to obtain a more  accurate  picture of
                  project  economics.  The process would also involve additional
                  testing of the quantity,  quality, and precise location of the
                  mineral  deposit.  The Company  expects that completion of the
                  feasibility  study  will take  between  12-18  months.  If the
                  feasibility study suggests that  cost-effective  mining of the
                  Tennessee Minerals Property is feasible, mining could begin on
                  the  Tennessee  Minerals  Property  within  24-36 months after
                  completion of the study,  subject to, among other things,  the
                  price of and  demand  for  extractable  heavy  metals  and the
                  Company's ability to obtain necessary financing,  permits, and
                  government approvals.

                  In conjunction  with the  pre-feasibility  study,  the Company
                  intends to perform  additional  geological  and  mineralogical
                  studies.   Additional  drill  holes  are  planned  to  confirm
                  geologic   interpretations   and  mineral  continuity  in  the
                  Tennessee  Minerals  Property  deposit.   Heavy  mineral  sand
                  samples taken from the drill holes is being taken for analysis
                  the  laboratories of Commercial Test and Engineering  ("CT&E")
                  in Denver,  Colorado. As sample results are completed at CT&E,
                  data is inputted  into a computer  generated  geologic/deposit
                  model, which has been developed for Altair by Mine Development
                  Associates of Reno, Nevada.  Also, the Company has collected a
                  bulk sample of  approximately  5,000 lbs from an exposed  sand
                  horizon on the property. The bulk sample is being processed to
                  produce  representative  samples  of  saleable  products.  The
                  sample was  transported  to the  Company's CJ test facility in
                  Reno, Nevada.  Material sized smaller than 320 mesh and larger
                  than 50 mesh has been removed  (these sizes contain  almost no
                  titanium).  The  remaining  50 to 325 mesh  fraction  is being
                  separated by screen at 200 mesh. The +200 mesh material, which
                  represents approximately 65% of the total sample by weight but
                  only  contains  about  35% of the  titanium,  will  be sent to
                  Northern   Florida  for   preparation   of  a  heavy   mineral
                  concentrate using  conventional  spiral  technology.  The -200
                  mesh  material  (approximately  12%  by  weight,  65%  of  the
                  titanium)  will  be  processed  in  the CJ to  produce  a fine
                  mineral  concentrate.  The heavy mineral  concentrates will be
                  further processed into potentially  marketable  products using
                  electrostatic and magnetic separators. Altair plans to utilize
                  a combination  of Company  employees and  consultants  for the
                  bulk sample  work.  Bulk  sample  testing is  scheduled  to be
                  completed during the first half of 1998.

         During  1997,  the Company  incurred  $480,248 in deferred  exploration
expenditures on the Tennessee Minerals  Property.  Expenditures were incurred on
leasehold  minimum  advance  royalty  payments,  auger hole drilling,  sampling,
sample  analysis and assay,  geological  and mineral  deposit  characterizations
studies and other related exploration activities.

         Provided that the planned testing of the CJ over the next twelve months
as described above is successful, the Company believes the Series 30 CJ would be
ready at that time for commercial use in applications  involving the recovery of
titanium,  zircon  and gold.  While  such  capabilities  of the CJ could then be
marketed,  the Company expects that the CJ's multiple operating parameters would
need to be adjusted to fit the  requirements of each  particular  customer's and
application's  requirements.  In the  event any of the  foregoing  tests are not
successful,  the Company expects that it would conduct additional  testing,  the
nature of which would  depend upon the results  obtained in the  above-described
tests.

Subsidiaries

         Altair  International  Inc.1  was  incorporated  under  the laws of the
province of Ontario, Canada in April 1973. The Company currently has two wholly-
owned subsidiaries,  Fine Gold Recovery Systems,  Inc. ("Fine Gold") and Mineral
Recovery Systems,  Inc., a Nevada  corporation  ("MRS"),  and one majority-owned
subsidiary, Intercontinental Development Corporation ("Indeco").

         Fine Gold was  acquired by the  Company in April  1994.  Fine Gold is a
development  stage  company  with no  operating  revenues  earned  to date.  The
Company's  acquisition  of TMI in February 1996 was effected by merging TMI with
and into  Fine  Gold  (the  "TMI  Merger").  Fine  Gold  also now  includes  the
operations of a wholly-owned subsidiary of the Company formerly known as Mineral
Recovery  Systems,  Inc., which was merged with and into Fine Gold in June 1996.
As discussed below,  another  wholly-owned  subsidiary of the Company,  formerly
known as Carlin Gold Company,  is now operated  under the name Mineral  Recovery
Systems,  Inc.  The  Company  intends  that Fine Gold will hold and  maintain CJ
technology rights, including patents, and will enter into a royalty arrangements
to allow MRS to develop and commercially utilize the CJ.
--------
1          The Company was incorporated in April 1973 under the name Diversified
Mines  Limited, which was  subsequently  changed to  Tex-U.S.  Oil & Gas Inc. in
February 1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold
Company Inc. in July 1988, to Altair  International Gold Inc. in March 1994, and
to Altair International Inc. in November 1996.


                                        8

<PAGE>



         As a result of the TMI Merger:  (i) TMI was merged with Fine Gold, with
Fine Gold  surviving  as a  wholly-owned  subsidiary  of the  Company;  (ii) the
Articles of  Incorporation  of Fine Gold became the Articles of Incorporation of
the surviving corporation and the officers and directors of Fine Gold became the
officers  and  directors of the  surviving  corporation,  (iii) all  outstanding
options to purchase TMI stock were  terminated  and, in exchange  therefor,  the
Company issued  580,000 Series E warrants,  each entitling the holder thereof to
purchase  one share of Common Stock for $2.00 until  January 31, 1997;  (iv) all
shares  of the  capital  stock of TMI were  converted  into  and  exchanged  for
1,919,957  shares of Common Stock,  which were issued and deposited  into escrow
pursuant to the terms of two escrow agreements. Of the 580,000 Series E Warrants
issued,  561,585 were exercised prior to January 31, 1997; the remaining  18,415
warrants have been canceled.

         Of the  1,919,957  shares  of Common  Stock  initially  deposited  into
escrow,  in connection  with the TMI Merger,  749,957  shares have been released
pursuant to the terms of the governing  agreements.  Of the remaining  1,170,000
shares of Common  Stock  initially  deposited  into escrow,  266,170  shares are
subject to a Performance  Escrow Agreement dated February 29, 1996 ("Performance
Escrow Agreement"),  which provides for release of one share of Common Stock for
each $1.80 in cash flow received by Altair, provided that no more than one-third
of the original number of shares of Common Stock escrowed may be released in any
one year over the first three years of the escrow.  Shares of Common Stock still
in  escrow  at the  end of five  years  may be  canceled  by the  Alberta  Stock
Exchange.

         The remaining  903,830 shares of Common stock initially  deposited into
escrow were subject to the terms of the Performance  Escrow Agreement.  However,
on March 19,  1998,  the Alberta  Stock  Exchange  approved  (and  thereby  made
effective)  a  settlement  agreement  (the  "Settlement")  with  respect to such
903,830  shares.  Pursuant to the  Settlement,  180,765 of the affected  903,830
shares will be released  effective  March 19,  1998  (subject to certain  resale
restrictions) to the beneficial owners, and the remaining 723,065 shares subject
to the Settlement will be canceled.

         MRS was incorporated by the Company in April,  1987(2).  MRS previously
has been involved in the  exploration for minerals and development of unpatented
mining claims in Nevada, Oregon and California.  All mining claims have now been
abandoned.  The  Company  currently  intends  that  MRS  will  arrange  for  the
manufacture of the CJ for commercial sales, rental or royalty  arrangements with
end users.  In addition  the Company  intends that MRS will lease or acquire and
develop  mineral  properties,   particularly  properties  that  contain  mineral
resources that may be processed with the CJ.

         In numerous  transactions  in 1996 and 1997,  the Company  purchased an
aggregate  of 83% of the  capital  stock of Indeco  for total  consideration  of
$355,835.  Indeco has as its sole asset a royalty agreement  entitling Indeco to
10% of the cost of manufacturing any CJs which are placed in production, sold or
exploited for profit  worldwide.  The Company's  acquisition  of Indeco has been
accounted for using the purchase  method,  and the entire amount of the purchase
price of Indeco stock has been allocated to the CJ royalty agreement.

Government Regulation and Environmental Concerns

         Government  Regulation.   The  Company's  present  exploration  of  the
Tennessee Minerals Property, and testing of the CJ, and any prospective testing,
construction  or mining  activities  the  Company  may  conduct  are  subject to
numerous  federal,  state,  and local laws and  regulations  concerning mine and
machine safety and environmental  protection,  including without  limitation the
Clean Air Act, the Clean Water Act, the Resource  Conservation  and Recovery Act
and the Comprehensive Environmental Response Compensation Liability Act. Some of
the laws and regulations that would pertain to mining,  construction  or testing
activities  require,  among other things,  maintenance  of air and water quality
standards, the protection of threatened endangered and other species of wildlife
and  vegetation,  the  preservation  of  certain  cultural  resources,  and  the
reclamation  of  exploration,  mining and  processing  sites.  In addition,  the
Company will be required to obtain certain  permits,  approvals  and/or licenses
from  federal,  state  and local  entities  before  developing  and  mining  the
Tennessee  Minerals  Property  or any  other  mining  property.  These  laws and
requirements  are continually  changing and, as a general  matter,  are becoming
more restrictive.  Although compliance with federal,  state or local ordinances,
regulations,  and  permitting  requirements  represents  a  small  part  of  the
Company's  present  budget,  continued  compliance  or  procurement  of required
approvals may necessitate  significant  capital  expenditures.  In the event the
--------
2           MRS was formerly known as Carlin  Gold Company.  The name change was
effective in June 1996.


                                       9

<PAGE>



Company fails to comply,  or is delayed in coming into  compliance with any such
ordinances or regulations, the Company may be subject to substantial fees or may
be required to expend significant capital to ensure compliance.

         The Company is committed to complying with and, to its knowledge, is in
compliance with all governmental regulations. The Company's primary product, the
CJ, does not require the addition of chemicals  in its  processing  of minerals.
The Company cannot, however,  predict the extent to which future legislation and
regulation  could  cause the  Company to incur  additional  operating  expenses,
capital  expenditures,  and/or restrictions and delays in the development of the
Company's products and properties.

         Environmental  Regulation and Liability.  Any proposed mining operation
of the Company on the Tennessee  Minerals Property or any subsequently  acquired
or leased  property  will be subject to  environmental  regulation  by  federal,
state,  and local  authorities.  Under federal and state law, the Company may be
jointly and  severally  liable  with prior  property  owners for the  treatment,
cleanup,  remediation,  and/or removal of substances discovered on the Tennessee
Minerals Property or any other property used by the Company, which are deemed by
the  federal  and/or  state  government  to be  toxic or  hazardous  ("Hazardous
Substances").  Liability may be imposed,  among other  things,  for the improper
release,  discharge,  storage,  use,  disposal or  transportation  of  Hazardous
Substances. The Company might use Hazardous Substances and, although the Company
intends to employ all reasonably practicable safeguards to prevent any liability
under applicable laws relating to Hazardous Substances,  mineral exploration and
extraction by its very nature will subject the Company to substantial  risk that
remediation will be required.

Employees

         The  business of the  Company is  currently  managed by Dr.  William P.
Long,  President  and Chief  Executive  Officer of the  Company,  Mr. C. Patrick
Costin,  Vice  President of the Company and President of MRS and Fine Gold,  and
Mr.  Edward  Dickinson,  Director of Finance of MRS. In addition,  MRS employs a
senior  process  engineer,  a  metallurgist,  a geologist,  a  controller  and a
part-time  employee  in  an  office  management  and  administrative  assistance
capacity. There are no other employees of the Company or its subsidiaries.

         Other  than  the  employment  agreements  of Dr.  Long  and Mr.  Costin
described below, and our employment  agreement with Mr. Dickinson,  there are no
employment  agreements  between  the  Company  or  its  subsidiaries  and  their
respective  executive  officers.   See  "Item  11.  Executive   Compensation  --
Employment  Agreements." The future success of the Company will depend, in part,
on its ability to attract and retain highly qualified  technical,  marketing and
management  personnel.  There is no assurance  the Company will be successful in
retaining or attracting  highly  qualified  individuals  in key  positions.  See
"Factors That May Affect Future Results--Dependence on Key Personnel."

Glossary of Terms

         Amenability means responsiveness of an ore deposit to processing.

         Ash means inorganic residue remaining after coal combustion.  Ash is an
undesirable  component of coal because it reduces  thermal  value and produces a
waste product after combustion.

         Assay  means to  analyze an ore or other  substance  to  determine  the
present, absence, and quantity of one or more components.

         Benificiate means to improve the grade of ore by processing.

         Centrifugal force means the component of force on a body in curvilinear
motion that is directed away from the axis of rotation.

         Coal fines  means  finely  pulverized  coal  particles  which will pass
through a 28 mesh screen.

         Coal washing  means  processing  of  pulverized  coal to remove ash and
pyrite.

         Environmental  remediation  means removal of harmful mineral  particles
from a site previously altered by human activities.



                                       10

<PAGE>



         Heavy  minerals  sands means beach or dune sands which  contain a small
fraction of heavy  particles.  Heavy  mineral  sands are  commercially  mined to
produce titanium minerals and zircon.

         Jig means a device for concentrating minerals based on specific gravity
and particle size.

         Mesh means one of the openings or spaces in a screen.  The value (size)
of the mesh is given as the number of openings per linear inch.

         Mill means a building  with  machinery  for  processing  ore. (Dry mill
refers to heavy minerals sand processing of dry materials.)

         Placer means  deposits of sand,  gravel and other  detrital or residual
material  containing a valuable mineral which has accumulated through weathering
and natural mechanical concentration processes.

         Pyrite means a  yellowish-brown  mineral  sulfide  containing  iron and
sulphur.  Pyrite is an undesirable component of coal because sulphur dioxide gas
is released when it is burned with coal.

         Specific  gravity  means  the ratio of the mass of a solid or liquid to
the mass of an equal volume of water at a specified temperature.

         Tails or tailings  means those portions of washed ore that are regarded
as too poor to be treated further, as distinguished from material (concentrates)
that is to be smelted or otherwise utilized.

         Thermal  value  means a  measure  of the  ability  of a fuel  (coal) to
produce energy when ignited.

Factors That May Affect Future Results

         This  Form  10-K  contains  various   forward-looking   statements  and
information that are based on management's  belief,  as well as assumptions made
by, and  information  currently  available  to,  management.  When used in these
documents,  the words "anticipate,"  "expect," "estimate,"  "project," "likely,"
"believe,"   "intend,"  and  similar   expressions   are  intended  to  identify
forward-looking statements.  Although the Company believes that the expectations
reflected in such  forward-looking  statements  are  reasonable,  it can give no
assurance  that  such  expectations  will  prove  to  have  been  correct.  Such
statements are subject to certain risks,  uncertainties and assumptions.  Should
one or more of these risks or uncertainties  materialize,  or should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated,  estimated,  projected,  or expected,  or  intended.  Among the key
factors that may have a direct  bearing on the Company's  operating  results are
the risks and  uncertainties  described  below.  The reader  should also consult
other  factors  identified  from time to time in the  Company's  reports  to the
Commission.

         Absence of  Operating  Revenues;  Operating  Losses.  The  Company is a
development stage company and has been since its inception. To date, the Company
has not generated  revenues from operations or realized a profit.  The Company's
losses from operations in 1996 were $1,327,226 and the Company's losses from
operations in 1997 were $1,831,471.  Based upon  management's  current estimates
for revenues and operation  expenses  during the fiscal year ending December 31,
1998,  management  currently  anticipates that the Company will experience a net
loss from  operations  in 1998 and may  continue to  experience  losses into the
future. The Company is presently investing  substantial resources in the testing
and  development of the CJ and the testing of the Tennessee  Minerals  Property.
There can be no assurance  that the CJ, the Tennessee  Minerals  Property or any
other  project  being  undertaken  or proposed  by the  Company  will enable the
Company to generate revenues or that the Company will ever realize a profit from
operations.

         Product  Development  Risk.  The CJ is in the  development  stage.  The
Company has completed only preliminary  testing of the Series 12 CJ, designed to
process  approximately 120 tons of solids per day. The Company has not completed
sufficient  testing of the Series 12 CJ to  determine  the volume of solids that
the Series 12 CJ is capable of processing. In addition, even if the Series 12 CJ
proves  capable of  processing  120 tons of solids per day, such capacity is too
small for most  commercial  operations,  with the  possible  exception  of small
placer  gold mines or similar  operations.  There can be no  assurance  that the
Series 12 CJ will prove  capable of  processing  120  tons  of solids per day or
of recovering all of the minerals it is designed to recover.  Even if the Series



                                       11

<PAGE>



12 CJ  performs to design  specifications,  because of its small  capacity,  the
Company  does not expect that the Series 12 CJ will be able to recover  minerals
in a cost-effective manner for most applications.

         In 1997, the Company  designed and constructed a Series 30 CJ, designed
to be  capable  of  processing  500  tons of  solids  per day.  There  can be no
assurance  that the Series 30 CJ or larger CJ will prove  capable of  processing
the volume of solids it is designed  to process or that such a larger  volume CJ
will prove capable of recovering the minerals it is designed to recover. Even if
the Series 30 CJ or larger CJ performs to design specifications, there can be no
assurance  that  the  Series  30 CJ  will  be  able  to  recover  minerals  in a
cost-effective  manner or otherwise prove  attractive to end users. In addition,
the introduction of new  technologies by competitors  could render the Series 30
CJ or larger CJ obsolete or unmarketable  or require costly  alterations to make
it marketable.

         Property Development Risk. The Tennessee Minerals Property is currently
in the exploratory stage. The Company is engaged in  pre-feasibility  testing to
determine  the size and quality of mineral  deposits on the  Tennessee  Minerals
Property. If the results of such tests suggest that the deposits are amenable to
large scale,  low-cost mining, the Company will undertake a feasibility study of
the Tennessee  Minerals  Property.  Such a  feasibility  study would involve the
actual design,  pricing,  and analysis of equipment and facilities that would be
used  to  mine  the  Tennessee  Minerals  Property.  The  Company  expects  that
completion  of a  feasibility  study  will take 12-18  months  and that,  if the
feasibility study suggests that cost-effective  mining of the Tennessee Minerals
Property is  feasible,  a mine would not be  operational  for 24-36 months after
completion  of the study.  There can be no  assurance  that the  pre-feasibility
testing or the  feasibility  study will  indicate  that the  Tennessee  Minerals
Property contains minable quantities of heavy minerals or that such deposits are
amenable to large-scale,  low-cost mining, as contemplated by the Company.  Even
if the testing and studies suggest that mining is  economically  feasible on the
Tennessee Minerals Property,  there can be no assurance that the Company will be
able to  obtain  the  capital,  resources,  and  permits  necessary  to mine the
Tennessee Minerals Property. Nor can there be any assurance that market factors,
such as a decline in the price of, or demand for,  minerals  recoverable  at the
Tennessee Minerals Property,  will not have an adverse effect on the development
of mining operations on such property.

         Dependence  on  Third  Party   Manufacturers.   The  Company  currently
contracts with a machine shop located in central  California for assembly of the
CJ. If the Company  completes  testing and develops a final  production model of
the CJ, of which there can be no assurance,  the Company does not currently have
the  know-how  or  resources  to  establish  its  own  manufacturing   facility.
Management  is  considering   options  for  manufacture  of  the  CJ,  including
manufacturing under contract,  exclusive licensing or a joint venture. There can
be no assurance that the Company will obtain suitable  manufacturing capacity or
that  such   manufacturing   capacity,   if  found,  will  produce   affordable,
high-quality  units capable of sustaining  high  reliability and low maintenance
costs in a production environment.

         Sufficiency  and  Price  of  Capital.  Due  to,  among  other  factors,
unanticipated expenses of development, the absence of manufacturers or licensees
interested in entering into an alliance, increases in costs of necessary capital
equipment,  uncertainties  relating to  acquisitions  of equipment,  properties,
intellectual property rights or companies,  general and industry market factors,
or other unforeseen  events affecting the Company's use of and need for capital,
the Company's  existing  capital may prove  insufficient to complete testing and
development of the CJ, the Tennessee Minerals Property,  or other new or ongoing
projects.  In  addition,  depending  on market  factors  affecting  the costs of
capital generally,  the performance of the Company, the Company's capital needs,
the market  perception of mining or mining  equipment  stocks,  the economics of
projects being pursued,  industry perception of the Company's ability to recover
minerals with the CJ or otherwise,  and other factors affecting the availability
of capital and/or price of obtaining  capital,  the Company may unable to obtain
necessary  capital,  or may be forced to pay a price for capital  that is higher
than the Company is presently paying or is generally  available in the industry.
If the Company is unable to obtain sufficient capital or is forced to pay a high
price for capital, the Company may be unable to pursue or fully exploit existing
or future development  opportunities.  Also,  because of their size,  resources,
history and other  factors,  certain  competitors of the Company may have better
access to capital  than the  Company  and,  as a result,  may be able to exploit
opportunities more easily or thoroughly than the Company.

         Competing Products and Alternative Technologies.  The CJ competes in an
arena in which particle  specific  gravity is the primary  criteria for particle
segregation and capture.  Mechanical  gravity separation devices such as spirals
and cones,  froth flotation  devices,  and heavy media separators may be used to



                                       12

<PAGE>



perform  some of the  functions  for  which  the CJ is  designed.  See  "Item 1.
Business--Competition--Alternative  Technologies."  In addition,  competitors of
the Company have designed jig or jig-like  devices for use in the  separation of
mineral  particles and  environmental  contaminants.  These devices  include the
Kelsey Jig and the Knelsen batch  concentrator  unit,  which are currently being
used  worldwide.  As of mid-1995,  according  to the Kelsey jig's  manufacturer,
Geologics  Pty.  Ltd.,  36 Kelsey  jigs were in service  at 28 sites  worldwide,
including two machines at one site in the United States. Knelsen units have been
installed in various mining applications,  primarily gold, throughout the world.
See  "Competition--Competing  Products."  Results from  further  tests or actual
operations  may  reveal  that  existing  alternative  technologies  or  jig-like
products  are  better  adapted  to any or all of the  uses for  which  the CJ is
intended.  Regardless  of test  results,  consumers  may view  such  alternative
technologies  or products as  technically  superior  to, or more cost  effective
than, the CJ. Moreover, there is no assurance that competitors, many of whom may
have significant capital and resources,  will not develop, or are not now in the
process of developing, superior or less expensive alternatives to the CJ.

         Dependence on Commodities Markets. If the CJ is successfully  developed
and manufactured, of which there can be no assurance, the Company intends to use
the CJ to separate and recover  valuable,  heavy  mineral  particles at deposits
owned or leased by the Company,  including the Tennessee Minerals Property,  and
market the CJ to other companies.  Active international  markets exist for gold,
titanium,  zicron, and many other minerals potentially  recoverable with the CJ.
Prices of certain minerals have fluctuated widely, and are beyond the control of
the Company.  A significant  decline in the price of minerals  being produced or
expected to be  produced,  among other  factors,  could have a material  adverse
effect on the Company. In addition, a general economic downturn in the mining or
mineral  industries  or the global  economy  may have an  adverse  effect on the
Company.

         Risk of Development,  Construction and Mining Operations. In connection
with the development of a mineral  deposits,  the ability to meet cost estimates
and  construction  and production  time estimates  cannot be assured.  Technical
considerations,   delays  in  obtaining   governmental  approvals  and  permits,
inability to obtain  financing or other factors could cause delays in developing
mineral deposits.

         Government  Regulation;   Environmental  Permits  and  Liability.   The
Company's present  exploration of the Tennessee Minerals  Property,  its ongoing
testing  of  the  CJ,  and  any  prospective  testing,  construction  or  mining
activities the Company may conduct are subject to certain permitting or approval
requirements  and  numerous  federal,  state,  and  local  laws and  regulations
concerning  mine and machine  safety and  environmental  protection,  including,
without  limitation,  the  Clean Air Act,  the Clean  Water  Act,  the  Resource
Conservation  and Recovery  Act, and the  Comprehensive  Environmental  Response
Compensation  Liability Act. Some of the laws and regulations that would pertain
to mining,  construction  or testing  operations  require,  among other  things,
maintenance  of air and water quality  standards,  the  protection of threatened
endangered and other species of wildlife and  vegetation,  the  preservation  of
certain  cultural  resources,  and the  reclamation of  exploration,  mining and
processing sites. These laws and approval  requirements are continually changing
and, as a general matter,  are becoming more  restrictive.  Although  compliance
with federal state or local ordinances,  regulations, and permitting or approval
requirements represents a small part of the Company's present budget,  continued
compliance   may   necessitate   significant,   and  even   crippling,   capital
expenditures.  In the  event  the  Company  fails to  comply  with  such laws or
regulations,  fails to obtain a necessary  permit or approval,  or is delayed in
coming into compliance with any governing ordinances or regulations, the Company
may be forced to cease  operations,  be  subject to  substantial  fees or may be
required to expend significant  capital to ensure  compliance.  Although no such
problems or delays are  anticipated,  there can be no assurance that the Company
will be able to  comply  with  all  applicable  laws  and  regulations,  or that
compliance or necessary approvals will be obtained without substantial delays or
expenses.

         In addition,  under federal law and  applicable  state law, the Company
may be  jointly  and  severally  liable  with  prior  property  owners  for  the
treatment, cleanup, remediation,  and/or removal of substances discovered on the
Tennessee Minerals Property or any other property used by the Company, which are
deemed  by  the  federal  and/or  state  government  to be  toxic  or  hazardous
("Hazardous Substances").  Liability may be imposed, among other things, for the
improper  release,  discharge,  storage,  use,  disposal  or  transportation  of
Hazardous  Substances.  The Company might use Hazardous Substances and, although
the Company intends to employ all reasonably  practicable  safeguards to prevent
any liability under  applicable laws relating to Hazardous  Substances,  mineral
exploration  and  extraction  by its very  nature  will  subject  the Company to
substantial risk that remediation will be required.

         Enforceability  of  Civil  Liabilities  Against  Foreign  Persons.  The
Company is an Ontario corporation,  a majority of its directors are residents of



                                       13

<PAGE>



Canada,   and  certain  of  the  Company's  experts   (including  its  principal
accountants and Canadian legal counsel) are located in Canada.  As a result,  it
may be difficult  for  shareholders  or  investors to effect  service of process
within the United States upon such persons or to enforce court judgments against
such persons in United States predicated upon civil liability  provisions of the
federal  securities  laws.  It is uncertain  whether  Canadian  courts would (i)
enforce  judgments of United States courts obtained  against the Company or such
directors, officers or experts predicated upon the civil liability provisions of
United  States  securities  laws or (ii) impose  liability  in original  actions
against the Company or its directors, officers or experts predicated solely upon
United States securities laws.

         Patents for the  Centrifugal  Jig.  Initial patents on the CJ have been
issued in the United  States,  South  Africa,  United  Kingdom,  Australia,  and
Canada. Patent applications are pending in Germany,  France, and Japan. A second
series of patents have been issued with  respect to a critical  component of the
CJ in the United States, Australia, Canada, Great Britain, General European, and
South Africa, as well as under General European procedures. The Company has also
filed an additional  application in the United States seeking a third patent for
a critical  component of the CJ. There can be no assurance  that pending  patent
applications  will be granted or that  persons in countries in which the Company
has not patented the CJ, or certain  critical  components,  will not develop and
market infringing  products.  The cost of, and other obstacles to, enforcing the
Company's  patents,  especially  outside  of North  America,  may also limit the
Company's ability to prevent infringing products from entering the market.

         Dependence on Key  Personnel.  The continued  success of the Company is
dependent  to a  significant  extent on the  services  of Dr.  William  P. Long,
President and Chief Executive Officer of the Company, and Mr. C. Patrick Costin,
Vice  President of the Company and President of Fine Gold and MRS, the Company's
subsidiaries.  The loss or unavailability of Mr. Long or Mr. Costin could have a
material  adverse effect on the Company.  No key man insurance is carried on the
lives of such key officers.  In addition to Dr. Long and Mr. Costin, the Company
employs a Director of Finance,  a senior process  engineer,  a  metallurgist,  a
geologist,  and  a  part-time  administrative  assistant.  There  are  no  other
employees of the Company or its  subsidiaries.  Aside from Dr. Long,  Mr. Costin
and the Director of Finance,  the Company has no employment  agreements with any
of its personnel. Competition for such personnel is intense, and there can be no
assurance  that the Company will be able to attract and  maintain all  personnel
necessary for the  development  and  operation of its business.  The loss of the
services  of key  personnel  or an  inability  to attract,  retain and  motivate
qualified  personnel  could  have a  material  adverse  effect on the  business,
financial condition or results of operations of the Company.

         Acquisition  Risks. The Company is currently  evaluating,  and plans to
continue to evaluate, additional opportunities for the license or acquisition of
additional  mining products or properties,  as well as the possible  acquisition
of, or development of strategic  relations  with,  other  companies who may have
products,  assets,  manufacturing  capabilities,  or  other  qualities  that are
compatible with the Company's business objectives.  The Company must compete for
attractive  acquisition  or strategic  alliance  candidates  with numerous other
companies,  many of whom have significantly  greater financial and technological
resources  than the Company.  There can be no assurance that the Company will be
able to  successfully  identify  attractive  acquisition  or strategic  alliance
opportunities.  Such acquisitions and alliances, if identified and completed, of
which there can be no  assurance,  could  involve the  incurrence  of additional
debt,  amortization  expenses  related to goodwill and intangible  assets or the
dilutive issuance of equity securities,  all of which could adversely affect the
Company's  operating  results  or  financial  condition.   Accordingly,   future
acquisitions and alliances may have an adverse effect on the Company's operating
results and financial condition,  particularly in periods immediately  following
the consummation of such  transactions,  while the operations of the acquired or
combined business are being integrated into the Company's operations.  There can
be no assurance that capital sought by the Company to pursue such  opportunities
can be obtained on terms favorable to the Company, if at all. The failure of the
Company to obtain  such  financing  could  restrict  its  ability to pursue such
business  opportunities.  Further, there can be no assurance that any particular
acquisition  or alliance  will be  successfully  integrated  into the  Company's
operations or will achieve profitability.

         Possible Issuance of Substantial  Additional Shares Without Stockholder
Approval.  The Company's Articles of Incorporation  authorize the issuance of an
unlimited  number  of  shares of Common  Stock.  All such  shares  may be issued
without any action or approval by the Company's  stockholders.  In addition, the
Company  has a stock  option  plan  which  has  potential  for  dilution  of the
ownership  interests of the Company's  stockholders.  Any shares of Common Stock
issued  would  further  dilute the  percentage  ownership of the Company held by
existing stockholders.



                                       14

<PAGE>



         Possible  Volatility of Stock Price.  The Common Stock is listed on the
Alberta Stock Exchange and has been listed on the Nasdaq  National Market System
since January 26, 1998.  Between March 24, 1997 and January 23, 1998, the Common
Stock was listed on the Nasdaq SmallCap Market.  Trading in the Common Stock has
been  characterized by a high degree of volatility.  See "Item 5. Market for the
Registrant's  Common  Stock  and  Related  Shareholder  Matters--Market  Price."
Trading  in the Common  Stock to date has been  dominated  by a small  number of
firms which make a market in such securities.  To the extent that the market for
the Common Stock  continues to be dominated by a small number of market  makers,
the market may continue to experience a high degree of  volatility.  Such market
dominance and  volatility  may  adversely  affect the price and liquidity of the
Common Stock in the future.  In addition,  the trading price of the Common Stock
could fluctuate widely in response to variations in quarterly financial results,
announcements  by the  Company  or its  competitors,  industry  trends,  general
economic  conditions  or other  events or factors.  Among other  factors,  it is
possible that in some future  quarters the Company's  operating  results will be
below the  expectations of public market  analysts and investors.  Regardless of
the general outlook for the Company's business, the announcement of financial or
research  and  development   results  that  differ  from  analyst  and  investor
expectations could have a material and adverse effect on the market price of the
Common Stock.

         Shares   Eligible  for  Future   Sales.   The  resale  of   "restricted
securities,"  as well as securities held by "affiliates" of the Company (as such
terms are defined in releases and rules  promulgated  under the Securities Act),
is  generally  subject  to the  provisions  of Rule 144  promulgated  under  the
Securities Act ("Rule 144"). In general,  under Rule 144 as currently in effect,
a person (or persons whose shares are  aggregated)  who has  beneficially  owned
restricted securities for at least one year (including the holding period of any
prior  owner  except  an  affiliate),   including  persons  who  may  be  deemed
"affiliates"  of the Company,  would be entitled to sell within any  three-month
period a number of shares  that does not exceed the  greater of 1% of the number
of shares of Common Stock then  outstanding or the average weekly trading volume
of the Common Stock during the four  calendar  weeks  preceding  the filing of a
Form 144 with respect to such sale.  In addition,  a person who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two  years  (including  the  holding  period  of  any  prior  owners  except  an
affiliate),  would be  entitled to sell such  shares  under Rule 144(k)  without
regard to the requirements described above. The Company is unable to predict the
effect that future sales under Rule 144 may have on the then  prevailing  market
price of Common  Stock.  In  addition,  shares  issued upon  exercise of options
granted  pursuant to the  Company's  employee  stock  option plan are  presently
registered  under the Securities  Act and,  subject to certain  restrictions  on
resale by affiliates,  may be sold without restriction.  It can be expected that
the sale of any  substantial  number  of shares of  Common  Stock  would  have a
depressive effect on the market price of the Common Stock.

         Absence of Dividends.  The Company has never declared or paid dividends
on the Common  Stock.  Moreover,  the  Company  currently  intends to retain any
future  earnings for use in its business  and,  therefore,  does not  anticipate
paying dividends on the Common Stock in the foreseeable future.

Item 2.  Properties
         ----------

         The Company  maintains a registered  office at 67 Richmond Street West,
Suite 500,  Toronto,  Ontario M5H 1Z5. The Company does not lease any space for,
or conduct any operations out of, the Toronto,  Ontario  registered  office.  In
addition,  the Company  leases 900 square feet of office space at 1725  Sheridan
Avenue,   Suite  140,  Cody,  Wyoming  82414,  which  serves  as  the  corporate
headquarters  for the Company and its  subsidiaries.  The Company's lease to the
Cody,  Wyoming  office space may be terminated by either party on 30 days' prior
written notice.

         Fine Gold and MRS lease 4,500  square feet of office space at 230 South
Rock Boulevard,  Suite 21, Reno,  Nevada 89502.  The lease for the Reno,  Nevada
offices expires on January 31, 2000. MRS leases  approximately 1,550 square feet
of laboratory  space at 7950 Security  Circle,  Reno,  Nevada 89506,  for its CJ
testing  operations.  The test facility  lease may be terminated by either party
upon eight weeks prior  written  notice.  Management  believes that the existing
offices and test facilities of the Company and its subsidiaries are adequate for
their current needs. In the event that alternative or additional office space is
required,  the Company  believes it could obtain  additional space on commercial
acceptable terms.


                                       15

<PAGE>




         The Tennessee  Minerals Property consists of approximately  4,300 acres
of real  property  located  near  Camden,  Tennessee,  which MRS  leases (or has
binding  commitments to lease) from multiple  owners of the real property.  Such
leases grant MRS certain exclusive rights, including the right to explore, test,
mine,  extract,  process,  and sell any minerals or other materials found on the
land, in exchange for the payment of minimum annual  advanced  royalty  payments
prior to commencement of production on the properties (or after  commencement of
production,  to the extent  production  royalty  payments  do not equal  nominal
royalty  payments) and,  thereafter,  production  royalty  payments in an amount
equal to a percentage of the value of minerals mined and sold from the property.
See Note 5 to the Consolidated  Financial  Statements for information  regarding
present and future minimum advanced royalty  payments.  The leases typically are
for a minimum term of ten years, and may be extended  indefinitely  provided the
Company is actively conducting exploration,  development,  or mining operations.
The leases are  cancelable by MRS at any time,  and are cancelable by the lessor
in the event MRS  breaches  the terms of the lease.  The mineral  deposit on the
Tennessee Minerals Property, and the Company's operations and proposed plan with
respect  to it are  exploratory  in  nature.  See  "Item 1.  Business--Tennessee
Minerals  Property." The Tennessee Minerals Property is accessed by public roads
and, to the Company's knowledge, has not been used in prior mining operations.

                  During  1997 and  1996,  the  Company  incurred  $480,249  and
$126,302  respectively  in deferred  exploration  expenditures  on the Tennessee
Minerals  Property.  Expenditures  were  incurred on leasehold  minimum  advance
royalty  payments,  auger hole drilling,  sampling,  sample  analysis and assay,
geological  and mineral  deposit  characterizations  studies, and other  related
exploration activities.


Item 3.  Legal Proceedings
         -----------------

         The  Company  is from  time  to time  involved  in  routine  litigation
incidental to the conduct of its business. The Company is currently not involved
in  any  suit,  action  or  other  legal  proceedings,  nor is it  aware  of any
threatened suit,  action or other legal  proceedings  which management  believes
will  materially and adversely  affect the business or operations of the Company
or its subsidiaries.


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         The Company  did not submit any  matters to a vote of security  holders
during the fourth quarter of the 1997 fiscal year.

                                     PART II

Item 5.  Market for the Registrant's Common Stock and Related Shareholder
         ----------------------------------------------------------------
         Matters
         -------

Market Price

         United States. In the United States, beginning on January 26, 1998, the
Common Stock began  trading on the Nasdaq Stock Market  National  Market  System
under the symbol "ALTIF." From March 24, 1997 until January 23, 1998, the shares
of Common Stock were quoted on the Nasdaq Stock Market SmallCap Market under the
symbol  "ALTIF." The follow table sets forth in United States  dollars,  for the
period from March 24, 1997 through the  conclusion of the 1997 fiscal year,  the
high and low sales  prices  for the  Common  Stock,  as  reported  by the Nasdaq
SmallCap Market.

Fiscal Year Ended                                    Low           High
December 31, 1997:
                                                  ----------    -----------

         1st Quarter (beginning March 24,           $8.5625       $12.25
             1997)..............................
         2nd Quarter............................     4.75           9.625
         3rd Quarter............................     5.125          9.875
         4th Quarter............................     7.75          16.625




                                       16

<PAGE>



         Prior to March 24,  1997,  the Common Stock was listed under the symbol
"AIGDF"  on  the  over-the-counter  bulletin  board  maintain  by  the  National
Association  of  Securities  Dealers  the  ("OTCBB").  The prices  listed  below
represent  the  closing  high and low bid prices  for the Common  Stock on OTCBB
during the 1996  fiscal  year and for the period  from  January 1, 1997  through
March 23, 1997.  Prior to March 27, 1996, the common Stock was not listed on the
OTCBB.  Quotes for the first  quarter of the 1996  fiscal  year  represent  only
trading  from  March 27 through  March 29.  The bid  prices set forth  below are
market quotations based on interdealer bid prices,  without markup,  markdown or
commission, and may not represent actual transactions.

Fiscal Year Ended                                       Low           High
December 31, 1997:
                                                     ----------     ----------

         1st Quarter (through March 23, 1997)           $6.5          $11.375


Fiscal Year Ended                                       Low           High
December 31, 1996:
                                                     ----------     ----------

         1st Quarter (March 27 - March 29,              $2.30         $2.30
            1996)...............................
         2nd Quarter............................         1.375         4.125
         3rd Quarter............................         2.85          4.625
         4th Quarter............................         3.89          3.31


         Canada. In Canada, the Common Stock is traded under the symbol "AIL" on
the Alberta Stock  Exchange (the "ASE").  The following  tables set forth,  on a
quarterly  basis,  the high and low  closing  sales  prices  during the last two
fiscal  years for shares of the Common  Stock on the ASE. All amounts are stated
in Canadian dollars, the currency in which the prices are quoted by the ASE. See
"--Exchange Rate Information."


                                                 Low              High
                                             ------------      -------------
Fiscal Year Ended
December 31, 1997:

         1st Quarter......................   $ Cdn. 7.75        $ Cdn. 16.55
         2nd Quarter......................          6.90               13.00
         3rd Quarter......................          7.40               13.50
         4th Quarter......................         11.10               23.50

Fiscal Year Ended
December 31, 1996:
         1st Quarter......................          1.78               4.25
         2nd Quarter......................          2.70               6.50
         3rd Quarter......................          3.98               6.20
         4th Quarter......................          5.30               11.40


Outstanding Shares and Number of Shareholders.

         As of  February  27,  1998,  the  number  of  shares  of  Common  Stock
outstanding  was  15,510,245  held by 504 holders of record.  In  addition,  the
Company has reserved 1,418,000 shares of Common Stock for issuance upon exercise
of options that have been, or may be,  granted  under its employee  stock option
plan and has reserved an estimated  539,223  shares of Common Stock for issuance
upon  conversion of outstanding  convertible  debentures and exercise of certain
warrants.  See "Item 5.  Market for the  Registrant's  Common  Stock and Related
Shareholder Matters--Recent Sales of Unregistered Securities". During the period
from December 31, 1997,  the date of the most recent  financial  statements,  to
February 27, 1998,  17,500 options issued  pursuant to the Altair  International
Stock Option Plan were exercised.

Dividends

         The Company has never  declared or paid  dividends on the Common Stock.
Moreover, the Company currently intends to retain any future earnings for use in
its business and,  therefore,  does not  anticipate  paying any dividends on the
Common Stock in the foreseeable future.



                                       17

<PAGE>



Transfer Agent and Registrar

         The  Transfer  Agent  and  Registrar  for the  Common  Stock is  Equity
Transfer Services, Inc., Suite 800, 120 Adelaide, Toronto, Ontario, M5H 3V1.

Canadian Taxation Considerations

         Dividends  paid on shares of Common  Stock  owned by  non-residents  of
Canada are subject to Canadian  withholding  tax. The rate of withholding tax on
dividends under the Income Tax Act (Canada) (the "Act") is 25%. However, Article
X of the  reciprocal  tax treaty between Canada and the United States of America
(the "Treaty") generally limits the rate of withholding tax on dividends paid to
United States residents to 15%. The Treaty further  generally limits the rate of
withholding  tax to 5% if  the  beneficial  owner  of  the  dividends  is a U.S.
corporation which owns at least 10% of the voting shares of the Company.

         If the beneficial  owner of the dividend  carries on business in Canada
through a permanent  establishment in Canada, or performs in Canada  independent
personal  services  from a fixed  base in  Canada,  and the shares of stock with
respect  to which the  dividends  are paid is  effectively  connected  with such
permanent  establishment  or fixed base,  the dividends are taxable in Canada as
business  profits at rates  which may exceed the 5% or 15% rates  applicable  to
dividends that are not so connected with a Canadian  permanent  establishment or
fixed base. Under the provisions of the Treaty, Canada is permitted to apply its
domestic  law  rules  for  differentiating  dividends  from  interest  and other
disbursements.

         A capital gain realized on the disposition of shares of Common Stock by
a person resident in the United States ("a non-resident") will be subject to tax
under the Act if the  shares  held by the  non-resident  are  "taxable  Canadian
property." In general,  shares of Common Stock will be taxable Canadian property
if the particular  non-resident used (or in the case of a non-resident  insurer,
used or held) the shares of Common  Stock in  carrying on business in Canada or,
pursuant  to  proposed  amendments  to the Act,  where at any  time  during  the
five-year  period  immediately  preceding the  realization of the gain, not less
than 25% of the issued and  outstanding  shares of any class or series of shares
of the Company were owned by the particular  non-resident,  by persons with whom
the particular  non-resident did not deal at arms' length, or by any combination
thereof.  If the shares of Common Stock constitute  taxable  Canadian  property,
relief nevertheless may be available under the Treaty.  Under the Treaty,  gains
from the  alienation of shares of Common Stock owned by a  non-resident  who has
never been resident in Canada  generally  will be exempt from  Canadian  capital
gains tax if the shares do not relate to a permanent establishment or fixed base
which the  non-resident  has or had in  Canada,  and if not more than 50% of the
value of the shares was derived from real  property  (which  includes  rights to
explore for or to exploit mineral deposits) situated in Canada.

Recent Sales of Unregistered Securities

         Following is a summary of all securities of the Company sold during the
fiscal  year  ended  December  31,  1997  that  were not  registered  under  the
Securities Act, other than  unregistered  sales  disclosed in Quarterly  Reports
filed on Form 10-Q for the  quarters  ended  March 31,  1997 and June 30,  1997.
Unless  otherwise  indicated,  all  amounts set forth below are stated in United
States dollars.

         On December  29, 1997,  pursuant to the terms of a Securities  Purchase
Agreement  dated  December  24,  1997 (the  "Purchase  Agreement"),  the Company
completed  the  private  placement  of  $5,000,000  in  principal  amount  of 5%
convertible subordinated debentures due December 29, 2001 (the "Debentures") and
warrants to purchase 75,000 shares of the Common Stock on or before December 29,
1999 at a price equal to $16.7188 per share (the "Investor Warrants") to a small
number of  institutional  investors in an offering exempt from the  registration
requirements  under the Securities Act. The Company also issued to the placement
agent which  arranged the  transaction  warrants to purchase  105,000  shares of
Common Stock on or before  December  29, 1999,  at a price equal to $16.7188 per
share (the "Placement Warrants";  collectively,  with the Investor Warrants, the
"Warrants").  The following  descriptions  do not purport to be complete and are
qualified by reference to the definitive  agreements,  Debentures,  and Warrants
filed as exhibits  to the  Company's  Current  Report on Form 8-K filed with the
Commission on January 13, 1998, as amended by Amendment No. 1 to Current  Report
on Form 8-K/A, filed on January 21, 1998.



                                       18

<PAGE>



         The  Debentures  have an  aggregate  face  value and  "issue  price" of
$5,000,000  and bear  interest  at a rate of 5% per  annum,  payable  in cash or
shares of Common  Stock at the  Company's  option.  The  Company  may redeem the
Debentures  at a price  equal  to  110% of the  unpaid  principal  amount  to be
redeemed,  plus any accrued  interest and other charges,  provided  that,  among
other  conditions,  a Registration  Statement on Form S-3 (or other  practicable
form) to be filed by the Company with respect to shares of Common Stock issuable
upon conversion of the Debentures or exercise of the Warrants (the "Registration
Statement")  is effective and the market price per share of Common Stock is less
than $6.50 per share.

         Subject  to  certain  restrictions  set  forth in the  Debentures,  the
Debentures  are each  convertible  by their holders into the number of shares of
Common  Stock equal to the  quotient of (a) the sum of the  principal  amount of
such Debenture and all accrued but unpaid  interest and charges,  divided by (b)
the lesser of (i) an amount  equal to 92% of the  average  market  price for one
share of Common Stock for the five  preceding  trading  days and (ii)  $14.36875
(subject to an increase of $.50 on each of December  29, 1999 and  December  29,
2000).  In addition,  the Company may require  conversion  of all or part of the
Debentures at the  above-described  conversion rate if, among other  conditions,
the Registration Statement is effective and the market price per share of Common
Stock  equals or exceeds  $18.679  (subject  to an  increase  of $.65 on each of
December 29, 1999 and December 29, 2000).

         Pursuant to a Registration  Rights  Agreement  dated as of December 24,
1997,  entered into in conjunction with the Purchase  Agreement,  the Company is
required to file the Registration  Statement and cause it to be effective within
150 days of December 29,  1997.  If the  Registration  Statement is not declared
effective  within 150 days of December 29, 1997,  the Company shall be obligated
to pay each holder of the  Debentures or Warrants an amount equal to two percent
(2%) of the principal amount of the relevant Debentures per month.

         In  addition,  subject  to the terms  and  conditions  of the  Purchase
Agreement,  the  Company has the right to cause the  initial  purchasers  of the
Debentures to purchase up to an additional $5,000,000 aggregate principal amount
of 5% Convertible Subordinated Debentures (the "Put Debentures"). If issued, the
Put Debentures  will be accompanied by warrants to purchase an aggregate  number
of shares of Common Stock equal to the product of (i) 75,000  multiplied by (ii)
the quotient of the principal amount of all Put Debentures divided by $5,000,000
(the "Put Warrants"). The exercise price for the Put Warrants shall be an amount
equal to 125% of the closing  price per share of the Common  Stock on the Nasdaq
SmallCap  Market or the  Nasdaq  National  Market,  as  applicable,  on the date
immediately prior to the date the Put Warrants are issued. As of March 23, 1998,
the Company has not issued the Put Debentures or issued the Put Warrants.

         The placement of the  Debentures  and Warrants was effected in reliance
upon the  exemption  from  registration  provided by Rule 506 of  Regulation  D,
promulgated  under the  Securities  Act,  based on a number  of  considerations,
including the following:  (i) each of the  purchasers of the  Debentures  and/or
Warrants  represented  and  warranted to the Company that it was an  "accredited
investor",  as defined in Rule  501(a)(3) of  Regulation D under the  Securities
Act;  (ii) no  general  solicitation  or  general  advertising  accompanied  the
offering or sale of the  Debentures  and Warrants;  (iii) each of the purchasers
represented  and warranted to the Company that it was acquiring the  Debentures,
Warrants,  and any shares of Common Stock  issuable upon  conversion or exercise
thereof,  for investment purposes only and not with view towards resale,  except
pursuant to a sale  registered or exempted  under the  Securities  Act; (iv) the
Securities  Purchase  Agreement and other documents  disclosed,  and each of the
Warrants  and  Debentures  was  imprinted  with a  legend  providing,  that  the
Debentures  and Warrants had not been  registered  under the  Securities Act and
cannot be resold  except  pursuant to an exemption  from the  Securities  Act or
effective registration statement;  and (v) each of the purchasers was furnished,
or  offered  access to, the  Company's  Annual  Report on Form 10-K for the year
ended December 31, 1996, as amended,  the definitive  proxy  statement  filed in
connection  therewith,  copies of interim or current  reports  filed in the 1997
fiscal year, and other information  requested about the Company or the terms and
conditions of the transaction described in the Purchase Agreement.

Item 6.  Selected Financial Data
         -----------------------

         The  following  table  sets  forth  selected   consolidated   financial
information  with  respect to the Company and its  subsidiaries  for the periods
indicated.  The data is derived from financial statements prepared in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP"), which
differ in certain  respects from those in the United States.  See Note 14 to the
consolidated financial statements included herein for certain reconciliations to
accounting  principles  generally accepted in the United States ("US GAAP"). The



                                       19

<PAGE>



selected financial data should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial  Condition and Results of  Operation,"  and
the consolidated  financial  statements and accompanying  notes included herein.
The TMI Merger was  consummated  in February 1996, and treated as a purchase for
accounting  purposes.  Accordingly,  the following  selected  financial data was
derived solely from the consolidated  financial statements of the Company, which
were  audited  for  the  years  1992-1996  by  McGovern,   Hurley,   Cunningham,
independent  chartered  accountants.  All  amounts  are stated in U.S.  dollars,
unless otherwise indicated.

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                            -------------------------------------------------------

                                                  1997           1996           1995          1994         1993
                                              ------------  --------------   ----------   ------------  -----------
<S>                                           <C>             <C>            <C>           <C>          <C>
Statements of Operations:
  Revenues from Operations....................$        -0-    $        -0-   $       -0-   $       -0-  $       -0-
  Operating Expenses..........................   1,858,033       1,335,725      438,103        573,049      234,294
  Interest Expense............................      43,497          19,373          -0-            -0-          -0-
  Interest Income.............................      70,059          27,872        1,000            979        2,315
  Net Loss....................................   1,831,471       1,327,226      437,103        572,070      231,979
  Loss per Common Share.......................      (0.13)          (0.12)        (0.07)        (0.12)       (0.05)
  Cash Dividends declared per Common Share....         -0-             -0-          -0-            -0-          -0-
  Deficit, Beginning of Year..................   3,956,564       3,332,064    2,894,961      2,322,891    2,092,912
  Net Loss....................................   1,831,471       1,327,226      437,103        572,070      231,979
  Other Expense (Income) .....................     515,844       (702,726)          -0-            -0-          -0-
  Deficit, End of Year........................   6,303,879       3,956,564    3,332,064      2,894,961    2,322,891

Balance Sheet Data:
  Working Capital ............................   7,480,153       2,974,955      313,502      (113,116)       20,861
  Total Assets................................  13,125,804       8,042,888      975,259        384,923      488,910
  Long-term Obligations.......................     602,451         269,685          -0-            -0-          -0-
  Current Liabilities.........................     712,810         308,762       90,910        164,011      118,085
  Net Stockholders' Equity....................  11,810,543       7,464,441      884,349        220,912      370,825
</TABLE>




Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

         The  following  discussion  should  be read  in  conjunction  with  the
consolidated financial statements and notes thereto.

Overview

         From  inception  through  the  end  of  1993,  the  Company's  business
consisted  principally of the exploration of mineral  properties for acquisition
and  development.  During 1994, the Company's focus changed as it became engaged
in the acquisition,  development and testing of mineral processing equipment for
use in the recovery of fine, heavy mineral particles,  including gold, titanium,
zircon and  environmental  contaminants.  Nevertheless,  the  Company  continues
exploring  mineral  properties  suitable  for  development  using the  Company's
patented mineral processing equipment.

         On November  15,  1994,  the Company  executed an option  agreement  to
acquire TMI, a  development  stage  enterprise  which owned all patent rights to
Campbell  Centrifugal Jig, an early-stage  version of the CJ. The Company funded
$373,955 of  option-related  costs  during 1994 and 1995.  Subsequently,  during
early 1996, the Company renegotiated the acquisition  agreement and acquired all
of the  outstanding  common stock of TMI. The acquisition was accounted for as a
purchase by the Company,  which agreed to issue to TMI's shareholders  1,920,000
shares  of its  common  stock  over a  five-year  period  and  580,000  warrants
entitling the holder to purchase one share of Common Stock for $2.00  (Canadian)
until March 1, 1997.

         The effective  purchase price of TMI was $3,732,450.  This consisted of
the issuance to the former TMI shareholders of Common Stock valued at $2,521,469
(1,919,557  shares of Common  Stock with a deemed  value of $1.31 per share) and
the absorption of Trans Mar's assets and liabilities, with liabilities exceeding
assets by $1,210,981 at February 29, 1996.  The purchase  price was allocated to
CJ patents and  development  costs.  On March 19,  1998,  the ASE  notified  the
Company  that it  had  approved a settlement  agreement  between the Company and
several former TMI shareholders,  resulting in (i) the release of 180,765 shares



                                       20

<PAGE>



of Common Stock placed in escrow in connection with the Company's acquisition of
TMI and (ii) the  cancellation  of 723,065  shares of Common Stock owned by such
former TMI shareholders,  which were also subject to the escrow arrangement. See
Item 1, "Business--Subsidiaries."

         Prior to 1994,  the Company  operated  its minerals  business  with the
intent of  receiving  income  from  property  sales,  joint  ventures,  or other
business arrangements with larger companies,  rather than developing and placing
its properties  into  production on its own. To date, no royalty income has been
received by the Company, and at present,  there are no business  arrangements or
joint venture prospects involving the Company's properties or potential property
sales from which the Company  presently  expects to receive income.  The Company
continues  to  explore  minerals  properties,  such  as the  Tennessee  Minerals
Property, but its exploration efforts are primarily focused on locating property
suitable for development using the CJ.

Results of Operations

         Fiscal Years 1995, 1996, and 1997

         The Company has earned no revenues  to date.  Operating  losses  before
extraordinary  items  totaled  $1,831,471  ($0.13 per share) for the 1997 fiscal
year, $1,327,226 ($0.12 per share) for the 1996 fiscal year, and $437,103 ($0.07
per share) for the 1995  fiscal  year.  Principal  factors  contributing  to the
losses  during  these  periods  were the  absence of revenues, coupled  with the
incurrence of operating expenses.

         Operating  expenses  increased from $438,103  during 1995 to $1,335,725
during 1996 and to $1,858,033  during 1997. Of the  $1,858,033  total  operating
expenses incurred during 1997, $590,831, representing 32% of the total operating
expenses,  was related to amortization of the company's  assets,  as compared to
amortization of $385,633 (29% of total operating expenses) and $3,151 (less than
1% of total operating expenses) during 1996 and 1995, respectively. Increases in
1997 and 1996  amortization  were due primarily to amortization of CJ patent and
development costs acquired in the TMI Merger.  Operating expenses,  exclusive of
amortization,  increased  from  $434,952  in 1995 to  $950,092  during  1996 and
$1,267,202 in 1997,  due primarily to increased  activity in acquiring,  testing
and developing the CJ and its potential  applications.  The Company  installed a
Series 12 CJ and commenced CJ testing at the University of Illinois during 1996,
and continued such testing during 1997.  During 1996, the Company  expanded into
new leased  office space in Reno,  Nevada and increased the level of staffing at
this location from one to four personnel. In addition, the Company had increased
expenditures  associated  with its  commencement of operations at its CJ testing
facility in Reno, Nevada during the first quarter of 1997. Also during 1996, the
Company incurred costs for corporate  services beyond the level of similar costs
incurred during earlier periods.  Commencing  during mid-1996,  and through 1997
increased  expenditures were required for professional  fees,  largely legal and
accounting costs related to the Company's election to permit the Common Stock to
trade in the U.S. public markets,  including expenses associated with Commission
filings and NASDAQ compliance, as well as the Company's decision to aggressively
enforce its licenses and patent rights.

         As a  result  of the  TMI  Merger,  Fine  Gold  assumed  all  of  TMI's
liabilities.  During  1996,  Fine Gold  entered  into  agreements  extinguishing
certain  of the TMI  accounts  payable  and notes  payable at less than the book
amounts of such  debt.  The net of such  forgiveness  of debt was  $702,726  and
resulted  in an  extraordinary  gain of $0.06 per share for 1996.  There were no
extraordinary items during 1997 or 1995.



                                       21

<PAGE>



Liquidity and Capital Resources

         The Company has financed its operations  since  inception  primarily by
the issuance of equity securities (Common Stock, the Debentures, and options and
warrants to purchase Common Stock) with aggregate net proceeds of $18,942,453 as
of December 31, 1997. The Company received cash proceeds from the sale of Common
Stock and the  exercise  of options  and  warrants  to acquire  Common  Stock of
$1,100,540 in 1995;  $7,156,846 in 1996  (including  $2,521,469  deemed value of
shares of Common Stock issued in the TMI Merger - $4,635,377 without such deemed
value);  and $2,569,194 in 1997. In addition,  during 1997, the Company received
net proceeds of $4,484,156 ($5,000,000 less $515,844 costs of issuance) from the
issuance of the  Debentures and Warrants.  See "Item 5. Market for  Registrant's
Common  Stock and  Related  Shareholder  Matters--Recent  Sales of  Unregistered
Securities."

         The Company has earned no revenues  from  operations  and has  incurred
recurring  losses. At December 31, 1997, the Company's  accumulated  deficit was
$6,303,879.  However,  due to proceeds  from the issuance of Common  Stock,  the
Debentures, warrants, and options, the Company has increased its working capital
and improved its financial  condition and resources during the last three years.
The Company's  working capital was $313,502 at December 31, 1995 and improved to
$2,974,955 at December 31, 1996. This trend continued in 1997 as working capital
at  December  31,  1997  rose to  $7,480,153  and the  Company's  cash  position
increased   from  $309,489  and  $3,270,161  at  December  31,  1995  and  1996,
respectively,  to $8,161,770  at December 31, 1997.  See "Item 5. Market for the
Registrant's Common Stock and Related Shareholder Matters."

         The  Company  currently  maintains  working  capital  which  management
believes will be sufficient for the Company's needs during 1998; however,  there
can be no assurance  that the Company will be able to raise  capital to fund the
Company's long-term capital  requirements.  As of December 31, 1997, the Company
had  $8,161,770  in cash  and  short-term  investments  available  to  meet  its
near-term development and operating needs. In addition, the Company had obtained
a firm commitment for the purchase of $5,000,000 of additional  Debentures.  See
"Item 5.  Market  for the  Registrant's  Common  Stock and  Related  Shareholder
Matters."  Subject to the terms and  conditions of the Purchase  Agreement,  the
Company  has the  discretion  to compel the  purchasers  of the  Debentures  and
Warrants to purchase any amount up to $5,000,000 in such  additional  Debentures
between  August 26,  1998 and October 28,  1998.  In the event the Company  does
elect to draw full funding,  proceeds in the amount of approximately  $4,750,000
($5,000,000 less  approximately  $250,000 cost of issuance) would be received by
the Company.  The Company  continues to use its working capital to invest in the
testing  and  development  of the CJ and to  invest  in the  Tennessee  Minerals
Property.  During 1997, the Company invested $480,249 in the Tennessee  Minerals
Property, and has used $165,423 to construct additional CJs and $45,128 to build
a CJ testing facility in Reno,  Nevada. The Company has not yet earned revenues,
although  limited revenue from the sale or rental of CJs now being fabricated is
anticipated  during 1998. This  anticipation  of limited  revenues is based upon
"proof  of  process"  tests  completed  during  1997  which  indicate  the  CJ's
suitability  in a  variety  of  applications.  See  "Item 1.  Business--Plan  of
Operation  -- Research,  Testing and  Development."  There can be no  assurance,
however,  that such  discussions  will result in an agreement or  generation  of
revenue.

Item 8.  Financial Statements and Supplementary Data
         -------------------------------------------

         The  financial  statements  required  by this Item  appear on pages F-1
through F-17 of this Form 10-K.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         ---------------------------------------------------------------
         Financial Disclosure
         --------------------

         None.


                                       22

<PAGE>



                                    PART III


Item 10. Directors and Executive Officers of the Registrant
         --------------------------------------------------

         The  following  table  sets forth  certain  information  regarding  the
executive officers and directors of the Company.


                                                                Held Position
       Name                         Office                          Since
------------------------   --------------------------------    ---------------

William P. Long.........    President, Chief Executive
                            Officer and Director                    1988

C. Patrick Costin.......    Vice President, Principal
                            Financial Officer; President of         1996
                            MRS and Fine Gold

James I. Golla..........    Secretary and Director                  1994

Robert F. Sheldon.......    Director                                1997

George E. Hartman.......    Director                                1997



         The  directors  of the  Company  are  elected at the annual  meeting of
shareholders of the Company. Each director of the Company holds office until his
successor is elected and qualified or until his earlier  death,  resignation  or
removal.  The executive  officers of the Company serve at the  discretion of the
Company's  Board of Directors.  None of the foregoing  officers and directors of
the Company was selected  pursuant to any arrangement or  understanding  between
him and any other person.

         William P. Long, 51, has been the President,  Chief  Executive  Officer
and a director of the Company  since 1988,  and the  Secretary and a director of
Fine Gold since the TMI Merger.  Dr. Long also served as the Vice  President  of
the wholly-owned  subsidiary of the Company  formerly known as Mineral  Recovery
Systems,  Inc. which was merged with and into Fine Gold in June,  1996. Dr. Long
has been an  executive  officer and  director of Carlin Gold  Company,  now MRS,
since its formation in April,  1987.  From 1987 to 1988,  Dr. Long was a mineral
and energy  consultant,  providing various services to clients in the mining and
energy industries,  including  arranging  precious metal property  acquisitions,
supervising  mineral  evaluations,  and providing market analyses.  From 1980 to
1986,  Dr. Long  served as the  Executive  Vice  President  and Chief  Financial
Officer of Thermal Exploration Company. From 1974 to 1980, Dr. Long was employed
by Amax  Exploration,  Inc. in various  capacities,  including Systems Engineer,
Business Analyst and Business Manager.  Dr. Long is affiliated with the American
Institute of Chemical  Engineers and the American Institute of Mining Engineers.
He obtained a bachelors  degree in Chemical and Petroleum  Refining  Engineering
and a Ph.D. in Mineral  Economics from the Colorado  School of Mines in 1969 and
1974, respectively.

         C. Patrick  Costin,  55, was  appointed a Vice  President and Principal
Financial Officer of the Company in June, 1996, and also currently serves as the
President  and a director  of Fine Gold and MRS.  Mr.  Costin also served as the
President  of the  wholly-owned  subsidiary  of the  Company  formerly  known as
Mineral  Recovery  Systems,  Inc. from March 1995 until its merger with and into
Fine Gold in June 1996. Mr. Costin is the chief executive  officer of Costin and
Associates,  a minerals consulting  organization  founded by Mr. Costin in 1992,
which  specializes in  identification  and evaluation of North American mine and
mineral deposit acquisition opportunities.  From 1982 to 1992, Mr. Costin served
as the manager of U.S.  exploration for Rio Algom Ltd. Mr.  Costin's  additional
experience in the mining and minerals industry includes Senior Mineral Economist
for the Stanford  Research  Institute  from 1977 to 1982,  Senior  Geologist for
Chevron  Resources  from  1975 to 1976,  Senior  Geologist  for  Newmont  Mining
Corporation  of Canada  from 1967 to 1975,  and  Geologist  for United Keno Hill
Mines  Ltd.  from  1965 to 1967.  Mr.  Costin  obtained  a  bachelors  degree in
Geological  Engineering  and a masters  degree in  Minerals  Economics  from the
Colorado School of Mines in 1965 and 1975, respectively.

         Robert F.  Sheldon,  75, has been a director of the Company since June,
1997.  Since his retirement in 1988, Mr. Sheldon has performed  consulting  work



                                       23

<PAGE>



for several clients,  including Newmont Exploration.  Mr Sheldon has served, and
continues to serve,  on the Board of Directors of several  companies in addition
to Altair.  Mr.  Sheldon  served as President of Newmont  Exploration  of Canada
Limited and Vice President of Newmont Mines Limited from 1975 until 1988 when he
retired.  Mr. Sheldon was  responsible for mineral  exploration,  appraisals and
development  of  mining   properties   throughout   Canada  for  Newmont  Mining
Corporation,  a natural resource company with worldwide operations.  Mr. Sheldon
obtained a bachelors  degree in Geological  Engineering  from the  University of
British  Columbia in 1948.  He is a member of the  Association  of  Professional
Engineers of B.C., the American Institute of Mining and Metallurgy, the Canadian
Institute of Mining and  Metallurgy,  the B.C. and Yukon  Chamber of Mines (past
president), and the Engineers Club, Vancouver, B.C. (past president).

         James I. Golla, 65, was appointed Secretary of the Company in November,
1996 and has been a  director  of the  Company  since  February,  1994.  He also
currently serves as a director of Blake River Explorations Ltd. and Consolidated
Richland Mines Inc. Mr. Golla was a journalist with the Globe and Mail, Canada's
national newspaper, from 1954 until his retirement early in 1997.

         George E. Hartman,  48, was elected a director of the Company in March,
1997.  Since 1995,  Mr.  Hartman  has served as  President  of Planvest  Pacific
Financial Corporation ("Planvest Pacific"), a Vancouver-based financial planning
firm with over 250  representatives,  27,500  clients  and $1  billion of assets
under  management.  Mr.  Hartman  also is on the Board of  Directors of Planvest
Capital  Corp.,  the  parent of  Planvest  Pacific.  In  addition,  Mr.  Hartman
continues to serve as  President  of Hartman & Company,  Inc., a firm founded by
Mr. Hartman in 1991 which provides consulting services to the financial services
industry.  Mr.  Hartman is the author of Risk is a Four-Letter  Word--The  Asset
Allocation Approach to Investing,  a Canadian best-seller  published in 1992 and
now in its fifth printing,  and host of a weekly personal finance radio program,
"Money Matters," aired on AM 1040 in Vancouver, British Columbia.

Compliance with Section 16(a) of the Exchange Act

         Section  16(a) of the  Securities  Exchange Act requires the  Company's
officers and directors to file reports  ("Section 16 Reports")  concerning their
ownership  of the Common  Stock with the  Commission  and to furnish the Company
with copies of such reports.  Based solely upon the Company's  review of Section
16 Reports and amendments thereto furnished to the Company, the Company believes
that the following reports were not filed with the Commission on a timely basis.
Bill Long  (President and Director),  Pat Costin (Vice  President),  James Golla
(Secretary and Director),  and George Hartman  (Director)  were each required to
file a Form 3 on March 20, 1997. The Company believes such Forms 3 were received
by the Commission on March 21, 1997.  Robert Sheldon was required to file a Form
3 on June 10,  1997,  which Form 3 the  Company  believes  was  received  by the
Commission on March 27, 1998. With respect to transactions  completed in August,
1997, Patrick Costin, Vice President of the Company, was required to file a Form
4 on September 10, 1997,  which Form the Company  believes 4 was received by the
Commission on September 11, 1997.


Item 11. Executive Compensation
         ----------------------

Summary Compensation Table

         The following  table sets forth all annual and  long-term  compensation
for  services  rendered in all  capacities  to the Company for the fiscal  years
ended December 31, 1997,  1996 and 1995 by William P. Long, the President of the
Company.  The Company had no other executive  officers whose total  compensation
during the fiscal year ended December 31, 1997 exceeded $100,000.

<TABLE>
<CAPTION>
                              Annual Compensation (1)                   Long Term Compensation
                       --------------------------------------   --------------------------------------
                                                                          Awards              Payouts
                                                                ---------------------------  ---------
               iscal    alary ($)(                   Other       Restrict    ecurities Unde
              FYear                                  Annual       Stock      ptions Granted    LTIP      All Other
 Name and      nded                                 ompensa-     Awards  ed S     (3)         Payouts    Compensa-
   Title      E        S          2)  Bonus ($)    C  tion         ($)      O              r    ($)        tion
-----------   ------   -----------   -----------   ----------   ---------   ---------------  ---------  -----------
<S>            <C>     <C>              <C>            <C>          <C>         <C>              <C>         <C>
William        1997    91,200           9,120         -0-          -0-          100,000         -0-         -0-
P. Long        1996    90,000           9,120         -0-          -0-          250,000         -0-         -0-
               1995    91,200           9,120         -0-          -0-          166,000         -0-         -0-
</TABLE>




                                       24

<PAGE>




-------------------------

(1)      All compensation paid is stated in United States dollars.
(2)      Bonus and salary  amounts  reflect  amounts  accrued and payable to Dr.
         Long  for  each  fiscal  year  in  accordance  with  the  terms  of his
         employment agreement with the Company.  See "--Employment  Agreements."
         Amounts  actually paid to Dr. Long in fiscal years 1997, 1996, and 1995
         were $75,600, $60,000 and $110,000,  respectively. The fiscal year 1995
         payments included earned but unpaid salary and bonus of $9,680 from the
         1994 fiscal year.  At December 31, 1997 $142,816  remained  outstanding
         and payable to Dr. Long, including interest on unpaid bonuses ($5,472).
(3)      Options  to  purchase  shares  of Common  Stock granted pursuant to the
         Altair International Inc. Stock Option Plan (the "Option Plan").



Option Grants in 1997

         The following  table sets forth grants of options to purchase shares of
Common Stock granted to Dr. Long during the year ended December 31, 1997:

<TABLE>
<CAPTION>
                                               % of Total
                                                Options                                    Potential Realizable
                               Securities      Granted to    Exercise                     Value at Assumed Annual
                               Underlying      Employees       Price                       Rates of Stock Price
                                 Options       in Fiscal      ($Cdn.      Expiration      Appreciation for Option
           Name                Granted (#)        Year         /sh)          Date                     Term
---------------------------   -------------   ------------  -----------   -----------   ---------------------------

                                                                                             5%            10%
                                                                                           ($Cdn)        ($Cdn.)
                                                                                        ------------   ------------

<S>                            <C>               <C>         <C>           <C>           <C>            <C>
William P. Long,               100,000 (1)       16.4%       10.25 (2)     05/15/02      283,188.69     625,772.75
President and Director
</TABLE>



-------------------------

(1)      Represents options granted on May 14, 1997 pursuant to the Option Plan.
(2)      The market value of the  underlying  shares of Common Stock as reported
         by the Alberta  Stock  Exchange on May 13,  1997,  the day prior to the
         grant date, was $10.25 (Cdn.).



Aggregated Option Exercises and at Year-End Option Values

         The following table sets forth  information  regarding  options held by
Dr. Long as of December 31, 1997,  and options  exercised  during the year ended
December 31, 1997.

<TABLE>
<CAPTION>
                      Securities
                       Acquired     Aggregate          Number of Securities          Value of Unexercised In-the-
                          on          Value           Underlying Unexercised               Money Options at
                       Exercise      Realized        Options at December 31,           December 31, 1997 ($Cdn.)
       Name              (#)         ($Cdn.)                 1997 (#)                            (1)
-------------------   ----------   ------------   ------------------------------   --------------------------------
                                                                   nexercisable
                                                   Exercisable    U                 Exercisable     Unexercisable
                                                  -------------   --------------   -------------   ----------------

<S>                       <C>           <C>          <C>                <C>          <C>                  <C>
William P. Long,         -0-           -0-           250,000           -0-           4,400,000           -0-
President and                                        100,000                         1,135,000
Director
</TABLE>


-------------------------


                                       25

<PAGE>





(1)      Based on the closing price of the Common Stock on December 30, 1997, as
         reported by The Alberta Stock Exchange, of $(Cdn.)21.60



Compensation of Directors

          Directors who are not officers of the Company are not  currently  paid
any fees for their  services as  directors.  Directors  who are not officers are
entitled to receive compensation to the extent that they provide services to the
Company at rates that would be charged by such  directors  for such  services to
arm's length parties.

         Directors  also have been and currently are entitled to  participate in
the Option Plan. As of December 31, 1997, the Company had outstanding options to
purchase 962,500 shares of Common Stock pursuant to the Option Plan,  417,500 of
which are held by directors of the Company.

Employment Agreements

         William  P.  Long,  President  of the  Company,  has  entered  into  an
employment  agreement  with the Company dated  January 1, 1998.  The term of the
agreement commenced on January 1, 1998 and, unless earlier  terminated,  expires
on December 31, 2007.  Pursuant to the  agreement,  Dr. Long is paid a salary of
$7,600 per month and an annual  bonus,  determined  by the board of directors of
the Company,  of not less than 10% of Dr.  Long's  annual  compensation.  In the
event the voting control of over 35% of the issued and outstanding  Common Stock
is acquired by an  individual or group (a "Change of Control") and the agreement
is  terminated  by the  Company or Dr. Long within 180 days before the Change of
Control or at any time  thereafter,  Dr. Long is  entitled to be issued  200,000
shares  of  Common  Stock.  Absent a Change  of  Control,  if the  agreement  is
terminated for any reason except by Dr. Long, by mutual consent,  by the Company
for cause,  or at the end of the term, Dr. Long is entitled to be issued 200,000
shares of Common Stock.

         C. Patrick Costin, a Vice President of the Company and the President of
MRS and  Fine  Gold,  is  employed  by Fine  Gold  pursuant  to the  terms of an
employment  agreement entered into August 15, 1994. The agreement expired by its
terms on December 31, 1997, but has been orally extended pending  execution of a
renewal  employment  agreement  during the second quarter of 1998. The agreement
provides that Mr. Costin shall be paid a salary of at least $7,500 per month and
may be entitled to bonuses as determined by the Board of Directors of Fine Gold.


Item 12. Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

         Following is information with respect to beneficial ownership of shares
of the Common Stock as of February  27, 1998 by persons  known to the Company to
own  more  than  5% of the  outstanding  Common  Stock,  each  of the  Company's
executive  officers and  directors,  and by all  officers  and  directors of the
Company as a group. Unless otherwise  indicated,  each of the shareholders named
in the table has sole  voting and  investment  power with  respect to the shares
identified as beneficially  owned. The Company is not aware of any arrangements,
the operation of which may at a subsequent date result in a change in control of
the Company.
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
                                                           Amount and
                                                            Nature of
   Title of     Name and Address of                        Beneficial             Percent
     Class       Beneficial Owner                         Ownership (1)         of Class(2)
---------------------------------------------------------------------------------------------------

<S>                                                       <C>                      <C>
    Common     William P. Long                            2,101,529 (3)            14.6%
                 57 Sunset Rim
                 Cody, Wyoming  82414




                                       26

<PAGE>





    Common     C. Patrick Costin                          1,033,333 (4)            6.7%
                1850 Aquila Avenue
                Reno, Nevada  89509

    Common     James I. Golla                              22,000 (5)                *
                 829 Terlin Boulevard
                 Mississauga, Ontario L5H 1T1

    Common     George Hartman                              25,000 (6)                *
                 233 Bayview Road
                 Lyon's Bay, British Columbia
                 Canada  V2N 2E0

               Robert Sheldon                              25,000 (7)                *
                 3475 Mathers Avenue
                 West Vancouver, British Columbia
                 Canada  V7V 2K8

    Common     All Directors and Officers as a Group      3,364,362 (8)            21.4%
               (5 persons)

</TABLE>

--------------------

*        Represents less than 1% of the outstanding shares of Common Stock.

(1)      Includes all shares issuable  pursuant to the exercise or conversion of
         options and warrants that are exercisable within 60 days.
(2)      Based on 15,110,245 shares  outstanding as of February 27, 1998. Shares
         of Common Stock underlying options or other convertible  securities are
         deemed to be  outstanding  for purposes of  calculating  the percentage
         ownership  of the owner of such  securities,  but not for  purposes  of
         calculating any other person's percentage ownership.
(3)      Includes 46,000 shares held by Dr. Long's minor daughter, 47,500 shares
         held by Dr.  Long's  minor son,  and  162,500  shares  held by the MBRT
         Trust,  an  irrevocable  trust for the benefit of the minor children of
         Dr. Long. Dr. Long  disclaims any  beneficial  interest in such 275,500
         shares.  Also includes 350,000 shares subject to presently  exercisable
         options granted to Mr. Long pursuant to the Option Plan.
(4)      Includes  411,667 shares held in escrow and to be released  one-half on
         June 1, 1998 and  one-half on June 1, 1999.  Mr.  Costin is entitled to
         exercise all voting  rights  applicable  to the escrowed  shares.  Also
         includes  225,000  shares  subject  to  presently  exercisable  options
         granted to Mr. Costin pursuant to the Option Plan.
(5)      Includes 15,000 shares subject to presently exercisable options granted
         to Mr. Golla pursuant to the Option Plan.
(6)      Includes 25,000 shares subject to presently exercisable options granted
         to Mr. Hartman pursuant to the Option Plan.
(7)      Includes 25,000 shares subject to presently exercisable options granted
         to Mr. Sheldon pursuant to the Option Plan.
(8)      Includes  640,000  shares  subject  to  presently  exercisable  options
         granted to officers and directors pursuant to the Option Plan.


Item 13. Certain Relationships and Related Transactions
         ----------------------------------------------

         Included in accounts payable and accrued liabilities of the Company for
fiscal  years  1997  and  1996  are   approximately   $142,816   and   $115,360,
respectively,  owing to Dr.  William P. Long,  President  of the  Company.  Such
amounts  represent  accrued salary and bonuses  payable to Dr. Long. No terms of
repayment  have been  negotiated  with  respect  to such  amounts.  See Item 11.
"Executive Compensation--Summary Compensation Table."

         Pursuant to an  agreement  dated  April 21,  1994,  the Company  issued
750,000  shares  of  Common  Stock,  with a  deemed  value of  $0.47  per  share
($352,500)  for all of the  outstanding  common shares of Fine Gold.  Mr. Costin
owned 95% of the Fine Gold common  shares and, as a result,  was issued  712,500



                                       27

<PAGE>



shares of Common  Stock.  Of the shares of Common  Stock  issued to Mr.  Costin,
411,667 remain in escrow,  to be released  one-half on June 1, 1998 and one-half
on June 1, 1999, pursuant to the terms of an escrow agreement among the Company,
Equity Transfer Services, Inc., Thomas P. Campbell and Mr. Costin, dated June 1,
1994 (the "Fine Gold Escrow  Agreement").  See "Item 12.  Security  Ownership of
Certain Beneficial Owners and Management".

                                     PART IV


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
         ---------------------------------------------------------------

         (a)      Documents Filed
                  ---------------

                  1.       Financial  Statements.   The  following  Consolidated
                           Financial  Statements  of the Company  and  Auditor's
                           Report  are  filed as part of this  Annual  Report on
                           Form 10-K:

                           o        Report of McGovern,  Hurley, Cunningham, for
                                    the years ended December 31, 1997,  1996 and
                                    1995

                           o        Consolidated  Balance Sheets at December 31,
                                    1997 and 1996

                           o        Consolidated  Statements of  Operations  and
                                    Deficit  for the years  ended  December  31,
                                    1997, 1996 and 1995

                           o        Consolidated   Statements   of   Changes  in
                                    Financial   Position  for  the  years  ended
                                    December 31, 1997, 1996 and 1995

                           o        Notes to Consolidated Financial Statements


                  2.       Financial Statement Schedules.  Not applicable.




                                       28

<PAGE>



                  3.       Exhibit List
<TABLE>
<CAPTION>

Exhibit                                                               Incorporated    Filed
  No.                              Exhibit                            by Reference   Herewith
-------   ---------------------------------------------------------   ------------   --------

<S>       <C>                                                             <C>           <C>
  3.1.1   Articles of Incorporation of the Registrant                     (1)

  3.1.2   Amendment to Articles of Incorporation of the
          Registrant dated November 6, 1996                               (2)

  3.2     Bylaws of the Registrant                                        (1)

  4.1     Form of Common Stock Certificate                                (1)

  4.2     Form of Series 5% Convertible Debenture                         (3)

  4.3     Form of Warrant                                                 (3)

 10.1     Articles of Merger of Mineral Recovery Systems, Inc.
          with and into Fine Gold Recovery Systems Inc. dated
          June 21, 1996, including Exhibit A thereto, Plan of
          Merger and Merger Agreement                                     (1)

 10.2     Merger Agreement among Fine Gold Recovery Systems
          Inc., Altair International Inc. and Trans Mar, Inc. dated
          February 8, 1996, as amended February 22, 1996 (the
          "TMI Merger Agreement")                                         (1)

 10.2.1   Exhibit 1.1(c) to the TMI Merger Agreement -- Articles
          of Merger                                                       (1)

 10.2.2   Exhibit 1.1(e)(1) to the TMI Merger Agreement --
          Principal Escrow Agreement dated February 29, 1996              (1)

 10.2.3   Exhibit  1.1(e)(2) to the TMI Merger  Agreement --
          Performance  Escrow Agreement dated February 27,
          1996                                                            (1)

 10.2.4   Exhibit 1.1(h) to the TMI Merger Agreement -- Warrant
          Certificate                                                     (1)

 10.2.5   Schedule 1.1(e)(ii) to the TMI Merger Agreement --
          Principal Escrow Release Schedule                               (1)

 10.2.6   Schedule 1.1(e)(iii) to the TMI Merger Agreement --
          Performance Escrow Release Schedule                             (1)

 10.3     Employment Agreement between Altair International
          Inc. and William P. Long dated January 1, 1998                               (5)

 10.4     Employment Agreement between Fine Gold Recovery
          Systems Inc. and C. Patrick Costin dated August 15,
          1994                                                            (1)

 10.5     Altair International Inc. Stock Option Plan adopted by
          shareholders May 10, 1996                                       (4)

 10.6     Share Purchase Agreement between Altair International
          Inc. and Fine Gold Recovery Systems, Inc. dated April
          21, 1994                                                        (1)

 10.7     Escrow Agreement among Altair International Inc.,
          Equity Transfer Services Inc., Thomas P. Campbell and
          C. Patrick Costin dated June 1, 1994                            (1)



                                       29

<PAGE>

<CAPTION>

Exhibit                                                               Incorporated    Filed
  No.                              Exhibit                            by Reference   Herewith
-------   ---------------------------------------------------------   ------------   --------

<S>                                                                       <C>         <C>
 10.8     Securities Purchase Agreement dated as of December
          24, 1997, among Altair International, Inc. and certain
          investors                                                       (3)

 10.9     Registration Rights Agreement dated as of December
          24, 1997, among Altair International, Inc., Prudential
          Securities Incorporated, and certain investors                  (3)

 10.10    Form of 5% Convertible Debenture                                (3)

 10.11    Form of Mineral Lease                                                        (5)

  22      Subsidiaries of the Registrant                                  (2)

 23.1     Consent of McGovern, Hurley, Cunningham                                      (5)

  27      Financial Data Schedule                                                      (5)

-----------------------
</TABLE>


(1)      Incorporated by reference to Registration Statement on Form 10-SB filed
         with the Commission on November 25, 1996.

(2)      Incorporated by reference to Amendment No. 1 to Registration  Statement
         on Form 10 filed with the Commission on December 23, 1996.

(3)      Incorporated  by reference to the Company's  Current Report on Form 8-K
         filed with the  Commission on January 13, 1998, as amended by Amendment
         No. 1 to Current Report on Form 8-K/A, filed on January 21, 1998.

(4)      Incorporated  by reference to the Company's  Registration  Statement on
         Form S-8 filed with the Commission on July 11, 1997.

(5)      Filed  herewith  and  attached  to this  Annual  Report  on  Form  10-K
         following page F-17 hereof.

         (b)      Reports on Form 8-K
                  -------------------

                  The Company filed a Current Report on Form 8-K on December 11,
                  1997,  in which the  Company  reported  the  issuance of press
                  release  regarding  its  retention  of a financial  advisor to
                  assist  the  Company  in  raising   money  through  a  private
                  placement.

         (c)      Exhibits
                  --------

                  Exhibits  to this  Report  are  attached  following  page F-17
                  hereof.

         (d)      Financial Statement Schedule
                  ----------------------------

                  Not applicable.


                                       30

<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 23, 1998.

 ALTAIR INTERNATIONAL INC.



                                        By:     /s/ William P. Long
                                             -----------------------------------
                                             William P. Long,
                                             President, Chief Executive Officer



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


     Signature                          Title                         Date
     ---------                          -----                         ----


/s/ William P. Long
-------------------------
William P. Long               President and Chief Executive      March 23, 1998
                              Officer and Director (Principal
                              Executive Officer)



/s/ C. Patrick Costin         Vice President (Principal          March 23, 1998
-------------------------     Financial and Accounting
C. Patrick Costin             Officer)




/s/ James I. Golla            Secretary and Director             March 23, 1998
-------------------------
James I. Golla



/s/ George Hartman            Director                           March 23, 1998
-------------------------
George Hartman


/s/ Robert Sheldon            Director                           March 23, 1998
-------------------------
Robert Sheldon









<PAGE>





                            ALTAIR INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1997





                      (Expressed in United States Dollars)






<PAGE>



                            ALTAIR INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1997



                      (Expressed in United States Dollars)






INDEX                                                                      PAGE

Auditors' Report                                                              1

Consolidated Balance Sheets                                                   2

Consolidated Statements of Operations and Deficit                             3

Consolidated Statements of Changes in Financial Position                      4

Notes to the Consolidated Financial Statements                           5 - 17




<PAGE>









                                                                        Page F-1


                                AUDITORS' REPORT


To the Shareholders of
Altair International Inc.


We have audited the consolidated  balance sheets of Altair International Inc. as
at December 31, 1997 and 1996 and the consolidated  statements of operations and
deficit,  and changes in  financial  position  for the years ended  December 31,
1997,  1996  and  1995.  These   consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in Canada.  Those standards  require that we plan and perform an audit to obtain
reasonable  assurance  whether  the  financial  statements  are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the overall financial statement presentation.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1997
and 1996 and the  results of its  operations  and the  changes in its  financial
position for the years ended December 31, 1997, 1996 and 1995 in accordance with
generally accepted accounting principles in Canada.



                                             McGOVERN, HURLEY, CUNNINGHAM


                                             /s/ McGovern, Hurley, Cunningham


                                             Chartered Accountants

North York, Canada
February 9, 1998,  except for
Note  2(b)(i)  which is dated
March 19, 1998





<PAGE>



<TABLE>

ALTAIR INTERNATIONAL INC.                                               Page F-2
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31,
================================================================================
<CAPTION>
                                                                                       1997                    1996
                                                                                         $                       $
(Expressed in United States Dollars - Note 1)                                                                (Note 12)

                                        ASSETS
CURRENT

<S>                                                                                   <C>                     <C>
     Cash and short-term investments                                                  8,161,770               3,270,161

     Advances and accounts receivable                                                     1,170                  13,556

     Prepaid expenses                                                                    30,023                    -

                                                                                      8,192,963               3,283,717

CAPITAL (Note 3)                                                                        397,723                 257,017

CENTRIFUGAL JIG (Note 4)                                                              3,918,378               4,365,064
                                                                                      ---------               ---------

MINERAL PROPERTIES AND RELATED DEFERRED
     EXPLORATION EXPENDITURES (Note 5)                                                  606,551                 126,302

GOODWILL                                                                                 10,189                  10,788
                                                                                         ------                  ------

                                                                                     13,125,804               8,042,888
                                                                                     ==========               =========

                                      LIABILITIES
CURRENT

     Accounts payable and accrued liabilities (Note 9)                                  227,439                 155,726

     Current portion of notes payable (Note 6)                                          253,890                 153,036

     Current portion of convertible debentures - Liability element (Note 8)             231,481                    -
                                                                                        -------                 -------

                                                                                        712,810                 308,762

NOTES PAYABLE (Note 6)                                                                    5,901                 269,685

CONVERTIBLE DEBENTURES - Liability element (Note 8)                                     596,550                    -
                                                                                        -------                 -------

                                                                                      1,315,261                 578,447
                                                                                      ---------                 -------

                                 SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 7)
     Issued
         15,492,745 Common shares (1996 - 14,686,296)                                13,942,453              11,373,259

COMMON SHARES TO BE ISSUED                                                                 -                     47,746

CONVERTIBLE DEBENTURES  - Equity element (Note 8)                                     4,171,969                    -

DEFICIT                                                                             (6,303,879)             (3,956,564)
                                                                                    -----------             -----------

TOTAL SHAREHOLDERS' EQUITY                                                           11,810,543               7,464,441
                                                                                     ----------               ---------

                                                                                     13,125,804               8,042,888
                                                                                     ==========               =========
------------------------------------------------------------------------------------------------------------------------
</TABLE>
APPROVED ON BEHALF OF THE BOARD:

         "JAMES I. GOLLA"                       , Director
         ---------------------------------------

         "WILLIAM P. LONG"                     ,  Director
         ---------------------------------------

         See Accompanying Notes to the Consolidated Financial Statements
<PAGE>
<TABLE>

ALTAIR INTERNATIONAL INC.                                               Page F-3
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31,
================================================================================
<CAPTION>
                                                                     1997           1996           1995
                                                                       $              $              $
(Expressed in United States Dollars - Note 1)                                     (Note 12)

OPERATING EXPENSES
<S>                                                                 <C>            <C>             <C>
     Professional Fees                                              293,883        321,363         66,582

     Wages and employee benefits                                    256,033        223,987        103,235

     Loss (gain) on foreign exchange                                123,612         (7,888)         6,489

     Shareholder relations                                          105,993         22,480         21,021

     Shareholder meetings                                            96,308         51,348          5,068

     Travel                                                          87,777         23,416            749

     Testing, research and development                               78,034        159,679        162,228

     General and office                                              74,266         78,672         21,435

     Insurance                                                       48,120         11,769          8,359

     Occupancy costs                                                 43,146         27,140           --

     Government fees and taxes                                       25,447          4,208          1,933

     Transfer agent=s fees                                           17,390         13,978          6,842

     Accounting and corporate services                                8,166          6,700          6,091

     Stock exchange fees                                              7,438          3,502          3,714

     Bank charges                                                     1,589            763           --

     Patent Maintenance                                                --            8,975           --

     Financing fees                                                    --             --           12,994

     Write-off of mineral properties and related
         deferred exploration expenditures                             --             --            8,212

     Amortization                                                   590,831        385,633          3,151
                                                                -----------    -----------    -----------

                                                                  1,858,033      1,335,725        438,103

Add: Interest on long-term debt                                      43,497         19,373           --

Less: Interest income                                               (70,059)       (27,872)        (1,000)
                                                                -----------    -----------    -----------

Loss from operations                                              1,831,471      1,327,226        437,103

(Gain) on forgiveness of debt                                          --         (702,726)          --
                                                                -----------    -----------    -----------

NET LOSS for the year                                             1,831,471        624,500        437,103

DEFICIT, beginning of year                                        3,956,564      3,332,064      2,894,961

Convertible debenture issuance costs (Note 8)                       515,844           --             --
                                                                -----------    -----------    -----------

DEFICIT, end of year                                              6,303,879      3,956,564      3,332,064
                                                                ===========      =========      =========

Net loss per share from operations
     Basic (Note 10)                                            $     (0.13)     $   (0.12)       $ (0.07)
                                                                ===========      =========        =======

Net income per share from gain on forgiveness of debt           $      --        $    0.06        $  --
                                                                ===========      =========        =======
</TABLE>


         See Accompanying Notes to the Consolidated Financial Statements
<PAGE>
<TABLE>

ALTAIR INTERNATIONAL INC.                                               Page F-4
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31,
================================================================================
<CAPTION>
                                                                    1997             1996           1995
                                                                      $                $              $
Expressed in United States Dollars - Note 1)                                       (Note 12)

CASH WAS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
<S>                                                                <C>             <C>           <C>
Net loss for the year                                              (1,831,471)     (624,500)     (437,103)

Charges not involving cash:

     Amortization                                                     590,831       385,633         3,151

     Write-off of mineral properties and related

         deferred exploration expenditures                               --            --           8,212
                                                                   ----------    ----------    ----------

                                                                   (1,240,640)     (238,867)    (425,740)
                                                                   ----------    ----------    ----------

Changes in noncash working capital balances:

(Increase) in prepaid expenses                                        (30,023)         --            --

Decrease (increase) in advances and accounts receivable                12,386        81,367       (51,191)

Increase (decrease) in accounts payable

     and accrued liabilities                                           71,444        64,816       (73,099)


                                                                       53,807       146,183      (124,290)


                                                                   (1,186,833)      (92,684)     (550,030)
                                                                   ----------    ----------    ----------
FINANCING ACTIVITIES

Increase in convertible debenture                                   5,000,000          --            --

Issuance of common shares for cash                                       --         222,530          --

Issuance of common shares pursuant to a private placement                --       1,414,778       875,529

Issuance of common shares for shares of subsidiary                       --       2,521,467          --

Convertible debenture issuance costs                                 (515,844)         --            --

Common shares to be issued                                               --          47,746          --

Exercise of stock options                                           1,530,406       526,850        53,553

Exercise of warrants                                                  991,042     2,471,219          --

Increase (decrease) in notes payable                                 (162,930)      422,721       171,458

                                                                    6,842,674     7,627,311     1,100,540
                                                                   ----------    ----------     ---------
INVESTING ACTIVITIES

Mineral properties and related deferred exploration expenditures     (480,248)     (125,648)       (8,212)

Purchase of capital assets                                           (237,283)     (254,709)      (22,787)

Centrifugal Jig patents and related expenditures                      (46,701)   (4,193,598)       (4,352)

Option agreement costs                                                   --            --        (212,832)


                                                                     (764,232)   (4,573,955)     (248,183)
                                                                   ----------    ----------    ----------

Increase in cash and short-term investments                         4,891,609     2,960,672       302,327

Cash and short-term investments, beginning of year                  3,270,161       309,489         7,162
                                                                   ----------    ----------    ----------

Cash and short-term investments, end of year                        8,161,770     3,270,161       309,489
                                                                   ==========    ==========    ==========
</TABLE>


  See Accompanying Notes to the Consolidated Financial Statements
<PAGE>






ALTAIR INTERNATIONAL INC.                                               Page F-5
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
1.       BASIS OF PRESENTATION

         As the majority of transactions occur in United States dollars (U.S.$),
         commencing  with  the  current  period,   the  consolidated   financial
         statements  have been expressed in United States  dollars.  Previously,
         the Canadian dollars (CDN) was used as the unit of measure. This change
         has been applied retroactively.

         The  Company  has  restated  the  prior  year=s  figures   whereby  the
         consolidated balance sheets,  consolidated statements of operations and
         deficit  and  the  consolidated  statements  of  changes  in  financial
         position have been  translated at the year end (December 31, 1996) rate
         of CDN$1.3706 = U.S.$1.

2.       SIGNIFICANT ACCOUNTING POLICIES

         Consolidation:
              The financial  statements  include the accounts of the Company and
              its  subsidiaries,  Mineral Recovery  Systems,  Inc. (100% owned),
              Intercontinental  Development  Corporation (83% owned),  Fine Gold
              Recovery Systems, Inc. (Fine Gold) (100% owned) and 660250 Ontario
              Limited (100% owned).

         Nature of Operations:
              The Company and its  subsidiaries  are engaged in the  business of
              developing and testing mineral processing  equipment in the United
              States  for  use  in  the  recovery  of  fine  and  heavy  mineral
              particles,  including  gold,  titanium,  zircon and  environmental
              contaminants.  The  Company and its  subsidiaries  are also in the
              process of exploring mineral properties in the United States.

         Mineral Properties and Related Deferred Exploration Expenditures:
              Mineral properties are carried at cost until they are brought into
              production at which time they are depleted on a unit-of-production
              method  based on proven and  probable  reserves.  If a property is
              subsequently  determined  not to be  economic,  the  property  and
              related deferred costs are written down to net realizable value.

              Exploration   expenses,  as  well  as  advance  royalty  payments,
              relating  to  mineral  properties  in  which  the  Company  has an
              interest  are  deferred  until the  properties  are  brought  into
              production    at   which   time   they   are    amortized   on   a
              unit-of-production  basis. Other general exploration  expenses are
              charged  to  operations  as  incurred.  The  cost  of the  mineral
              properties  abandoned or sold and the related deferred exploration
              costs are charged to operations in the current year.

              The Company  reviews its mineral  properties on an annual basis to
              determine if events or changes in  circumstances  have  transpired
              which  indicate  that the carrying  value of its assets may not be
              recoverable.  In performing its review,  the Company estimates the
              future  cash  flows  expected  to result  from each  asset and its
              eventual  disposition.  If the sum of the  undiscounted,  expected
              future cash flow is less than the carrying value of the asset,  an
              impairment loss is recognized. It is reasonably possible, based on
              existing knowledge,  that changes in future conditions in the near
              term could require a change in the  determination  of the need for
              and amount of any writedown.

         Administrative Expenditures:
              Administrative expenditures are charged to operations as incurred.

         Short-term Investments:
              Surplus cash of the Company is invested in a diversified portfolio
              of United States dollar -  denominated  money market  instruments.
              These  investments  are liquid and can be converted to cash at any
              time through the public money market.  The carrying  amount of the
              short-term investments approximates their market value.




                                                                    Continued...

<PAGE>



ALTAIR INTERNATIONAL INC.                                               Page F-6
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
1.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Capital Assets and Amortization:
              Capital assets are stated at  acquisition  cost.  Amortization  is
              provided  based on the  estimated  useful  life of the  assets  as
              follows:

                     Furniture and office equipment        20% declining balance

                     Mining equipment                      20% declining balance

                     Vehicles                              20% declining balance

                     Centrifugal Jig equipment              7 year straight line

                     Test facility                         20% declining balance

         Centrifugal Jig Patents and Related Expenditures:
              The  Centrifugal  Jig patents are carried at acquisition  cost and
              are being amortized on a straight-line  basis over their remaining
              lives.

              The related  expenditures  are also being  carried at  acquisition
              costs and the amortization policies are as follows:

                      Royalty agreement (Note 2(c))        -  15 year straight
                                                              line

                      License agreement                    -  No amortization as
                                                              the Company
                                                              intends to sell
                                                              the licence

                      Mineral recovery technology rights   -  Costs are deferred
                                                              until the jig
                                                              technology
                                                              produces revenue

         The   Company   reviews  its   centrifugal   jig  patents  and  related
         expenditures  on an annual  basis to  determine if events or changes in
         circumstances have transpired which indicate that the carrying value of
         its  assets may not be  recoverable.  In  performing  its  review,  the
         Company  estimates  the future cash flows  expected to result from each
         asset and its  eventual  disposition.  If the sum of the  undiscounted,
         expected future cash flow is less than the carrying value of the asset,
         an impairment loss is recognized.  It is reasonably possible,  based on
         existing knowledge,  that changes in future conditions in the near term
         could require a change in the  determination of the need for and amount
         of any writedown.

         Research and Development Expenditures:
              Research and development expenditures are charged to operations as
              incurred.

         Goodwill:
              Goodwill  is  the  excess  of  the  cost  of  the   investment  in
              subsidiaries  over the  estimated  fair  value  of the net  assets
              acquired and is amortized on a straight-line  basis over 20 years.
              Goodwill is written  down (to fair  value) when  declines in value
              are considered  other than temporary based on expected future cash
              flows of the respective subsidiary.

         Foreign Currency Translation:
              The Company's consolidated  operations are integrated and balances
              denominated in currencies  other than U.S.  dollars are translated
              into  U.S.  dollars  using  the  temporal   method.   This  method
              translates  monetary  balances  at the  rate  of  exchange  at the
              balance sheet date,  non-monetary  balances at historical exchange
              rates and revenue and expense items at average exchange rates. The
              resulting  gains and losses are  included in income  (loss) in the
              reporting period.


                                                                    Continued...

<PAGE>




ALTAIR INTERNATIONAL INC.                                               Page F-7
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
1.       SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Use of Estimates:
              The preparation of consolidated financial statements in conformity
              with generally accepted accounting  principles requires management
              to make estimates and assumptions that affect the reported amounts
              of assets and liabilities and disclosure of contingent  assets and
              liabilities at the date of the consolidated  financial  statements
              and the related reported amounts of revenue and expense during the
              report period. Actual results could differ from those estimates.
              Management believes that the estimates are reasonable.

         Financial Instruments:
              The carrying amounts for accounts receivable,  advances,  accounts
              payable and accrued  liabilities  and notes payable on the balance
              sheets approximate fair value because of the limited term of these
              instruments.  Fair value  estimates  are made at the balance sheet
              date, based on relevant market  information and information  about
              the financial instrument. These estimates are subjective in nature
              and involve  uncertainties in significant matters of judgement and
              therefore   cannot  be  determined  with  precision.   Changes  in
              assumptions could significantly affect these estimates.

2.       ACQUISITIONS

         (a)  Fine Gold Recovery Systems, Inc. (Fine Gold)
                  Pursuant  to an  agreement  dated  April 21,  1994 the Company
                  issued 750,000 common shares, with a deemed value of $0.34 per
                  share  ($255,000) for all of the outstanding  common shares of
                  Fine Gold, a corporation  incorporated  in the State of Nevada
                  and involved in the  development  of a  "Centrifugal  Jig", an
                  apparatus   designed  to  recover   fine  gold  from   mineral
                  properties.  Pursuant to an agreement  dated  January 1, 1994,
                  between  Thomas P. Campbell,  the inventor of the  Centrifugal
                  Jig, and Fine Gold,  Fine Gold  acquired the rights to develop
                  and market  applications  for the Centrifugal Jig at specified
                  target   sites  and  utilize  the   Centrifugal   Jig  in  the
                  exploitation of such sites, and further obtained the agreement
                  of Mr. Campbell to provide certain  services and assistance to
                  Fine Gold during the term of the  agreement.  The agreement is
                  valid throughout the world except (i) areas subject to patents
                  held by Trans Mar,  Inc.  (Note 2 (b)),  (ii) the  Republic of
                  Costa  Rica and  certain  areas in Mexico  and  Guiana,  South
                  America.

                  A total of 650,000 shares issued  pursuant to the  acquisition
                  were subject to a Performance Escrow Agreement. As at December
                  31, 1997,  433,334  common shares  remain in escrow,  of which
                  216,666  will be  released  on June 1,  1998  and the  balance
                  released on June 1, 1999.

                  As  at  December  31,  1997,   Fine  Gold  was  still  in  the
                  development  stage in that no  operating  revenues  have  been
                  earned and no operating expenses have been incurred.


                                                                    Continued...



<PAGE>
ALTAIR INTERNATIONAL INC.                                               Page F-8
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
2.       ACQUISITIONS (Continued)
         (b)  Trans Mar, Inc. (TMI)
              In  March  1996,  the  Company  acquired  100% of the  issued  and
              outstanding  common  stock  of  TMI  for  total  consideration  of
              1,919,957 common shares at $1.31 each ($2,521,469), the assumption
              of  $1,210,981  of net  liabilities,  and  580,000  Series E share
              purchase warrants (Note 7(i)).

              TMI was  involved  in the  development  of the  patented  Campbell
              Centrifugal  Jig and held  patent  rights to the  Centrifugal  Jig
              technology  (subject  to a 10%  royalty  - See  Note  2(c)) in the
              United States, South Africa, United Kingdom, Australia and Canada.
              The transaction was accounted for using the purchase  method.  The
              excess  paid  over the net book  value  (which  approximates  fair
              value) of the assets acquired was allocated to the Centrifugal Jig
              patents.  TMI was  merged  with  Fine Gold  immediately  after the
              acquisition.  The  1,919,957  common  shares were  deposited  into
              escrow pursuant to the terms of two escrow agreements as follows:

          i)  1,170,000  common  shares are to be  released  dependent  upon the
              Company  receiving  revenues from the sale of the Centrifugal Jigs
              formerly held by TMI. The basis of the share release is one common
              share  for  each  $1.31  in cash  flow  received  by the  Company,
              provided  that no more than  one-third of the  original  number of
              common  shares  escrowed  may be released in any one year over the
              first three years of the escrow.  Common shares still in escrow at
              the  end of five  years  may be  cancelled  by the  Alberta  Stock
              Exchange  (ASE).  On March 19, 1998,  the ASE notified the Company
              that it have approved a settlement  agreement  between the Company
              and several former TMI shareholders,  resulting in (i) the release
              of 180,765  common shares placed in escrow in connection  with the
              Company's  acquisition of TMI and (ii) the cancellation of 723,065
              common  shares owned by such former TMI  shareholders,  which were
              also subject to the escrow arrangement.

         ii)  The  remaining  749,957  common  shares  have been  released  from
              escrow.   Each  former  TMI   shareholder  or  warrant  holder  is
              restricted  from selling more than the greater of 15,000 shares or
              10% of such holder's holdings in any calendar quarter.

         (c)  Intercontinental Development Corporation (INDECO)
              In 1996, the Company  purchased 66% of the issued and  outstanding
              shares  of  INDECO  for  total  consideration  of  $319,298.  This
              acquisition  has been  accounted  for using the  purchase  method.
              INDECO  is a  dormant  company  whose  sole  asset  is  a  royalty
              agreement  entitling  the  corporation  to  10%  of  the  cost  of
              manufacturing any Centrifugal Jigs which are placed in production,
              sold or exploited for profit  worldwide.  The entire amount of the
              purchase  price has been allocated to the Centrif ugal Jig Royalty
              Agreement.  During 1997,  the Company  acquired an additional  17%
              interest  in  INDECO  for  total  consideration  of  $36,537.  The
              additional   cost  of  the   investment   has  been  allocated  to
              Centrifugal Jig Royalty Agreement.

3.       CAPITAL ASSETS
<TABLE>
<CAPTION>
                                                             Accumulated       Net        Net
                                                   Cost     Amortization       1997       1996
                                                   ----     ------------       ----       ----
                                                    $             $             $          $
<S>                                               <C>            <C>          <C>        <C>
                Furniture and office equipment    42,473         16,935       25,538     27,131

                Vehicles                          92,629         26,555       66,074     63,493

                Mining equipment                   9,501          4,917        4,584      8,096

                Centrifugal jig equipment        333,028         70,182      262,846    158,297

                Testing facility                  45,128          6,447       38,681    -
                                                  ------          -----       ------

                                                 522,759        125,036      397,723    257,017
                                                 =======        =======      =======    =======
</TABLE>

                                                                    Continued...


<PAGE>
ALTAIR INTERNATIONAL INC.                                               Page F-9
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
4.       CENTRIFUGAL JIG PATENTS AND RELATED EXPENDITURES

                 Royalty Agreement (Note 2(c))          $ 355,835

                 Less: Accumulated amortization           (34,449)   $   321,386
                                                        ---------
                 Patents                                4,095,302

                 Less: Accumulated amortization          (817,477)     3,277,825
                                                        ---------
                 Patent application                                       10,164

                 Mineral recovery technology rights                      243,000

                 License agreement                                        66,003
                                                                          ------

                                                                      $3,918,378
                                                                      ==========

         License Agreement
              On June 10, 1996, the Company  entered into an agreement with RDR,
              Inc. to acquire the entire right,  title and interest in a license
              agreement  related to the  Centrifugal  Jig. The Company agreed to
              purchase the right for $75,000  with an initial  deposit of $5,000
              and  monthly  payments  of $2,000  commencing  July 1, 1996 over a
              35-month period. The Company intends to resell the license.

5.       MINERAL PROPERTIES AND RELATED DEFERRED EXPLORATION EXPENDITURES

         The Company's  subsidiary,  Mineral Recovery  Systems,  Inc. (MRS), has
         entered  into   various   mineral   leases  for  a  100%   interest  in
         approximately 4,300 acres of land in Benton County, State of Tennessee,
         United States for $18,712 and minimum annual advance  royalty  payments
         as follows:

                    Year                                          Amount
                    ----                                          ------
                                                                     $

                    1998                                          18,712

                    1999                                          32,348

                    2000                                          36,423

                    2001                                          36,423

                    2002                                          36,423

                    2003 and each thereafter                     442,186
                                                                 -------

                                                                 602,515
                                                                 =======

         The mineral leases are subject to a production  royalty,  however,  MRS
         will receive a credit for all advance royalties paid against production
         royalties.  The lessors can only  terminate the leases upon the failure
         of MRS to make the required minimum payments as required by the leases.
         During the year  approximately  $480,000 (1996 - $110,000) was incurred
         on exploration.


                                                                    Continued...

<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-10
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
6.       NOTES PAYABLE
<TABLE>
<CAPTION>
                                                                                       1997             1996
                                                                                       ----             ----
                                                                                        $                $
<S>                                                                                   <C>              <C>
          Notes payable assumed from Trans Mar, Inc., interest payable at

           various rates, unsecured, principal and interest due December 31, 1999     190,559          198,702

          Notes payable to former shareholders of Trans Mar, Inc., non-interest

          bearing, unsecured, principal due December 31, 1999                          41,141          175,842

          Note payable, interest payable at 10% per annum, unsecured,

          blended payments of $2,000 per month, due April 1, 1999                      28,091           48,177
                                                                                       ------           ------

                                                                                      259,791          422,721

          Less: Current portion                                                       253,890          153,036
                                                                                      -------          -------

          Long-term portion of notes payable                                            5,901          269,685
                                                                                        =====          =======
</TABLE>
         Notes  payable to former  shareholders  of Trans Mar, Inc.  (TMI),  are
         subject to a repayment  agreement with the former  shareholders  of TMI
         dated  March 3, 1996.  Although  the  original  notes  payable  are due
         December 31, 1999,  the Company  agreed to retire  $50,000 per month of
         the TMI debt assumed by the Company.

7.       CAPITAL STOCK
              The capital stock is as follows:

                Authorized
                Unlimited common shares

                Issued
                15,492,745 common shares                             $13,942,453
                                                                     ===========
              Transactions during the prior three years are as follows:
<TABLE>
<CAPTION>
                                                                                  Shares              Amount
                                                                                  ------              ------
                                                                                     #                  $
<S>                                                                              <C>                 <C>
                Balance, December 31, 1994                                       5,200,849           3,115,873

                Common shares issued for cash                                    2,700,000             875,529

                Exercise of stock options                                          247,000              53,553

                Exercise of warrants                                               350,000             171,458
                                                                                   -------             -------

                Balance, December 31, 1995                                       8,497,849           4,216,413
                                                                                 ---------           ---------

                Private placements                                                 554,027           1,414,778

                Exercise of stock options                                          702,000             526,850

                Exercise of warrants                                             2,912,463           2,471,219

                Common shares issued for cash                                      100,000             222,530

                Common shares issued for the acquisition of TMI (Note 2(b))      1,919,957           2,521,469
                                                                                 ---------           ---------

                Balance, December 31, 1996                                      14,686,296          11,373,259

                Exercise of stock options                                          362,500           1,530,406

                Exercise of warrants                                               411,229             991,042

                Common shares issued on warrants exercised in December, 1996        32,720              47,746
                                                                                    ------              ------

                Balance, December 31, 1997                                      15,492,745          13,942,453
                                                                                ==========          ==========
</TABLE>
                                                                    Continued...
<PAGE>


ALTAIR INTERNATIONAL INC.                                              Page F-11
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
7.       CAPITAL STOCK (Continued)

         Stock Options

         As at December 31, 1997,  962,500 common shares of the Company ("Common
         Shares") are reserved for issuance to directors, officers and employees
         under the Company's  stock option plan.  The exercise  price and expiry
         dates of options outstanding as of December 31, 1997 are as follows:

                             Number of               Price
                              Shares                   $     Expiry Date
                              ------                 -----   -----------

                              125,000                2.70    March 7, 2001

                              250,000                2.92    May 27, 2001

                               75,000                3.06    July 29, 2001

                               17,500                6.13    November 6, 2001

                               15,000                6.86    December 31, 2001

                               25,000                9.00    March 10, 2002

                              200,000                7.42    May 14, 2002

                               25,000                6.77    June 3, 2002

                              150,000                7.78    August 26, 2002

                               80,000               12.78    December 22, 2002
                              -------
                              962,500
                              =======

 <TABLE>
<CAPTION>
    Warrants
             i)     Series E

<S>                                                                               <C>
                        Issued and outstanding, beginning of the year             319,644

                        Exercised during the year                                (301,229)

                        Expired during the year                                   (18,415)
                                                                                 --------

                        Issued and outstanding, end of the year                       NIL
                                                                                 ========
             ii)    Series F

                        Issued and outstanding, beginning of the year              50,000

                        Exercised during the year                                 (50,000)
                                                                                  -------

                        Issued and outstanding, end of the year                       NIL
                                                                                  =======
             iii)   Series H

                        Issued and outstanding, beginning of the year              60,000

                        Exercised during the year                                 (60,000)
                                                                                  -------

                        Issued and outstanding, end of the year                       NIL
                                                                                  =======
             iv)    Convertible Debentures Placement Warrants (Note 8)

                        Issued and outstanding, end of the year                   105,000
                                                                                  =======

             v)     Convertible Debenture Transaction Warrants (Note 8)

                        Issued and outstanding, end of the year                    75,000
                                                                                   ======
</TABLE>

                                                                    Continued...

<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-12
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
8.       CONVERTIBLE DEBENTURES

         On December 29, 1997,  the Company  issued  $5,000,000  in  convertible
         subordinated  debentures due December 29, 2001 (the Debentures) bearing
         interest  at 5% per  annum  payable  in cash or  common  shares  of the
         Company (Common  Shares),  annually or upon conversion or maturity,  at
         the discretion of the Company.  Subject to certain  restrictions during
         the first 180 days after closing,  the  Debentures  are  convertible by
         holders of the Debentures into Common Shares at a conversion rate equal
         to the lesser of (i) 92% of the average  price of the Common Shares for
         the five trading days prior to  submission of a notice of conversion by
         the holder,  or (ii) $14.36875 (the Ceiling  Price).  The Ceiling Price
         will be  increased  by $0.50 at the end of the  second  year  following
         closing and an additional  $0.50 at the end of the third year following
         closing.  The Company may force  conversion of the Debentures if, among
         other things,  the average closing price for the five preceding trading
         days exceeds 130% of the Ceiling Price ($18.68). The Company may redeem
         outstanding Debentures at a price of 110% of face value if, among other
         things, the price of the Common Shares is trading below $6.50 per share
         for the  preceding  10  consecutive  trading  days.  In addition to the
         above,  the Company has the right to cause  initial  purchasers  of the
         Debentures  to purchase up to an additional  $5,000,000 of  convertible
         subordinated   debentures  on  terms  and  conditions  similar  to  the
         Debentures.

         The purchasers of the  Debentures  also received  transaction  warrants
         entitling  the holders to purchase  75,000  Common  Shares on or before
         December 29, 1999,  at a price of $16.7188  per share.  Any  additional
         placement  of  convertible  subordinated  debentures  will also include
         transaction  warrants  entitling  the holder to purchase  75,000 Common
         Shares, or a lesser proportionate number if the aggregate value of such
         debentures  is less than  $5,000,000,  at a price  equal to 125% of the
         closing  bid  price of the  Common  Shares  on the  closing  date.  The
         placement agent received 105,000 placement warrants entitling the agent
         to purchase  105,000  Common  Shares at $16.7188 per share on or before
         December 29, 1999.

         The  Company's  convertible  debentures  contain  both debt and  equity
         components.  The Company  has  accounted  for the present  value of the
         interest  portion as a liability.  At December 31, 1997, this liability
         amounted  to  $828,031.  The  present  value of the  principal  and the
         holders'  conversion  option have been  classified  as a  component  of
         shareholders'  equity and was $4,171,969 at December 31, 1997. The fair
         value of the liability  element of  convertible  debentures at December
         31, 1997 was approximately equal to the book value.

         As part of the  placement  of the  Debentures,  the Company has filed a
         registration  statement with the  Securities  and  Exchange  Commission
         registering   the  Common  Shares   issuable  upon  conversion  of  the
         Debentures and related warrants. If such registration  statement is not
         declared effective within 150 days from closing, a penalty of 2% of the
         face value of the  Debentures  per month will be payable to the holders
         of the Debentures.

9.       COMMITMENT

         Under the  current  employment  agreement  between  the Company and its
         president, Dr. William P. Long, Dr. Long is entitled to receive payment
         of 200,000  Common Shares in the event:  (i) voting control of over 35%
         of the issued  stock is acquired by a person or a group of persons in a
         merger,  takeover,  or similar  transaction,  and Dr. Long's employment
         agreement  is  terminated  within 180 days  before or at any time after
         such change of control,  or (ii)  absent,  a change of control,  if Dr.
         Long's employment agreement is terminated for any reason, except by Dr.
         Long, by mutual consent,  by the Company for cause or at the end of the
         term. In addition, included in accounts payable and accrued liabilities
         is $142,816 (1996 - $115,361) owing to Mr. Long.



                                                                    Continued...

<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-13
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
10.      NET LOSS PER SHARE

         The existence of stock  options,  warrants and  convertible  debentures
         affects the  calculation of loss per share on a fully diluted basis. As
         the effect of this  dilution is to reduce the reported  loss per share,
         the fully diluted loss per share has not been presented.

11.      INCOME TAXES

         As at December  31,  1997,  The Company has  approximately  $939,000 of
         non-capital  losses  carried  forward for income tax purposes which are
         available to reduce future  year's  income for tax purposes  which will
         begin to expire in 1998.

12.      COMPARATIVE FIGURES

         Certain  of the 1996  comparative  figures  have been  reclassified  to
         conform with the financial statement presentation adopted for 1997.

13.      CONCENTRATION OF CREDIT RISK

         As at December 31, 1997,  MRS had  $216,181  invested in a  diversified
         portfolio of United States  dollar-denominated money market instruments
         in the United States.  This portfolio is neither insured nor guaranteed
         by  the  United  States   Government.   Subsequent  to  the  year  end,
         substantially  all of the cash and short-term  investments on hand were
         transferred to the money market.

14.      DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

         The  Company  prepares  its  accounts  in  accordance  with  accounting
         principles   generally  accepted  in  Canada  ("Canadian  GAAP")  which
         conform, in all material respects, with accounting principles generally
         accepted in the United States ("U.S. GAAP"), except as described below.

         Development Stage Company
         As of December  31,  1997,  the  Company  would be  characterized  as a
         "development  stage  enterprise"  under U.S.  GAAP due to  Statement of
         Financial  Accounting  Standards No. 7 (SFAS 7). Under  Canadian  GAAP,
         there  are  no   requirements   for  the  indication  or  reporting  of
         development  stage entities.  The following is a summary of the deficit
         accumulated  during the  development  stage prepared in accordance with
         SFAS 7:



                                                                    Continued...
<PAGE>


ALTAIR INTERNATIONAL INC.                                              Page F-14
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
14.      DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)


                                                                   Accumulated
                                                              deficit during the
                                                               development stage
                                                               -----------------
                                                                       $

             Professional Fees                                        1,115,663

             Salaries and wages                                       1,620,432

             Shareholders= expenses                                     776,846

             Office and general                                         832,508

             Loss on sale of mining claims                              101,047

             Amortization                                               981,926

             Interest on long-term debt                                  62,870

             Write-off of mineral properties and related deferred
             exploration expenditures                                 1,292,354

             Write-off of organization costs                              8,563
                                                                          -----

                                                                      6,792,209

             Less:    Interest Income
                                                                       (111,572)

                      Gain on sale of marketable securities             (35,773)

                      Lease payments                                   (143,754)

                      Gain on forgiveness of debt                      (702,726)

                      Option payments                                   (70,906)
                                                                        -------

             Total accumulated loss                                   5,727,478

             Convertible debenture costs                                515,844

             Share issue costs                                           60,557
                                                                         ------

             Accumulated deficit, December 31, 1997                   6,303,879
                                                                      =========

         Foreign Currency Translation
         In Canada and the United  States,  a  distinction  is made  between the
         measurement  and accounting for an enterprise's  own  transactions in a
         foreign currency. The Company remeasures its books and records into the
         functional  currency prior to translation into the reporting  currency.
         The Company maintains its books and records in Canadian dollars and the
         U.S.  subsidiaries  maintain  their books and records in United  States
         dollars.  The  remeasurement  of  the  Company's  financial  statements
         according to U.S. GAAP would not change the results of the consolidated
         financial statements prepared in accordance with Canadian GAAP.

         Statement of Changes in Financial Position
         The  U.S.  Financial  Accounting  Standards  Board  (FASB)  issued  its
         Statement  of  Financial  Accounting  Standards  No. 95 (SFAS  No.  95)
         effective  for years ending after July 15, 1988.  SFAS No. 95, which is
         entitled "Statement of Cash Flows", established standards for cash flow
         reporting with its primary purpose being to provide  information  about
         the cash  receipts  and cash  payments of an entity  during the period.
         Canadian Generally Accepted  Accounting  Principles (GAAP) dealing with
         the  statement  of changes in  financial  position  is based on a broad
         concept, embracing all changes in financial position. The following are
         the Statements of Cash Flow prepared in accordance with U.S. GAAP based
         upon the financial statements in accordance with Canadian GAAP for each
         of the three years ended December 31, 1997:



                                                                   Continued....

<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-15
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
14       DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
<TABLE>
<CAPTION>

      (Expressed in United States Dollars)                                       1997              1996              1995
                                                                                   $                 $                $
      CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                            <C>                 <C>              <C>
      Net loss for the year                                                    (1,831,471)         (624,500)        (437,103)

      Adjustments to reconcile net loss for the year to net cash (used):

      Amortization                                                                590,831           385,633            3,151

      Write-off of mineral properties and related exploration expenditures              -                 -            8,212

      Gain on forgiveness of debt                                                       -          (702,726)               -

      Changes in assets and liabilities:

               Prepaid expenses                                                   (30,023)                -                -

               Advances and accounts receivable                                    12,386            81,367          (51,191)

               Accounts payable and accrued liabilities                            71,444            64,816          (73,099)
                                                                                ---------         ---------        ---------

      NET CASH (USED IN) OPERATING ACTIVITIES                                  (1,186,833)         (795,410)        (550,030)
                                                                                ---------         ---------        ---------

      CASH FLOWS FROM INVESTING ACTIVITIES

      Purchase of mineral properties and related                                 (480,248)         (275,790)          (8,212)
               deferred exploration expenditures

      Purchase of capital assets                                                 (237,283)          (87,114)         (22,787)

      Purchase of Centrifugal Jig                                                 (46,701)         (351,503)          (4,352)

      Option agreement costs                                                            -                -          (212,832)
                                                                                ---------         ---------        ---------

      NET CASH (USED IN) INVESTING ACTIVITIES                                    (764,232)         (714,407)        (248,183)
                                                                                ---------         ---------        ---------


      CASH FLOWS FROM FINANCING ACTIVITIES

      Issuance of common shares for cash                                                -           222,530                -

      Proceeds from exercise of stock options                                   1,530,406           526,850           53,553

      Proceeds from exercise of warrants                                          991,042         2,411,219          171,458

      (Decrease) in notes payable                                                (162,930)         (152,634)               -

      Issuance of common shares pursuant to a                                                     1,414,778          875,529
               private placement                                                        -

      Common shares to be issued                                                        -            47,746                -

      Issuance of convertible debentures                                        5,000,000                 -                -

      Convertible debenture issuance costs                                       (515,844)                -                -
                                                                                ---------         ---------        ---------

      NET CASH PROVIDED BY FINANCING ACTIVITIES                                 6,842,674         4,470,489        1,100,540
                                                                                ---------         ---------        ---------

      NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS                           4,891,609         2,960,672          302,327

      CASH AND SHORT-TERM INVESTMENTS, beginning of year                        3,270,161           309,489            7,162
                                                                                ---------           -------            -----

      CASH AND SHORT-TERM INVESTMENTS, end of year                              8,161,770         3,270,161          309,489
                                                                                =========         =========          =======
</TABLE>
                                                                    Continued...
<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-16
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
14       DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

         Non-Cash Investing and Financing Activities

         SFAS No. 95  requires  the Company to  disclose  information  about all
         investing and financing  activities  that affect  recognized  assets or
         liabilities  but do not result in cash receipts or cash  payments.  The
         following  is a summary  of the 1996 and 1997  non-cash  investing  and
         financing activities:

         a)   For the  year ended  December  31, 1997.  There  were no  non-cash
              investing or financing activities.

         b)   For the year ended December 31, 1996. The company acquired 100% of
              the  issued  and  outstanding   common  stock  of  TMI  for  total
              consideration   of   1,919,957   common   shares  at  $1.31   each
              ($2,515.144), the assumption of $1,210,981 of net liabilities, and
              the issuance of the 580,000 Series E share purchase warrants.

         Under Canadian GAAP,  there is no requirement to disclose the Company's
         policy for  determining  which items are  treated as cash  equivalents.
         Under  U.S.  GAAP  cash  equivalents  are  short-term,   highly  liquid
         investments that are readily converted to known amounts of cash and are
         so near their  maturities  that they present an  insignificant  risk of
         change in value because of changes in interest rates.

         The cash and  short-term  investments  on hand as at December  31, 1997
         represent cash, short-term  investments with original maturity dates of
         less  than  30  days  and a  diversified  portfolio  of  United  States
         dollar-denominated  money market  instruments which are considered cash
         equivalents under U.S. GAAP.

         Income Taxes
         Under Canadian GAAP, the future tax benefit  related to the non-capital
         loss carry forwards have not been recorded in the accounts.  Under U.S.
         GAAP,  companies must follow the requirements of Statement of Financial
         Accounting  Standards No. 109 (SFAS 109) which  required the use of the
         asset/liability  method for  measurement  of tax  liabilities,  wherein
         deferred tax assets are recognized as well as deferred tax liabilities.

         The Company has significant  non-capital loss carryforwards  (Note 11).
         SFAS 109 would require the recognition of a long-term tax asset for the
         future benefit expected from the application of these  carryforwards to
         future  profitable  years.  If it is expected that the entire amount of
         non-capital loss carryforwards  will not be utilized,  then a valuation
         allowance is applied to the asset to reasonably  state the asset at its
         expected  value.  Under  SFAS  109,  disclosure  of the  amount  of the
         valuation allowance is required. As at December 31, 1997, the valuation
         allowance is equal to 100% of the  deferred  tax asset.  Changes in the
         value of the  deferred  asset are  recognized  each year as income  tax
         expense.


                                                                    Continued...
<PAGE>

ALTAIR INTERNATIONAL INC.                                              Page F-17
NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS
DECEMBER 31, 1997
(Expressed in United States dollars - Note 1)
--------------------------------------------------------------------------------
14.      DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES  (Continued)

         Stock Options
         All  962,500  (1996  -  745,000)  of the  common  share  stock  options
         outstanding  at December 31, 1997,  are  currently  exercisable.  As at
         December  31,  1997,  443,000  (1996  -  723,630)  common  shares  were
         available for granting of options.  The following  summary sets out the
         activity during the year.


<TABLE>
<CAPTION>
                                                                                1997                1996
                                                                                ----                ----
                                                                                  $                   $

<S>                                                                             <C>                <C>
                 Outstanding at beginning of year                               745,000            677,000

                 Granted during the year                                        580,000            770,000

                 Exercised at an average price of $4.22 (1996 - $0.75)         (362,500)          (702,000)
                                                                                -------            -------

                 Outstanding at end of year                                     962,500            745,000
                                                                                =======            =======
</TABLE>

         Under Canadian GAAP, there is no requirement to record  compensation on
         the issuance of stock  options to employees  or  directors.  Under U.S.
         GAAP,  compensation  would be  accrued at the date of  granting  of the
         options  calculated  as the  difference  between  the market  price and
         exercise price at the date of grant.

         For the fiscal  years ended  December  31,  1997 and 1996 the  exercise
         price of all stock  options  granted has been equal to or greater  than
         the  market  price  on  the  date  of  the  grant  and   therefore  the
         compensation cost under U.S. GAAP would be $Nil.

         Reconciliation  to  accounting  principles  generally  accepted  in the
         United States.

         The  following  presents  amounts that would have been reported had the
         Company's  consolidated financial statements been prepared on the basis
         of United States accounting principles.

         Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                               1997            1996
                                                                               ----            ----
                                                                                  $               $

<S>                                                                         <C>                   <C>
                Deferred convertible debenture issuance costs (i)           515,844               -

                Deficit (i)                                               3,956,564               -

                Total shareholders' equity (i)                           11,294,699               -

                Total assets (i)                                         13,641,648               -
</TABLE>

              i)  Convertible debenture issuance costs in the amount of $515,844
                  have been added to the deficit under Canadian GAAP.  According
                  to U.S. GAAP the amount is  classified  as deferred  financing
                  costs.

              ii) Under  U.S.  GAAP,  interest  expense  would be  imputed  with
                  respect to a  non-interest  bearing note payable as in Note 6.
                  The effect on net income of not recording  imputed interest is
                  negligible.

         Other
         There are no other material  differences between Canadian GAAP and U.S.
         GAAP.