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, 2002

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


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

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

                         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 SmallCap Market
 ---------------------------       -------------------------------------------
      (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. [ ]

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Act). YES [] NO [X]

         The aggregate market value of the common shares held by  non-affiliates
of the  Registrant on June 30, 2002,  based upon the average bid and asked price
of the common  shares on the NASDAQ  Stock Market of $0.47 per share on June 28,
2002,  was  approximately  $9,928,000.  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  March  7,  2003,  the  Registrant  had
30,799,492 common shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
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<PAGE>

<TABLE>
<CAPTION>

                               INDEX TO FORM 10-K


<S>                                                                                                         <C>
PART I.......................................................................................................1

Item 1:    Business..........................................................................................1

Item 2.    Properties.......................................................................................29

Item 3.    Legal Proceedings................................................................................30

Item 4.    Submission of Matters to a Vote of Security Holders..............................................30


PART II.....................................................................................................30

Item 5.    Market for the Common Shares and Related Shareholder Matters.....................................30

Item 6.    Selected Financial Data..........................................................................35

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations............35

Item 8.    Financial Statements and Supplementary Data......................................................44

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............45


Part III....................................................................................................45

Item 10.   Directors and Executive Officers of the Registrant...............................................45

Item 11.   Executive Compensation...........................................................................45

Item 12.   Security Ownership of Certain Beneficial Owners and Management...................................45

Item 13.   Certain Relationships and Related Transactions...................................................45

Item 14.     Controls and Procedures........................................................................45

Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................46
</TABLE>

<PAGE>


                                     PART I

This Annual Report on Form 10-K for the year ended December 31, 2002 (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  Securities  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 shares") of Altair Nanotechnologies 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  encouraged  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.

Item 1:      Business

         Certain  technical  terms  used  in the  following  description  of our
business are defined in a glossary set forth on page 20. We have identified such
terms by italicizing  them the first time they are used in the text.  Unless the
context   requires   otherwise,   all  references  to  "Altair,"  "we,"  "Altair
Nanotechnologies  Inc.," or the  "Company"  in this  Form  10-K  refer to Altair
Nanotechnologies Inc. and all of its subsidiaries.

         In relation to the Tennessee mineral property, Altair is an exploration
stage company (as defined in Guide 7  promulgated  under the  Securities  Act of
1933, as amended),  and there is no assurance that a commercially viable mineral
deposit exists on the Tennessee mineral property or any other property leased by
Altair.  We will cease to be an  exploration  stage  company with respect to the
Tennessee mineral property only when and if we have established the existence of
a commercially minable deposit.

General
-------

         Altair  Nanotechnologies  Inc. was  incorporated  under the laws of the
Province  of  Ontario,  Canada in April 1973 for the  purpose of  acquiring  and
exploring  mineral  properties.  It was  redomesticated  in July  2002  from the
Business  Corporation Act (Ontario) to the Canada Business  Corporations  Act, a
change which causes Altair to be governed by Canada's federal corporate statute.
The change reduces the requirement for resident  Canadian  directors from 50% to
25%, thereby allowing us greater  flexibility to attract  qualified  nominees to
our board.

             During the period from  inception  through  1994,  we acquired  and
explored multiple mineral properties. In each case, sub-economic  mineralization
was  encountered  and the  exploration  was abandoned.  Since 1994, we have also
devoted  substantial  resources  to  the  development  and  testing  of  mineral
processing equipment for use in the recovery of fine, heavy mineral particles.

         In November 1999, we acquired all patent  applications,  technology and
tangible  assets  related  to a  hydrometallurgical  process  developed  by  BHP
Minerals  International,  Inc. ("BHP")  primarily for the production of titanium
dioxide  products  from titanium  bearing ores or  concentrates  (the  "titanium
processing technology"), and all tangible equipment and other assets used by BHP
to develop and  implement  the titanium  processing  technology  (the  "titanium
processing  assets").  We plan  to  initially  employ  the  titanium  processing
technology  as a  platform  for the  sale  of  contract  services,  intellectual
property  licenses and for the production and sale of metal oxide  nanoparticles
in various applications. See "--Titanium Pigment Processing Technology."
                                       1
<PAGE>

         We have also leased,  and are exploring,  approximately  8,700 acres of
land near Camden,  Tennessee  (the  "Tennessee  mineral  property") to determine
whether it would be amenable to large-scale  mining for titanium and zircon. See
"--Tennessee Mineral Property."

         During 1996,  we acquired the rights to the Campbell  Centrifugal  Jig,
since modified and renamed the Altair  Centrifugal Jig (the "jig"). The jig is a
machine that uses a rotating  circular  screen and  pulsating  water to separate
valueless  mineral  particles from more valuable mineral  particles based on the
differences  in their  specific  gravity.  During 2002,  we elected to terminate
further  development  work on the jig for the  foreseeable  future  and  instead
concentrate our limited resources on the development of the titanium  processing
technology.  As a result, we recorded an adjustment during the second quarter of
2002 to write off the  remaining  net book value of the jig  assets and  related
patents in our financial statements. See "--The Jig."

         We have  experienced an operating  loss in every year of operation.  In
the  fiscal  year  ended  December  31,  2002,  we  experienced  a net  loss  of
$9,921,496.  Certain  information  regarding  the net sales,  income (loss) from
operations and assets associated with each of the titanium  processing,  jig and
Tennessee  mineral property segments of our business are set forth in Note 13 to
the Consolidated  Financial  Statements of the Company attached hereto following
the signature and  certification  pages and are incorporated into this Form 10-K
by this reference.

         Altair currently has two wholly-owned subsidiaries,  Fine Gold Recovery
Systems, Inc., a Nevada corporation ("Fine Gold"), and Mineral Recovery Systems,
Inc., a Nevada corporation  ("MRS").  Altair also has two indirect  wholly-owned
subsidiaries,  Altair Nanomaterials,  Inc., a Nevada corporation,  and Tennessee
Valley Titanium, Inc., a Nevada corporation.

Titanium Pigment Processing Technology
--------------------------------------

         Description of the Titanium Processing Technology.
         --------------------------------------------------

         On November 15, 1999,  we purchased  from BHP all patent  applications,
technology and tangible assets related to a hydrometallurgical process developed
by BHP primarily for the production of titanium  dioxide  products from titanium
bearing ores or concentrates (i.e., the titanium processing technology), and all
tangible  equipment  and other assets used by BHP to develop and  implement  the
titanium  processing  technology  (i.e., the titanium  processing  assets).  The
titanium  processing  technology is capable of producing  conventional  titanium
dioxide  pigment   products.   Conventional   titanium   dioxide   pigments  are
finely-sized powders consisting of titanium dioxide crystals.  These powders may
be either anatase or rutile phase (shape) and  approximate  0.17 to 0.30 microns
in size.  Our  titanium  processing  technology  is also  capable  of  producing
titanium  dioxide  and other  metal  oxide  nanoparticles.  These are  specialty
products with a size range of 10 to 100 nanometers  (approximately one tenth the
size of conventional pigments). The primary products currently being produced in
the  processing  plant are titanium  dioxide,  lithium  titanate and  stabilized
zirconia nanoparticles.

         The  titanium   processing   technology   is  based  on  a  proprietary
dense-phase  crystal growth technique which controls  crystal  formation using a
combination of mechanical  and fluid dynamics and chemical and thermal  control.
Through  introduction of very small  quantities of selected  chemicals  ("doping
elements") during crystal growth, the size, phase,  catalytic and photocatalytic
activity and size  distribution  of crystals  can be  controlled  within  narrow
limits and to specification.
                                       2
<PAGE>

         Titanium Processing Assets.
         ---------------------------

         The titanium  processing  assets  consist  principally  of a production
facility  located  in Reno,  Nevada  in a  building,  formerly  leased,  that we
purchased from BHP in 2002.  During 2000, we installed  additional  equipment to
increase  production  capacity  to a  nominal  annual  amount  of  200  tons  of
nanoparticles.  We also added a separate  pilot facility to produce large sample
quantities of product for development, test and evaluation purposes. In 2001, we
added hydration and filtering  equipment to improve  production  processing.  In
2002, we purchased advanced milling equipment to improve product quality.

         Plans for Development of the Titanium Pigment Processing Technology.
         -------------------------------------------------------------------

         The  titanium  processing  technology  has  potential  to produce  both
titanium  pigments,  which are commercially  traded in bulk, and  nanoparticles,
which are sold on  specialty  product  markets.  During  2002,  our efforts were
directed toward development of nanoparticle  products,  pharmaceutical  products
and titanium pigment production.

         Nanoparticle  Products.  For the  year  ended  December  31,  2002,  we
generated  $134,925  of  revenue  through  sales of  titanium  dioxide,  lithium
titanate and yttria stabilized zirconia nanoparticles and other materials. These
products were used  principally in thermal spray and catalyst  applications  and
for developmental work on battery materials. We are also developing nanoparticle
products  that  may be  useful  in  controlling  algae  in  swimming  pools,  in
cosmetics, in self-cleaning and sanitizing and in environmental purification.

         Pharmaceutical  Products.  In the second  quarter of 2002, we initiated
research  and   development   efforts   directed   toward  the   utilization  of
nanomaterials in the  pharmaceuticals  industry.  In July 2002, we announced the
development of a new active pharmaceutical  ingredient ("API") for the treatment
of  hyperphosphatemia  (elevated serum phosphate levels) in patients  undergoing
kidney dialysis,  as well as a new drug delivery system using inorganic  ceramic
nanoparticles.  This API,  given  the name  RenaZorb(TM),  showed  an  excellent
capacity for phosphate removal in laboratory tests using simulated stomach acid.
Testing of this product using animals was initiated in late 2002 and is expected
to be  completed  during the first  quarter of 2003.  We are  currently  seeking
business relationships with pharmaceutical companies that can conduct additional
testing and  development,  seek necessary FDA approvals and take the other steps
necessary to bring the new pharmaceutical ingredient and drug delivery system to
market.

         Titanium Pigment  Production.  In late 2002, we entered into a contract
with a large materials company to determine whether an ore concentrate  produced
by them is suitable for making white titanium  dioxide  pigment.  Extraction and
iron removal work has been  completed and  purification  and pigment  production
steps have begun.  We expect to complete the project during the first quarter of
2003. If the project is successful,  we hope to enter into a contract to license
our  technology  for the  production  of  titanium  dioxide  pigment.  A  second
agreement  based on an ore body located in Vietnam was also signed in late 2002,
but no work has as yet been done.

         Products In Development Using the Titanium Processing Technology.
         ----------------------------------------------------------------

To date, we have developed titanium dioxide  nanoparticles and other products we
intend  to  initially  produce  with the  titanium  processing  technology.  The
designation,  description,  potential  applications and status of development of
our products that we have publicly announced are as follows:
                                       3

<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Product
Designation              Description                 Potential Applications        Status of Development & Sales
-----------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                              <C>                           <C>
Titanium Dioxide     This technology is a low        The technology may be         The Company is presently working on one
Pigment Process      cost, environmentally           licensed to mineral           development contract of $100,000 and has
                     preferred method of making      companies, coatings           signed a $250,000 contract for
                     titanium dioxide pigment.       companies or pigment          development, subject to funding.
                                                     companies.                    Additional interest has been expressed.
-----------------------------------------------------------------------------------------------------------------------------
TiNano(TM)40 VHP     This is an uncoated, high       Environmental purification,   During 2002, we sold $85,900 of this
                     purity titanium dioxide         photocells, catalyst and      product to 31 customers.  Of this
                     nanoparticle product with       similar ceramic               amount, $61,200 was sold to a customer
                     good thermal stability.         applications, self-cleaning   for commercial thermal spray
                                                     & sanitizing uses and         applications.  The remainder was sold
                                                     thermal spray coatings.       for use primarily in the testing and
                                                     Intermediate for              development of thermal spray, catalyst
                                                     manufacture of derivatives    and chemical mechanical planarization
                                                     such as lithium titanate      applications.  We have received follow
                                                     and barium titanate.          up orders from two customers.


                                                                                   Development    of   such    product   is
                                                                                   substantially    complete.    Commercial
                                                                                   viability  is dependent  upon when,  and
                                                                                   if,   potential   customers   decide  to
                                                                                   incorporate   such   product   into  end
                                                                                   products they are developing.
-----------------------------------------------------------------------------------------------------------------------------
TiNano(TM)40 USP     This product meets US           Cosmetic and other uses       During 2002, we sold $800 of this
                     Pharmacopeia specifications     requiring US Pharmacopeia     product to five customers.  We are
                     and exhibits high UV            purity specifications. USP    developing coating procedures to make
                     absorption characteristics,     grade may also be used in     TiNanoTM 40 CNPC from this regulated
                     and high thermal stability.     many of the VHP               material.
                                                     applications and has
                                                     greater temperature           Development    of   such    product   is
                                                     stability.                    substantially    complete.    Commercial
                                                                                   viability  is dependent  upon when,  and
                                                                                   if,   potential   customers   decide  to
                                                                                   incorporate   such   product   into  end
                                                                                   products they are developing.



-----------------------------------------------------------------------------------------------------------------------------
TiNano(TM)40 HPC     This product exhibits high UV   Environmental purification,   During 2002, we sold $650 of this product
                     absorption,  high photo         photocells, catalysts, and    to one customer. We intend to discontinue
                     catalytic activity and          similar ceramic applica-      this product as other products overlap
                     excellent thermal stability.    tions. Also may be used       this market.
                                                     for self-cleaning and
                                                     sanitizing applications.
-----------------------------------------------------------------------------------------------------------------------------

TiNano(TM)40 RPC     This product exhibits high UV   Cosmetics, plastics and       During 2002, we sold $150 of this
                     absorption.  It exhibits        coatings applications         product to two customers.  We are
                     reduced photo catalytic         requiring reduced             developing a dispersion technology for
                     activity achieved using our     photochemical activity.       application in plastics, organic
                     inorganic coating rather than                                 formulations and wood treatment.
                     the traditional Si-Al
                     treatment.  Also exhibits
                     excellent thermal stability.

                                                                                   Development of the dispersion technology
                                                                                   is  ongoing.   Commercial  viability  is
                                                                                   dependent upon when,  and if,  potential
                                                                                   customers  decide  to  incorporate  such
                                                                                   product  into  end  products   they  are
                                                                                   developing and is projected during 2003.
                                                             4
<PAGE>
-----------------------------------------------------------------------------------------------------------------------------
Product
Designation              Description                 Potential Applications        Status of Development & Sales
-----------------------------------------------------------------------------------------------------------------------------
TiNano(TM)40 CNPC    This product exhibits high UV   Cosmetic and coating          During 2002, we sold $150 of this
                     absorption and has excellent    applications.                 product to two customers.  We are
                     thermal properties.  The                                      developing a coating and dispersion
                     product is USP grade TiO2                                     technology.
                     coated with hydrous alumina
                     and silica.  The coating                                      Development of the dispersion technology
                     substantially eliminates                                      is  ongoing.   Commercial  viability  is
                     photo catalytic activity.                                     dependent upon when,  and if,  potential
                                                                                   customers  decide  to  incorporate  such
                                                                                   product  into  end  products   they  are
                                                                                   developing and is projected during 2003.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       4
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                             <C>                           <C>
Lithium Titanate     This product is a robust        Lithium ion batteries where   During 2001, we sold $18,200 of lithium
Spinel               crystalline structure of        high charge and discharge     titanate to nine customers for use in
                     lithium titanate.  It           rates are desired.            testing and development of battery
                     withstands high lithium                                       materials.
                     insertion rates with very
                     little distortion.

                                                                                   Development    of   such    product   is
                                                                                   substantially    complete.    Commercial
                                                                                   viability  is dependent  upon when,  and
                                                                                   if,   potential   customers   decide  to
                                                                                   incorporate   such   product   into  end
                                                                                   products they are developing.
-----------------------------------------------------------------------------------------------------------------------------

Yttria Stabilized    This product is a nano-sized    Used in solid oxide fuel      Fuel cell components have been made and
Zirconia             crystalline material with       cell components and as a      tested.  In 2002, we sold $1,000 of this
                     excellent stability and         ceramic coating.              product for testing in thermal spray
                     coating characteristics.  At                                  applications.
                     high temperatures, it has the
                     capability for ionic                                          Development    of   such    product   is
                     conduction of oxygen.                                         substantially    complete.    Commercial
                                                                                   viability  is dependent  upon when,  and
                                                                                   if,   potential   customers   decide  to
                                                                                   incorporate   such   product   into  end
                                                                                   products they are developing.
-----------------------------------------------------------------------------------------------------------------------------
RenaZorb(TM)         This product is a               This pharmaceutical can be    Laboratory testing was completed in
                     nanoparticle-sized              used for controlling serum    2002.  Testing using animals was begun
                     lanthanum-based ceramic         phosphate levels in kidney    in late 2002 and will be completed
                     material with a large surface   dialysis patients and in      during first quarter 2003.
                     area and capability to bind     chemically related products.
                     phosphates and selected other                                 Although FDA approval of the product may
                     anions.                                                       take several years, Altair anticipates
                     (See also text discussion in    (See also text discussion     receiving license fees in 2003.  (See
                     following subsection)           in following subsection)      also text discussion in following
                                                                                   subsection and Item 7. Management's
                                                                                   Discussion of Financial Condition and
                                                                                   Results of Operations)
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                            5
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
<S>                      <C>                         <C>                           <C>
Product
Designation              Description                 Potential Applications        Status of Development & Sales
-----------------------------------------------------------------------------------------------------------------------------

Unnamed Drug         This product is a               Drug delivery device.         Development of such product is
Delivery Device      micron-sized hollow sphere                                    substantially complete.  Commercial
                     whose structure is composed                                   viability is dependent upon when, and
                     of interlocked  nanoparticles.                                if, potential customers decide to
                     It is highly porous.                                          incorporate such products into end
                     (See  also  text                                              products they  are  developing.
                     discussion in following
                     subsection)
-----------------------------------------------------------------------------------------------------------------------------
                     This product is a compound      This product is intended      Several versions are presently
NanoCheck(TM)        with large surface area that    for the swimming pool and     undergoing test and evaluation.
                     is insoluble in water over a    aquarium markets for the
                     wide pH range.                  removal of phosphate,
                                                     thereby preventing algae
                                                     growth.
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

The products  identified  above,  and other products we are developing  with the
titanium  processing  technology,  are  generally  not  commodities  and must be
customized for a specific  application working in cooperation with the end user.
Accordingly, unless and until we receive an order containing specifications with
respect to commercial  quantities of each nanoparticle  product, that product is
necessarily  in  the  development  phase.  To  date,  we  have  sold  commercial
quantities of  TiNano(TM)  40 to one customer for resale in  commercial  thermal
spray applications.

         Our New  Pharmaceutical  Ingredient.  We have  given  our API the  name
RenaZorb(TM). RenaZorb(TM) is a highly active, lanthanum based nanomaterial with
low  intestinal  solubility  and excellent in vitro  phosphate  binding.  Animal
testing on RenaZorb(TM)  has begun in dogs and rats, but no human tests have yet
been  conducted.  Nonetheless,  based upon our  initial  laboratory  testing and
research in simulated human stomach fluid we believe that RenaZorb(TM) may offer
the following advantages over competing products:

         o   Lower dosage  requirements  because of better phosphate binding per
             gram of drug compared with existing or proposed drugs;
         o   Fewer and less  severe  side  effects  because of less  gassing and
             lower dosage;
         o   Better patient compliance because of fewer tablets: and
         o   Lower cost than  existing  or proposed  prescription  drugs in this
             therapeutic category

         In most kidney dialysis  patients,  serum phosphate levels must be kept
in check.  This is done by ingesting a phosphate  binder after meals.  Phosphate
binders absorb the phosphate in the food that the patient  consumes,  preventing
absorption of phosphate in the patient's gastrointestinal tract.

         Existing  phosphate  binders include Tums(TM)  antacid,  which contains
calcium  carbonate,   and  also  aluminum   hydroxide-based   products  such  as
Gaviscon(TM) manufactured by Glaxo Smith Kline, both of which are available over
the counter,  as well as Renagel(TM)  (chemical name sevelmer)  manufactured  by
Genzyme,  which is available only by  prescription.  In addition,  Fosrenol(TM),
lanthanum carbonate tetra hydrate ("LCTH"),  developed by Shire  Pharmaceuticals
("Shire")  of the UK, is  awaiting  United  States  FDA and  foreign  regulatory
approvals, which are expected in mid-2003. Shire announced in March 2003 that it
had received an approvable letter from the FDA for Fosrenol(TM).  The approvable
letter requested additional data and analysis from Shire.

         While over the counter  phosphate  binders are relatively  inexpensive,
they have several disadvantages. Calcium carbonate-containing phosphate binders,


                                       6
<PAGE>

such as  Tums(TM),  in high  doses,  may  cause  increased  blood  pressure  and
increased risk of  cardiovascular  disease and is generally not  recommended for
long-term use by dialysis patients. With prolonged use, aluminum hydroxide-based
phosphate binders,  such as Gaviscon(TM),  may cause toxic neurological  effects
and are  generally  avoided by  physicians.  Aluminum  dementia  has been widely
reported in kidney dialysis patients using these products.

         The prescription  phosphate binder Renagel(TM) is relatively  expensive
(approximately  $1,300 per patient per year), has a high dosage requirement (2 x
800 mg or 4 x 400 mg  capsules/tablets  three times per day) and water intake is
required. The most common side effects related to the use of Renagel(TM) include
nausea  (7%  of  patients),  constipation  (2%  of  patients),  diarrhea  (4% of
patients),  gas or bloating (4% of patients)  and heartburn or  indigestion  (5%
patients).  Renagel  is  the  only  prescription  non-calcium  phosphate  binder
currently approved by the United States FDA.

         Fosrenol(TM)  (LCTH), for which US FDA approval is pending, is expected
to be marketed as a chewable  tablet with a proposed  dosage of 1.5 to 3.0 grams
active drug per day. As with all medicines,  Fosrenol(TM)  will probably display
some side effects but these are expected to be minor.  It has been reported that
the use of Fosrenol does increase serum lanthanum levels compared with levels in
patients  taking a placebo.  RenaZorb(TM),  which is  nanotechnology  based,  is
expected  to be  developed  in a tablet or capsule  dosage form with a projected
dosage of 0.6 to 2.0 grams per day.  Although  we have done no human  testing on
RenaZorb(TM),  we believe RenaZorb(TM) has the potential for fewer side effects,
lower cost and better patient compliance. We base these possible advantages upon
in vitro (laboratory) testing conducted by Altair in which RenaZorb was compared
to LCTH,  the active  chemical in  Fosrenol.  Our in vitro  testing  showed that
RenaZorb binds at least 30% more phosphate per gram of drug than LCTH, therefore
requiring a lower dose.  Lower dose often  correlates  well with a reduction  of
observed side effects in chemically related homologous compounds.

         Both RenaZorb(TM) and Fosrenol(TM)  involve the binding of phosphate by
lanthanum  compounds.  In fact,  the end  product of the  binding  mechanism  is
identical;  lanthanum  orthophosphate  is  formed.  Based  on  laboratory  tests
conducted by Altair comparing  RenaZorb(TM)  with LCTH, the active ingredient in
Fosrenol(TM),  RenaZorb(TM)  required  30% less drug to bind the same  amount of
phosphate  and shows less  lanthanum  going into  solution in simulated  stomach
fluid at pH values of 3.0 and 4.5.  In  addition,  in  Altair's  testing,  using
methods published by AnorMED,  RenaZorb(TM)  reacts with phosphate more rapidly,
possibly  because of its high  nanoparticle-derived  surface  area. In 20 minute
simulated  stomach  acid  tests  conducted  by  Altair,   RenaZorb(TM)  absorbed
approximately  140 mg of  phosphate  and LCTH  absorbed  approximately  60 mg of
phosphate.  It is  reported  that  Renagel(TM)  absorbed  less  than  100  mg of
phosphate in vivo.

         Our New Drug Delivery  System.  Our new drug delivery  system  involves
depositing  drugs on or inside  hollow  "wiffle  ball"  spheres made of titanium
dioxide and other metal oxide nanoparticles.

         To date,  our research on drug  delivery  systems  involving the use of
nanoparticles has been limited to coating known drugs on the surface of titanium
dioxide nanoparticles. We have not done any animal or human testing with our new
drug delivery  systems and do not have the  expertise,  resources or capacity to
complete such testing.  We are currently  seeking  business  relationships  with
pharmaceutical  companies that can conduct  additional  testing and  development
using their  pharmaceutical  active ingredients to coat the Altair nanomaterials
and then seek  necessary  FDA  approvals  and take the other steps  necessary to
bring the combined drug delivery system to market. Because of the early stage of
development  of these  drug  delivery  systems,  we are unable to state with any
certainty  how (or if) such drug  delivery  systems  would be used and, if used,
what the uses for such  systems  would be and what the  comparative  advantages,


                                       7
<PAGE>

sides  effects  and  other  aspects  of such  drug  delivery  systems  would be.
Nevertheless,  based upon our early testing,  we believe that the following uses
of a nanoparticle-based drug delivery system are feasible:

         o   New delivery forms for existing drugs;
         o   Delivery  methods  for new drugs;
         o   Delivery  of hard to dissolve drugs;
         o   Delivery of sustained release drugs; and
         o   Delivery of dual action drugs.

         New  Delivery  Forms and New  Drugs.  Our drug  delivery  system may be
useful in connection with drugs whose patents are expiring. On average, patented
drugs generate $200 to $400 million in sales,  with average sales margins of 90%
to 95%. The margin for generic drugs drops,  however, to 20% to 30% or less. New
dosage  forms are  patentable  and, if  patented,  may extend the drug's  patent
protection  for 20 years.  In addition,  new dosage forms may reduce the cost of
producing  various drugs,  increasing  margins if exclusive or generic,  and may
reduce undesirable side effects.

         Hard to Dissolve  Drugs.  Our drug delivery  system may also be used to
deliver drugs that work in the  gastrointestinal  tract without being  absorbed.
These types of drugs  remove  unwanted  materials  from the  digestive  systems.
Possible uses for these types of drugs include lowering cholesterol. Another use
for our drug  delivery  system  would be for  highly  insoluble  drugs that need
greater  absorption  to enter the blood  stream.  The  significant  increase  in
surface  area of our  titanium  dioxide  micro-spheres  may allow  greater  drug
absorption.  This greater  absorption  may also be used to redevelop  previously
failed  candidate drug compounds  that were  unsuccessful  because of inadequate
absorption rates or amounts.

         Sustained  Release  Drugs and Dual Action  Drugs.  We also  believe our
system may be useful in  connection  with the sustained  release of  fungicides,
including the following applications:

         o   Anti-fungal drugs;
         o   Topical anti-fungal drugs with sustained release;
         o   Tile cleaning products (mold, mildew) with residual action;
         o   Cosmetics (preservatives);
         o   Mildew prevention in paints and coatings;
         o   Fabric mildew protection;
         o   Exterior  cleaning  systems  for removal  and  prevention  of mold,
             mildew and green algae;
         o   Wood protection and preservation; and
         o   UV protection of wood.

Altair's  hollow  sphere  "wiffle  ball"  like  structures  can  deliver  active
chemicals or drugs in a sustained  release fashion because the active  component
can be  "mounted"  on both the  outside  surface  and  inside  the  hollow  ball
structure.  The  dissolution  and  availability  of the  surface-mounted  active
component will be different than the active component inside the hollow spheres.
Material  inside  the hollow  structure  will be  released  slowly  compared  to
surface-mounted  material.  An additional feature of Altair's nanoparticle based
hollow "wiffle ball" structures is that two different active substances could be
mounted,  one inside the hollow spheres and another on the surface.  This allows
the  possibility  for dual action  pharmaceuticals  to be  developed  using this
technology.


                                       8
<PAGE>


         Target Market for Products of the Titanium Processing Technology.
         ----------------------------------------------------------------

         Nanoparticle Products. End users of these specialty chemicals typically
work closely with suppliers to set product specifications,  which may or may not
be subsequently certified for individual applications.  Very little nanoparticle
product is sold as a fungible "shelf-item" product.

         Altair's plan for nanoparticle market entry has been to prepare a suite
of products  that have a range of physical  and chemical  properties.  Potential
nanoparticle  end users are invited to test our basic products and to separately
work with us so that we may tailor a nanoparticle  product for their  particular
use. We have filled 380 orders  requesting 886 samples of nanoparticle  products
from the 470 companies and  laboratories  that have contacted us. Based on sales
to date and sample requests,  applications for and interest in our nanoparticles
are seemingly most advanced in applications  for batteries  (lithium  titanate),
thermal sprays (titanium  dioxide),  solid oxide fuel cells (yttrium  stabilized
zircon) and catalysts  (both titanium  dioxide and yttrium  stabilized  zircon).
These are applications from which we hope to make large-volume  commercial sales
in the future.

         Pharmaceutical  Products.  Our pharmaceutical  product RenaZorb(TM) was
developed  for the  treatment of elevated  phosphate  levels in kidney  dialysis
patients.  According to information  published by AnorMED,  the worldwide market
for phosphate  binders for chronic renal failure patients is approximately  $400
million  to  $600  million  annually.  It  is  not  our  intent  to  manufacture
pharmaceuticals  but, rather, to grant licenses to pharmaceutical  companies for
the  manufacture and sale of products  developed  using our  technology.  We are
seeking business  relationships with  pharmaceutical  companies that can conduct
additional testing and development using their pharmaceutical active ingredients
to coat our  experimental  drug  delivery  system  and then seek  necessary  FDA
approvals and take the other steps necessary to bring the combined drug delivery
system to market.

         We have entered into eight  confidentiality  agreements relating to the
development/licensing  of  RenaZorb(TM),  and  we  have  recently  received  new
inquiries.  Animal  testing  of  RenaZorb(TM)  began  in  December  2002  and is
currently  being  conducted  by two  pharmaceutical  companies,  one of which is
testing in dogs and both of which are testing in rats.  We have written  testing
agreements  with both these  companies.  We expect the results of these tests in
mid-March. Assuming such results are positive, RenaZorb(TM) will have to undergo
human  testing  and  receive  FDA  approval  before  it  could be  approved  for
marketing.  Human  testing  typically  takes 1 to 2 years and, if merited by the
results of animal testing,  is expected to begin in 2003. FDA approval typically
occurs  between  3 and 5 years  following  the  completion  of  animal  testing,
although we believe that FDA  approval of  Fosrenol(TM),  a  chemically  related
drug, could accelerate the approval process for RenaZorb(TM).

                  Titanium  Pigments.  Altair is  attempting  to identify one or
more  large  minerals   companies  to  license  the  titanium   dioxide  pigment
application  of its  titanium  processing  technology.  Altair has entered  into
contracts with two materials companies under which Altair has performed, or will
perform,  test work  related  to  large-scale  production  of  titanium  dioxide
pigments using our technology.  With respect to one of the materials  companies,
Altair has  submitted a phase-two  proposal  for the  economic  evaluation  of a
demonstration  titanium  dioxide  pigment  plant  that  could be  expanded  to a
full-scale plant with production  capabilities of between  10,000-20,000  metric
tons of titanium dioxide pigment per year.

         Research,   Testing  and   Development   of  the  Titanium   Processing
         Technology.
         -----------------------------------------------------------------------

         Our titanium  processing  technology  is the result of several years of
research and  development  work done by BHP. We are  continuing the research and
development  work  to  both  improve  the  process  and  to  develop  commercial


                                       9
<PAGE>

applications  for it. Such work is being  conducted by the former BHP  employees
who became  employees of the Company on January 1, 2001.  During fiscal 2002, we
incurred  $560,000 in research and development  expenses related to the titanium
processing technology.  During fiscal 2001, we incurred $541,000 in research and
development expenses related to the titanium processing  technology,  and during
fiscal 2000, we incurred $1,426,000 in research and development expenses related
to the titanium processing  technology.  During 2002, we received $90,300 from a
materials  company in return for testing the company's  mineral  concentrates in
the  production  of titanium  dioxide  pigments  using our  titanium  processing
technology. No customer-sponsored research was undertaken in 2001 or 2000.

         In  addition,   we  are  engaged  in  or  seeking  joint  research  and
development  efforts with potential  customers and other interested parties with
regard  to our  nanoparticle  products,  pharmaceutical  products  and  titanium
pigment production technology.

         The Titanium Processing Technology and Proprietary Rights.
         ---------------------------------------------------------

         BHP filed several patent applications with the United States Patent and
Trademark  Office with respect to the titanium  processing  technology,  and the
applications  have  been  transferred  to us.  We  have  subsequently  filed  13
additional patent applications  relating to nanoparticle  technology.  In August
2002, we filed a patent  application  covering the  development  of a new active
pharmaceutical ingredient for the treatment of hyperphosphatemia (elevated serum
phosphate levels) in patients undergoing kidney dialysis,  as well as a new drug
delivery  system using  inorganic  ceramic  nanoparticles.  During  2002,  three
patents  were  awarded to us covering  the  production  of titanium  pigment and
nanomaterials  using our  technology,  which patents  expire in 2019.  All other
applications are in the review process.

         The potential  value of our titanium  processing  technology,  and each
application  of it, lies in the  likelihood  that  patents  will be granted with
respect  to  patent   applications  and  that  granted  patents  are  valid  and
enforceable.  We can  provide no  assurance  that the patents  requested  in all
patent  applications  material to our  business  will be granted or that granted
patents will be enforceable. Our business would be materially adversely affected
if one or more patent  applications  are not  granted or if granted  patents are
determined to be unenforceable.

         Competition--the Titanium Processing Technology.
         ------------------------------------------------

         Our titanium  processing  technology is  fundamentally  different  from
current commercial processing techniques.  Other processes are based on either a
precipitation   of  particles   from  aqueous   solution  or  the  formation  of
crystallites   from  molten   droplets  of  titanium  oxide  generated  in  high
temperature  flame  reactors.  Our  process  is  a  dense-phase  crystal  growth
technique which controls crystal formation using a combination of mechanical and
fluid dynamics and chemical and thermal control.

         Our process permits  exceptional control over particle size, shape, and
crystalline form. Our titanium  processing  technology produces discrete anatase
crystals in nanometer  sizes and may be doped to be  thermally  stable up to 800
degrees  Centigrade.   By  remaining  stable  in  high-temperature   processing,
nanoparticles  produced by our titanium processing technology retain the desired
nanoparticle size and crystalline phase. In addition, our technology is designed
to minimize process effluents needing environmental  remediation and to accept a
wide variety of naturally occurring titanium feed stocks.

                                       10
<PAGE>

         We have not operated the titanium processing technology at a commercial
scale.  Accordingly,  we  cannot  describe  processing  efficiencies  and  costs
associated with our titanium processing  technology or compare such efficiencies
and costs to those of competitors.

         In addition,  our ability to capitalize  on and develop our  technology
may be limited by the limited  amount of capital we have  available and our lack
of a substantial operating history.  Competing  nanoparticle producers generally
are financially strong corporations with established customer  relationships and
operating  histories.  The  titanium  dioxide  nanoparticle  business is a young
industry  subject to rapid  technological  changes  and there is wide  disparity
within  the  industry  with  respect  to  the   composition  and  attributes  of
nanoparticle  products.  The manufacturing methods and costs to manufacture also
vary  greatly,  with  certain  methods  lending  themselves  to  specific  niche
applications.  As a  result,  competition  within  the  industry  is driven by a
variety of factors,  principally  price and product  attributes.  Our  marketing
efforts have centered  around our ability to produce a wide range of products at
attractive prices.

         Royalty Obligations Related to Our Titanium Processing Technology.
         -----------------------------------------------------------------

         We purchased our titanium processing technology and titanium processing
assets from BHP pursuant to an Asset Purchase and Sale Agreement  dated November
15, 1999 which  included an obligation  to pay royalties  based on product sales
realized through use of the titanium  processing  technology.  From November 15,
1999  through  August 8, 2002,  we paid BHP a total of $2,067 of  royalties.  On
August 8, 2002, we entered into a transaction with BHP wherein we purchased from
BHP the land and  building  that  houses  the  titanium  processing  assets.  In
connection  with the purchase,  the  requirement to pay royalties was terminated
effective August 12, 2002. See "Item 2.  Properties" for additional  information
on the land and building acquired from BHP.

Tennessee Mineral Property
--------------------------

         Description of the Tennessee Mineral Property.
         ----------------------------------------------

         The Tennessee mineral property consists of approximately 8,700 acres of
land  containing  fine,  heavy  minerals  that we have leased in or near Camden,
Tennessee.

         Prior to our  beginning  to  acquire  leases on the  Tennessee  mineral
property in 1996,  sections of the  Tennessee  mineral  property  were leased or
owned  by each of E.I du  Pont de  Nemours  and  Company  (from  1950 to  1954),
KerrMcGee  Corporation (from 1975 to 1989), and BHP Minerals  International Inc.
(from 1991 to 1994). Each of these  predecessors  engaged in drilling,  sampling
and other  exploratory  activities on the Tennessee  mineral property but, based
upon  such  predecessors'  particular  circumstances  and the  economics  of the
period, elected to stop work and relinquish property rights.

         The  topography  of  the  Tennessee   mineral   property   consists  of
vegetation-covered  rolling  hills  comprised  of sands  deposited in an ancient
beach  environment.  Minerals on the  Tennessee  mineral  property  occur in the
Cretaceous McNairy formation, and heavy minerals comprising 2% to 8% of the sand
(by weight) are typical. The mineralized sands on the Tennessee mineral property
have not yet been  proven to be a reserve (as defined in  Regulation  S-K,  Item
802, Guide 7 promulgated under the Exchange Act), and our limited operations and
proposed plan with respect to it are exploratory in nature.


                                       11
<PAGE>


         Research and Exploration on the Tennessee Mineral Property.
         ----------------------------------------------------------

         From 1996, our exploration activities on the Tennessee mineral property
have included  geologic  mapping,  collection of bulk samples for  metallurgical
testing,  drilling  of  156  auger  holes  between  30 and  100  feet  deep  and
preparation of geologic  models.  Our geologic model also  incorporates 40 drill
holes completed by an earlier exploration company.

         During 1997, we collected  approximately 5,000 pounds of representative
sand for testing from an exposed sand  horizon.  This sample was processed by an
independent  Florida heavy sands  producer and Altair to produce  representative
samples of  market-quality  products.  The sample  results  were  reviewed by an
independent  consulting group hired by us to prepare a pre-feasibility  study of
approximately 5,200 acres of the Tennessee mineral property known as the "Camden
Property."  The  consultants  examined  heavy  mineral  suites  from the  Camden
Property  (prepared from sands naturally  containing about 4% heavy minerals and
96% quartz) and found that titanium bearing minerals constitute about 65% of the
total heavy mineral portion of the suite,  zircon accounted for 15% of the heavy
mineral portion of each suite and the remainder was non-valuable heavy minerals.
The study, completed in July 1998, also indicated that market-quality  ilmenite,
rutile and zircon products could be produced from such heavy minerals suites and
that markets currently exist for such products.

         In August 1998, based on the consultant's  pre-feasibility  report,  we
commenced additional  feasibility testing.  This consisted of testing the use of
fine mineral  spiral  equipment in Florida on Tennessee  mineral  property sands
followed by spiral equipment  testing of Tennessee  mineral property sands at an
equipment  contractor's  facility.  In  2000,  based  on the  contractor's  test
results, we designed and commissioned construction of a spiral-based pilot plant
for testing at the Tennessee mineral property.  The plant was erected at Camden,
and testing  operations began in early 2001 (see "Location and Status of Work on
the Tennessee Mineral  Property").  Further  feasibility  testing is expected to
involve, among other things, the following:

         o   drilling and  sampling in order to more  accurately  determine  the
             quantity,  quality and  continuity  of  minerals  on the  Tennessee
             mineral property;
         o   examining  production costs and the market for products produced at
             the pilot facility;
         o   designing  and  pricing  construction  costs  associated  with  any
             proposed mining facility;
         o   identifying and applying for the permits necessary for any proposed
             full-scale mining facility; and
         o   attempting to secure financing for any proposed  full-scale  mining
             facility.

         Subsequent to completion of the 1998 pre-feasibility study, our further
exploration  of the  Tennessee  mineral  property has suggested the existence of
additional heavy mineral sands in an area northwest of the Camden Property known
as "Little  Benton."  Preliminary  data  indicate  that Little  Benton  contains
mineralization similar to the Camden Property. We have approximately 3,500 acres
under lease in the Little Benton area and intend to conduct  further  testing in
the future.

         Expenditures on the Tennessee  mineral  property were $599,000 in 2002,
$931,000 in 2001 and  $4,769,000  to date.  Expenditures  have been incurred for
pilot plant design, fabrication and site preparation,  leasehold minimum advance
royalty payments, and other related exploration activities.  During 2002, due to
a lack of  resources,  we reduced  our  expenditures  on the  Tennessee  mineral
property to a minimal amount and did no further exploration or development work.
We anticipate  spending between $150,000 and $300,000  maintaining the Tennessee
mineral property during 2003.

         Products and Competition--the Tennessee Mineral Property.
         --------------------------------------------------------

         Based on the  exploratory  work done to date,  we  anticipate  that the
saleable  products which could be produced from the Tennessee  mineral  property


                                       12
<PAGE>

are  ilmenite,  rutile and zircon.  Testing at the  Tennessee  mineral  property
indicates  that  Camden  ilmenites  contain  from 64% to 72%  titanium  dioxide.
Ilmenites  commercially  traded  today  typically  contain  40% to 70%  titanium
dioxide and are used primarily in the production of titanium dioxide pigment,  a
specialty  chemical  used  principally  as a whitener and  opacifier  for paper,
plastics  and paint.  According  to the latest U.S.  Geological  Survey  report,
ilmenite  is  the  most  abundant  naturally  occurring,  commercially  produced
titanium  mineral  and  supplies  approximately  90% of  the  world  demand  for
titaniferous  material.  The value of titanium mineral concentrates  consumed in
the United States in 2002 was  approximately  $450 million.  There are presently
two entities in the United States which produce ilmenite  concentrate from heavy
mineral  sands and virtually  all  production  is used by four titanium  pigment
producers whose plants are primarily  located in the  southeastern  U.S. Pigment
producers  use various  methods to process  ilmenite  concentrate  into titanium
dioxide pigment and require that the concentrate feedstock meet certain chemical
and size criteria applicable to the process being used.

         Rutile,  which generally contains greater than 95% titanium dioxide, is
also used in the production of titanium  dioxide pigment.  In pigment  products,
its  processing  costs are  significantly  less than  ilmenite due to the higher
concentration  of titanium  dioxide.  Although this greatly  enhances its market
value, rutile is much less abundant than ilmenite, representing approximately 5%
of the total heavy minerals contained in the Tennessee mineral property.

         Zircon, which is used in ceramic,  refractory and foundry applications,
represents  approximately  15% of the heavy minerals  contained in the Tennessee
mineral property.  Zircon sand is currently being produced at three mines in the
southeastern  U.S. and in several  countries around the world.  Titanium-bearing
minerals and zircon are commonly found and mined together.

Location and Status of  Work on the Tennessee Mineral Property.
--------------------------------------------------------------

         On the  following  page is a  location  map for the  Camden  and Little
Benton region,  within which are the leased parcels we collectively  refer to as
the Tennessee mineral property.  Access within blocks is via a network of County
and farm roads.  Lease blocks in the Camden area are made up of contiguous rural
tracts. Land uses are dominantly  forestry and cattle grazing.  Bottom lands are
sometimes used for row crops. There is no history of mining in these areas.

         Altair has an operational pilot plant on the Camden lease block.  Pilot
plant  operations  are fully  permitted  with the state of Tennessee and federal
agencies.  The plant includes dedicated  electrical service, a lay-down area for
heavy  mineral  sand  samples,  and  a  combined  water  storage/sand  placement
structure. Plant elements include a feed system, conveyors,  trommel, two stages
of cyclones, and a five-stage spiral plant.

         During 2001,  we excavated  970 tons of material from four sites in the
Camden  leasehold  area  and  processed  it  through  the test  facility.  Plant
operations  closely   approximated   design  expectations  and  we  incurred  no
significant  operating  problems.  Processing  of the  sample  material  yielded
titanium recoveries  exceeding 80% and zirconium recoveries exceeding 90%. These
percentages  represent  the amounts of titanium  and  zirconium  recovered  as a
percentage of the total  titanium and zirconium  contained in the sample.  Heavy
mineral concentrates were subsequently processed through an off-site dry mill to
prepare sample products which are now being analyzed by interested parties.

                                       13
<PAGE>

Research, Testing and Development of the Tennessee Mineral Property.
-------------------------------------------------------------------

         During  2002,  we did no  additional  development  work and limited our
expenditures  to  $599,000.  This  compares to the $931,000 in  exploration  and
development  expenses we incurred in fiscal 2001 and  $1,218,000 in  exploration
and  development  expenses we incurred in fiscal 2000  related to the  Tennessee
mineral property.

         We plan to further  develop the  property  by joining  with a qualified
partner,  if  available,  to  provide  additional  financial,   engineering  and
corporate resources.



                                       14
<PAGE>



[MAP OF THE COMPANY'S TENNESSEE MINERAL PROPERTY OMITTED]






















                                       15
<PAGE>

The Jig
-------

         Description of the Jig.
         -----------------------

         The Altair Centrifugal Jig 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.   Preliminary
demonstration  tests conducted by Altair and a previous owner of the jig suggest
that the jig may be commercially useful in a number of applications, including:

         o   Recovery of ultra fine gold from waste streams or former tailings;
         o   Recovery of zircon, rutile, ilmenite, leucoxene, and other valuable
             fractions from heavy mineral sand operations;
         o   Sulfur and ash removal from fine coal;
         o   Recovery of tin and 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; and
         o   Remediation of nuclear waste.

         Several prototype and demonstration  jigs have been built and tested by
Altair and  previous  owners of the jig. Our Series 12 Jig stands about six feet
tall,  requires  floor  space of about 25 square  feet and weighs  approximately
2,000 pounds. Our Series 30 Jig stands about 10 feet tall,  requires floor space
of  about 54  square  feet  and  weighs  approximately  7,000  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.

         How the Jig Works.
         ------------------

         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 jig 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 jig are  introduced  into the top of the jig in a slurry mix
with water.  The slurry is diffused across the top of the interior of a vertical
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.  Use of the jig
requires no chemical additives. In operation,  the jig utilizes a combination of
standard  mechanical  jig and  centrifugal  technologies.  The jig is of  simple
mechanical  design  with few wear  surfaces.  To compete as a viable  commercial
unit, the jig must perform reliably over long time periods.  The 600+ hours that
we have tested and operated the Series 30 Jig is  insufficient to give assurance
as to the length of the operating life of the jig.

         Target Markets for the Jig.
         ---------------------------

         In the long run,  the jig may  potentially  be  useful  for a number of
applications, the most promising of which may be the processing of heavy mineral
sands to recover  titanium  and  zircon.  In  September  2002,  we  completed  a


                                       16
<PAGE>

consulting  project for a titanium pigment  producer.  The project was a test in
which the jig was used to determine the feasibility of recovering fine particles
of titanium  dioxide from pigment  processing waste at a plant site. The pigment
producer has analyzed the test results and has  requested a proposal  from us to
proceed with a full-scale project to recover the titanium dioxide from the waste
ponds at the plant.  We responded  with the requested  proposal and are awaiting
further word from the pigment producer.

        In the  meantime,  we are not  actively  marketing  the jig on a  retail
basis, but are seeking  opportunities to exploit the jig for projects similar to
that described  above. We are also seeking a partner who has adequate  resources
to develop and market the jig or sell the jig technology.

         Jig Technology and Proprietary Rights.
         --------------------------------------

         Initial  patents  related  to the  concept  of the jig as a whole  were
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These patents  expired on various  dates  between May 1999 and December  2000. A
series of second  patents  with  respect to the process by which water is pulsed
through the cylindrical screen on the jig, a critical component  differentiating
the jig from competing  products,  have been issued in the United States,  South
Africa, Japan, Europe,  Australia,  Canada, United Kingdom,  Germany and France.
These patents  expire on various dates between  January 2010 and January 2011. A
third series of patents with respect to an efficiency enhancing component of the
jig have been  issued in the United  States,  Europe,  Australia,  Japan,  South
Africa, Canada and Brazil. These patents have expiration dates between April and
November 2018.

         Competition for the Jig.
         ------------------------

         Various mineral processing  technologies perform many functions similar
or  identical  to those  for  which  the jig is  designed.  Minerals  processing
technologies   are   generally   predicated   on  the   physical   and  chemical
characteristics  of the  materials  being  processed.  A minerals  processor may
exploit contrasts in size, specific gravity, hardness,  magnetic susceptibility,
electrical conductivity,  and similar characteristics to selectively extract and
concentrate mineral constituents. Minerals processors also exploit variations in
chemical reactivity and molecular affinity to selectively separate minerals.

         The jig competes in an arena in which particle  specific gravity is the
primary criteria for particle  segregation and capture.  Competing  technologies
include  spirals and cones,  which are most  effective in feed sizes larger than
150 mesh, froth flotation devices,  which can be effective on particles 200 mesh
or smaller in size and heavy media separation,  which is effective  primarily in
the  removal  of  ash  from  coal  and  in   small-scale   analytic   laboratory
applications. Competing jig-like products include the following:

         o   The Kelsey jig, which was developed in Australia and, although more
             complicated than the jig,  incorporates similar centrifugal and jig
             technologies.  According  to  the  Kelsey  jig's  manufacturer,  MD
             mineral  technologies,  Kelsey  jigs are in  service  at 25  plants
             worldwide.

         o   The Falcon Concentrator,  which was developed in Canada and is used
             mainly for pre-concentration and scavenging.  A centrifugal device,
             its  applications  to date  have  been  in the  gold  and  tantalum
             industries.

         o   The Knelson  Concentrator,  which was  developed in Canada and is a
             batch concentrator rather than a jig. (A batch concentrator differs
             from the jig in that it process a finite  "batch" of  material,  is


                                       17
<PAGE>

             completely  emptied,  and then  processes a  completely  new finite
             batch, while the jig processes a continuous flow of materials). Our
             understanding  is that the Knelson  Concentrator  is best suited to
             small volumes. Knelson Concentrators have been installed in various
             mining applications, primarily gold, throughout the world.

         Long term testing needs to be completed to accurately  define operating
costs  and  operating  efficiencies  associated  with  the  jig as  compared  to
competing  products.  Results from further tests or actual operations may reveal
that these  alternative  technologies  and products are better adapted to any or
all of the uses for  which the jig is  intended.  Moreover,  regardless  of test
results,  consumers  may view  any or all of such  alternative  technologies  as
technically superior to, or more cost effective than, the jig.

         Altair  is a small  player in an  industry  comprised  of major  mining
companies  possessing  tremendous  capital resources and we are 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 our equipment.

         Research, Testing and Development of the Jig.
         --------------------------------------------

         We have concluded  that, in the foreseeable  future,  our limited human
and financial  resources can most  effectively be utilized in the development of
the titanium processing assets and titanium processing technology.  Accordingly,
during  2002,  we  incurred  only  those  expenditures  (estimated  at  $27,000)
necessary  to maintain  the jig.  This  compares to the $11,000 in research  and
development  expenses we  incurred  in fiscal  2001 and $43,000 in research  and
development expenses we incurred in fiscal 2000 related to the jig.

         We are seeking to sell the jig  technology  or license it to others who
have adequate resources to complete  development of the jig, establish marketing
and distribution channels and initiate  manufacturing.  At the same time, we are
seeking special project work where the jig may be utilized profitably.


Subsidiaries.
-------------

         Altair  Nanotechnologies  Inc. was  incorporated  under the laws of the
province  of  Ontario,  Canada 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, then to Altair International Gold Inc. in March 1994, then to
Altair  International Inc. in November 1996 and then to Altair  Nanotechnologies
Inc. in July 2002. In July 2002,  Altair  Nanotechnologies  Inc.  redomesticated
from  the  Ontario  Business  Corporations  Act to  Canada's  federal  corporate
statutes, the Canada Business Corporations Act.

         Fine Gold was acquired by Altair in April 1994. Fine Gold has earned no
operating  revenues  to date.  Fine  Gold  acquired  the  intellectual  property
associated  with the jig in 1996.  Altair  intends  that Fine Gold will hold and
maintain jig technology rights, including patents.

         MRS was incorporated by Altair in April, 1987 and was formerly known as
Carlin Gold Company.  MRS  previously has been involved in the  exploration  for
minerals on  unpatented  mining  claims in Nevada,  Oregon and  California.  All
mining  claims  have  now been  abandoned.  MRS  currently  holds,  directly  or
indirectly,  all of Altair's  interest in the Tennessee  mineral  property,  and
Altair  intends that MRS will  continue to lease or acquire and explore  mineral
properties in the future, particularly properties that contain minerals that may
be processed with the jig.

                                       18
<PAGE>

         Altair  Nanomaterials,  Inc. was incorporated in 1998 as a wholly-owned
subsidiary  of MRS and  holds  all of the  Company's  interest  in our  titanium
pigment  processing  technology  and related  assets.  The remaining  100% owned
subsidiary,  Tennessee  Valley  Titanium,  does not presently have any assets or
operations.

Government Regulation and Environmental Concerns.
-------------------------------------------------

         Government Regulation.
         ----------------------

         Our exploration of the Tennessee mineral property,  testing of the jig,
and operation of the titanium  pigment  processing  facility are, and any future
testing, operation, construction or mining activities of Altair will be, subject
to a number of federal,  state,  and local laws and regulations  concerning mine
and machine  safety and  environmental  protection.  Such laws include,  without
limitation,  the Clean Air Act, the Clean Water Act,  the Resource  Conservation
and Recovery  Act, and the  Comprehensive  Environmental  Response  Compensation
Liability  Act.  Such laws require  that we take steps to,  among other  things,
maintain air and water quality  standards,  protect  threatened,  endangered and
other species of wildlife and vegetation,  preserve certain cultural  resources,
and reclaim exploration, mining and processing sites.

         Compliance with federal, state, or local laws or regulations represents
a small part of our present budget;  nevertheless,  continued  compliance may be
extremely costly,  especially if we actually commence  extraction  operations on
the  Tennessee  mineral  property.  If we fail to  comply  with any such laws or
regulations,  a  government  entity  may levy a fine on us or require us to take
costly measures to ensure compliance. Any such fine or expenditure may adversely
affect our development.

         We are  committed  to  complying  with and,  to our  knowledge,  are in
compliance with, all governmental  regulations.  We cannot, however, predict the
extent  to which  future  legislation  and  regulation  could  cause us to incur
additional  operating expenses,  capital  expenditures,  and/or restrictions and
delays in the development of our products and properties.

         Environmental Regulation and Liability.
         ---------------------------------------

         Any proposed  mining or processing  operation on the Tennessee  mineral
property,  at the titanium  pigment  processing  facility or any other  property
acquired by us will be subject to federal,  state, and local environmental laws.
Under such laws,  we may be jointly and  severally  liable  with prior  property
owners for the  treatment,  cleanup,  remediation,  and/or removal of substances
discovered on the Tennessee  mineral  property or any other property used by us,
which are deemed by the federal and/or state government to be toxic or hazardous
("Hazardous  Substances").  Courts or government  agencies may impose  liability
for,  among  other  things,  the  improper  release,  discharge,  storage,  use,
disposal,  or  transportation  of Hazardous  Substances.  We might use Hazardous
Substances  and,  although  we  intend  to  employ  all  reasonably  practicable
safeguards to prevent any liability under  applicable laws relating to Hazardous
Substances,   companies  engaged  in  mineral  exploration  and  processing  are
inherently  subject to substantial risk that  environmental  remediation will be
required.


                                       19
<PAGE>



Employees.
----------

         The  business of Altair is  currently  managed by Dr.  William P. Long,
Chief  Executive  Officer of the Company,  Dr. Rudi E. Moerck,  President of the
Company and Mr. C. Patrick  Costin,  Vice President of the Company and President
of MRS and Fine Gold. In addition,  we employ a Chief  Financial  Officer and 20
additional  employees.  Aside from Dr. Long, Mr. Costin and the Chief  Financial
Officer, we have no employment agreements with any of our personnel.

         We do  not  anticipate  that  the  number  of  Company  employees  will
significantly  increase until we have sufficient sales and business  activity to
warrant it.


Where You Can Find More Information
-----------------------------------

         We file annual,  quarterly, and current reports, proxy statements,  and
other  information with the SEC. You may read and copy any reports,  statements,
or other  information  that we file at the SEC's  Public  Reference  Room at 450
Fifth  Street,   N.W.,   Washington,   D.C.  20549.   Please  call  the  SEC  at
1-800-SEC-0330  for further  information on the Public  Reference  Room. The SEC
also maintains an Internet site (http://www.sec.gov) that makes available to the
public reports, proxy statements,  and other information regarding issuers, such
as Altair, that file electronically with the SEC.

         Our common shares are quoted on the Nasdaq  SmallCap  Market.  Reports,
proxy statements and other  information  concerning  Altair can be inspected and
copied at the Public  Reference  Room of the National  Association of Securities
Dealers, 1735 K Street, N.W., Washington, D.C. 20006.

Enforceability of Civil Liabilities Against Foreign Persons.
------------------------------------------------------------

         We are a Canadian  corporation,  and a majority  of our  directors  are
residents of Canada.  In addition,  certain of our experts  (including  Canadian
legal  counsel) are located in Canada.  As a result,  investors may be unable to
effect  service of process upon such persons within the United States and may be
unable to enforce court  judgments  against such persons  predicated  upon civil
liability  provisions  of the United  States  securities  laws.  It is uncertain
whether  Canadian  courts would (i) enforce  judgments of United  States  courts
obtained against us 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  Altair or its  directors,  officers or
experts predicated upon United States securities laws.


                                       20
<PAGE>

Glossary of Terms.
------------------

         Anatase  means  one of three  naturally  occurring  mineral  phases  of
titanium  dioxide  (along with rutile and  brookite).  Anatase  particles have a
tetragonal crystal structure.

         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.

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

         Ilmenite means a  titanium-bearing  oxide mineral  containing  variable
percentages  of iron and used as a raw  material in the  production  of titanium
pigments.

         Iron ore  fines  means  particles  of iron  ore,  usually  less  than 1
millimeter in diameter.

         Lithium titanate is a compound of lithium, titanium and oxygen.

         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.

         Micron  means  one  millionth  of  a  meter.  One  micron  equals  1000
nanometers.

         Mill means a building  with  machinery  for  processing  ore.  Dry mill
refers to heavy minerals sand  processing of dry  materials.  Wet mill refers to
heavy minerals sand process of material that are mixed with water in slurry.

         Photocatalytic  means a process by which light frequencies activate the
catalytic nature of a substrate.

         Rutile  means  one of  three  naturally  occurring  mineral  phases  of
titanium  dioxide  (along with anatase and  brookite).  Rutile  particles have a
tetragonal crystal structure.

         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.

         Suite means an assemblage of minerals  which  naturally  occur together
(i.e. a mineral suite).

         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.

         Tantalum  is rare metal  that is  ductile  (i.e.  not  brittle)  easily
fabricated, highly resistant to corrosion by acids, and a good conductor of heat
and  electricity  and has a high melting point.  The major use for tantalum,  as
tantalum  metal powder,  is in the production of electronic  components,  mainly
tantalum  capacitors.  Major end uses for tantalum  capacitors  include portable
telephones, pagers, personal computers, and automotive electronics.

         Yttrium is an element on the periodic table.

                                       21
<PAGE>

Forward-looking Statements.
---------------------------

         This  Form  10-K  contains  various  forward-looking  statements.  Such
statements  can  be  identified  by  the  use  of  the   forward-looking   words
"anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or
similar words. These statements discuss future expectations, contain projections
regarding future developments,  operations,  or financial  conditions,  or state
other  forward-looking   information.   When  considering  such  forward-looking
statements,  you should  keep in mind the risk  factors  noted in the  following
section and other cautionary  statements throughout this Form 10-K and our other
filings   with  the   Commission.   You  should  also  keep  in  mind  that  all
forward-looking  statements  are based on  management's  existing  beliefs about
present and future events  outside of  management's  control and on  assumptions
that may prove to be  incorrect.  If one or more risks  identified  in this Form
10-K or any other  applicable  filings  materializes,  or any  other  underlying
assumptions  prove incorrect,  our actual results may vary materially from those
anticipated, estimated, projected, or intended.

         Among the key factors that may have a direct  bearing on our  operating
results are risks and  uncertainties  described  under  "Factors That May Affect
Future  Results,"  including  those  attributable  to the absence of significant
operating  revenues,  the  absence  of  profits,   uncertainties  regarding  the
development  and  commercialization  of the  jig,  uncertainties  regarding  the
quality, quantity and grade of minerals on the Tennessee mineral property, risks
related to our proposed  development and exploitation of our titanium processing
technology  and  titanium  processing  assets and  uncertainties  regarding  our
ability to obtain  capital  sufficient to continue our operations and pursue our
proposed business strategy.

Factors that May Affect Future Results.
---------------------------------------


We have  not  generated  any  substantial  operating  revenues  and may not ever
generate substantial revenues.
--------------------------------------------------------------------------------
         To date, we have not generated substantial revenues from operations. We
have generated $268,041 of revenues from our titanium processing  technology and
$28,270  from use of the jig in  consulting  contracts.  We have  not  completed
exploration of the Tennessee mineral property.  We can provide no assurance that
we will ever generate  revenues from the Tennessee  mineral  property or that we
will generate substantial  revenues from the titanium processing  technology and
the jig.

We may continue to experience significant losses from operations.
--------------------------------------------------------------------------------
         We have  experienced a loss from  operations in every fiscal year since
our inception. Our losses from operations in 2001 were $6,021,532 and our losses
from operations in 2002 were  $8,771,378.  Although we have made  projections of
possible one-time  profitability  during 2003, such projections are based solely
on an  expectation  that we will enter into a license  agreement with respect to
our new RenaZorb(TM) product and that such license agreement will include, among
other things, a one-time up-front multi-million dollar payment. We may not enter
into any such license  agreement,  or such license agreement may not involve any
significant  up-front  payments.  Even if we do receive a  significant  up-front
payment  during  2003 and achieve  one-time  profitability,  we will  thereafter
experience  a  net  operating  loss  until,  and  if,  the  titanium  processing
technology,  the jig and/or the  Tennessee  mineral  property  begin  generating
significant,  sustained  revenues.  Even if any or all such products or projects
begin generating  significant,  sustained revenues,  the revenues may not exceed
our costs of production and operating expenses.

                                       22
<PAGE>


We may not be able to raise sufficient capital to meet future obligations.
--------------------------------------------------------------------------------
         As of December 31, 2002, we had $244,681 in cash, and a working capital
deficit of $204,365.  Although we have raised additional  capital since December
31, 2002,  we do not expect that this  capital,  when  combined  with  projected
revenues  from  nanoparticle  sales,  will be  sufficient  to fund  our  ongoing
operations. Accordingly, we will need to raise significant amounts of additional
capital in the future in order to sustain our ongoing  operations  and  continue
the testing and  additional  development  work  necessary  to place the titanium
processing  technology  into  continuous  operation.  In addition,  we will need
additional  capital for  exploration of the Tennessee  mineral  property.  If we
determine to construct and operate a mine on the Tennessee mineral property,  we
will need to obtain a  significant  amount of  additional  capital  to  complete
construction of the mine and commence operations.

         We may not be able obtain the amount of  additional  capital  needed or
may be forced to pay an extremely high price for capital.  Factors affecting the
availability and price of capital may include the following:

         o   market  factors  affecting  the  availability  and cost of  capital
             generally;
         o   our financial results;
         o   the amount of our capital needs;
         o   the  market's  perception  of mining,  technology  and/or  minerals
             stocks;
         o   the economics of projects being pursued;
         o   industry perception of our ability to recover minerals with the jig
             or titanium  processing  technology or from the  Tennessee  mineral
             property; and
         o   the price, volatility and trading volume of our common shares.

            If we are unable to obtain sufficient capital or are forced to pay a
high  price  for  capital,  we may be  unable  to  meet  future  obligations  or
adequately  exploit  existing  or  future  opportunities,  and may be  forced to
discontinue operations.

We  have a  substantial  number  of  warrants,  options  and  other  convertible
securities  outstanding and may issue a significant  number of additional shares
upon exercise or conversion thereof.
--------------------------------------------------------------------------------
         As of December 31, 2002, there were outstanding warrants to purchase up
to 9,170,171  common shares at a weighted  average  exercise  price of $1.92 per
share and  options  to  purchase  up to  4,061,700  common  shares at a weighted
average  exercise  price of $3.83 per share.  The existence of such warrants and
options may hinder  future equity  offerings,  and the exercise of such warrants
and options may further dilute the interests of all shareholders.  Future resale
of the common  shares  issuable on the exercise of such warrants and options may
have an adverse effect on the prevailing market price of the common shares.

         In addition,  we have issued a Second Amended and Restated Secured Term
Note.  Under the Second  Amended and  Restated  Secured  Term Note, a conversion
right with  respect to $280,000 of  principal  accrues on each of March 1, 2003,
June 1, 2003,  September  1, 2003,  December  1, 2003 and March 1, 2004.  If the
amount that would be subject to a conversion  right is prepaid prior to the date
of accrual,  such conversion right does not accrue.  Once a conversion right has
accrued, the principal amount subject to that conversion right cannot be prepaid
unless all principal amounts not subject to a conversion right have been prepaid
in full. Each conversion right gives the holder the right to convert the subject
principal amount into common shares at a conversion price equal to the lesser of
(a)  $1.00  per share and (b) 70% of the  average  of the  closing  price of our
common  shares for the five trading  days ending on the trading day  immediately
preceding the date on which that conversion right accrued.

                                       23
<PAGE>

         In order to illustrate the relationship between the market price of our
common  shares and the issuance of common shares upon the exercise of conversion
rights that may accrue under the Second Amended and Restated  Secured Term Note,
the following table sets forth how many additional common shares would be issued
upon the exercise of such conversion rights if such conversion rights accrue and
the average of the closing  price of our common  stock for the five trading days
ending on the day before each conversion right accrues are (a) $1.43 or greater,
(b) $0.50 per share, (c) $0.25 per share,  and (d) $0.10 per share.  Such prices
are  selected  for  illustration  purposes  only and do not  reflect  our actual
estimate  of the  average  of the  closing  price of our  common  stock  for any
particular period.

<TABLE>
<CAPTION>

                                          $1.43 or         $0.50           $0.25             $0.10
                                           Greater
<S>                                       <C>            <C>             <C>              <C>
                Shares Issuable(1)        1,400,000      4,000,000       8,000,000        20,000,000

      Percentage of Outstanding(2)
                     Common Shares          4.4%           11.7%           20.9%             39.8%
</TABLE>


         (1) Assumes that  shareholder  approval is obtained for the transaction
         in which we issued the Second  Amended and  Restated  Secured Term Note
         and all related  transactions,  that no principal is prepaid,  that all
         conversion rights accrue and are exercised at the same time and that no
         default  occurs and that no  penalties  or premiums  are required to be
         paid.

         (2)  Represents  percentage  of  outstanding  common  shares  following
         exchange assuming the 30,244,348 common shares  outstanding on December
         31, 2002 are outstanding on the date of conversion.

         The  potential  accrual of such  conversion  rights  may hinder  future
equity  offerings,  and the  exercise of any  conversion  rights that accrue may
further dilute the interests of all shareholders. The sale in the open market of
common shares issuable upon the exercise of conversion rights may place downward
pressure  on the market  price of our common  shares.  Speculative  traders  may
anticipate the exercise of conversion  rights and, in  anticipation of a decline
in the market  price of our common  shares,  engage in short sales of our common
shares. Such short sales could further negatively affect the market price of our
common shares.

Our  competitors  may be able to raise  money  and  exploit  opportunities  more
rapidly, easily and thoroughly than we can.
--------------------------------------------------------------------------------
         We have limited financial and other resources and, because of our early
stage of development,  have limited access to capital. We compete or may compete
against entities that are much larger than we are, have more extensive resources
than we do and have an established reputation and operating history.  Because of
their size,  resources,  reputation,  history and other factors,  certain of our
competitors  may have better access to capital and other  significant  resources
than we do and, as a result, may be able to exploit  acquisition and development
opportunities more rapidly, easily or thoroughly than we can.

We have  pledged  substantial  assets to secure the Second  Amended and Restated
Secured Term Note.
--------------------------------------------------------------------------------
         We have  pledged all of the  intellectual  property,  fixed  assets and
common  stock  of  Altair  Nanomaterials,  Inc.,  our  second-tier  wholly-owned
subsidiary,  to secure  repayment of a Second Amended and Restated  Secured Term
Note with a face value of  $1,400,000  and a due date of March 31, 2004.  Altair


                                       24
<PAGE>

Nanomaterials,  Inc.  owns and operates the titanium  processing  technology  we
acquired from BHP in 1999. The Second Amended and Restated  Secured Term Note is
also  secured by a pledge of the common  stock and  leasehold  assets of Mineral
Recovery Systems,  Inc., which owns and operates our leasehold  interests in the
Camden, Tennessee area. If we default on the Second Amended and Restated Secured
Term Note, severe remedies will be available to the holder of the Second Amended
and Restated Secured Term Note,  including  immediate seizure and disposition of
all pledged assets.

We have  issued a  $3,000,000  note to secure the  purchase  of the land and the
building where our titanium processing assets are located.
--------------------------------------------------------------------------------
         In August 2002, we entered into a purchase and sale  agreement with BHP
Minerals International Inc. to purchase the land, building and fixtures in Reno,
Nevada where our titanium processing assets are located. In connection with this
transaction,  BHP also  agreed to  terminate  our  obligation  to pay  royalties
associated  with  the  sale or use of the  titanium  processing  technology.  In
return, we issued to BHP a note in the amount of $3,000,000, at an interest rate
of 7%,  secured by the  property we acquired.  The first  payment of $600,000 of
principal plus accrued interest is due February 8, 2006.  Additional payments of
$600,000  plus  accrued  interest  are due  annually on February 8, 2007 through
2010. If we fail to make the required payments on the note, BHP has the right to
foreclose and take the property.  If this should occur,  we would be required to
relocate  our titanium  processing  assets and  offices,  causing a  significant
disruption in our business.

Operations using the titanium  processing  technology,  the jig or the Tennessee
mineral property may lead to substantial environmental liability.
--------------------------------------------------------------------------------
         Virtually any proposed use of the titanium processing  technology,  the
jig or the Tennessee  mineral  property  would be subject to federal,  state and
local  environmental  laws.  Under such laws,  we may be jointly  and  severally
liable with prior property owners for the treatment, cleanup, remediation and/or
removal of any  hazardous  substances  discovered  at any  property  we use.  In
addition,  courts or government  agencies may impose  liability for, among other
things,   the  improper   release,   discharge,   storage,   use,   disposal  or
transportation of hazardous  substances.  We might use hazardous substances and,
if we do, we will be subject to substantial risks that environmental remediation
will be required.

Certain of our experts and  directors  reside in Canada and may be able to avoid
civil liability.
--------------------------------------------------------------------------------
         We are a Canadian corporation,  and a majority of our directors and our
Canadian  legal counsel are residents of Canada.  As a result,  investors may be
unable to effect  service of process upon such persons  within the United States
and may be unable to enforce  court  judgments  against such persons  predicated
upon civil  liability  provisions  of the United States  securities  laws. It is
uncertain  whether Canadian courts would (i) enforce  judgments of United States
courts  obtained  against us 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 Altair or its directors,  officers
or experts predicated upon United States securities laws.

We are dependent on key personnel.
--------------------------------------------------------------------------------
         Our  continued  success  will  depend  to a  significant  extent on the
services of Dr. William P. Long, our Chief Executive  Officer,  Dr. Rudi Moerck,
our President,  and Mr. C. Patrick  Costin,  our Vice President and President of
Fine Gold and MRS. The loss or  unavailability  of Dr. Long,  Dr.  Moerck or Mr.
Costin  could  have a  material  adverse  effect  on us. We do not carry key man
insurance on the lives of Dr. Long, Dr. Moerck or Mr. Costin.

                                       25
<PAGE>

We may issue  substantial  amounts  of  additional  shares  without  stockholder
approval.
--------------------------------------------------------------------------------
         Our Articles of  Incorporation  authorize  the issuance of an unlimited
number of common  shares.  All such  shares may be issued  without any action or
approval by our stockholders.  In addition, we have two stock option plans which
have  potential for diluting the ownership  interests of our  stockholders.  The
issuance of any  additional  common shares would further  dilute the  percentage
ownership of Altair held by existing stockholders.

The market price of our common shares is extremely volatile.
--------------------------------------------------------------------------------
         Our common shares are listed on the Nasdaq SmallCap Market.  Trading in
our common shares has been characterized by a high degree of volatility. Trading
in our common shares may continue to be characterized by extreme  volatility for
numerous reasons, including the following:

         o   Uncertainty  regarding  the  viability of the  titanium  processing
             technology, the jig or the Tennessee mineral property;
         o   Dominance  of  trading in our  common  shares by a small  number of
             firms;
         o   Positive or negative announcements by us or our competitors;
         o   Uncertainty  regarding  our ability to maintain  our listing on the
             Nasdaq SmallCap Market and/or continue as a going concern;
         o   Industry trends,  general economic  conditions in the United States
             or  elsewhere,  or  the  general  markets  for  equity  securities,
             minerals, or commodities; and
         o   Speculation  by short sellers of our common shares or other persons
             who stand to profit from a rapid  increase or decrease in the price
             of our common shares.

We may be delisted from the Nasdaq SmallCap Market.
--------------------------------------------------------------------------------
         Our  listing  on the Nasdaq  SmallCap  Market is  conditioned  upon our
compliance with the NASD's  continued  listing  requirements  for such market by
June 2003, including the $1.00 per share minimum bid requirement.  If the market
price for our common shares has not increased to $1.00 per share for at least 10
consecutive days by June 2003, we expect to be delisted from the Nasdaq SmallCap
Market.  The  Staff of  Nasdaq  has  indicated  that it may  submit to the SEC a
proposed rule or policy change which,  if approved by the SEC,  could lead to an
additional  180 day  extension  beyond  June 2003 in order to meet the $1.00 per
share minimum bid requirement; however, even if such change were to be approved,
we would not likely be eligible for such additional 180 extension  unless our we
had a minimum  stockholders'  equity  balance of  $5,000,000  in June  2003.  We
presently do not have a stockholders' equity balance of $5,000,000 and, absent a
significant  infusion of  capital,  do not expect to have such a balance in June
2003.  Delisting from the Nasdaq SmallCap Market may have a significant negative
impact on the trading price, volume and marketability of our common shares.

We have  never  declared  a cash  dividend  and do not  intend to declare a cash
dividend in the foreseeable future.
--------------------------------------------------------------------------------
         We have never declared or paid cash dividends on our common shares.  We
currently intend to retain any future earnings,  if any, for use in our business
and,  therefore,  do not anticipate paying dividends on our common shares in the
foreseeable future.

We may be unable to exploit  the  potential  pharmaceutical  application  of our
titanium processing technology.
--------------------------------------------------------------------------------
         We do not  have  the  technical  or  financial  resources  to  complete
development  of,  and take to  market,  any  pharmaceutical  application  of our


                                       26
<PAGE>

titanium  processing  technology.  In order for  Altair to get any  significant,
long-term  benefit  from  any  potential   pharmaceutical   application  of  our
technologies, the following must occur:

         o   we must enter into an evaluation  license or similar agreement with
             an existing  pharmaceutical  company under which such company would
             pay a fee for the right to  evaluate  a  pharmaceutical  use of our
             technology  for a  specific  period  of time and for an  option  to
             purchase or receive a license for such use of our technology;

         o   tests  conducted  by  such  pharmaceutical  company  would  have to
             indicate  that the  pharmaceutical  use of our  technology is safe,
             technically viable and financially viable;

         o   such pharmaceutical  company would have to apply for and obtain FDA
             approval  of  the  pharmaceutical  use of  our  technology,  or any
             related products, which would involve extensive additional testing;
             and

         o   such  pharmaceutical  company would have to successfully market the
             product incorporating our technology.

Although we may receive some significant  one-time payments in various stages of
the testing and evaluation of the pharmaceutical  application of our technology,
we are not expecting to receive  significant ongoing revenue unless and until an
end product incorporating the technology goes to market.

We may not be able to  license  our  technology  for  titanium  dioxide  pigment
production.
--------------------------------------------------------------------------------
         Because of our relatively small size and limited  resources,  we do not
plan to use our titanium  processing  technology for  large-scale  production of
titanium  dioxide  pigments;  we have,  however,  entered into  discussions with
various minerals and materials  companies about licensing our technology to such
entities for large-scale  production of titanium dioxide  pigments.  We have not
entered into any long-term  licensing  agreements with respect to the use of our
titanium  processing  technology for large-scale  production of titanium dioxide
pigments  and can  provide no  assurance  that we will be able to enter into any
such an agreement.  Even if we enter into such  agreement,  we would not receive
significant  revenues  from such license until  feasibility  testing is complete
and, if the results of  feasibility  testing  were  negative,  would not receive
significant revenues at any time.

We may not be able to sell nanoparticles  produced using the titanium processing
technology.
--------------------------------------------------------------------------------
         We plan to use the titanium  processing  technology to produce titanium
dioxide  nanoparticles.  Titanium  dioxide  nanoparticles  and other products we
intend to initially produce with the titanium  processing  technology  generally
must be customized for a specific  application  working in cooperation  with the
end user. We are still testing and customizing our titanium dioxide nanoparticle
products  for various  applications  and have no long-term  agreements  with end
users to purchase any of our titanium dioxide nanoparticle  products.  We may be
unable to recoup  our  investment  in the  titanium  processing  technology  and
titanium processing equipment for various reasons, including the following:

         o   we may be unable to  customize  our titanium  dioxide  nanoparticle
             products to meet the distinct needs of potential customers;

         o   potential  customers  may  purchase  from  competitors  because  of
             perceived or actual quality or compatibility differences

                                       27
<PAGE>

         o   our marketing and branding efforts may be insufficient to attract a
             sufficient number of customers; and

         o   because of our limited  funding,  we may be unable to continue  our
             development   efforts  until  a  strong  market  for  nanoparticles
             develops.

         In  addition,  the uses for such  nanoparticles  are  limited,  and the
market  for such  nanoparticles  is  small.  In light of the  small  size of the
market,  the addition of a single  manufacturer may cause the price to drop to a
point at which we cannot produce the nanoparticles at a profit.

Our costs of production may be too high to permit profitability.
--------------------------------------------------------------------------------
         We have not produced any mineral products using our titanium processing
technology and equipment on a commercial  basis.  Our actual costs of production
may exceed those of competitors  and, even if our costs of production are lower,
competitors  may be able to sell titanium  dioxide and other products at a lower
price than is economical for Altair.

         In addition, even if our initial costs are as anticipated, the titanium
processing  equipment may break down, prove unreliable or prove inefficient in a
commercial  setting. If so, related costs, delays and related problems may cause
production  of  titanium  dioxide  nanoparticles  and  related  products  to  be
unprofitable.

We have not  completed  testing  and  development  of the jig and are  presently
focusing our resources on other projects.
--------------------------------------------------------------------------------
         We have not completed  testing of, or developed a production  model of,
any series of the jig. We do not expect to complete  testing and  development of
the jig during the coming year and have  determined to focus most of our limited
resources  on the  titanium  processing  technology.  We  may  never  develop  a
production model of the jig.

Even if we complete  development of the jig, the jig may prove  unmarketable and
may not perform as anticipated in a commercial operation.
--------------------------------------------------------------------------------
         The  designed  capacity  of the  Series  12 jig is too  small  for coal
washing, heavy minerals extraction,  and most other intended applications of the
jig,  except use in small placer gold mines or similar  operations.  Even if the
Series 12 jig is completed and performs to design  specifications  in subsequent
tests or at a  commercial  facility,  we  believe  that,  because  of its  small
capacity, the potential market for the Series 12 jig is limited.

         If we complete development of and begin marketing a production model of
the Series 30 jig, it may not prove  attractive to potential  end users,  may be
rendered obsolete by competing  technologies or may not recover end product at a
commercially  viable  rate.  Even if  technology  included in the jig  initially
proves attractive to potential end users,  performance  problems and maintenance
issues may limit the market for the jig.


The jig faces  competition  from other  jig-like  products and from  alternative
technologies.
--------------------------------------------------------------------------------
         Various   jig-like   products  and   alternative   mineral   processing
technologies  perform many functions similar or identical to those for which the
jig is designed. Results from further tests or actual operations may reveal that
these alternative  products and technologies are better adapted to any or all of
the uses for which the jig is intended.  Moreover,  regardless  of test results,
consumers may view any or all of such  alternative  products and technologies as
technically superior to, or more cost effective than, the jig.

                                       28
<PAGE>

Certain patents for the jig have expired, and those that have not expired may be
difficult to enforce.
--------------------------------------------------------------------------------
         All of the initial  patents issued on the jig have expired,  and we are
unable to prevent competitors from copying the technology once protected by such
patents. Additional patents related to the process through which water is pulsed
through the cylindrical  screen on the jig expire beginning in 2010, and patents
for an efficiency-enhancing aspect of the cylindrical screen expire during 2018.
The cost of enforcing patents is often significant,  especially outside of North
America. Accordingly, we may be unable to enforce even our patents that have not
yet expired.

We have  suspended  examining the  feasibility  of mining the Tennessee  mineral
property and may not have working capital  sufficient to again continue  testing
efforts.
--------------------------------------------------------------------------------
         Due to a shortage of working  capital,  we have  suspended  feasibility
testing of the Tennessee mineral property.  We do not expect to obtain an amount
of  working  capital  sufficient  to  again  start  feasibility  testing  of the
Tennessee mineral property in the foreseeable future.

         Even if we again commence  feasibility testing on the Tennessee mineral
property,  we are unable to provide any  assurance  that mining of the Tennessee
mineral  property is feasible or to identify all processes that we would need to
complete  before we could commence a mining  operation on the Tennessee  mineral
property.  To the extent early feasibility  testing yields positive results,  we
expect feasibility testing to involve, among other things, the following:

         o   operating a pilot  mining  facility to determine  mineral  recovery
             efficiencies and the quality of end products;
         o   additional  drilling  and  sampling  in  order  to more  accurately
             determine the quantity,  quality and  continuity of minerals on the
             Tennessee mineral property;
         o   examining  production costs and the market for products produced at
             the pilot facility;
         o   designing any proposed mining facility;
         o   identifying and applying for the permits necessary for any proposed
             full-scale mining facility; and
         o   attempting to secure financing for any proposed  full-scale  mining
             facility.

Our test  production  at the  pilot  plant,  economic  analysis  and  additional
exploration activities may indicate any of the following:

         o   that the Tennessee mineral property does not contain heavy minerals
             of a  sufficient  quantity,  quality  or  continuity  to permit any
             mining;
         o   that production costs exceed anticipated revenues;
         o   that end  products  do not meet  market  requirements  or  customer
             expectations;
         o   that there is an insufficient  market for products minable from the
             Tennessee mineral property; or
         o   that  mining  the  Tennessee  mineral  property  is  otherwise  not
             economically or technically feasible.

         Even  if we  conclude  that  mining  is  economically  and  technically
feasible  on the  Tennessee  mineral  property,  we may be unable to obtain  the
capital, resources and permits necessary to mine the Tennessee mineral property.
Market  factors,  such as a decline  in the price  of, or demand  for,  minerals
recoverable  at  the  Tennessee  mineral  property,  may  adversely  affect  the
development  of mining  operations  on such  property.  In addition,  as we move
through the testing  process,  we may identify  additional items that need to be
researched and resolved before any proposed mining operation could commence.

                                       29
<PAGE>

We cannot  forecast the life of any potential  mining  operation  located on the
Tennessee mineral property.
--------------------------------------------------------------------------------
         We have not explored and tested the Tennessee  mineral  property enough
to establish the existence of a commercially minable deposit (i.e. a reserve) on
such property.  Until such time as a reserve is established  (of which there can
be no  assurance),  we cannot  provide an estimate as to how long the  Tennessee
mineral property could sustain any proposed mining operation.

We may be  unable to  obtain  necessary  environmental  permits  and may  expend
significant resources in order to comply with environmental laws.
--------------------------------------------------------------------------------
         In order to begin  construction and commercial  mining on the Tennessee
mineral property, we must obtain additional federal, state and local permits. We
will also be required to conform our operations to the  requirements of numerous
federal,  state and local  environmental laws. Because we have not yet commenced
design of a commercial mining facility on the Tennessee mineral property, we are
not in a position  to  definitively  ascertain  which  federal,  state and local
mining  and  environmental  laws or  regulations  would  apply  to a mine on the
Tennessee  mineral property.  Nevertheless,  we anticipate having to comply with
and/or  obtain  permits  under the Clean Air Act,  Clean Water Act and  Resource
Conservation   and  Recovery  Act,  in  addition  to  numerous  state  laws  and
regulations  before  commencing  construction  or  operation  of a  mine  on the
Tennessee mineral property.  We can provide no assurance that we will be able to
comply with such laws and  regulations or obtain any such permits.  In addition,
obtaining  such  permits  and  complying  with  such   environmental   laws  and
regulations may be cost prohibitive.

The market for  commodities  produced using the jig or at the Tennessee  mineral
property may significantly decline.
--------------------------------------------------------------------------------
         If the jig is successfully  developed and  manufactured on a commercial
basis,  we intend  to use the jig,  or lease the jig for use,  to  separate  and
recover valuable,  heavy mineral particles.  Active international  markets exist
for gold, titanium,  zircon and many other minerals potentially recoverable with
the jig. Prices of such minerals  fluctuate widely and are beyond our control. A
significant  decline in the price of minerals  capable of being extracted by the
jig could have significant negative effect on the value of the jig. Similarly, a
significant  decline in the price of  minerals  expected  to be  produced on the
Tennessee  mineral  property  could have a  significant  negative  effect on the
viability of a mine or processing facility on such property.

Item 2.  Properties

         We  maintain a  registered  office at 56  Temperance  Street,  Toronto,
Ontario M5H 3V5. We do not lease any space for,  or conduct any  operations  out
of, the Toronto,  Ontario  registered  office. In addition,  we lease 900 square
feet of office space at 1725 Sheridan  Avenue,  Suite 140, Cody,  Wyoming 82414,
which serves as the corporate headquarters for Altair and its subsidiaries.  Our
lease for the Cody, Wyoming office space may be terminated by either party on 30
days' prior written notice.

         On August 8, 2002, we entered into a purchase and sale  agreement  with
BHP wherein we  purchased  the land,  building  and  fixtures at 204 Edison Way,
Reno,  Nevada  89502,  where our titanium  processing  assets are  located.  The
building contains  approximately  80,000 square feet of production,  laboratory,
testing and office  space.  Upon  completion  of the  purchase  transaction,  we
vacated  5,700 square feet of leased  office space at 230 South Rock  Boulevard,
Suite 21, Reno,  Nevada  which had been leased on a  month-to-month  basis,  and
relocated  the  employees  that had  occupied  that office to the 204 Edison Way
building.

                                       30
<PAGE>

         MRS leases  approximately 1,550 square feet of laboratory space at 7950
Security Circle,  Reno, Nevada 89506, for its jig testing  operations.  The test
facility  lease may be terminated by either party upon eight weeks prior written
notice.  We believe that the existing  offices and test facilities of Altair and
its  subsidiaries  are  adequate  for  our  current  needs.  In the  event  that
alternative or additional  office space is required,  we believe we could obtain
additional space on commercially acceptable terms.

         The Tennessee mineral property consists of approximately 8,700 acres of
real  property  located near Camden,  Tennessee,  which MRS leases 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 the Notes to the  Consolidated
Financial  Statements  for  information  regarding  present  and future  minimum
advance  royalty  payments.  The leases  typically are for a minimum term of ten
years,  and may be extended  indefinitely  at MRS'  option,  provided  Altair 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  minerals on the  Tennessee  mineral
property have not yet proven to be a reserve,  and our  operations  and proposed
plan  with   respect   to  it  are   exploratory   in   nature.   See  "Item  1.
Business--Tennessee   Mineral  Property."  The  Tennessee  mineral  property  is
accessed  by public  roads  and,  to our  knowledge,  has not been used in prior
mining operations.


Item 3.  Legal Proceedings

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


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

         We did not submit any matters to a vote of security  holders during the
fourth quarter of the 2002 fiscal year.


                                     PART II


Item 5.  Market for the Common Shares and Related Shareholder Matters


Market Price
------------

         Our common  shares are traded on the Nasdaq  SmallCap  Market under the
symbol "ALTI." The following table sets forth,  for the periods  indicated,  the
high and low sales prices for our common  shares,  as reported on our  principal
trading market at the time.

                                       31
<PAGE>
<TABLE>
<CAPTION>

Fiscal Year Ended December 31, 2001                                 Low                High
                                                        ----------------    ----------------

         <S>                                                     <C>                 <C>
         1st Quarter                                             $1.000              $3.406
         2nd Quarter                                             $1.969              $2.890
         3rd Quarter                                             $1.230              $2.710
         4th Quarter                                             $1.010              $1.790

Fiscal Year Ended December 31, 2002                                 Low                High
                                                        ----------------    ----------------

         1st Quarter                                             $0.750              $1.560
         2nd Quarter                                             $0.370              $1.140
         3rd Quarter                                             $0.300              $0.930
         4th Quarter                                             $0.450              $0.800
</TABLE>

The  quotations  set forth above reflect  inter-dealer  prices,  without  retail
mark-up, mark down or commission and may not represent actual transactions.  The
last sale price of our common shares, as reported on the Nasdaq National Market,
on March 7, 2003 was $.39 per share.

Outstanding Shares and Number of Shareholders
---------------------------------------------

         As of March 7,  2003,  the  number of  common  shares  outstanding  was
30,799,492 held by 497 holders of record.  In addition,  as of the same date, we
have reserved 4,991,700 common shares for issuance upon exercise of options that
have  been,  or may be,  granted  under  our  employee  stock  option  plans and
9,157,671 common shares for issuance upon exercise of outstanding warrants.

Dividends
---------

         We have never  declared or paid cash  dividends  on our common  shares.
Moreover,  we  currently  intend to retain  any future  earnings  for use in our
business and,  therefore,  do not anticipate  paying any dividends on our common
shares in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans
------------------------------------------------------------------

         We have stock option plans  administered by the Board of Directors that
provide for the granting of options to employees,  officers, directors and other
service  providers  of the  Company.  All  option  plans have been  approved  by
security  holders.  We also have an Employee  Stock Purchase Plan ("ESPP") which
allows employees to purchase common shares through payroll deductions. The ESPP,
which is a  broadly-based  plan open to all employees,  has not been approved by
shareholders. The following table sets forth certain information with respect to
compensation  plans under which equity securities are authorized for issuance at
December 31, 2002:

                                       32
<PAGE>



<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
                                       Number of                               Number of securities
                                   securities to be                           remaining available for
                                      issued upon        Weighted-average      future issuance under
                                      exercise of       exercise price of      equity compensation
                                      outstanding        outstanding            plans (excluding
                                   options, warrants   options, securities        reflected in
                                       and rights      warrants and rights        column (a))
          Plan Category                   (a)                  (b)                    (c)
-----------------------------------------------------------------------------------------------------
<S>                                     <C>                   <C>                   <C>
Equity compensation plans               4,061,700             $3.83                 930,000
approved by security holders
-----------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders              None                 N/A                  338,450
-----------------------------------------------------------------------------------------------------
              Total                     4,061,700             $3.83                1,268,450
-----------------------------------------------------------------------------------------------------
</TABLE>


Recent Sales of Unregistered Securities.
----------------------------------------

During the  three-month  period ended December 31, 2002, we offered and sold the
following equity securities in private placements intended to be exempt from the
registration  requirements  of the Securities  Act and similar state  securities
laws:

Between  October 4, 2002 and October 15, 2002, we sold 266,667 common shares and
266,670  warrants to purchase common shares to six accredited  investors for net
proceeds of  $200,000.  Each of these sales also  included  four  options (for a
total of  1,066,668  options),  each option  granting  the investor the right to
purchase the same  quantity,  and no less,  of common shares and warrants at the
same price as the initial placement.  The options expire at staggered dates, the
latest being April 15,  2003,  and all of the options  terminated  if one of the
options is  permitted to expire  without  being  exercised in full.  Half of the
warrants are  exercisable at $1.25 and the other half are  exercisable at $1.75.
The  warrants  expire on the  earlier  of five  years from the date of issue or,
after one year from date of issue or anytime  after the  shares are  registered,
the 180th day  following  the date the  closing  price  equals  or  exceeds  the
exercise price by more than $2.00 for 10 days,  whether or not consecutive.  The
target  price is $3.25 for half of the  warrants and $3.75 for the other half of
the warrants.  During the  three-month  period ended December 31, 2002,  options
were exercised for 133,333 common shares, resulting in net proceeds of $100,000.
All  remaining  options  have  terminated  because of the  holders'  failures to
exercise an option prior to its expiration.

On  November  21,  2002,  we issued  1,500,000  common  shares to Doral 18,  LLC
("Doral")  in exchange  for a reduction  of the  principal  amount owed to Doral
under  a term  note.  The  principal  amount  was  reduced  from  $2,000,000  to
$1,400,000.  We also  issued  to  Doral a  warrant  for  750,000  common  shares
exercisable at $1.00 per share which expires on the earlier of November 21, 2007
or the 180th day  following  the date the  closing  price of our  common  shares
equals or exceeds $3.00 for 5 consecutive days.

On November 26, 2002, we sold  1,562,500  common shares and 585,938  warrants to
purchase  common  shares to six  investors  for net  proceeds of  $625,000.  The
warrants are  exercisable  at $1.00 and expire on the earlier of five years from
the date of issue or,  after one year  from date of issue or  anytime  after the
shares are registered, the 180th day following the date the closing price equals
or exceeds $3.00 for 10 days, whether or not consecutive.

                                       33
<PAGE>

The above-described common shares, options and warrants were offered and sold in
reliance  upon the  exemption  for sales of  securities  not  involving a public
offering,  as set  forth  in  Section  4(2) of the  Securities  Act and Rule 506
promulgated under the Securities Act based upon the following: (a) each investor
represented  and warranted to the Company that it was an "accredited  investor,"
as defined in Rule 501 of Regulation D promulgated  under the Securities Act and
had such background, education, and experience in financial and business matters
as to be  able  to  evaluate  the  merits  and  risks  of an  investment  in the
securities;  (b) there was no  public  offering  or  general  solicitation  with
respect to the offering, and each investor represented and warranted that it was
acquiring  the  securities  for  its own  account  and not  with  an  intent  to
distribute  such  securities;  (c) each  investor was provided  with an offering
summary,  a copy of the most  recent  Annual  Reports  on Form  10-K,  Quarterly
Reports  on Form 10-Q and  Current  Reports on Form 8-K of the  Company  and all
other  information  requested by the investor  with respect to the Company,  (d)
each investor  acknowledged that all securities being purchased were "restricted
securities"  for purposes of the  Securities  Act,  and agreed to transfer  such
securities  only in a transaction  registered  with the SEC under the Securities
Act or exempt from  registration  under the Securities Act; and (e) a legend was
placed on the certificates and other documents  representing  each such security
stating that it was restricted  and could only be  transferred  if  subsequently
registered under the Securities Act or transferred in a transaction  exempt from
registration under the Securities Act.

In addition to the sales of unregistered  securities described above, we adopted
the ESPP on August 6, 2002,  which allows  employees to purchase  common  shares
through  payroll  deductions and registered the common shares issuable under the
ESPP on a Registration Statement on From S-8. Through December 31, 2002, a total
of 161,550  common  shares were issued under the ESPP,  resulting in proceeds of
$92,183.


Transfer Agent and Registrar
----------------------------

         The  Transfer  Agent  and  Registrar  for our  common  shares is Equity
Transfer Services, Inc., Suite 420, 120 Adelaide Street West, Toronto,  Ontario,
M5H 4C3.


Canadian Taxation Considerations
--------------------------------

         Dividends  paid on common shares 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.
                                       34
<PAGE>

         A capital gain realized on the disposition of common shares 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,  common shares will be taxable  Canadian  property if the particular
non-resident used (or in the case of a non-resident  insurer,  used or held) the
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 common shares
constitute taxable Canadian property, relief nevertheless may be available under
the Treaty.  Under the Treaty,  gains from the alienation of common shares 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.

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 the United  States  ("U.S.
GAAP").  The  selected  financial  data should be read in  conjunction  with the
section entitled  "Management's  Discussion and Analysis of Financial  Condition
and  Results  of  Operations"  and the  consolidated  financial  statements  and
accompanying notes included herein. All amounts are stated in U.S. dollars.
<TABLE>
<CAPTION>

For the Year Ended December 31,                  2002           2001            2000            1999            1998
                                           ----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS

<S>                                        <C>             <C>             <C>             <C>             <C>
Revenues                                   $    253,495    $     42,816    $       --      $       --      $       --


Cost of sales                              $     93,583    $     18,175    $       --      $       --      $       --

Operating expenses                         $  8,016,623    $  6,046,173    $  6,647,367    $  3,729,534    $  3,842,441
Interest expense                           $  1,151,388    $  1,881,077    $    215,216    $      1,966    $    959,612
Interest income                            $     (2,105)   $   (148,980)   $    (83,440)   $   (134,811)   $   (335,037)
(Gain) loss on foreign exchange            $        835    $        402    $   (864,669)   $    160,619    $     17,109
Loss on extinguishment of debt             $    914,667    $       --      $       --      $       --      $       --
Gain on forgiveness of debt                $       --      $       --      $       --      $    (67,442)   $    (25,805)

Loss on redemption of convertible
   debentures                              $       --      $       --      $       --      $       --      $    193,256
Net Loss                                   $  9,921,496    $  7,754,031    $  5,914,474    $  3,689,866    $  4,651,576
Basic and diluted net loss per
     common share from operations          $       0.40    $       0.39    $       0.34    $       0.24    $       0.31

Cash dividends declared per
     common share                          $       --      $       --      $       --      $       --      $       --


Deficit, beginning of year                 $ 29,412,826    $ 21,606,378    $ 15,691,904    $ 12,002,038    $  7,350,462
Net loss                                      9,921,496       7,754,031       5,914,474       3,689,866       4,651,576
Preferential dividend                            48,666          52,417            --              --              --
                                           ----------------------------------------------------------------------------
Deficit, end of year                       $ 39,382,988    $ 29,412,826    $ 21,606,378    $ 15,691,904    $ 12,002,038
                                           ============================================================================

BALANCE SHEET DATA
Working capital                            $   (204,365)   $    (81,154)   $    234,714    $ (5,931,717)   $  3,008,789
Total assets                               $  8,914,405    $ 10,853,243    $ 16,651,770    $ 13,365,848    $  7,103,267
Long-term obligations                      $  3,905,040    $  1,462,060    $  2,689,493    $       --      $     31,091
Current liabilities                        $    604,503    $    714,689    $  3,741,366    $  7,578,083    $    222,431
Net shareholders' equity                   $  4,404,862    $  8,676,494    $ 10,220,911    $  5,787,765    $  6,849,745
</TABLE>

                                       35
<PAGE>


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,  our  business   consisted
principally  of the  exploration  of  mineral  properties  for  acquisition  and
exploration.  During  1994,  our  focus  changed  as we  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.  Since that time, we have continued  exploring
mineral  properties  on which  we  might  use our  patented  mineral  processing
equipment.

        In 1996, we acquired all patent rights to the Campbell  Centrifugal Jig,
since modified and renamed the Altair Centrifugal Jig. Since April 1996, we have
acquired mineral leaseholds on approximately 8,700 acres of land in Tennessee. A
prefeasibility  study  issued  in July 1998  confirmed  the  existence  of heavy
minerals and suggests that the property warrants further  exploration.  Based on
the results of these independent  studies, we initiated  additional  feasibility
testing,  but have since  suspended  such  testing  due to a shortage of working
capital.

        In November  1999, we acquired all patent  applications  and  technology
related to a hydrometallurgical process developed by BHP Minerals International,
Inc.  ("BHP")  primarily for the  production of titanium  dioxide  products from
titanium bearing ores or concentrates (the "titanium processing technology") and
all tangible equipment and other assets (the "titanium  processing assets") used
by BHP to develop and implement the titanium processing technology.

         The  titanium  processing  technology  has  potential  to produce  both
titanium  pigments,  which are commercially  traded in bulk, and  nanoparticles,
which are sold on  specialty  product  markets.  During  2002,  our efforts were
directed toward development of nanoparticle  products,  pharmaceutical  products
and titanium pigment production.


Liquidity and Capital Resources.
--------------------------------

         We generated sales revenues of $253,495 in 2002 but incurred a net loss
of $9,921,496. At December 31, 2002, our accumulated deficit was $39,382,988, or
an increase of  $9,970,162  over the  accumulated  deficit at December 31, 2001.
This  increase was due to the net loss for the year and a  preferential  warrant
dividend  of  $48,666  recorded  in  connection  with the  repricing  of certain
warrants during 2002.

                                       36
<PAGE>

         Our cash and short-term investments decreased from $599,884 at December
31, 2001 to $244,681 at December  31, 2002 due to the  incurrence  of  operating
costs and the lack of substantial revenues.

         Amendment To Note Purchase Agreement;  Security Issuances.  On December
15,  2000,  we and an investor  entered  into a  Securities  Purchase  Agreement
pursuant to which we issued an  Asset-Backed  Exchangeable  term Note (the "2000
Note") and  detachable  warrants to purchase  350,000 common shares at $3.00 per
share.  The 2000 Note was in the principal amount of $7,000,000 with interest at
a rate of 10% per annum.  Net  proceeds  of $4  million  from the 2000 Note were
placed in a  restricted  bank  account  to  secure a letter  of credit  and were
scheduled to be released as principal  payments were made. The 2000 Note was due
and  payable in full on  December  15,  2003 and was  secured by a pledge of the
intellectual  property  and common stock of Altair  Nanomaterials,  Inc. and the
common stock of Mineral Recovery Systems, Inc.

         During 2001, we made cash  payments of principal  and interest  against
the 2000 Note of  $1,894,000  and $387,000,  respectively,  and paid $919,000 of
principal  and  interest  through the  exchange of 824,800  shares of our common
stock in accordance with the terms of the 2000 Note.

         On December 28, 2001, we entered into a Note  Termination  and Issuance
Agreement  with the  investor.  The 2000 Note was  exchanged for a new note (the
"2001 Note")  having a face amount of  $2,000,000.  In  addition,  the letter of
credit was terminated  and $2,500,733 of restricted  cash securing the letter of
credit was paid to the  investor.  The 2001 Note had an interest rate of 11% per
annum with interest payments due monthly. If interest was not paid, the investor
automatically  received the right to exchange  (immediately or at any later date
during the term) the monthly  interest  payment  amount  into common  stock at a
specified  exchange  price.  The  principal  amount of the 2001 Note was due and
payable on March 31, 2003.  During 2002, a total of $215,808 in accrued interest
was exchanged for an aggregate of 299,304 common shares.

         In November 2002, we entered into a Note  Amendment  Agreement with the
investor  pursuant to which the $2,000,000  2001 Note was terminated in exchange
for our issuance of 1,500,000 common shares and a $1,400,000  Second Amended and
Restated  Secured Term Note (the "2002 Note").  We also issued to the investor a
warrant  for  750,000  common  shares  exercisable  at $1.00 per share  during a
five-year term in exchange for the  investor's  agreement to extend the due date
of the 2002 Note to March 31, 2004 and eliminate certain restrictive  covenants.
The 2002 Note has an interest rate of 11% with the interest  payable  monthly in
cash.  The  principal  amount may be  prepaid  at any time with a 5%  prepayment
penalty.  Under the terms of the 2002 Note, a  conversion  right with respect to
$280,000 of principal accrues on each of March 1, 2003, June 1, 2003,  September
1, 2003, December 1, 2003 and March 1, 2004. If the amount that would be subject
to a conversion  right is prepaid prior to the date of accrual,  such conversion
right does not accrue. Once a conversion right has accrued, the principal amount
subject to that conversion right cannot be prepaid unless all principal  amounts
not subject to a  conversion  right have been prepaid in full.  Each  conversion
right gives the investor the right to convert the subject  principal amount into
common  shares at a conversion  price equal to the lesser of (a) $1.00 per share
and (b) 70% of the  average of the  closing  price of our common  shares for the
five trading days ending on the trading day  immediately  preceding  the date on
which that conversion right accrued.

         The 2002 Note is  secured  by a pledge of the  equipment,  intellectual
property and common stock of Altair Nanomaterials Inc., which holds the titanium
processing  technology and titanium  processing  assets,  and by a pledge of the
leasehold  interest in mineral  deposits  and common  stock of Mineral  Recovery
Systems, Inc.

         During 2002, we sold  4,903,093  common shares  together with 3,584,334
warrants in private  placements for gross  proceeds of $3,335,122.  The warrants
are  exercisable at prices ranging from $1.00 to $2.50 and expire on the earlier
of five years from the date of issue or on  specified  dates  after the  closing
price equals or exceeds prices ranging from $2.50 to $5.50. In addition, 286,169
previously issued warrants were exercised during 2002, resulting in net proceeds
to us of $300,477.

                                       37
<PAGE>

         Capital   Commitments.   The  following   table   discloses   aggregate
information about our contractual  obligations including notes payable,  mineral
lease payments,  facilities lease payments and contractual  service  agreements,
and the periods in which payments are due as of December 31, 2002:
<TABLE>
<CAPTION>

                                                Less Than                               After
Contractual Obligations            Total         1 Year      1-3 Years    4-5 Years    5 Years
                                 ----------    ----------   ----------   ----------   ----------
<S>                              <C>           <C>          <C>          <C>          <C>
Notes Payable                    $4,400,000*   $1,120,000   $  280,000   $1,200,000   $1,800,000

Mineral Leases                    1,135,021       147,467      452,868      392,055      142,631

Contractual Service Agreements      423,080       260,580      100,000       62,500         --
                                 ----------    ----------   ----------   ----------   ----------
Total Contractual Obligations    $5,958,101    $1,528,047   $  832,868   $1,654,555   $1,942,631

                                 ==========    ==========   ==========   ==========   ==========
</TABLE>

* Before discount of $494,960.


         Current and Expected  Liquidity.  At December 31, 2002, we had cash and
cash equivalents of $244,681,  an amount sufficient to fund our basic operations
through  January 31,  2003.  From  December  31,  2002  through the date of this
report, we received cash from product sales,  collection of accounts receivable,
and  commitments  for  external  funding  in an  amount  sufficient  to fund our
operations  through April 30, 2003. After that date, we will require  additional
financing to provide working capital to fund our day-to-day operations.  We will
also  require  additional  financing  to continue  our  development  work on the
titanium processing technology and the Tennessee mineral property.

         In light of the decreasing price of, and limited market for, our common
shares,  our ability to continue to fund our operations  primarily through sales
of  securities  is limited,  although we expect to generate  some funds  through
offerings of our common stock and  warrants to purchase  our common  stock,  and
additional  exercises of  outstanding  warrants,  during 2003. We also expect to
generate  limited  revenues  from the sales of  nanoparticle  products  and fees
generated from development and testing services provided to potential  licensors
of our  titanium  processing  technology.  As of  March  7,  2003,  we  have  no
commitments to provide additional financing for periods after April 30, 2003, to
purchase  titanium dioxide  nanoparticles or to license our titanium  processing
technology.

         We also  expect to  generate  revenues  through  the  licensing  of our
titanium processing technology,  specifically the pharmaceutical  application of
the technology  (i.e.  RenaZorb(TM))  and the  application of our technology for
large-scale  titanium pigment production.  With respect to large-scale  titanium
pigment production, Altair has completed initial testing for a materials company
and has  submitted  a  phase-two  proposal  for  the  economic  evaluation  of a
demonstration  titanium  dioxide  pigment  plant  that  could be  expanded  to a
full-scale  plant with  production  capabilities of between 10-20 metric tons of
titanium dioxide pigment per year. If the phase-two proposal is accepted in some
form,  Altair  would  expect  to  generate  limited  revenues  in 2003  (but not
sufficient to cover monthly operating  expenses) in exchange for the testing and
development  work  associated  with the evaluation of a  demonstration  titanium
dioxide plant. A licensing agreement associated with a full-scale plant would be
expected to generate  significant  revenues in the  long-term,  but  significant
up-front revenues from such an agreement are unlikely.

         With respect to RenaZorb(TM), testing of this product using animals was
initiated in late 2002 and is expected to be completed  during the first quarter
of 2003.  Assuming that,  consistent  with the initial  partial-results  we have
received,  such tests  demonstrate the therapeutic  potential of RenaZorb(TM) in
                                       38
<PAGE>


animal testing,  we expect to be able to negotiate a license  agreement with one
or more pharmaceutical  companies during the first six months of 2003. Altair is
uncertain what the terms of such license agreement would be, but  pharmaceutical
license  agreements  often involve up front or staged  payments,  in addition to
royalties  once  the  drug is  approved  by the FDA and  marketed.  Based on our
understanding  of terms of license  agreements under similar  circumstances,  we
believe that  up-front or early stage  payments  associated  with such a license
agreement may be large enough to provide  liquidity for Altair  throughout 2003,
and even permit  Altair to report  one-time  profitability  during 2003. We can,
however,  provide no assurance that we will enter into such a license  agreement
or that such license agreement would involve any significant  up-front payments.
If we are unable to enter into a license  agreement with respect to RenaZorb(TM)
or another product during the first six months of 2003 (or otherwise  consummate
a significant licensing or sale transaction), we will be forced to significantly
curtail  our  operations  and  expenses,  and our ability to continue as a going
concern will be uncertain.

Critical Accounting Policies and Estimates

        Management based the following  discussion and analysis of our financial
condition and results of operations on our  consolidated  financial  statements.
The preparation of these financial  statements requires us to make estimates and
judgments that affect the reported amounts of assets,  liabilities,  revenue and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going  basis,  we evaluate our critical  accounting  policies and  estimates,
including those related to long-lived  assets and stock-based  compensation.  We
base our estimates on  historical  experience  and on various other  assumptions
that we believe to be reasonable under the  circumstances,  the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

     We believe  the  following  critical  accounting  policies  affect the more
significant  judgments and estimates used in the preparation of our consolidated
financial statements.  These judgments and estimates affect the reported amounts
of assets and  liabilities  and the  reported  amounts of revenues  and expenses
during the reporting  periods.  Changes to these  judgments and estimates  could
adversely affect the Company's future results of operations and cash flows.

o        Long-lived  assets.  Our  long-lived  assets  consist   principally  of
         titanium  processing  assets,  the intellectual  property  (patents and
         patent  applications)  associated with it, and a building.  At December
         31, 2002, the carrying value of these assets was $8,475,732,  or 94% of
         total assets.  We evaluate the carrying value of long-lived assets when
         events or  circumstances  indicate that an impairment may exist. In our
         evaluation,  we estimate the net undiscounted cash flows expected to be
         generated by the assets, and recognize  impairment when such cash flows
         will be less than the carrying  values.  Events or  circumstances  that
         could  indicate  the  existence  of  a  possible   impairment   include
         obsolescence  of the  technology,  an absence of market  demand for the
         product, and/or continuing technology rights protection.

o        Stock-Based Compensation.  We have two stock option plans which provide
         for the issuance of stock options to employees  and service  providers.
         Although Statement of Financial  Accounting Standards ("SFAS") No. 123,
         "Accounting for Stock Based Compensation," encourages entities to adopt
         a  fair-value-based  method of accounting for stock options and similar
         equity  instruments,  it also  allows an entity to  continue  measuring
         compensation    cost   for   stock-based    compensation    using   the
         intrinsic-value   method  of   accounting   prescribed   by  Accounting
         Principles  Board ("APB") Opinion No. 25,  "Accounting for Stock Issued
         to Employees."  We have elected to follow the accounting  provisions of
         APB 25 and to furnish the pro forma disclosures required under SFAS No.
         123, but we also issue warrants and options to  non-employees  that are
         recognized as expense when issued in accordance  with the provisions of
         SFAS No.  123. We  calculate  compensation  expense  under SFAS No. 123
         using a modified  Black-Scholes  option pricing model.  In so doing, we
         estimate  certain  key  variables  used in the model.  We  believe  the
         estimates we use are appropriate and reasonable.

                                       39
<PAGE>

Results of Operations.
----------------------

         Operating  losses  totaled  $9,921,496  ($0.40  per share) for the 2002
fiscal  year,  $7,754,031  ($0.39  per  share)  for the 2001  fiscal  year,  and
$5,914,474  ($0.34  per  share)  for the 2000  fiscal  year.  Principal  factors
contributing  to the losses  during these  periods were the lack of  substantial
revenues coupled with the incurrence of operating expenses.

Fiscal Year 2002 vs. 2001

         During  2002,  we  generated  $134,925  of  revenues  through  sales of
titanium  dioxide  nanoparticles,   lithium  titanate  nanoparticles  and  other
materials.  Titanium  dioxide  nanoparticle  sales  included  $62,073  sold to a
customer  for  use in  commercial  thermal  spray  applications.  Revenues  also
included $90,300 earned under a services agreement entered into with a materials
company in September 2002. Under the terms of the agreement,  we are testing the
materials  company's mineral  concentrates in the production of titanium dioxide
pigments  using  our  titanium  processing  technology.  The  testing  is  being
conducted  over  a  five-month  period  and  will  generate  total  revenues  of
approximately  $100,000.  Also  included in revenues in 2002 was $28,270  earned
from a consulting  project  involving use of the jig to recover titanium dioxide
from pigment  processing waste, and $40,972 of previously  deferred revenues for
which product shipments were made and received by the customer in 2002.

         During  2002,  we  suffered  from a shortage of working  capital  which
forced us to reassess  planned  expenditures  for our development  projects.  We
elected  to  concentrate  our  resources  on the  development  of  the  titanium
processing  technology  and suspend  development  work on the Tennessee  mineral
property  and jig. We are  currently  making only  minimal  expenditures  on the
Tennessee  mineral  property.  As a result  of this,  expenditures  for  mineral
exploration and development  have decreased from $930,777 in 2001 to $598,977 in
2002.  This reduced level of  expenditures  will continue until we have adequate
working capital available to resume  development.  At present,  we are unable to
determine a date when this may occur.

         During 2002, our research and development ("R&D") efforts were directed
toward  pharmaceuticals,  the titanium  pigment process,  batteries,  catalysts,
thermal spray  coatings and fuel cells.  R&D expense  increased from $559,454 in
2001 to $587,137 in 2002,  primarily as a result of  increased  staff time being
devoted  to these  R&D  projects  with a  resulting  decrease  in time  spent on
construction projects and administrative and general activities.

         Professional services,  which consist principally of legal,  consulting
and  audit  expenses,  increased  from  $593,088  in 2001 to  $712,530  in 2002.
Consulting  expenses  increased  from  $238,000  in 2001 to  $347,000  in  2002,
primarily as a result of our efforts to locate and secure additional  financing.
Legal fees increased  from $197,000 in 2001 to $235,000 in 2002,  primarily as a
result of the preparation of regulatory  filings and other documents  associated
with financing activities and costs associated with patent  applications.  These
increases were partially offset by a decrease in audit expenses of $27,000.

                                       40
<PAGE>

         During 2002, we reduced our general and administrative expenses as much
as possible in order to conserve cash. As a result,  these expenses decreased by
$464,331 to  $2,360,315  in 2002,  compared  to  $2,824,646  in 2001.  The major
components of general and administrative expenses that decreased in 2002 were:

o        Investor  relations  -  these  expenses  decreased  by  $283,000  (from
         $336,000  to  $53,000)  due  to a  significant  reduction  in  investor
         relations programs.
o        Rents - Our purchase of the building that we  previously  rented at 204
         Edison Way in Reno,  Nevada,  and the  relocation  of staff from rented
         office space to the purchased building resulted in a reduction of rents
         expense by $67,000 (from $274,000 to $207,000).
o        Sample costs - these  decreased by $64,000 (from  $173,000 to $109,000)
         due to the purchase of raw  materials in bulk  quantities as opposed to
         smaller lots, and less labor being required in sample production.
o        Bank charges - these  decreased by $28,000 (from $34,000 to $6,000) due
         to a  decrease  in fees for a letter of credit  associated  with a term
         note. The letter of credit was terminated in 2001.
o        Stock options  expense - this  decreased by $105,000  (from $105,000 to
         zero) due to a reduction in options granted.
o        Other  -  expenses  for  such  items  as  tools,   operating  supplies,
         laboratory  supplies and temporary  labor  decreased by $138,000  (from
         $459,000 to $321,000) as a result of our efforts to reduce costs.

         These decreases were partially  offset by an increase in property taxes
of $87,000  (from $1,000 to $88,000),  and an increase in property and liability
insurance  expenses of $47,000 (from $96,000 to $143,000).  In addition,  salary
expense increased by $84,000 (from $1,143,000 to $1,227,000) due to a payment in
connection with an employment agreement.

         In November  2002, we entered into a note  amendment  agreement with an
investor  who held a  $2,000,000  term note  issued by us in December  2001.  In
accordance  with the  terms of the note  amendment  agreement,  we issued to the
investor  1,500,000  common  shares and a warrant for 750,000  common  shares in
return for a reduction  in the  principal  balance of the note by  $600,000  and
changes to certain  terms  contained  in the prior  note.  We then issued to the
investor  an amended  term note in the  amount of  $1,400,000.  Under  generally
accepted accounting principles, the transaction is recorded as an extinguishment
of debt and the issuance of a new note.  Accordingly,  costs associated with the
issuance of the 1,500,000  common shares and warrant for 750,000  common shares,
together with the write off of costs incurred in the issuance of the prior note,
have  been  recorded  as a loss  on  extinguishment  of debt  in the  amount  of
$914,667.

         During  the  second  quarter of 2002,  due to a  shortage  of cash,  we
elected to reduce  expenditures on the Tennessee  mineral  property to a minimal
amount. As a result of this, development activities have been delayed, including
our  intended  use of the jig to enhance the  recovery of heavy  minerals on the
property.  Since we cannot  determine  when adequate  funds will be available to
further  develop  and utilize the jig,  we have  recorded an  impairment  of jig
assets in the amount of  $2,759,956.  This  impairment  charge had the effect of
reducing  the jig  assets'  depreciable  balance  to zero,  thereby  terminating
further depreciation charges. As a result, depreciation and amortization expense
decreased by $140,500 to $997,708 in 2002 compared to $1,138,208 for 2001.

         Interest  expense  decreased  from  $1,881,077 in 2001 to $1,151,388 in
2002 due  principally to a reduction in the balance of our term note for much of
the year 2002.

                                       41
<PAGE>

         During most of 2001, we had a restricted  cash balance  associated with
the term note of between  $2,500,000  and $4,000,000  that was earning  interest
income.  In  December  2001,  we  terminated  the  term  note,  transferred  the
restricted cash to the holder of the note and issued a new term note in a lesser
amount.  As a result  of this,  cash  balances  available  for  investment  were
significantly  reduced during 2002 and interest income declined from $148,980 in
2001 to $2,105 in 2002.

         There are several  recent  pronouncements  of the Financial  Accounting
Standards  Board  that  have or may have an effect on our  reported  results  of
operations. See Note 2 of Notes to the Consolidated Financial Statements in Item
8 for a discussion of these pronouncements.

Fiscal Year 2001 vs. 2000

         During 2001, we generated $42,816 of revenues through sales of titanium
dioxide  nanoparticles,  lithium  titanate  nanoparticles  and other  materials.
Titanium dioxide nanoparticle sales represented 70% of revenues during 2001 with
the primary  application  for this product being thermal spray  coatings.  Sales
revenues in 2001  included  $16,985 of  previously  deferred  revenues for which
product shipments were made in 2001.

         Mineral exploration and development  expenses decreased from $1,217,966
in 2000 to $930,777 in 2001.  During 2000,  we began  construction  of a mineral
processing  pilot plant at the Tennessee  mineral  property.  In connection with
such  construction,  we incurred  $413,000 of costs for  permitting,  design and
construction of the plant site and ancillary facilities, and $388,000 for design
and fabrication of the processing  equipment.  During 2001, we incurred $188,000
of  costs  to  complete  construction  of  the  pilot  plant.  This  decline  in
construction  costs from 2000 to 2001 was partially  offset by the incurrence of
operating costs at the plant.

         Research and development  expense  decreased from $1,555,472 in 2000 to
$559,454 in 2001. On January 1, 2001, we hired fourteen former BHP employees who
had been involved in the development of the titanium processing  technology that
we acquired from BHP in November 1999. When we acquired the titanium  processing
technology,  we  entered  into a  services  agreement  with BHP  under  which we
obtained  the  services of these  fourteen  individuals,  and certain  other BHP
employees,  for the period November 15, 1999 through December 31, 2000. In 2000,
the cost associated with this services  agreement was $1,368,000 and was charged
to research and  development  expense.  During 2001, of the  $1,190,000 in total
salaries  and  overheads,  $354,000 was  allocated  to research and  development
expense, resulting in a decrease of $996,000 in research and development expense
in 2001 from 2000.

         Professional  services  increased  from $366,275 in 2000 to $593,088 in
2001. In the first quarter of 2001, we hired new auditors to audit our financial
statements.  As a result of this,  our audit fees increased from $26,000 in 2000
to $157,000 in 2001. We also experienced an increase in legal fees from $176,000
in 2000 to $198,000 in 2001,  primarily as a result of preparation of regulatory
filings and other  documents  associated with financing  activities.  Consulting
expenses  increased from $164,000 in 2000 to $238,000 in 2001,  also as a result
of financing activities.

         General and administrative expenses increased by $553,396 to $2,824,646
in 2001,  compared to  $2,271,250 in 2000.  Salaries and overheads  increased by
$820,000 to  $1,268,000  in 2001,  compared to $448,000 in 2000,  as a result of
hiring the fourteen former BHP employees, the president of Altair Nanomaterials,
a  marketing  manager  and a  general  counsel.  With  respect  to the  titanium
processing  technology,  we  experienced  an increase in expenses of $245,000 to
$610,000 in 2001, compared to $365,000 for 2000, for operating  supplies,  small
tools,  maintenance,  office  supplies and  production of product  samples.  Our
general corporate expenses  decreased by $508,000 to $738,000 in 2001,  compared
to $1,246,000 for 2000,  principally due to a decrease in expense recognized for
options granted to employees and service providers.
                                       42
<PAGE>

         Depreciation   and  amortization   expense   decreased  by  $98,196  to
$1,138,208 in 2001, compared to $1,236,404 for 2000,  principally as a result of
lengthening  the  amortization  periods of  certain  patents.  The  amortization
periods were extended to equal the patent lives.

         On December  15,  2000,  we and an investor  entered  into a Securities
Purchase Agreement pursuant to which we issued to the investor the 2000 Note and
a Warrant to purchase  350,000  common  shares at an initial  exercise  price of
$3.00 at any time on or before December 15, 2005 (the "Warrant"). The 2000 Note,
Warrant and related  rights were sold to the investor in exchange for $7,000,000
(less financing  fees).  Proceeds from the 2000 Note were allocated  between the
2000 Note and the Warrant;  the portion  allocated to the Warrant  resulted in a
discount on the 2000 Note which was being accreted to interest  expense over the
term of the 2000 Note.  Interest  expense for 2001 was  $1,881,077,  compared to
interest expense of $215,216 in 2000. The increase results from interest expense
of $805,000 on the 2000 Note,  amortization of the Warrant discount of $403,000,
amortization  of debt  issue  costs of  $100,000  and  interest  related  to the
issuance of common  shares as payment of principal and interest on the 2000 Note
of  $301,000.  In addition to this,  interest  expense of $240,000  was incurred
related  to the  estimated  fair value of  warrants  issued to the  investor  in
exchange  for the  waiver of  penalties  that  would  have  accrued  due to late
effectiveness  of the registration  statement  associated with the 2000 Note and
modification  to the 2000  Note  terms  involving  the  redemption  of  exchange
amounts.  At the same time,  interest income  increased in 2001 over 2000 due to
interest earned on the proceeds received from the 2000 Note.

         The  purchase  price for the  titanium  processing  technology  that we
acquired  from  BHP  was  stated  in  Australian  dollars  and  was  payable  in
installments  through  August  2000.  During  2000,  the  United  States  dollar
strengthened  against  the  Australian  dollar  resulting  in a gain on  foreign
exchange of $864,000.

Carrying Value of Assets

         We have recorded our investments in the titanium processing  technology
and titanium  processing  assets at actual cost. We depreciate such assets using
the  straight-line  method over their estimated  useful life. The asset carrying
value is the actual cost less accumulated  depreciation.  We assess the carrying
values  of  these  assets  on a  quarterly  basis  by  comparing  the  projected
undiscounted  cash flows to be generated by the assets to the carrying  costs of
the assets.  In order to determine  the  projected  cash flows  related to these
assets, we use the information and feedback obtained from prospective  customers
together with general information as to product markets,  competitive forces and
our production capability to arrive at assumptions with respect to sales volumes
and pricing.  We next estimate costs of sales based on engineering  analysis and
actual  experience.  Operating  margins  are  then  calculated  based  on  these
assumptions  and compared to the carrying cost of the assets.  Delays in revenue
generation may make the recoverability of our assets less likely.

         When we  acquired  the  titanium  processing  technology  and  titanium
processing  assets from BHP, the core technology for producing  titanium dioxide
nanoparticles was completely  developed,  a pilot plant was under  construction,
and we believed  the titanium  processing  technology  and  titanium  processing
assets had near-term  commercial  value. We expected to complete the pilot plant
as  a  processing   facility  and  begin   generating   sales  revenues  through
nanoparticle product sales in 2000. We completed  construction of the processing
facility,  made a single small sale of  nanoparticles  in 2000,  sold $42,816 of
nanoparticles  in 2001 and sold $134,925 of  nanoparticles  in 2002,  $62,073 of
which were sold for use in commercial  thermal spray  applications.  In 2002, we
also earned  $90,300  under a services  agreement  entered into with a materials
company.  We are testing the materials  company's  mineral  concentrates  in the
                                       43
<PAGE>


production  of  titanium   dioxide   pigments  using  our  titanium   processing
technology.  If the testing indicates that our technology has certain advantages
with respect to cost, product quality and/or processing efficiencies,  we expect
to license it for use in the manufacture of titanium  dioxide  pigments.  During
2002, we also initiated R&D work utilizing  nanoparticles  in the development of
pharmaceuticals.  We subsequently  developed  RenaZorb(TM)  for the treatment of
hyperphosphatemia  in kidney  dialysis  patients.  Testing of this product using
animals  was  begun  in  late  2002  and  we  are  currently   seeking  business
relationships with pharmaceutical  companies that can conduct additional testing
and development, seek necessary FDA approvals and take the other steps necessary
to bring the new  product to market.  If  testing  is  successful,  we expect to
license  RenaZorb(TM) to a pharmaceutical  manufacturer.  We presently  estimate
that cash flows  from  future  nanoparticle  sales and fees from  licensing  the
titanium  processing  technology  and  RenaZorb(TM)  will  be in  excess  of the
carrying value of the assets.  However,  the delay in sales,  combined with cash
outlays for construction  and operation,  has affected our current cash position
and financing plans as more fully described in "Liquidity and Capital Resources"
above.

         As  discussed  above in "Results of  Operations  - Fiscal Year 2002 vs.
2001",  a cash shortage  during 2002 required that we delay  development  of the
Tennessee  mineral  property and jig. Since we could not determine when adequate
funds would be available to further  develop and utilize the jig, we recorded an
impairment of jig assets in the amount of $2,759,956. This impairment charge had
the effect of reducing the jig assets' carrying cost to zero.

Item 8.      Financial Statements and Supplementary Data.

         Supplementary Data. The following  Supplementary  Financial Information
for the fiscal quarters ended March 31, June 30, September 30 and December 31 in
each of the  years  2001 and 2002  were  derived  from our  unaudited  quarterly
consolidated  financial  statements  filed by us with  the SEC in our  Quarterly
Reports on Form 10-Q with respect to such  periods  (except for 4th quarter data
which was  determined  by  comparing  annual  financial  data  with 3rd  quarter
financial data).

<TABLE>
<CAPTION>

                  Supplementary Financial Information by Quarter, 2002 and 2001
                                           (Unaudited)

                                     Quarter Ended  Quarter Ended   Quarter Ended   Quarter Ended
                                        March 31        June 30       September 30    December 31
<S>                                   <C>              <C>            <C>             <C>
Year Ended December 31, 2002:
   Sales                              $    48,937      $    4,734     $    45,089     $   154,735
   Gross Margin                       $    18,762      $    3,583     $    28,387     $   109,180
   Net Loss                           $ 1,679,531      $4,588,254     $ 1,531,005     $ 2,122,706
   Loss per Common Share: (1)
     Basic and Diluted                $      0.07      $     0.19     $      0.06     $      0.08

Year Ended December 31, 2001:
   Sales                                     None            None            None     $    42,816
   Gross Margin                              None            None            None     $    18,175
   Net Loss                           $ 1,903,774      $2,335,304     $ 1,600,556     $ 1,914,397
   Loss per Common Share: (1)
     Basic and Diluted                $      0.10      $     0.12     $      0.08     $      0.09
</TABLE>

                                       44
<PAGE>

 (1) Loss per common  share is computed  independently  for each of the quarters
presented.  Therefore,  the sum of the  quarterly  loss per common share amounts
does not necessarily equal the total for the year.


         Financial  Statements.  The financial  statements required by this Item
appear on pages F-1 through F-26 of this Form 10-K.

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

         None.

                                    Part III

Item 10.     Directors and Executive Officers of the Registrant

         The  information  required by this Item is incorporated by reference to
the section entitled  "Election of Directors" in the Company's  definitive proxy
statement to be filed with the Commission.

Item 11.     Executive Compensation

         The  information  required by this Item is incorporated by reference to
the section entitled "Executive  Compensation" in the Company's definitive proxy
statement to be filed with the Commission.


Item 12.     Security Ownership of Certain Beneficial Owners and Management

         The  information  required by this Item is incorporated by reference to
the  section  entitled  "Security  Ownership  of Certain  Beneficial  Owners and
Management"  in the Company's  definitive  proxy  statement to be filed with the
Commission.


Item 13.     Certain Relationships and Related Transactions

         The  information  required by this Item is incorporated by reference to
the section entitled  "Certain  Relationships  and Related  Transactions" in the
Company's definitive proxy statement to be filed with the Commission.


Item 14.     Controls and Procedures

a)       Under the  supervision  and with the  participation  of our management,
         including  our  principal  executive  officer and  principal  financial
         officer,  we conducted an  evaluation  of our  disclosure  controls and
         procedures,  as such term is defined under Rule  13a-14(c)  promulgated
         under the  Securities  Exchange Act of 1934, as amended (the  "Exchange
         Act"), within 90 days of the filing date of this report.  Based on this
         evaluation,  our principal  executive  officer and principal  financial
         officer  concluded  that our  disclosure  controls and  procedures  are
         effective in alerting  them on a timely  basis to material  information
         relating  to our  Company  (including  its  consolidated  subsidiaries)
         required to be included in our  reports  filed or  submitted  under the
         Exchange Act.

                                       45
<PAGE>

b)       There have been no significant  changes  (including  corrective actions
         with regard to significant  deficiencies or material weaknesses) in our
         internal controls or in other factors that could  significantly  affect
         these controls  subsequent to the date of the evaluation  referenced in
         paragraph (a) above.

Item 15.     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 Auditors'  Report are filed as part of this Annual
Report on Form 10-K:

    o        Independent Auditors' Report of Deloitte & Touche LLP

    o        Consolidated Balance Sheets, December 31, 2002 and 2001

    o        Consolidated  Statements of Operations  for Each of the Three Years
             in the Period Ended December 31, 2002 and for the Period from April
             9, 1973 (Date of Inception) to December 31, 2002

    o        Consolidated Statements of Shareholders' Equity from April 9, 1973
             (Date of Inception) to December 31, 2002

    o        Consolidated  Statements  of Cash Flows for Each of the Three Years
             in the Period Ended December 31, 2002 and for the Period from April
             9, 1973 (Date of Inception) to December 31, 2002

    o        Notes to Consolidated Financial Statements


                  2. Financial Statement Schedule. Not applicable.

                  3. Exhibit List
<TABLE>
<CAPTION>

Exhibit No.         Description                                       Incorporated by Reference/
                                                                      Filed Herewith (and Sequential Page #)


                                                                      Incorporated by reference to the Current
      <S>           <C>                                               <C>
      3.1           Articles of Continuance                           Report on Form 8-K filed with the SEC on July
                                                                      18, 2002.


      3.2           Bylaw No. 1

                                                                      Incorporated by reference to the Current
                                                                      Report  on  Form 8-K filed with the SEC on
                                                                      July 18, 2002.
</TABLE>

                                                                46
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.         Description                                       Incorporated by Reference/
                                                                      Filed Herewith (and Sequential Page #)

      <S>           <C>                                               <C>
                                                                      Incorporated by reference to Registration
      4.1           Form of Common Stock Certificate                  Statement on Form 10-SB filed with the
                                                                      Commission on November 25, 1996, File No.
                                                                      1-12497.
                                                                      Incorporated by reference to the Company's
                    Amended and Restated Shareholder Rights           Current Report on Form 8-K filed with the
      4.2           Plan dated October  15,  1999,  between the       Commission on November 19, 1999, File No.
                    Company and Equity Transfer Services, Inc.        1-12497.

                                                                      Incorporated by reference to the Company's
                    Employment Agreement between Altair               Annual Report on Form 10-K filed with the
     10.1           International Inc. and William P. Long            Commission on March 31, 1998, as amended by
                    dated January 1, 1998                             Amendment No. 1 to Annual Report on Form
                                                                      10-K/A filed on May 15, 1998.

                    Employment Agreement between Fine Gold            Incorporated by reference to Registration
     10.2           Recovery Systems Inc. and C. Patrick Costin       Statement on Form 10-SB filed with the
                    dated August 15, 1994                             Commission on November 25, 1996.


     10.3           Altair International Inc. Stock Option Plan       Incorporated by reference to the Company's
                    adopted by shareholders on May 10, 1996           Registration Statement on Form S-8 filed with
                                                                      the Commission on July 11, 1997.

                    1998 Altair International Inc. Stock Option
     10.4           Plan adopted by Shareholders on June 11,          Incorporated by reference to the Company's
                    1998                                              Definitive Proxy Statement on Form 14A filed
                                                                      with the Commission on May 12, 1998.


                                                                      Incorporated by reference to the Company's
     10.5           2002 Employee Wage Stock Purchase Plan            Registration Statement on Form S-8, File No.
                                                                      333-99099, filed with the Commission on
                                                                      September 3, 2002.

                                                                      Incorporated by reference to the Company's
                                                                      Annual Report on Form 10-K filed with the
     10.6           Form of Mineral Lease                             Commission on March 31, 1998, as amended by
                                                                      Amendment No. 1 to Annual Report on Form
                                                                      10-K/A filed on May 15, 1998.

                                                                      Incorporated by reference to the Company's
     10.7           Purchase and Sale Agreement dated August 8,       Amendment No. 1 to Registration Statement on
                    2002 between the Company and BHP Minerals         Form S-2, File No. 333-102592, filed with the
                    International Inc. (re Edison Way property)       Commission on February 7, 2003.
                                                                      Incorporated by reference to the Company's
                                                                      Amendment No. 1 to Registration Statement on
     10.8           Installment Note dated August 8, 2002 (re         Form S-2, File No. 333-102592, filed with the
                    Edison Way property)                              Commission on February 7, 2003.
</TABLE>

                                                                47
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.         Description                                       Incorporated by Reference/
                                                                      Filed Herewith (and Sequential Page #)
      <S>           <C>                                               <C>
     10.9           Trust Deed dated August 8, 2002 (re Edison        Incorporated by reference to the Company's
                    Way property)                                     Amendment No. 1 to Registration Statement on
                                                                      Form S-2, File No. 333-102592, filed with the
                                                                      Commission  on February 7, 2003.


     10.10          Note Amendment Agreement dated November 21,       Incorporated by reference to the Company's
                    2002                                              Current Report on Form 8-K filed with the
                                                                      Commission on November 27, 2002.


                    Second Amended and Restated Secured Term          Incorporated by reference to the Company's
     10.11          Note dated November 21, 2002                      Amendment No. 1 to Current Report on Form 8-K
                                                                      filed with the Commission on December 4, 2002,
                                                                      File No. 1-12497.

                    Stock Pledge Agreement dated December 15,         Incorporated by reference to the Company's
     10.12          2000 (Mineral Recovery Systems common             Current Report on Form 8-K filed with the
                    stock).                                           Commission on December 26, 2000.

                                                                      Incorporated by reference to the Company's
     10.13          Stock Pledge Agreement dated December 15,         Current Report on Form 8-K filed with the
                    2000 (Altair Technologies common stock).          Commission on December 26, 2000.


     10.14          First Amendment to Stock Pledge Agreement         Incorporated by reference to the Company's
                                                                      Current Report on Form 8-K filed with the SEC
                                                                      on January 4, 2002.


     23.1           Consent of Deloitte & Touche LLP                  Filed herewith.

      24            Powers of Attorney                                Included in the Signature Page hereof.

     99.1           Certification of Chief Executive Officer          Filed herewith

     99.2           Certification of Chief Financial Officer          Filed herewith
</TABLE>

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

         We filed a Current  Report on Form 8-K on November 27, 2002 in which we
(i) reported the partial prepayment and amendment of the $2,000,000 Secured Term
Note dated December 28, 2001 and related  transactions,  (ii) filed, among other
exhibits,  an amended and restated note,  and (iii) in order to satisfy  certain
requirements  related to our listing on the Nasdaq SmallCap  Market,  provided a
proforma  balance sheet as of October 31, 2002 showing  shareholders'  equity in
excess of $5 million.

         We filed a Current Report on Form 8-K/A on December 4, 2002 in order to
file a second amended and restated note which  superceded and replaced the first
amended and  restated  note filed with the Form 8-K on November  27,  2002.  The
second amended and restated note contained a new provision regarding  conversion
rights of the  holder,  and a covenant  by us to submit the second  amended  and
restated note for approval by shareholders at the next annual meeting.

                                       48
<PAGE>

         (c) Exhibits

             Exhibits  to this  Report  are  attached  following  page F-26
             hereof.

         (d) Financial Statement Schedule. Not applicable.

                                       49
<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 14, 2003.

                              ALTAIR NANOTECHNOLOGIES INC.


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

                      Date: March 14, 2003

                   POWER OF ATTORNEY AND ADDITIONAL SIGNATURES

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Form 10-K has been signed by the following  persons in the capacities and on the
dates  indicated.  Each person whose  signature to this Form 10-K appears  below
hereby  constitutes and appoints William P. Long and Edward Dickinson,  and each
of them, as his true and lawful  attorney-in-fact  and agent, with full power of
substitution,  to sign on his behalf  individually  and in the  capacity  stated
below  and to  perform  any  acts  necessary  to be done in  order  to file  all
amendments  and  post-effective  amendments  to this Form 10-K,  and any and all
instruments or documents  filed as part of or in connection  with this Form 10-K
or the  amendments  thereto and each of the  undersigned  does hereby ratify and
confirm all that said  attorney-in-fact and agent, or his substitutes,  shall do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>

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

<S>                                   <C>                                   <C>
/s/ William P. Long                   Chief Executive Officer and           March 14, 2003
---------------------------
    William P. Long                   Director (Principal Executive
                                      Officer)


/s/ Edward Dickinson                  Chief Financial Officer,              March 14, 2003
---------------------------
    Edward Dickinson                  Secretary and Director
                                      (Principal Financial and
                                      Accounting Officer)


/s/ James I. Golla                    Director                              March 14, 2003
---------------------------
    James I. Golla


/s/ George Hartman                    Director                              March 14, 2003
---------------------------
    George Hartman


/s/ Robert Sheldon                    Director                              March 14, 2003
---------------------------
    Robert Sheldon
</TABLE>

                                       50

<PAGE>

                                 CERTIFICATIONS

I, William P. Long, certify that:

         1.  I  have  reviewed  this  annual  report  on  Form  10-K  of  Altair
Nanotechnologies Inc.;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 17, 2003            /s/ William P. Long
                               --------------------------------------------
                                    William P. Long, Chief Executive Officer
                                       51
<PAGE>

I, Edward Dickinson, certify that:

         1.  I  have  reviewed  this  annual  report  on  Form  10-K  of  Altair
Nanotechnologies Inc.;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a) designed such disclosure  controls and procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

                  b) evaluated the effectiveness of the registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the registrant's internal controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 17, 2003          /s/ Edward Dickinson
                             ----------------------------------------------
                                  Edward Dickinson, Chief Financial Officer.

                                       52
<PAGE>

     Altair Nanotechnologies Inc.
     and Subsidiaries
     (An Exploration Stage Company)

     Consolidated  Financial Statements as of December 31, 2002 and 2001 and for
     Each of the Three Years in the Period  Ended  December 31, 2002 and for the
     Period  from April 9, 1973 (Date of  Inception)  to  December  31, 2002 and
     Independent Auditors' Report

                                       53

<PAGE>


ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

<TABLE>
<CAPTION>

TABLE OF CONTENTS
-------------------------------------------------------------------------------------------------------------------
                                                                                                               Page

<S>                                                                                                             <C>
INDEPENDENT AUDITORS' REPORT                                                                                    F-1

FINANCIAL STATEMENTS:

  Consolidated Balance Sheets, December 31, 2002 and 2001                                                       F-2

  Consolidated  Statements  of  Operations  for Each of the  Three  Years in the
    Period Ended December 31, 2002 and for the Period from April 9, 1973
    (Date of Inception) to December 31, 2002                                                                    F-3

  Consolidated Statements of Shareholders' Equity for the Period from April 9, 1973
    (Date of Inception) to December 31, 2002                                                                F-4  - F-7

  Consolidated  Statements  of Cash  Flows  for Each of the  Three  Years in the
    Period Ended December 31, 2002 and for the Period from April 9, 1973
    (Date of Inception) to December 31, 2002                                                                F-8  - F-11

  Notes to Consolidated Financial Statements                                                                F-12 - F-26
</TABLE>


                                       54
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Altair Nanotechnologies Inc.
Reno, Nevada

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Altair
Nanotechnologies   Inc.  (an   exploration   stage  company)  and   subsidiaries
(collectively  referred to as the  "Company")  as of December 31, 2002 and 2001,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 2002,
and for the period from April 9, 1973 (date of  inception) to December 31, 2002.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits. The Company's  consolidated  financial
statements for the period from April 9, 1973 (date of inception) to December 31,
1997 were  audited by other  auditors  whose  report,  dated  February 17, 2000,
expressed an unqualified opinion on those statements.  The financial  statements
for the period from April 9, 1973 (date of inception)  through December 31, 1997
reflect a net loss of  $7,350,462  of the related  totals.  The other  auditors'
report has been  furnished to us and our  opinion,  insofar as it relates to the
amounts  included for such prior periods,  is based solely on the report of such
other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about 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.  We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.

In our  opinion,  based on our audit  and the  report  of other  auditors,  such
consolidated  financial statements present fairly, in all material respects, the
financial  position  of the Company as of  December  31, 2002 and 2001,  and the
results of its  operations and its cash flows for each of the three years in the
period ended  December 31, 2002,  and for the period from April 9, 1973 (date of
inception)  to December 31,  2002,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is an exploration
stage  enterprise  engaged   principally  in  the  business  of  developing  and
commercializing  ceramic oxide nanoparticle  products. As discussed in Note 1 to
the  consolidated  financial  statements,  the Company's  operating losses raise
substantial doubt about its ability to continue as a going concern. Management's
plans  concerning  these matters are also described in Note 1. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties. In addition, because the Company is still in the
exploration   stage,   there  have  been  no  adjustments  to  record  potential
impairments on long-term assets that are currently being developed.


/s/ DELOITTE & TOUCHE, LLP
    ----------------------
    Salt Lake City, Utah
    March 11, 2003


                                      F-1

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(Expressed in United States Dollars)
-------------------------------------------------------------------------------
ASSETS                                                                     2002           2001
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                            $  244,681    $    599,884
  Accounts receivable, net                                                132,859           4,154
  Other current assets                                                     22,598          29,497
                                                                     ------------    ------------
           Total current assets                                           400,138         633,535

PROPERTY, PLANT, AND EQUIPMENT, Net                                     7,349,818       5,987,950

PATENTS AND RELATED EXPENDITURES, Net                                   1,146,249       3,739,864

OTHER ASSETS                                                               18,200         491,894
                                                                     ------------    ------------
TOTAL ASSETS                                                         $  8,914,405    $ 10,853,243
                                                                     ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Trade accounts payable                                             $    455,246    $    373,690
  Accrued liabilities                                                     149,257         154,715
  Loans payable--related parties                                             --           143,000
  Capital lease obligations--current portion                                 --             2,312
  Deferred revenue                                                           --            40,972
                                                                     ------------    ------------
           Total current liabilities                                      604,503         714,689
                                                                     ------------    ------------
NOTES PAYABLE, Long-term portion                                        3,905,040       1,462,060
                                                                     ------------    ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 6, 7, 8, 9, 10, and 11)

SHAREHOLDERS' EQUITY:
  Common stock, no par value, unlimited shares authorized;
    30,244,348 and 22,694,142 shares issued and outstanding
    at December 31, 2002 and 2001                                      43,787,850      38,089,320
  Deficit accumulated during the development stage                    (39,382,988)    (29,412,826)
                                                                     ------------    ------------
           Total shareholders' equity                                   4,404,862       8,676,494
                                                                     ------------    ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $  8,914,405    $ 10,853,243
                                                                     ============    ============
</TABLE>


See notes to the consolidated financial statements.

                                      F-2

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


                                                                                                 Period April 9,
                                                                                                  1973 (Date of
                                                             Year Ended December 31,              Inception) to
                                                 --------------------------------------------     December 31,
                                                      2002             2001            2000            2002
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>              <C>
SALES                                            $    253,495    $     42,816    $       --       $   296,311
COST OF SALES                                          93,583          18,175            --           111,758
                                                 ------------    ------------    ------------    ------------
GROSS MARGIN                                          159,912          24,641            --           184,553
                                                 ------------    ------------    ------------    ------------
OPERATING EXPENSES:
  Mineral exploration and development                 598,977         930,777       1,217,966       6,517,642
  Research and development                            587,137         559,454       1,555,472       3,716,096
  Professional services                               712,530         593,088         366,275       3,276,442
  General and administrative expenses               2,360,315       2,824,646       2,271,250      14,207,797
  Depreciation and amortization                       997,708       1,138,208       1,236,404       5,515,122
  Asset impairment                                  2,759,956            --              --         2,759,956
                                                 ------------    ------------    ------------    ------------
           Total operating expenses                 8,016,623       6,046,173       6,647,367      35,993,055
                                                 ------------    ------------    ------------    ------------
LOSS FROM OPERATIONS                                7,856,711       6,021,532       6,647,367      35,808,502
                                                 ------------    ------------    ------------    ------------
OTHER EXPENSE (INCOME):
  Interest expense                                  1,151,388       1,881,077         215,216       4,535,339
  Interest income                                      (2,105)       (148,980)        (83,440)       (815,945)
  Loss (gain) on foreign exchange                         835             402        (864,669)       (557,942)
  Loss on extinguishment of debt                      914,667            --              --           914,667
  Gain on forgiveness of debt                            --              --              --          (795,972)
  Loss on redemption of convertible debentures           --              --              --           193,256
                                                 ------------    ------------    ------------    ------------
           Total other expense (income), net        2,064,785       1,732,499        (732,893)      3,473,403
                                                 ------------    ------------    ------------    ------------
NET LOSS                                            9,921,496       7,754,031       5,914,474      39,281,905

PREFERENTIAL WARRANT DIVIDEND                          48,666          52,417            --           101,083
                                                 ------------    ------------    ------------    ------------
NET LOSS APPLICABLE TO SHAREHOLDERS              $  9,970,162    $  7,806,448    $  5,914,474    $ 39,382,988
                                                 ============    ============    ============    ============
LOSS PER COMMON SHARE--Basic and diluted         $       0.40    $       0.39    $       0.34    $       4.82
                                                 ============    ============    ============    ============

WEIGHTED AVERAGE SHARES--Basic and diluted         24,975,837      20,063,473      17,371,214       8,164,811
                                                 ============    ============    ============    ============
</TABLE>

See notes to the consolidated financial statements.

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


                                                                                                  Deficit
                                                                                                Accumulated
                                                       Common Stock                 Stock        During the
                                                ------------------------         Subscription   Development
                                                   Shares       Amount           Receivable       Stage         Total
                                                ----------    ----------           ----------    ----------  ----------
<S>                                             <C>          <C>                 <C>            <C>          <C>
APRIL 9, 1973 (DATE OF INCEPTION)                     --     $      --           $      --      $      --    $     --

Common stock issued                                101,668       387,073                --             --       387,073
Net loss                                              --            --                  --         (361,572)   (361,572)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1984                        101,668       387,073                --         (361,572)     25,501

Common stock issued                                 40,000       240,770                --             --       240,770
Common stock issued for management fees              1,280         7,004                --             --         7,004
Net loss                                              --            --                  --          (78,606)    (78,606)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1985                        142,948       634,847                --         (440,178)    194,669

Common stock issued for property                     3,333        18,058                --             --        18,058
Acquisition of subsidiary                          780,000        44,551                --             --        44,551
Common stock issued for underwriter bonus            4,000             1                --             --             1
Net loss                                              --            --                  --         (210,667)   (210,667)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1986                        930,281       697,457                --         (650,845)     46,612

Common stock issued for property                     6,667         8,027                --             --         8,027
Flow through shares                                298,650       463,301                --             --       463,301
Common stock issued for rights offering            257,822       253,947                --             --       253,947
Net loss                                              --            --                  --         (696,642)   (696,642)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1987                      1,493,420     1,422,732                --       (1,347,487)     75,245

Common stock issued for services                    16,667        14,592                --             --        14,592
Common stock issued                                 16,667        14,592                --             --        14,592
Common stock issued in settlement of debt          233,333        51,073                --             --        51,073
Net loss                                              --            --                  --         (149,316)   (149,316)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1988                      1,760,087     1,502,989                --       (1,496,803)      6,186

Common stock issued                                127,500        75,058                --             --        75,058
Common stock issued in settlement of lawsuit        41,667        22,800                --             --        22,800
Net loss                                              --            --                  --         (151,372)   (151,372)
                                                ----------    ----------           ----------    ----------  ----------
BALANCE,  DECEMBER 31, 1989                      1,929,254     1,600,847                --       (1,648,175)    (47,328)
                                                ----------    ----------           ----------    ----------  ----------

                                                                                                           (Continued)
</TABLE>
                                      F-4

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------

                                                                                                 Deficit
                                                                                               Accumulated
                                                      Common Stock                 Stock        During the
                                                ------------------------       Subscription    Development
                                                   Shares       Amount          Receivable        Stage          Total
                                               -----------   -----------       -----------     -----------    -----------
<S>                                              <C>         <C>               <C>             <C>            <C>
BALANCE,  DECEMBER 31, 1989                      1,929,254   $ 1,600,847       $      --       $(1,648,175)   $   (47,328)

Common stock issued                                133,333       218,882              --              --          218,882
Exercise of stock options                           33,333        18,240              --              --           18,240
Common stock issued for property                    11,666        11,674              --              --           11,674
Common stock issued for services                    13,333        21,888              --              --           21,888
Net loss                                              --            --                --          (230,125)      (230,125)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE,  DECEMBER 31, 1990                      2,120,919     1,871,531              --        (1,878,300)        (6,769)

Common stock issued                                266,667       196,994              --              --          196,994
Common stock issued for property                    28,333        17,146              --              --           17,146
Net loss                                              --            --                --          (258,209)      (258,209)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE,  DECEMBER 31, 1991                      2,415,919     2,085,671              --        (2,136,509)       (50,838)

Common stock issued                              1,086,753       443,237              --              --          443,237
Common stock issued for property                   115,000        49,249              --              --           49,249
Common stock issued for settlement of debt          55,177        24,155              --              --           24,155
Net loss                                              --            --                --          (353,665)      (353,665)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE, DECEMBER 31, 1992                       3,672,849     2,602,312              --        (2,490,174)       112,138

Common stock issued                                 48,000        36,393              --              --           36,393
Common stock issued for property                    46,667        55,012              --              --           55,012
Net loss                                              --            --                --          (193,323)      (193,323)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE,  DECEMBER 31, 1993                      3,767,516     2,693,717              --        (2,683,497)        10,220

Common stock issued                                600,000       131,329              --              --          131,329
Common stock issued for shares of subsidiary       750,000       257,187              --              --          257,187
Common stock issued for royalties                   83,333        33,641              --              --           33,641
Net loss                                              --            --                --          (227,860)      (227,860)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE,  DECEMBER 31, 1994                      5,200,849     3,115,874              --        (2,911,357)       204,517

Common stock issued                              2,700,000       875,529              --              --          875,529
Exercise of stock options                          247,000        53,553              --              --           53,553
Exercise of stock warrants                         350,000       171,458              --              --          171,458
Net loss                                              --            --                --          (424,109)      (424,109)
                                               -----------   -----------       -----------     -----------    -----------
BALANCE,  DECEMBER 31, 1995                      8,497,849     4,216,414              --        (3,335,466)       880,948
                                               -----------   -----------       -----------     -----------    -----------
                                                                                                            (Continued)
</TABLE>

                                      F-5

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


                                                                                                   Deficit
                                                                                                  Accumulated
                                                          Common Stock               Stock        During the
                                                  --------------------------      Subscription    Development
                                                     Shares          Amount        Receivable        Stage          Total
                                                  ----------      ----------       --------     -----------      ----------

<S>                                                <C>          <C>            <C>             <C>             <C>
BALANCE,  DECEMBER 31, 1995                        8,497,849    $  4,216,414   $       --      $ (3,335,466)   $    880,948

Common stock issued                                  554,027       1,637,307           --              --         1,637,307
Exercise of stock options                            702,000         526,850           --              --           526,850
Exercise of stock warrants                         3,012,463       2,471,219           --              --         2,471,219
Stock options issued to non-employees                   --           285,503           --              --           285,503
Common stock issued for acquisition of TMI         1,919,957       2,521,469           --              --         2,521,469
Net loss                                                --              --             --        (1,032,903)     (1,032,903)
                                                  ----------      ----------       --------     -----------      ----------
BALANCE,  DECEMBER 31, 1996                       14,686,296      11,658,762           --        (4,368,369)      7,290,393

Exercise of stock options                            362,500       1,530,406           --              --         1,530,406
Stock options issued to non-employees                   --           528,555           --              --           528,555
Stock options issued to employees                       --            62,800           --              --            62,800
Exercise of stock warrants                           443,949       1,038,788           --              --         1,038,788
Net loss                                                --              --             --        (2,982,093)     (2,982,093)
                                                  ----------      ----------       --------     -----------      ----------
BALANCE,  DECEMBER 31, 1997                       15,492,745      14,819,311           --        (7,350,462)      7,468,849

Stock options issued to non-employees                   --           841,944           --              --           841,944
Stock options issued to employees                       --            15,420           --              --            15,420
Common stock cancelled                              (723,065)           --             --              --              --
Common stock issued for convertible debenture        387,735       3,061,444           --              --         3,061,444
Exercise of stock options                             17,500         113,664           --              --           113,664
Net loss                                                --              --             --        (4,651,576)     (4,651,576)
                                                  ----------      ----------       --------     -----------      ----------
BALANCE,  DECEMBER 31, 1998                       15,174,915      18,851,783           --       (12,002,038)      6,849,745

Stock options issued to non-employees                   --           765,386           --              --           765,386
Common stock issued                                  300,000       1,862,500           --              --         1,862,500
Net loss                                                --              --             --        (3,689,866)     (3,689,866)
                                                  ----------      ----------       --------     -----------      ----------
BALANCE,  DECEMBER 31, 1999                       15,474,915      21,479,669           --       (15,691,904)      5,787,765

Stock options issued to non-employees                   --           424,063           --              --           424,063
Stock subscription receivable                           --              --         (561,300)           --          (561,300)
Stock warrants issued                                   --         1,245,050           --              --         1,245,050
Exercise of stock options                             71,300         335,778           --              --           335,778
Common stock issued                                3,779,273       8,904,029           --              --         8,904,029
Net loss                                                --              --             --        (5,914,474)     (5,914,474)
                                                  ----------      ----------       --------     -----------      ----------
BALANCE,  DECEMBER 31, 2000                       19,325,488      32,388,589       (561,300)    (21,606,378)     10,220,911
                                                  ----------      ----------       --------     -----------      ----------

                                                                                                                (Continued)
</TABLE>
                                      F-6

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


                                                                                         Deficit
                                                                                       Accumulated
                                                Common Stock               Stock       During the
                                        ----------------------------    Subscription   Development
                                           Shares          Amount        Receivable       Stage            Total
                                        ------------    ------------   ------------    ------------    ------------
<S>                                       <C>           <C>            <C>             <C>             <C>
BALANCE,  DECEMBER 31, 2000               19,325,488    $ 32,388,589   $   (561,300)   $(21,606,378)   $ 10,220,911

Stock options issued to non-employees           --           158,089           --              --           158,089
Stock subscription receivable                   --              --          561,300            --           561,300
Stock warrants issued                           --           776,469           --              --           776,469
Preferential warrant dividend                   --            52,417           --           (52,417)           --
Shares issued for settlement of debt         824,800       1,220,423           --              --         1,220,423
Exercise of stock options                     65,000         130,000           --              --           130,000
Common stock expired                        (266,170)           --             --              --              --
Exercise of warrants                         713,333         713,333           --              --           713,333
Common stock issued                        2,031,691       2,650,000           --              --         2,650,000
Net loss                                        --              --             --        (7,754,031)     (7,754,031)
                                        ------------    ------------   ------------    ------------    ------------
BALANCE,  DECEMBER 31, 2001               22,694,142      38,089,320           --       (29,412,826)      8,676,494

Stock options issued to non-employees           --            27,601           --              --            27,601
Shares issued under Employee Stock
  Purchase Plan                              161,550          92,183           --              --            92,183
Stock warrants issued                           --           347,773           --              --           347,773
Preferential warrant dividend                   --            48,666           --           (48,666)           --
Shares issued for settlement of debt       1,500,090         975,000           --              --           975,000
Shares issued for interest                   299,304         292,208           --              --           292,208
Shares issued for services                   400,000         279,500           --              --           279,500
Exercise of warrants                         286,169         300,477           --              --           300,477
Common stock issued                        4,903,093       3,335,122           --              --         3,335,122
Net loss                                        --              --             --        (9,921,496)     (9,921,496)
                                        ------------    ------------   ------------    ------------    ------------

BALANCE,  DECEMBER 31, 2002               30,244,348    $ 43,787,850   $       --      $(39,382,988)   $  4,404,862
                                          ==========    ============   ============    ============    ============

                                                                                                        (Concluded)
</TABLE>

See notes to consolidated financial statements.

                                      F-7

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


                                                                                                           Period April 9,
                                                                                                           1973 (Date of
                                                                    Year Ended December 31,                Inception) to
                                                            --------------------------------------------    December 31,
                                                                2002           2001            2000            2002
                                                            ------------    ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>             <C>
CASH FLOWS FROM EXPLORATION ACTIVITIES:
  Net loss                                                  $ (9,921,496)   $ (7,754,031)   $ (5,914,474)   $(39,281,905)
  Adjustments to reconcile net loss to net cash used
    in exploration activities:
    Depreciation and amortization                                997,708       1,138,208       1,236,404       5,515,122
    Shares issued for services                                   203,500            --              --           303,426
    Shares issued for interest                                   292,208         819,755            --         1,116,035
    Issuance of stock options to non-employees                    27,601         158,089         424,063       3,031,141
    Issuance of stock options to employees                          --              --              --            78,220
    Issuance of stock warrants                                   108,556         396,123         420,182         924,861
    Amortization of discount on note payable                     384,616         403,021          12,052         799,689
    Amortization of debt issuance costs                          404,567         100,000            --           504,567
    Asset impairment                                           2,759,956            --              --         2,759,956
    Loss on extinguishment of debt                               914,667            --              --           914,667
    Loss on redemption of convertible debenture                     --              --              --           193,256
    Gain on forgiveness of debt                                     --              --              --          (795,972)
    Loss on disposal of fixed assets                                --              --              --             1,945
    Loss (gain) on foreign currency translation                     --               402        (864,669)       (559,179)
    Deferred financing costs written off                            --              --              --           515,842
    Changes in assets and liabilities (net of effects
      of acquisition):
      Restricted cash                                               --         4,000,000      (4,000,000)           --
      Accounts receivable                                       (128,705)         (4,154)           --          (132,859)
      Other current assets                                         6,899          18,170         990,579       1,712,000
      Other assets                                                (2,000)            886        (169,606)       (170,720)
      Accounts payable                                            81,556         369,763         (75,161)        340,747
      Accrued liabilities                                         (5,458)           --              --            (5,458)
      Deferred revenue                                           (40,972)        (16,985)         57,957            --
                                                            ------------    ------------    ------------    ------------

           Net cash used in exploration activities            (3,916,797)       (370,753)     (7,882,673)    (22,234,619)
                                                            ------------    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Asset acquisition                                                 --              --              --        (2,422,417)
  Purchase of property and equipment                          (2,525,916)       (158,296)       (226,612)     (3,661,425)
  Disposal (purchase) of patents and related expenditures           --             5,933            --        (1,882,187)
                                                            ------------    ------------    ------------    ------------

           Net cash used in investing activities              (2,525,916)       (152,363)       (226,612)     (7,966,029)
                                                            ------------    ------------    ------------    ------------

                                                                                                              (Continued)
</TABLE>


                                       F-8

<PAGE>

<TABLE>
<CAPTION>

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND
FOR THE PERIOD FROM APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------

                                                                                                                Period April 9,
                                                                                                                 1973 (Date of
                                                                            Year Ended December 31,              Inception) to
                                                                 --------------------------------------------     December 31,
                                                                      2002           2001            2000            2002
                                                                 ------------    ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common shares for cash, net of issuance costs      $  3,335,122    $  2,650,000    $  8,904,029    $ 21,508,781
  Collection of stock subscription receivable                            --           561,300            --           561,300
  Issuance of shares under Employee Stock Purchase Plan                92,183            --              --            92,183
  Issuance of convertible debenture                                      --              --              --         5,000,000
  Proceeds from exercise of stock options                                --           130,000         335,778       2,708,491
  Proceeds from exercise of warrants                                  300,477         713,333            --         4,917,805
  Issuance of related party notes                                       6,243         168,000            --           174,243
  Issuance of notes payable                                         2,505,040            --         7,000,000       9,505,040
  Payment of notes payable                                               --        (4,385,599)     (6,498,931)    (11,120,816)
  Payment of related party notes                                     (149,243)        (25,000)           --          (174,243)
  Payment on capital lease                                             (2,312)        (24,763)           --           (27,075)
  Purchase of call options                                               --              --          (449,442)       (449,442)
  Redemption of convertible debentures                                   --              --              --        (2,250,938)
                                                                 ------------    ------------    ------------    ------------
           Net cash (used in) provided by financing activities      6,087,510        (212,729)      9,291,434      30,445,329
                                                                 ------------    ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                               (355,203)       (735,845)      1,182,149         244,681

CASH AND CASH EQUIVALENTS, Beginning of period                        599,884       1,335,729         153,580            None
                                                                 ------------    ------------    ------------    ------------

CASH AND CASH EQUIVALENTS, End of period                         $    244,681    $    599,884    $  1,335,729    $    244,681
                                                                 ============    ============    ============    ============
                                                                                          Year Ended December 31,
                                                                                  ---------------------------------
                                                                                     2002            2001            2000
                                                                                 ------------    ------------    ------------
SUPPLEMENTAL DISCLOSURES:
  Cash paid for interest                                                         $      --       $    386,557    $     85,929
                                                                                 ============    ============    ============
  Cash paid for income taxes                                                     $      --       $       --      $       --
                                                                                 ============    ============    ============
</TABLE>

                                      F-9

<PAGE>
ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000,
AND FOR THE PERIOD APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
-------------------------------------------------------------------------------


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

For the year ended December 31, 2002:

o    We issued 50,000 common shares in payment of financing fees associated with
     the Doral 18, LLC 2001 Note.  The common shares had a fair value of $76,000
     which was recorded as debt issuance cost on the balance sheet.

o    In connection  with the  extinguishment  of the Doral 18, LLC 2001 Note, we
     issued  1,500,000  shares of our common  stock to reduce  our note  payable
     balance by $600,000.  We also issued to Doral 18, LLC a warrant for 750,000
     common  shares  that had a fair value of  $239,217,  as  determined  by the
     Black-Scholes pricing model. As a result of this transaction, we recorded a
     loss on extinguishment of debt of $914,667.


o    We entered into a note  payable with BHP with a face amount of  $3,000,000.
     There is no interest due on the note for the first 36 months.  As a result,
     we imputed the  interest and reduced the face amount of the note payable by
     $566,763. The imputed interest expense for the period was $71,803.


o    We repriced warrants, held by a shareholder, for 582,500 common shares. The
     repriced  warrants have an incremental  fair value of $48,666 and have been
     accounted for as a preferential warrant dividend.


For the year ended December 31, 2001:

o    In  connection  with  amendments  to the Doral 18, LLC 2000 Note, we issued
     warrants for 300,000 shares of common stock.  The warrants had an estimated
     fair value of $346,354 of which  $239,562 has been  amortized into interest
     expense during the year ended December 31, 2002. The remaining  amount will
     be recognized over the life of the note.

o    We  cancelled  call  options on 228,456  shares of our common  stock to pay
     $97,743 of  principal  and  $244,941  of interest on the Doral 18, LLC 2000
     Note.  In addition,  the  cancellation  of the call options  resulted in an
     additional interest expense of $210,568.

o    In  accordance  with the  terms of our  Doral 18,  LLC 2000  Note,  we paid
     $644,804 of  principal  and  $273,731 of interest  through the  issuance of
     824,800 shares of our common stock. In addition, the conversion of the note
     resulted in an additional interest expense of $301,888.

o    We repriced warrants, held by a shareholder, for 713,333 common shares. The
     repriced  warrants have an incremental  fair value of $52,417 and have been
     accounted for as a preferential warrant dividend.

o    In  connection  with the 2001  Note  issued  to Doral  18,  LLC,  we issued
     warrants for 200,000  common  shares.  The  warrants had an estimated  fair
     value of $74,733.  We also repriced  existing  warrants for 650,000  common
     shares from $3.00 per share to $1.50 per share. The repriced  warrants have
     an incremental fair value of $199,222.
                                      f-10

<PAGE>

                                                           (Continued)

ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000,
AND FOR THE PERIOD APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
-------------------------------------------------------------------------------


For the year ended December 31, 2000:

o    We  entered  into a capital  lease  obligation  of $46,395  for  laboratory
     equipment.

o    We  issued  1,003,626  shares  of  common  stock  as  part  of a  repricing
     agreement.

o    We recorded a stock  subscription  receivable  for 165,000 shares of common
     stock with an investor.

o    In conjunction  with the Doral 18, LLC note, we issued warrants to purchase
     350,000  common  shares at $3.00 per share.  The  warrants had an estimated
     fair value of $824,900.

o    We  cancelled  call  options on 19,222  shares of our  common  stock to pay
     $18,221 of interest on the 2000 Note.


See notes to consolidated financial statements.             (Concluded)

                                      F-11

<PAGE>



ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
(An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000,
AND FOR THE PERIOD APRIL 9, 1973 (DATE OF INCEPTION) TO DECEMBER 31, 2002
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


1.    DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

      Description of Business--Altair  Nanotechnologies  Inc. is incorporated in
      Canada  and  is   engaged  in  the   business   of  (1)   developing   and
      commercializing  ceramic oxide  nanoparticle  products,  (2) exploring and
      developing  mineral  properties in the United  States,  and (3) developing
      mineral  processing  equipment (a centrifugal jig) for use in the recovery
      of fine and  heavy  mineral  particles.  During  2002,  we  experienced  a
      shortage of working  capital.  As a result,  we  concentrated  our limited
      resources  on  the  development  of  nanoparticle  products,  reduced  our
      expenditures  on the  mineral  properties  to a minimal  level and stopped
      development  of the  centrifugal  jig.  Our  authorized  capital  stock is
      comprised of an unlimited number of common shares with no par value.

      Principles of Consolidation--The consolidated financial statements include
      the accounts of Altair  Nanotechnologies  Inc. and its subsidiaries  which
      include (1) Mineral Recovery  Systems,  Inc. (MRS), (2) Fine Gold Recovery
      Systems,  Inc.  (FGRS),  (3) Altair  Nanomaterials,  Inc.  (ANI),  and (4)
      Tennessee Valley Titanium,  Inc. (TVT),  (collectively  referred to as the
      "Company"),  all of which are 100% owned.  Intercompany  transactions  and
      balances have been eliminated in consolidation.

      Basis of Presentation--The  accompanying consolidated financial statements
      have been  prepared  on a going  concern  basis,  which  contemplates  the
      realization  of assets and the  satisfaction  of liabilities in the normal
      course of business. As shown in the consolidated  financial statements for
      the years ended December 31, 2002,  2001, and 2000, we incurred net losses
      of $9,921,496,  $7,754,031,  and $5,914,474,  respectively,  and since the
      date of inception  have  incurred  cumulative  losses of  $39,281,905.  At
      December 31, 2002 and 2001, we had stockholder's  equity of $4,404,862 and
      $8,676,494,  respectively.  At  December  31,  2002,  current  liabilities
      exceeded current assets by $204,365.  These factors,  among others,  raise
      substantial  doubt  about the  Company's  ability to  continue  as a going
      concern.

      The  consolidated  financial  statements  do not include  any  adjustments
      relating  to the  recoverability  and  classification  of  recorded  asset
      amounts or the amounts and  classification  of  liabilities  that might be
      necessary  should  we be  unable  to  continue  as a  going  concern.  Our
      continuation  as a going concern is dependent upon our ability to generate
      sufficient  cash flow to meet our obligations on a timely basis, to obtain
      additional  financing  or  refinancing  as may  be  required,  to  develop
      commercially  viable  products and processes,  and ultimately to establish
      successful   operations.   We  are  in  the  process  of  developing   and
      commercializing  ceramic  oxide  nanoparticle  products.  We have financed
      operations  primarily  through the issuance of equity  securities  (common
      stock,  convertible  debentures,  stock options and warrants),  and by the
      issuance  of debt  (term  notes).  Additional  funds will be  required  to
      complete development activities.  We believe that current working capital,
      cash receipts from anticipated  sales, and funding through sales of common
      stock will be sufficient to enable us to continue as a going concern.

                                      F-12
<PAGE>

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Use of Estimates--The  preparation of consolidated financial statements in
      conformity with  accounting  principles  generally  accepted in the United
      States of America  requires that we 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  reported  amounts of revenues and expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      Cash and Cash  Equivalents--Cash  and cash  equivalents  are highly liquid
      investments  with an  original  maturity  of three  months  or less.  Cash
      equivalents are recorded at cost, which approximates fair value.

      Accounts  Receivable--Accounts  receivable  consists  of amounts  due from
      customers  for sales of products and  services,  net of an  allowance  for
      losses of $3,203 and $0 at December 31, 2002 and 2001, respectively.

      Property, Plant, and Equipment--Property,  plant, and equipment are stated
      at cost less accumulated depreciation.  Depreciation is recorded using the
      straight-line method over the following useful lives:

         Furniture and office equipment                    3-7 years
         Vehicles                                          5 years
         Pigment production equipment                      5-10 years
         Building                                          30 years

      Patents   and  Related   Expenditures--Patents   related  to  the  pigment
      production technology are carried at cost and amortized on a straight-line
      basis over their estimated useful lives, which range from 14 to 20 years.

      Exploration--Expenditures  incurred in the search for mineral deposits and
      the determination of the commercial viability of such deposits are charged
      to expense as incurred.

      Research   and   Development    Expenditures--Research   and   development
      expenditures are charged to expense as incurred.

      Debt  Issuance  Costs--Debt  issuance  costs  are  recorded  at  cost  and
      amortized  over the life of the note payable.  Debt issuance costs were $0
      and $475,694 at December 31, 2002 and 2001, respectively.

      Foreign  Currency  Translation--Asset  and liability  accounts,  which are
      originally  recorded in the appropriate local  currencies,  are translated
      into U.S. dollars at year-end exchange rates. Revenue and expense accounts
      are translated at the average  exchange rates for the period.  Transaction
      gains and losses are included in the accompanying  consolidated statements
      of operations.  Substantially  all of our assets are located in the United
      States of America.

      Stock-Based   Compensation--We  have  elected  to  follow  the  accounting
      provisions   of  Accounting   Principles   Board  (APB)  Opinion  No.  25,
      "Accounting  for Stock Issued to Employees,"  and to furnish the pro forma
      disclosures  required under  Statement of Financial  Accounting  Standards
      (SFAS) No. 123, "Accounting for Stock-Based Compensation."

                                      F-13
<PAGE>

      To estimate  compensation expense that would be recognized under SFAS 123,
      we have used the modified  Black-Scholes  option pricing model.  If we had
      accounted for our stock options using the accounting  method prescribed by
      SFAS 123, our net loss and loss per share would be as follows:
<TABLE>
<CAPTION>

                                                       2002            2001            2000
<S>                                               <C>             <C>            <C>
Net loss (both basic and diluted):
  As reported                                     $  9,921,496    $  7,754,031   $  5,914,474
  Deduct: stock-based employee compensation
    expense included in reported net income,
    net of related tax effects                            --              --             --
  Add: stock-based employee compensation
    expense determined under value based
    method for all awards, net of related tax
    effects                                            235,823       1,474,690      3,723,135
  Pro forma net loss                                10,157,319       9,228,721      9,637,609

Loss per common share (both basic and diluted):
  As reported                                             0.40            0.39           0.34
  Pro forma                                               0.41            0.46           0.56
</TABLE>



      In calculating pro forma compensation, the fair value of each stock option
      is estimated on the date of grant using the  Black-Scholes  option-pricing
      model and the following weighted average assumptions:
<TABLE>
<CAPTION>

                                                        2002             2001             2000

<S>                                                    <C>              <C>              <C>
Dividend yield                                          None             None             None
Expected volatility                                       67%              81%              93%
Risk-free interest rate                                 2.19%            4.76%            6.40%
Expected life (years)                                    1.8              5.0              4.6
</TABLE>



      Long-Lived  Assets--We  evaluate the carrying  value of long-term  assets,
      including intangibles,  when events or circumstance indicate the existence
      of a possible impairment,  based on projected undiscounted cash flows, and
      recognize  impairment  when such cash flows will be less than the carrying
      values.  Measurement of the amounts of impairments,  if any, is based upon
      the  difference   between  carrying  value  and  fair  value.   Events  or
      circumstances  that could indicate the existence of a possible  impairment
      include  obsolescence of the  technology,  an absence of market demand for
      the product, and/or continuing technology rights protection.

      Revenue  Recognition--Revenue  is recognized at the time the purchaser has
      accepted delivery of the product. For the year ended December 31, 2002, we
      sold  titanium  dioxide  and  lithium  titanate  nanoparticles,  and other
      materials,  to customers  totaling  $134,925.  Of that amount,  $62,073 of


                                      F-14
<PAGE>

      titanium  dioxide  nanoparticles  was  sold  to  a  customer  for  use  in
      commercial  products held for sale.  Revenue also includes  $90,300 earned
      under a services  agreement with a materials  company where we are testing
      the company's  mineral  concentrates in the production of titanium dioxide
      pigments using our titanium processing  technology.  Revenue also includes
      $28,270  earned  from a  consulting  project  involving  use of the jig to
      recover  titanium  dioxide  from pigment  processing  waste and $40,972 of
      previously  deferred  revenues  for  which  product  was  shipped  and the
      purchaser accepted delivery during 2002.

      Net Loss Per Common  Share--Basic  net loss per common share is calculated
      by  dividing  net loss by the  weighted  average  number of common  shares
      outstanding during the period.  The existence of stock options,  warrants,
      and convertible debentures does not affect the calculation of net loss per
      share on a fully  diluted  basis  because  the  effect  of  including  the
      additional common stock equivalents would be antidilutive.

      Recent Accounting  Pronouncements - In June 2001, the Financial Accounting
      Standards  Board  ("FASB")  issued  SFAS  No.  142,  "Goodwill  and  Other
      Intangible  Assets." SFAS No. 142  establishes  accounting  and  reporting
      standards for goodwill and intangible assets,  requiring annual impairment
      testing  for  goodwill  and  intangible  assets,  and the  elimination  of
      periodic amortization of goodwill and certain intangibles. We adopted SFAS
      No.  142 on  January  1,  2002.  There was no  impact on our  consolidated
      financial statements.

      In June  2001,  the  FASB  issued  SFAS  No.  143, "Accounting  for  Asset
      Retirement Obligations," which requires asset retirement obligations to be
      recognized when they are incurred and displayed as  liabilities.  SFAS No.
      143 is effective  for the year ending  December 31,  2003.  Management  is
      currently  evaluating the impact of this pronouncement on the consolidated
      financial statements.

      In  August  2001,  the  FASB  issued  SFAS  No.  144, "Accounting  for the
      Impairment  or  Disposal  of  Long-Lived  Assets." SFAS No. 144  addresses
      accounting  and  reporting  for the  impairment  or disposal of long-lived
      assets,  including the disposal of a segment of business.  We adopted SFAS
      No.  144 on  January 1, 2002.  During  the  quarter  ended June 30,  2002,
      changes in  circumstances  regarding  the  development  and use of the jig
      indicated that an impairment adjustment for the jig was required. See Note
      3 for  information  regarding the  adjustments  we have recorded for asset
      impairment.

      In  April  2002,  the  FASB  issued  SFAS  No.  145,  "Rescission  of FASB
      Statements  No.  4, 44 and 64,  Amendment  of FASB  Statement  No.  13 and
      Technical Corrections." FAS No. 145 rescinds several statements, including
      SFAS No, 4, "Reporting Gains and Losses from  Extinguishment of Debt." The
      statement  also makes  several  technical  corrections  to other  existing
      authoritative  pronouncements.  We adopted SFAS No. 145 effective  July 1,
      2002 and, as a result,  the loss on extinguishment of debt is reflected in
      the accompanying consolidated financial statements as other expense rather
      than an extraordinary  loss. In addition,  the gain on forgiveness of debt
      and the loss on redemption of convertible  debentures that were previously
      reflected as extraordinary  items have been  reclassified to other expense
      (income).

      In June  2002,  the  FASB  issued  SFAS  No.  146, "Accounting  for  Costs
      Associated  with  Exit  or  Disposal  Activities," which  requires  that a
      liability  for a cost  associated  with an exit or  disposal  activity  be
      recognized  when the liability is incurred and nullifies  Emerging  Issues
      Task Force (EITF) Issue 94-3.  We adopted SFAS No. 146  effective  July 1,
      2002  and  it  had  no  material  impact  on  our  consolidated  financial
      statements.

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
      Stock-Based  Compensation-Transition  and Disclosure." SFAS No. 148 amends
      SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation," to  provide
      alternative  methods of  transition to SFAS No. 123's fair value method of
      accounting for


                                      F-15
<PAGE>

      stock-based employee compensation. SFAS No. 148 also amends the disclosure
      provisions  of SFAS No. 123 and APB  Opinion  No. 28,  "Interim  Financial
      Reporting," to require disclosure in the summary of significant accounting
      policies of the effects of an entity's  accounting  policy with respect to
      stock-based employee  compensation on reported net income and earnings per
      share  in  annual  and  interim  financial  statements.  Adoption  of this
      statement by the Company will be effective January 1, 2003;  however,  the
      Company has adopted the disclosure  provisions of SFAS No. 148. Management
      is currently evaluating this pronouncement and its potential impact on the
      consolidated financial statements.

      In November 2002, the FASB issued  Financial  Accounting  Standards  Board
      Interpretation  No.  ("FIN") 45,  "Guarantor's  Accounting  and Disclosure
      Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
      of Others,"  which  requires the guarantor to recognize as a liability the
      fair  value of the  obligation  at the  inception  of the  guarantee.  The
      disclosure  requirements in FIN 45 are effective for financial  statements
      of interim or annual periods  ending after  December 15, 2002.  Management
      believes we have no  guarantees  that are  required to be disclosed in the
      financial  statements.  The recognition  provisions are to be applied on a
      prospective  basis to  guarantees  issued after  December  31,  2002.  The
      adoption of the recognition provisions of FIN 45 is not expected to have a
      material impact on our consolidated financial statements.

      Comprehensive  Income--The only component of comprehensive income in 2002,
      2001, and 2000 was net loss.

      Deferred  Income  Taxes--We  use the  asset  and  liability  approach  for
      financial accounting and reporting for income taxes. Deferred income taxes
      are  provided  for  temporary  differences  in the  bases  of  assets  and
      liabilities  as reported for financial  statement  purposes and income tax
      purposes.  We have recorded a valuation allowance against all net deferred
      tax assets.

      Other Expense (Income)  Items--As a result of a 1994 merger with TransMar,
      Inc. (TMI), FGRS assumed all of TMI's liabilities.  During 1999, 1998, and
      1996,  FGRS  extinguished  certain of TMI's  liabilities  at less than the
      recorded  amounts of such debt.  The gain on  forgiveness  of debt totaled
      $67,442, $25,805, and $702,725 in 1999, 1998, and 1996, respectively.

      During 1998, we redeemed convertible debentures of $2,250,000, incurring a
      redemption loss of $193,256.

      These  items  were  previously  shown  as  extraordinary  items  but  were
      reclassified as other expense (income) in conjunction with the adoption of
      SFAS No. 145 during the current year.

      Deferred Revenue--We entered into a sales contract on October 6, 2000 with
      a  customer  for  titanium  dioxide  nanoparticles  under  which the total
      contract  amount  was  prepaid.  During  2002,  $40,972  of  products  was
      delivered under the contract and recognized as sales revenues.

      Fair  Value of  Financial  Instruments--Our  financial  instruments,  when
      valued using market interest rates, would not be materially different from
      the amounts presented in the consolidated financial statements.

      Reclassifications--Certain  reclassifications  have been made to the prior
      period amounts to conform to classifications adopted in the current year.

                                      F-16
<PAGE>

3.    ASSET IMPAIRMENT

      During the quarter  ended June 30, 2002,  we made the  determination  that
      certain assets of the Company were impaired. Due to a shortage of cash, we
      made the decision to reduce  expenditures  associated  with  exploring and
      developing  the  Tennessee  mineral  property  to a minimal  amount.  As a
      result,  development activities have been delayed,  including our intended
      use of the jig to enhance the recovery of heavy minerals on this property.
      Although  we have  utilized  the jig to  perform  tests for fine  particle
      recovery at a third party's facility and we continue to seek manufacturers
      and   distributors   for   marketing  the  jig  under   licensing   and/or
      distributorship  agreements,  we cannot determine when and if the jig will
      generate substantial  revenues and profits.  This, in combination with our
      lack of funds to further  develop the jig for commercial use, caused us to
      believe that the jig assets were impaired.  Since we cannot determine when
      adequate  funds will be available to further  develop and utilize the jig,
      we have  recorded an  impairment  charge  related to the jig assets in the
      amount of $2,759,956, which represents the remaining net book value of the
      jig patents and related  expenditures  of $2,366,155 and the jigs included
      in property, plant, and equipment of $393,801.

      We also assessed the carrying value of the titanium processing  technology
      and titanium  processing  assets during the quarter ended June 30, 2002 by
      analyzing  future  estimated cash flows  associated with these assets over
      the succeeding  ten-year period.  These assets have begun generating sales
      revenues,  we have entered into development  contracts and  non-disclosure
      agreements with companies  interested in joint development  and/or testing
      of certain  nanomaterials  products,  and we are in discussions  regarding
      licensing of our technology to others.  In our future  estimated cash flow
      analysis,  we examined product  markets,  assessed our  opportunities  for
      market entry and sales based on current  sales and/or  customer  interest,
      including  samples  supplied  and  development   agreements   signed,  and
      estimated  the  costs,  including  capital  costs,   associated  with  the
      generation  of  revenues.  At the same  time,  we took into  consideration
      recent developments with respect to licensing our technology to others and
      pharmaceutical  applications that have significant revenue potential,  and
      estimated future cash flows associated with these activities. Based on our
      future  estimated  cash  flow  analysis,  we  believe  that  the  titanium
      processing  technology and titanium  processing assets are not impaired as
      of December 31, 2002.

4.    PROPERTY, PLANT, AND EQUIPMENT

      Property,  plant, and equipment  consisted of the following as of December
31, 2002 and 2001:

                                                    2002             2001

Furniture and office equipment                   $    82,113    $    75,833
Vehicles                                             125,031        125,031
Pigment production equipment                       7,162,641      6,974,548
Building                                           2,335,978           --
Centrifugal jig equipment                               --          649,065
Jig testing equipment                                   --           45,128
                                                 -----------    -----------

Total                                              9,705,763      7,869,605
Less accumulated depreciation                     (2,355,945)    (1,881,655)
                                                 -----------    -----------
Total property, plant, and equipment             $ 7,349,818    $ 5,987,950
                                                 ===========    ===========

                                      F-17
<PAGE>

      Depreciation expense for the years ended December 31, 2002, 2001, and 2000
      totaled $770,250, $772,268, and $751,846, respectively.

5.       PATENTS AND RELATED EXPENDITURES

      Patents and related  expenditures  consisted of the  following at December
31, 2002 and 2001:

                                                      2002            2001

Pigment production patent applications            $ 1,517,736    $ 1,517,736
Centrifugal jig patents                                  --        4,210,987
Royalty agreement                                        --          424,881
Mineral recovery technology rights                       --          243,000
                                                  -----------    -----------
                                                    1,517,736      6,396,604
Less accumulated amortization                        (371,487)    (2,656,740)
                                                  -----------    -----------
Total patents and related expenditures            $ 1,146,249    $ 3,739,864
                                                  ===========    ===========

      Patents and related  expenditures  are being  amortized  over their useful
      lives with a weighted average  amortization  period of approximately  16.5
      years.  Amortization  expense was $227,458 for the year ended December 31,
      2002,  which  represented  the  amortization  relating  to the  identified
      intangible  assets still required to be amortized under SFAS No. 142. This
      amount  included  $141,779  of  amortization  expense  related  to the jig
      patents which was recorded prior to an adjustment for asset  impairment at
      June 30,  2002.  For each of the next  five  years,  amortization  expense
      relating to intangibles will be $85,680 per year. Amortization expense was
      $365,940  and  $484,558  for the years ended  December  31, 2001 and 2000,
      respectively.

6.       NOTES PAYABLE

      Notes payable consisted of the following at December 31, 2002 and 2001:

                                                       2002           2001

Note payable to BHP Minerals International, Inc.   $ 2,505,040   $      --
Note payable to Doral 18, LLC                        1,400,000     1,867,857
Less current portion                                      --            --
Less discount resulting from allocation
  of debt proceeds to warrant                             --        (405,797)
                                                   -----------   -----------
Long-term portion of notes payable                 $ 3,905,040   $ 1,462,060
                                                   ===========   ===========


      On December 15, 2000, pursuant to a securities purchase agreement, we sold
      to Doral 18, LLC ("Doral") a $7 million 10% Asset-Backed Exchangeable Term
      Note (the 2000 Note) and  detachable  warrants to purchase  350,000 common
      shares at $3.00 per share.  Net  proceeds of $4 million from the 2000 Note
      were placed in a restricted  bank account to secure a letter of credit and
      were scheduled to be released as principal  payments were made.  Under the
      2000 Note,  we were  required to make  monthly  payments in the  principal


                                      F-18
<PAGE>

      amount of $291,667  plus  accrued  interest and we had the right to redeem
      the  monthly  payment  amounts in cash at any time.  If we elected  not to
      redeem the monthly payment amount in cash, on each due date, the holder of
      the 2000 Note automatically received the right to exchange (immediately or
      at any later date during the term) the monthly  payment amount into common
      shares at a specified exchange price. The 2000 Note was due and payable in
      full on December 15, 2003.

      During  2001,  we made cash  principal  payments of  $1,894,394,  interest
      payments of $286,557, and incurred additional interest expense of $100,000
      related to fees to extend the registration  statement  associated with the
      2000 Note.  Doral also  converted  $644,804 of  principal  and $273,731 of
      interest payable on the 2000 Note into 824,800 shares of common stock.

      On December 28, 2001, a Termination and Issuance Agreement was signed with
      Doral.  The 2000 Note was  exchanged for a new note ("2001 Note") having a
      face amount of  $2,000,000.  In addition,  the letter of credit  discussed
      above was terminated and $2,500,733 of restricted cash securing the letter
      of credit was paid to Doral. The 2001 Note had an interest rate of 11% per
      annum with interest payments due monthly.  If interest was not paid, Doral
      automatically  received the right to exchange (immediately or at any later
      date  during the term) the  monthly  interest  payment  amount into common
      stock at a specified exchange price. The principal amount of the 2001 Note
      was due and payable on March 31, 2003.

      During the first  quarter of 2002, a total of $53,644 of monthly  interest
      payment  amounts were  exchanged by Doral for 59,599  common  shares.  The
      conversion  of these shares  resulted in  additional  interest  expense of
      $16,095.  On April 2, 2002,  we entered an  agreement  with Doral  whereby
      Doral agreed to waive, for the period March 27, 2002 through September 27,
      2002, a provision of the 2001 Note that required us to maintain a cash and
      cash equivalents  balance of $250,000 any time our common shares closed at
      less than $1.00 per share for three consecutive trading days. In addition,
      Doral agreed to amend, for the period March 27, 2002 through September 27,
      2002,  a provision  of the 2001 Note which  required us to have a cash and
      cash equivalents balance of at least $250,000 at the end of every quarter.
      Such  amount was  reduced to  $125,000.  In return,  we prepaid a total of
      $110,904  of  interest  on the 2001 Note for the  period  March  27,  2002
      through  September 27, 2002 by issuing Doral 143,791  common  shares.  The
      conversion  of these shares  resulted in  additional  interest  expense of
      $35,762.

      On September  23, 2002,  we entered an agreement  with Doral whereby Doral
      agreed to waive,  for the period  September  28, 2002  through  January 1,
      2003, a provision of the 2001 Note that required us to maintain a cash and
      cash equivalents  balance of $250,000 any time our common shares closed at
      less than $1.00 per share for three consecutive trading days. In addition,
      Doral agreed to amend,  for the period  September 28, 2002 through January
      1, 2003, a provision of the 2001 Note which required us to have a cash and
      cash equivalents balance of at least $250,000 at the end of every quarter.
      Such  amount was  reduced to  $125,000.  In return,  we prepaid a total of
      $57,260 of  interest  on the 2001 Note for the period  September  28, 2002
      through  January  1, 2003 by  issuing  Doral  95,914  common  shares.  The
      conversion  of these shares  resulted in  additional  interest  expense of
      $18,543.

      On November  21, 2002,  a Second  Amended and  Restated  Secured Term Note
      ("2002  Note") was  signed  with  Doral.  At  closing,  we issued to Doral
      1,500,000  common  shares in  exchange  for a reduction  of the  principal
      amount outstanding from $2,000,000 to $1,400,000.  We also issued to Doral
      a warrant for 750,000  common shares in exchange for Doral's  agreement to
      (i) extend the due date of the 2002 Note to March 31, 2004, (ii) eliminate
      the requirement  that we maintain a cash and cash  equivalents  balance of
      $250,000 any time our common shares close at less than $1.00 per share for


                                      F-19
<PAGE>

      three  consecutive  trading days, and (iii) eliminate the requirement that
      we have a cash and cash  equivalents  balance of at least  $250,000 at the
      end of every  quarter.  The warrant is  exercisable at $1.00 per share and
      expires on the earlier of November 21, 2007 or the 180th day following the
      date the closing price equals or exceeds $3.00 for 5 consecutive days. The
      fair value of the warrants,  as determined  by the  Black-Scholes  pricing
      model,  is  $239,217.  The 2002 Note has an interest  rate of 11% with the
      interest  payable monthly in cash. The principal  amount may be prepaid at
      any time with a 5% prepayment penalty. Under the terms of the 2002 Note, a
      conversion right with respect to $280,000 of principal  accrues on each of
      March 1, 2003, June 1, 2003, September 1, 2003, December 1, 2003 and March
      1, 2004.  If the amount  that  would be subject to a  conversion  right is
      prepaid  prior to the date of  accrual,  such  conversion  right  does not
      accrue. Once a conversion right has accrued,  the principal amount subject
      to that  conversion  right cannot be prepaid unless all principal  amounts
      not  subject  to a  conversion  right  have  been  prepaid  in full.  Each
      conversion  right gives  Doral the right to convert the subject  principal
      amount into common shares at a conversion price equal to the lesser of (a)
      $1.00 per share and (b) 70% of the  average  of the  closing  price of our
      common  shares  for the  five  trading  days  ending  on the  trading  day
      immediately  preceding the date on which that  conversion  right  accrued.
      Because this is a contingent  embedded  beneficial  conversion feature, no
      amounts have been allocated to the beneficial conversion feature until the
      contingency is resolved.

      In accordance with EITF 96-19, "Debtor's  Accounting for a Modification or
      Exchange of Debt  Instruments," the exchange of the notes  discussed above
      was considered to result in a  substantially  different  debt  instrument.
      Accordingly,  the note was recorded at its face amount of $1,400,000.  The
      new warrants issued, recorded at a fair value of $239,217, the unamortized
      debt discount and debt issuance  costs  associated  with the 2001 Note and
      the debt issuance costs associated with the 2002 Note were included in the
      calculation of loss on extinguishment of debt.

      The 2002  Note is  secured  by a  pledge  of the  equipment,  intellectual
      property  and  common  stock  of ANI,  and by a  pledge  of the  leasehold
      interest in mineral deposits and common stock of MRS.

      On August 8, 2002, we entered into a purchase and sale  agreement with BHP
      Minerals  International,  Inc.  ("BHP")  wherein  we  purchased  the land,
      building and fixtures in Reno, Nevada where our titanium processing assets
      are  located.  In  connection  with this  transaction,  BHP also agreed to
      terminate our obligation to pay royalties  associated with the sale or use
      of the titanium processing technology.  In return, we issued to BHP a note
      in the amount of  $3,000,000,  at an interest  rate of 7%,  secured by the
      property we  acquired.  Interest  does not begin to accrue until August 8,
      2005. As a result,  we imputed the interest and reduced the face amount of
      the note  payable  by  $566,763,  an  amount  that is being  amortized  to
      interest  expense over the life of the note. The first payment of $600,000
      of  principal  plus accrued  interest is due February 8, 2006.  Additional
      payments of $600,000 plus accrued interest are due annually on February 8,
      2007 through 2010.

7.    STOCK OPTIONS AND WARRANTS

      Stock  Options--We  have stock option plans  administered  by the Board of
      Directors that provide for the granting of options to employees, officers,
      directors  and other  service  providers of the Company.  Options  granted
      under the plans  generally are granted with an exercise price equal to the
      market value of a common share at the date of grant,  have five-year terms
      and typically  vest over periods  ranging from  immediately to three years
      from the date of grant.

                                      F-20
<PAGE>

      Stock option activity for the years ended December 31, 2002, 2001 and 2000
      is summarized as follows:
<TABLE>
<CAPTION>

                                          2002                   2001                   2000
                                 ----------------------- ----------------------  ---------------------
                                                Weighted               Weighted               Weighted
                                                 Average               Average                Average
                                                Exercise               Exercise               Exercise
                                     Shares       Price    Shares       Price     Shares       Price
<S>                                <C>          <C>      <C>          <C>      <C>          <C>
Outstanding at beginning
  of year                          3,666,700    $ 4.38   2,958,700    $ 5.37   3,060,000    $ 5.92
Granted during the year              975,000      0.94   1,368,000      2.12     420,000      3.86
Cancelled/Expired                   (580,000)     1.93    (595,000)     4.14    (450,000)     7.80
Exercised                               --       --        (65,000)     2.00     (71,300)     4.71
                                  ----------    ------  ----------    ------   ---------    ------

Outstanding at end of year         4,061,700    $ 3.83   3,666,700    $ 4.38   2,958,700    $ 5.37
                                  ==========    ======  ==========    ======  ==========    ======

Options exercisable at year end    3,410,700    $ 4.26   2,999,700    $ 4.84   2,153,700    $ 5.45
                                  ==========    ======  ==========    ======  ==========    ======
Weighted average fair value of
  options granted during year                   $ 0.64                $ 1.70                $ 3.24
                                                ======                ======                ======
</TABLE>

      The following table summarizes information about stock options outstanding
      at December 31, 2002:
<TABLE>
<CAPTION>

                                                                             Stock Options
                               Stock Options Outstanding                     Exercisable
                       ----------------------------------------       -----------------------------
                                          Weighted
                                           Average     Weighted                        Weighted
                                          Remaining    Average                         Average
Range of                   Number        Contractual   Exercise          Number        Exercise
Exercise Prices         Outstanding    Life (Years)    Price          Exercisable      Price

<C>                     <C>                <C>       <C>                <C>             <C>
$0.70 to $1.30          1,030,000          4.4       $   1.05           710,000         $   1.05
$2.00 to $3.06          1,143,000          2.9           2.16           822,000             2.22
$4.00 to $6.85          1,178,700          1.6           5.27         1,168,700             5.28
$7.15 to $10.00           710,000          0.8           8.17           710,000             8.17
                        ---------         -----      --------         ---------         --------
                        4,061,700          2.5       $   3.83         3,410,700         $   4.26
                        =========         =====      ========         =========         ========
</TABLE>


      We have elected to follow the  measurement  provisions  of APB Opinion No.
      25, under which no  recognition  of expense is required in accounting  for
      stock options  granted to employees for which the exercise price equals or
      exceeds the fair market  value of the stock at the grant date.  Generally,
      stock  options  are  granted at an option  price at or  greater  than fair
      market  value on the date of grant.  We recorded  compensation  expense of
      $27,601, $158,089, and $424,063 for stock options granted to non-employees
      for the years ended December 31, 2002, 2001, and 2000, respectively.

                                      F-21
<PAGE>

      Warrants--Warrant  activity for the years ended  December 31, 2002,  2001,
      and 2000 is summarized as follows:
<TABLE>
<CAPTION>

                                     2002                      2001                       2000
                              ----------------------   -----------------------   -------------------------
                                           Weighted                   Weighted                   Weighted
                                           Average                    Average                    Average
                                           Exercise                   Exercise                   Exercise
                               Warrants     Price       Warrants        Price     Warrants        Price
<S>                           <C>          <C>         <C>             <C>         <C>          <C>
Outstanding at beginning
  of year                     4,612,007    $ 2.92      1,883,672       $ 5.18      150,000      $ 8.50
Granted during the year       5,069,333      1.41      3,441,668         1.24    1,733,672        4.89
Expired                        (225,000)     9.00         --              --          --           --
Exercised                      (286,169)     1.05       (713,333)        1.00         --           --
                              ---------    ------      ---------       ------    ---------      ------
Outstanding at end of year    9,170,171    $ 1.92      4,612,007       $ 2.92    1,883,672      $ 5.18
                              =========    ======      =========       ======    =========      ======
</TABLE>


      The warrants were issued in conjunction  with debt offerings,  issuance of
      common  stock,  and  payment  for outside  services.  To estimate  expense
      related  to  the  issuance  of   warrants,   we  have  used  the  modified
      Black-Scholes  option pricing model.  The warrants expire on various dates
      ranging  from  January  2003  to  November  2007.  Most  warrants  contain
      provisions whereby the expiration date is accelerated if our Common Shares
      close at or above specified prices ranging from $2.50 to $12.00 per share.

8.    OTHER TRANSACTIONS

      On March 31, 2000, we entered into a common stock purchase  agreement with
      a  private  equity  fund  pursuant  to which  the  equity  fund  purchased
      1,251,303  Common  Shares of Altair  for an  aggregate  purchase  price of
      $6,000,000;  however,  the number of shares received by the equity fund in
      exchange for $6,000,000 was subject to repricing adjustments if the lowest
      average  closing  price  for  any ten  days  during  each  of four  30-day
      repricing periods did not meet a certain threshold.  Prior to December 15,
      2000, the equity fund repriced  750,782 of the initial shares it purchased
      under the common  stock  purchase  agreement  and  received an  additional
      1,003,626 Common Shares.

      Pursuant to an  assignment  and  agreement  dated  December 15, 2000,  the
      equity fund referred to in the preceding paragraph  transferred all of its
      remaining rights under the common stock purchase agreement,  including its
      right to reprice the remaining 500,521 of the initial 1,251,303 shares, to
      Doral  18,  LLC  (Doral).  Pursuant  to  this  purchase  agreement,  Doral
      exercised its right to reprice  approximately 70,928 of the initial shares
      and  received  247,678  Common  Shares.   In  exchange  for  approximately
      $1,650,000, we bought from Doral and terminated all remaining rights under
      the common stock  purchase  agreement,  including all remaining  repricing
      rights. In conjunction with this buyout, Doral granted us a call option to
      purchase  247,678  Common  Shares for a nominal  exercise  price.  Between
      December 15, 2000 and December 28, 2001,  we paid $97,743 of principal and
      $244,941 of interest on the $7 million 10% Asset-Backed  Exchangeable Term
      Note  through  the  cancellation  of call  options on the  247,678  Common
      Shares.

                                      F-22
<PAGE>

      In 2001,  we  received  payment of  $561,300  from an  investor on a stock
      subscription receivable.

      On March 26, 2001,  266,170  shares of common stock held in escrow as part
      of the 1999 TransMar,  Inc.  merger  agreement were cancelled  because the
      assets  acquired  from  TransMar,  Inc.  did not  generate  the cash  flow
      required by the escrow agreement.

      On October 18, 2001, we reduced the exercise price of 255,000  outstanding
      warrants  to $1.00 per share  for a period of 45 days and we  reduced  the
      exercise price of 458,333 outstanding  warrants to $1.00 per share through
      December  14,  2001.  As a  result  of these  repricings,  we  recorded  a
      preferential  warrant  dividend of $52,417 as of the repricing  date.  The
      warrants had been  previously  issued with  exercise  prices  ranging from
      $4.00 to $8.00.

      On April 16, 2002,  we reduced the exercise  price of 582,500  outstanding
      warrants to $1.05 per share for the period April 26, 2002 through June 30,
      2002. The warrants had been previously issued with exercise prices ranging
      from  $3.50 to  $5.00.  As a result of these  repricings,  we  recorded  a
      preferential warrant dividend of $48,666 as of the repricing date. A total
      of 286,169 warrants were exercised prior to the expiration date.

      On August 6, 2002,  we adopted an Employee  Stock  Purchase  Plan ("ESPP")
      which allows  employees to purchase common shares at the fair market value
      through payroll deductions.  Through December 31, 2002, a total of 161,550
      common  shares were issued under the ESPP at prices  ranging from $0.38 to
      $0.78 per share.

9.       LEASES

      Operating  Leases--We lease certain premises and equipment under operating
      leases, all of which are on a month-to-month basis.

      Lease  expense for the years  ended  December  31,  2002,  2001,  and 2000
      totaled $207,265, $304,330, and $283,964, respectively.

      Mineral  Leases--Our  subsidiary,  MRS, has entered  into various  mineral
      leases for a 100%  interest  in  approximately  8,700 acres of land in the
      state of Tennessee,  United  States with minimum  annual  advance  royalty
      payments as follows:

         Year ending December 31:
           2003                                $ 147,467
           2004                                  223,236
           2005                                  229,632
           2006                                  229,632
           2007                                  162,423
           Thereafter                            142,631

      The mineral leases are subject to a production royalty;  however, MRS will
      receive a credit against  production  royalties for all advance  royalties
      paid.  The lessors can only  terminate  the leases upon  failure of MRS to
      make the minimum  payments  as  required  by the  leases.  The Company has
      incurred royalties of $129,691,  $87,593, and $101,559 for the years ended
      December 31, 2002, 2001, and 2000, respectively.  As of December 31, 2002,
      we owed $124,959 of royalty payments to lessors.

                                      F-23
<PAGE>


10.   INCOME TAXES

      Because of the net operating losses and a valuation  allowance on deferred
      tax  assets,  there was no  provision  for income  taxes  recorded  in the
      accompanying  consolidated financial statements for the three years in the
      period ended December 31, 2002.

      A  reconciliation  of the  federal  statutory  income  tax  rate  and  our
      effective income tax rates is as follows:
<TABLE>
<CAPTION>

                                                      Year Ended December
                                           ------------------------------------------
                                              2002            2001           2000

<S>                                        <C>            <C>            <C>
Federal statutory income taxes (benefit)   $(3,489,557)   $(2,713,911)   $(2,010,921)
Meals and entertainment                          3,470            601          1,824
Valuation allowance                          3,486,087      2,713,310      2,009,097
                                           -----------    -----------    -----------
    Total                                  $      --      $      --      $      --
                                           ===========    ===========    ===========
</TABLE>



      The components of the deferred tax assets consisted of the following as of
      December 31, 2002 and 2001:

                                        2002             2001
Deferred tax assets:
  Net operating loss carryforward   $ 10,502,652    $  6,238,645
  Unrealized loss                        172,557          80,359
                                    ------------    ------------
  Total deferred tax assets           10,675,209       6,319,004

Deferred tax liabilities:
  Basis difference in assets          (1,748,777)       (879,780)
  Allowance for bad debts                 (1,121)           --

Valuation allowance                   (8,925,311)     (5,439,224)
                                    ------------    ------------
Total deferred tax assets           $       --      $       --
                                    ============    ============

      The net operating loss carryforwards  total $30,007,577 as of December 31,
      2002 and will expire at various dates beginning in 2002 through 2021.

11.   COMMITMENTS AND CONTINGENCIES

      Litigation--We are currently not aware of any  investigations,  claims, or
      lawsuits  which we believe  could have a  material  adverse  effect on our
      consolidated   financial  position  or  on  our  consolidated  results  of
      operations.

                                      F-24
<PAGE>

12.   RELATED PARTY TRANSACTIONS

      During the year ended  December  31,  2002,  officers  made loans to us of
      $6,243  and  we  repaid  loans  from  officers  of  $149,243.  These  were
      short-term,  unsecured,  non-interest bearing loans payable on demand, the
      proceeds of which were used to meet working  capital needs. As of December
      31, 2001, we had related party loans  outstanding of $143,000.  There were
      no related party loans outstanding at December 31, 2002.

13.   BUSINESS SEGMENT INFORMATION

      In  accordance  with  SFAS  No.  131, "Disclosure  about  Segments  of  an
      Enterprise and Related Information," management views the Company as being
      three business segments: Titanium Pigment Processing Technology, Tennessee
      Mineral Property, and the Jig.

      Reportable   segment  data  reconciled  to  the   consolidated   financial
      statements as of and for the fiscal years ended  December 31, 2002,  2001,
      and 2000 is as follows:
<TABLE>
<CAPTION>

                                           Net Sales     Net Loss        Assets

2002:
<S>                                        <C>           <C>           <C>
  Titanium Pigment Processing Technology   $   225,225   $ 2,456,771   $ 6,274,732
  Tennessee Mineral Property                      --         598,977        18,200
  The Jig                                       28,270     2,929,010        10,270
  Unallocated                                     --       2,786,600     2,611,203
                                           -----------   -----------   -----------
Consolidated total                         $   253,495   $ 8,771,358   $ 8,914,405
                                           ===========   ===========   ===========
2001:
  Titanium Pigment Processing Technology   $    45,816   $ 2,783,647   $ 6,752,399
  Tennessee Mineral Property                      --         930,777        16,200
  The Jig                                         --         300,913     2,929,930
  Unallocated                                     --       2,006,195     1,154,714
                                           -----------   -----------   -----------
Consolidated total                         $    45,816   $ 6,021,532   $10,853,243
                                           ===========   ===========   ===========
2000:
  Titanium Pigment Processing Technology   $      --     $ 2,908,436   $ 7,260,506
  Tennessee Mineral Property                      --       1,217,966          --
  The Jig                                         --         366,370     3,385,967
  Unallocated                                     --       2,154,595     6,005,297
                                           -----------   -----------   -----------
Consolidated total                         $      --     $ 6,647,367   $16,651,770
                                           ===========   ===========   ===========
</TABLE>

                                      F-25