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

                                    FORM 10-K

|X|      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

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

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

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

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

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

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

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

Common Shares, no par value                    Nasdaq National 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. |_|

         The aggregate market value of the Common Shares held by  non-affiliates
of the  Registrant  on March 15, 1999,  based upon the closing sale price of the
Common  Shares on the NASDAQ Stock Market of $7.125 per share on March 15, 1999,
was approximately  $89,739,254.  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 15, 1999 the  Registrant had 15,174,915  Common
Shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the Registrant's Proxy Statement for the Annual Meeting of
                  Shareholders to be held on June 10, 1999 are
              incorporated by reference in Part III of this Report.
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<PAGE>

<TABLE>
                               INDEX TO FORM 10-K
                               ------------------
<CAPTION>

<S>        <C>                                                                                                    <C>
PART I     .......................................................................................................1
           Exchange Rate Information..............................................................................1

Item 1.    Business...............................................................................................1
           --------
           General................................................................................................1
           The Jig................................................................................................2
           Target Markets for the Jig.............................................................................3
                  Heavy Minerals Recovery.........................................................................3
                  Coal Washing....................................................................................4
                  Environmental Remediation.......................................................................5
                  Other Testing...................................................................................5
           Tennessee Mineral Property.............................................................................5
           California Mineral Property............................................................................6
           Technology and Proprietary Rights......................................................................7
           Competition--the Jig...................................................................................7
                  Alternative Technologies........................................................................7
                  Spirals and Cones...............................................................................8
                  Froth Flotation Devices.........................................................................8
                  Heavy Media Separation..........................................................................8
                  Competing Products..............................................................................8
           Competition--the Mineral Properties....................................................................8
           Plan of Operation......................................................................................9
                  Business Development-the Jig....................................................................9
           Business Development-the Mineral Properties............................................................9
                  Research, Testing and Development of the Jig...................................................10
                  Research, Testing and Development of the Mineral Properties....................................11
           Subsidiaries..........................................................................................12
           Government Regulation and Environmental Concerns......................................................12
                  Government Regulation..........................................................................12
                  Environmental Regulation and Liability.........................................................13
           Employees.............................................................................................13
           Glossary of Terms.....................................................................................13
           Forward-looking Statements............................................................................14
           Factors that May Affect Future Results................................................................14
                  Absence of Operating Revenues or Profits.......................................................15
                  Possibility of Continuing Operating Losses.....................................................15
                  Risks Associated With Sufficiency and Price of Capital.........................................15
                  Government Regulation..........................................................................15
                  Enforceability of Civil Liabilities Against Foreign Persons....................................16
                  Dependence on Key Personnel....................................................................16
                  Acquisition Risks..............................................................................16
                  Possible Issuance of Substantial Amounts of Additional Shares Without Stockholder Approval
                            .....................................................................................16
                  Volatility of Stock Price......................................................................16
                  Shares Eligible for Future Sales...............................................................17
                  Absence of Dividends...........................................................................17
                  Capacity Limitations of the Series 12 Jig......................................................17
                  Testing Status of the Series 30 Jig--Mineral Sands Processing..................................17
                  Testing Status of the Series 30 Jig--Coal Washing..............................................18
                  Risks Upon Completion of Testing...............................................................18
                  Competition From Alternative Technologies......................................................18
                  Competition From Other Jig-like Products.......................................................18
                  Dependence on Commodities Markets..............................................................19
                  Dependence on Third Party Manufacturers........................................................19
                  Patents for the Centrifugal Jig................................................................19
                  Exploratory Stage of Development--Tennessee Mineral Property...................................19
                  Uncertainty of Obtaining Environmental Permits for the Tennessee Mineral Property..............20
                  Exploratory Stage of Development--California Mineral Property..................................20
                  Absence of Detailed Plans for the California Mineral Property..................................21
                  Uncertainty of Obtaining Environmental Permits for the California Mineral Property.............21
                  Environmental Liability on Mineral Properties..................................................21

Item 2.    Properties............................................................................................21
           ----------

Item 3.    Legal Proceedings.....................................................................................22
           -----------------
</TABLE>


                                                         i

<PAGE>

<TABLE>

<S>        <C>                                                                                                   <C>
Item 4.    Submission of Matters to a Vote of Security Holders...................................................22
           ---------------------------------------------------

PART II    ......................................................................................................23

Item 5.    Market for the Registrant's Common Stock and Related Shareholder Matters..............................23
           ------------------------------------------------------------------------
           Market Price..........................................................................................23
           Outstanding Shares and Number of Shareholders.........................................................24
           Dividends.............................................................................................24
           Transfer Agent and Registrar..........................................................................24
           Canadian Taxation Considerations......................................................................24

Item 6.    Selected Financial Data...............................................................................24
           -----------------------
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.................25
           -------------------------------------------------------------------------------------
           Overview..............................................................................................25
           Results of Operations.................................................................................26
           Liquidity and Capital Resources.......................................................................27
           Year 2000 Issues......................................................................................27

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk............................................28
           ----------------------------------------------------------
Item 8.    Financial Statements and Supplementary Data...........................................................28
           -------------------------------------------
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................28
           ------------------------------------------------------------------------------------

PART III   ......................................................................................................28

Item 10.   Directors and Executive Officers of the Registrant....................................................28
           --------------------------------------------------
Item 11.   Executive Compensation................................................................................28
           ----------------------
Item 12.   Security Ownership of Certain Beneficial Owners and Management........................................28
           --------------------------------------------------------------

Item 13.   Certain Relationships and Related Transactions........................................................28
           ----------------------------------------------
PART IV    ......................................................................................................29

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

SIGNATURES ......................................................................................................32
</TABLE>


                                                        ii

<PAGE>

                                     PART I

This Annual Report on Form 10-K for the year ended December 31, 1998 (this "Form
10-K") contains "forward- looking  statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the  "Securities  Act"),  and Section
21E of the Exchange Act of 1934, as amended (the "Exchange  Act"),  that involve
risks and  uncertainties.  Purchasers of any of the common shares,  no par value
(the "Common Stock") of Altair  International  Inc.  ("Altair" or the "Company")
are  cautioned  that the  Company's  actual  results will differ (and may differ
significantly)  from the results  discussed in the  forward-looking  statements.
Factors that could cause or contribute to such differences include those factors
discussed herein under "Factors That May Affect Future Results" and elsewhere in
this Form 10-K generally.  The reader is also 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.

Exchange Rate Information.

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

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                    ----------------------------------------------------------------------
                                      1998           1997           1996           1995            1994
                                    ---------      ---------      ---------      ---------      ----------
                                                       (Canadian dollar per US dollar)
<S>                                  <C>           <C>             <C>            <C>             <C>   
High...............................  1.5770        1.4398          1.3822         1.4238          1.4078

Low................................  1.4075        1.3392          1.3310         1.3285          1.3103

Average............................  1.4894        1.3849          1.3638         1.3725          1.3664

Year End...........................  1.5375        1.4288          1.3697         1.3655          1.4030
</TABLE>


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

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

         Altair  International  Inc.  was  incorporated  under  the  laws of the
Province  of  Ontario,  Canada in April 1973 for the  purpose of  acquiring  and
developing  mineral  properties.  Unless the  context  requires  otherwise,  all
references to "Altair,"  "Altair  International  Inc.," or the "Company" in this
Prospectus refer to Altair International Inc. and each of its subsidiaries.

         Since 1994, the Company has increasingly  shifted its emphasis from the
acquisition and development of mineral properties to the development and testing
of mineral  processing  equipment for use in the recovery of fine, heavy mineral
particles,  including titanium, zircon, gold and environmental contaminants. The
Company has also leased,  and seeks to lease or acquire,  lease mineral deposits
suitable for the use of its mineral processing equipment.

         During 1996,  Altair  acquired  the rights to the Campbell  Centrifugal
Jig, since modified and renamed the Altair Centrifugal Jig (the "Jig"),  through
a merger involving the Company, Fine Gold Recovery Systems, Inc., a wholly owned
subsidiary  of the Company  ("Fine  Gold"),  and Trans Mar,  Inc.,  a Washington
corporation  ("TMI").  The Jig is a machine that uses a rotating circular screen


                                        1

<PAGE>
and pulsating water to separate  valueless  mineral particles from more valuable
mineral particles based on the differences in their specific gravity.  In tests,
the Jig has proven capable of segregating and recovering  extremely fine mineral
particles which are not  economically  recoverable  using existing  conventional
techniques.  Altair is presently  testing and customizing the Jig for use in the
recovery  of heavy  minerals  such as  titanium  and  zircon  and for use in the
washing of coal.  Management believes that the Jig could also be used to recover
other minerals such as gold and for environmental remediation. See "--Technology
and Proprietary Rights."

         Altair has also leased, and is exploring,  an approximately 13,600 acre
parcel of land near Camden,  Tennessee  (the  "Tennessee  Mineral  Property") to
determine  whether it would be amenable to  large-scale  mining for titanium and
zircon using the Jig or other  equipment.  Preliminary  reports suggest that the
Tennessee  Mineral  Property  contains  significant  amounts of  valuable  heavy
minerals,  including titanium and zircon, and is suitable for a large-scale sand
mining operation with a multi-decade life. See "--Tennessee Mineral Property."

         In  October  1998,  Altair  acquired  an option to enter into a mineral
processing lease on a heavy mineral sand stockpile located near Ione, California
(the "California  Mineral  Property";  collectively  with the Tennessee  Mineral
Property, the "Mineral Properties"). Although the limited size of the California
Mineral Property suggests that any mineral processing operation conducted on the
property  would be small scale and  short-term,  existing data suggests that the
stockpiled  materials  grade between 14% and 31% heavy minerals  (compared to 2%
heavy  minerals  content in some primary mine  locations).  Of the heavy mineral
content,  approximately 50-65% is ilmenite, which is used as a feed stock in the
manufacture  of titanium  dioxide  pigment--a  common  ingredient  in  plastics,
paints,  and paper.  Altair has commenced initial drilling to verify the content
of the stockpile,  and, if such tests reveal consistent,  adequate mineral grade
of ilmenite,  Altair plans to commence gravity  separation tests and feasibility
analysis sometime in 1999.

         From  a  financial  and  accounting   standpoint,   the  Company  is  a
development  stage firm and has been since its  inception.  To date, the Company
has derived no revenues from product sales or otherwise and has  experienced  an
operating loss in every year of operation. In the fiscal year ended December 31,
1998, the Company experienced operating losses of $1,762,088.

         Throughout  this Form 10-K,  the  Company is  sometimes  referred to or
defined as a  "development  stage"  company  or firm.  Such  references  are for
financial  and  accounting  purposes  only and are  intended to signify that the
Company is  devoting  substantially  all of its  efforts to  establishing  a new
business, and planned principal operations have commenced, but there has been no
significant revenue therefrom.  References to the Company as a development stage
company are not intended to imply that  exploration  activities  with respect to
the Tennessee Mineral Property,  the California  Mineral Property,  or any other
mineral deposits have disclosed a commercially  viable reserve.  For purposes of
Regulation  S-K, Item 802,  Guide 7 promulgated  under the Exchange Act of 1934,
the Company should be considered an "exploration stage" company.

The Jig.

         The 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.  Management  believes  the Jig  will  prove  able to
economically  recover  smaller  particles  than can  presently  be  economically
recovered by competing  gravity  technologies.  While not yet confirmed  through
actual operations, the cost to manufacture and operate the Jig is expected to be
similar to the cost to manufacture  and operate  competing  gravity  separators,
which can efficiently  process only particles larger than 150 mesh. In contrast,
the  Company's  tests  suggest  that the Jig will be able to  maintain  relative
efficiency when processing feeds as small as 400 mesh. See  "--Competition."  In
tests conducted to date using the Jig to process relatively small particles, the
Jig has yielded  product  quality  (grade and  contaminates)  equivalent to that
yielded by alternative  technologies processing larger particles.  See "--Target
Markets" and "--Competition."

         Several prototype and demonstration  Jigs have been built and tested by
the Company and TMI.  Continued field testing of the Jig is being  undertaken to
increase the volume  capacity,  identify any design  problems that may reside in
the Jig technology,  evaluate the Jig's ability to perform sustained operations,
determine  the potential for downtime  during such  operations  and estimate the
anticipated maintenance costs associated with continued operations.

                                        2

<PAGE>

In addition,  field testing is being carried out to improve operating design for
specific  applications.  There can be no assurance that the testing program will
be successful for all  applications or that testing will  demonstrate the Jig to
be economically  attractive to end users.  See "--Factors That May Affect Future
Results."

         During 1998, the Company conducted preliminary testing of the Series 30
Jig at a mineral  recovery plant operated by a large heavy mineral sand producer
located in northern Florida.  Results of the testing indicate that the Series 30
Jig is capable of producing separation results comparable in efficiency to those
of the Series 12 Jig for zircon  concentrates.  The Series 30 Jig,  however,  is
designed  to be capable of  processing  500 tons of solids per day, or more than
four times the  throughput  capacity of the Series 12 Jig. The volumes of solids
per day that the Series 30 and Series 12 Jigs are actually capable of processing
have not been  established  through testing;  however,  the Company expects that
continued  testing over the next six to twelve  months will confirm that the two
models can process the volumes they have been  designed to process.  The Company
has also  begun  design  work for a larger  Jig that  would  have over twice the
processing  capacity  of  the  Series  30  Jig.  See  "--Research,  Testing  and
Development."  Such  increased  capacity  would  enhance  the  Jig's  commercial
potential for high volume applications such as coal washing and recovery of iron
ore  fines.   Also,   multiple  units  might  be  used  in  series  or  parallel
configurations to process high volume operations.

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

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


Target Markets for the Jig.

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

         Heavy Minerals Recovery.  In the minerals arena, the Company is seeking
to enter into royalty or limited  licensing  agreements  under which the Jig can
add value to the  beneficiation  process,  especially  the  processing  of heavy
mineral  sands.  Verification  testing with the Series 12 Jig suggests the Jig's
potential  for  recovering  zircon  from heavy  minerals  sand dry mill tails in
Florida.  In Phase 1 and 2 trials conducted by the Company involving  separation
of  commercial  grade  zircon  products  from mineral  sands,  the Series 12 Jig
withdrew a larger  portion of zircon from the feed ore than other  mineral sands
processing  equipment  in  use  today.  In  tests  on  zircon/contaminate  feeds
conducted by the Company,  the Series 12 Jig has yielded greater than 90% zircon
concentrates  and  recovered  up to 75% of the zircon  fed to the unit.  Initial
testing of the Series 30 Jig on zircon/contaminate  feeds produced results which
were generally equivalent to the Series 12 Jig. The Company plans more extensive
testing of the Series 30 Jig during 1999.
See "--Plan of Operation."

         
The primary  valuable  minerals  produced  from heavy mineral sands are
titanium and zircon. Titanium is used primarily as a basic component of titanium
dioxide,  a pigment  used  principally  as a whitener and  opacifier  for paper,
plastics  and  paint.  Zircon is used  primarily  for  foundry  molds and in the
manufacture  of certain  types of glass and ceramics.  The Company  believes the
domestic and  international  markets for both of these products are  significant
and well established.  Both are commodities  traded in bulk,  usually under long
term contracts, and are also sold in 50-100 lbs. bags, usually traded as a


                                        3

<PAGE>
spot-priced  product. The U.S. Geological Survey has reported that production of
titanium  dioxide in the United States during 1998 was  approximately  1,360,000
metric tons,  representing a market value of approximately $3 billion.  The U.S.
Geological  Survey does not report  zirconium  production for the United States;
however,  according to the 1993 Mineral  Commodities  Summaries  prepared by the
U.S.  Department of the Interior,  Bureau of Mines,  consumption of zirconium in
the United States during 1992 was approximately 75,000 metric tons, representing
a market value of  approximately  $16.1 million.  There can be no assurance that
testing will demonstrate  that the Jig can  economically  extract heavy minerals
from heavy minerals sands or that the Jig will prove attractive to end users.

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

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

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

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

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

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

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

                                        4

<PAGE>

         Based on these test results, and others, the Company believes utilities
in the eastern  United  States may be able to use the Jig to remove  pyrite from
high sulphur eastern coals,  potentially  reducing the need to incur the expense
of transporting low-sulphur western coals. For example, the cost of transporting
coal from  Wyoming,  a large coal mining area, to the  midwestern  United States
typically  comprises 75% of the cost of the delivered coal product. In addition,
the Company  believes  the Jig may be used to remove ash from coal,  which would
benefit  utilities  because ash  reduces  the  thermal  value of coal and causes
undesirable  environmental  impacts.  The Company  established  a coal wash test
program with  Kerr-McGee  Coal Corp. and the University of Southern  Illinois to
utilize a Series 12 Jig in  processing  coal feeds in an on-line coal wash plant
production  environment.  The test  program was  completed in late- 1998 and the
Company  expects  the  results to be  published  by the  University  of Southern
Illinois in the second quarter of 1999. See "--Plan of Operation."  There can be
no assurance that testing will demonstrate that the Jig can economically  remove
pyrite,  ash or other  substances  or that the Jig  will be  attractive  to coal
purchasers.

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

         Other Testing. The Company has licensed a Series 12 Jig to BHP Minerals
International   Inc.  ("BHP")  for  installation  at  BHP's  worldwide   testing
laboratory  in Reno,  Nevada.  Under the terms of the  license,  in exchange for
nominal  consideration,  the Company has granted BHP a non-exclusive license for
use of the Series 12 Jig until  September 1, 1999.  BHP is not restricted in its
choice of ores or minerals for testing. The Series 12 Jig has been installed and
the Company has committed to train BHP personnel to operate and conduct  routine
maintenance,  and to provide limited consulting to BHP on an on-going basis. See
"---Plan of Operation."

Tennessee Mineral Property.

The Tennessee  Mineral Property  consists of approximately  13,600 acres of land
that the  Company has leased (or has  binding  commitments  to lease) in or near
Camden, Tennessee,  containing fine, heavy minerals. From 1996, when the Company
began acquiring leases,  through 1998,  exploration  activities on the Tennessee
Mineral Property have included geologic mapping, sample collection,  drilling of
123 auger holes and  preparation  of geologic  and deposit  models.  The deposit
model also  incorporates  40 drill  holes  completed  by an earlier  exploration
company.   Deposit  model  estimates  are  consistent  with  deposit   estimates
previously  determined by other resource  companies.  The mineralized deposit on
the  Tennessee  Mineral  Property  has not yet been  proven to be a reserve  (as
defined in  Regulation  S-K, Item 802,  Guide 7  promulgated  under the Exchange
Act), and the Company's limited  operations and proposed plan with respect to it
are exploratory in nature.

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


                                       5
<PAGE>

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

         In July 1998,  an  independent  consulting  group  hired by the Company
completed a technical  pre-feasibility study of approximately 4,700 acres of the
Tennessee  Mineral Property known as the "Camden Deposit." The study states that
the Camden  Deposit  contains an indicated  resource of 12 million tons of total
heavy minerals consisting of 65%  titanium-bearing  minerals,  5% zircon and 20%
non-valuable  heavy minerals.  It indicated that saleable  ilmenite,  rutile and
zircon products can be produced,  and that established  markets  currently exist
for such  products.  The study  then  modeled  mining and  production  costs and
concluded that the Camden Deposit has the potential to be economically mined via
a large-scale sand mining operation with an approximate 20-year life.

         Based on the positive results of the consultant's  report,  the Company
initiated a final feasibility study in August 1998. The Company anticipates that
such  study  will  involve  additional   drilling  to  further  define  resource
characteristics,  detailed  analysis of mineralogical  characteristics  and mine
processing  methods,  larger  scale  testing of the Series 30 Jig,  analysis  of
product markets,  and evaluation of possible  strategic  alliances.  The Company
expects that  completion of a feasibility  study will take 12-18 months.  If the
feasibility study suggests that  cost-effective  mining of the Tennessee Mineral
Property is feasible, mining could begin within 24-36 months after completion of
the  study,  subject  to,  among  other  things,  the price of,  and  demand for
extractable  heavy  minerals  and the  Company's  ability  to  obtain  necessary
financing,  permits,  and  government  approvals.  See "--Plan of Operation" and
"--Government Regulation and Environmental Concerns."

         Subsequent to the  completion  of the  pre-feasibility  study,  further
exploration  of the  Tennessee  Mineral  Property by the Company  suggested  the
existence of an  additional  heavy mineral sands  resource of  approximately  10
million  tons in an area  northwest of the Camden  Deposit  known as the "Little
Benton  Deposit."  Preliminary  results  indicate that the Little Benton Deposit
contains a high-grade titanium mineralization similar to the Camden Deposit. The
Company has approximately  7,900 acres under lease in the Little Benton area and
intends to conduct further testing of the Little Benton Deposit. If such testing
affirms the  existence of the  indicated  resource,  and the  feasibility  study
suggests  that  cost-effective  mining  of the  Tennessee  Mineral  Property  is
feasible,  the production  capacity and/or life of the mining operation could be
significantly increased.

California Mineral Property.

         In October 1998, the Company  entered into an exploration  license with
respect to a heavy mineral sand  stockpile near Ione,  California.  The license,
which allows the Company to explore and test for heavy minerals,  has a one-year
term and  includes  an  option to enter  into a  production  agreement  with the
licensee to extract heavy minerals from the sand stockpile.

         The stockpile was  accumulated  over a 40-year period as an impoundment
of material  removed from sand ores used by a glass sand mining operation in the
area.  The  Company  has  drilled 23 auger  holes in the  property;  preliminary
testing of the resulting  samples indicates that the sands grade from 14% to 31%
total heavy minerals with  approximately  250,000 tons of ilmenite present.  The
very high  concentration  of heavy  minerals  in a small  area  suggests  that a
small-scale,  low-cost mining operation may be effective in mining the property.
During 1999, the Company intends to drill  additional  holes to define the heavy


                                       6
<PAGE>

mineral resource area, assess potential environmental implications of mining the
stockpile,   and  conduct  gravity   separation   tests  to  determine   product
marketability.  If the exploratory work on the property indicates that it can be
economically developed,  the Company intends to exercise its option with respect
to the  production  agreement  and  commence  mining in late 1999 or early 2000,
subject to, among other things,  the price of and demand for  extractable  heavy
minerals and the Company's  ability to obtain necessary  financing,  permits and
governmental approvals.  See "--Plan of Operation" and "--Government  Regulation
and Environmental Concerns."

         Technology and Proprietary Rights.

In operation,  the Jig utilizes a  combination  of standard  mechanical  jig and
centrifugal technologies. Without having tested the Jig in sustained, commercial
operations, management believes production models of the Jig, if completed, will
be  capable  of  sustaining  high  reliability  and low  maintenance  costs in a
production  environment.  See "--Plan of Operation."  Use of the Jig requires no
chemical additives. The Series 12 Jig stands about six feet tall, requires floor
space of about 25 square feet and weighs  approximately 2,000 pounds,  while the
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.

         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.

         The  Company  does  not  intend  to  establish  its  own  manufacturing
facility.  Management  is  considering  options  for  manufacture  of  the  Jig,
including manufacturing under contract, exclusive licensing, or a joint venture.
The arrangement  could eventually  include an exclusive license for manufacture,
warehousing and  distribution of spare parts, as well as maintenance and leasing
of the Jig. Currently,  the Company has entered into an agreement with a machine
shop located in central Tennessee to manufacture three Series 30 Jigs.

         Initial  patents related to the concept of the Jig as a whole have been
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These  patents  expire 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. On
May 15, 1997,  the Company filed an  application  in the United States seeking a
third patent for an efficiency  enhancing  component of the Jig.  Patents on the
same  component  have been issued in Europe,  Australia,  Japan,  South  Africa,
Canada and Brazil with expiration dates between April and November 2018.

         In separate transactions in 1996, 1997, and 1998, the Company purchased
an  aggregate of  approximately  99% of the capital  stock of  Intercontinental
Development  Corporation ("Indeco") for total consideration of $424,605.  Indeco
has as its sole assets a royalty  agreement  entitling it to 10% of profits from
use of the Jig worldwide.

Competition--the Jig.

         Alternative  Technologies.   Various  mineral  processing  technologies
perform  many  functions  similar  or  identical  to those  for which the Jig is
designed.  See "Factors That May Affect Future  Results--Competing  Products and
Alternative   Technologies."  Minerals  processing  technologies  are  generally
predicated on the physical and chemical  characteristics  of the materials being
processed. A minerals processor may exploit contrasts in size, specific gravity,
hardness,   magnetic  susceptibility,   electrical  conductivity,   and  similar

                                        7

<PAGE>
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 in this arena include the following:

         Spirals and Cones. To separate out valuable  particles with a spiral or
         cone,  a mineral  processor  runs a sand- size feed  slurried  in water
         through a tilted trough  (spiral) or over a convex surface  (cone).  In
         this process,  fine-sized  particles  tend to "float" and not settle as
         quickly as larger  particles.  The difference in settling speed permits
         the mineral  processor  to separate  out and extract the more  valuable
         heavy  particles.  Spirals and cones are most  effective  in feed sizes
         larger than 150 mesh.

         Froth Flotation Devices.  To separate minerals using a froth floatation
         device,  a processor  introduces  chemical  agents into a pool of mixed
         particles,  which agents attach to certain  sulfides.  Once attached to
         the  chemical  agents,  the sulfides  float to the  surface.  The froth
         flotation  method can be effective on particles  200 mesh or smaller in
         size.

         Heavy Media Separation.  Heavy media separation is a process in which a
         feed  containing  both dense and light particles is fed into a solution
         whose specific gravity is midway between the particles to be separated.
         The light  particles  float to the surface of the  solution,  while the
         heavy particles sink. Heavy media separation is effective  primarily in
         the  removal of ash from coal and in small  scale  analytic  laboratory
         applications.

                  The Company  believes that, in certain  applications,  the Jig
may prove more efficient,  cost effective,  or adaptable than spirals and cones,
froth  flotation  devices,  or heavy  media  separation  devices.  Nevertheless,
results  from  further  tests  or  actual   operations  may  reveal  that  these
alternative  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  technologies as technically superior to, or more
cost effective than, the Jig.

         Competing  Products.  The Company believes that the Jig currently faces
several forms of competition in the  commercial  segregation of dense  particles
contained in feeds between 150 and 400 mesh,  including  the Kelsey Jig,  Falcon
concentrators and the Knelsen batch concentrator unit, which are currently being
used worldwide. See "Factors That May Affect Future Results--Competing  Products
and Alternative  Technologies."  Another centrifugal jig device, the Kelsey jig,
has been  developed in  Australia  subsequent  to the  invention of the Jig. The
Kelsey  jig is more  complicated  in  design  than the Jig,  which  the  Company
believes  makes it more  expensive  to  manufacture,  operate and  maintain in a
production environment.  According to the Kelsey jig's manufacturer,  Geo Logics
Pty.  Ltd.,  Kelsey  jigs are in service at 20 plants  worldwide.  In  addition,
Falcon,  a Canadian  company,  produces a concentrator  which is used mainly for
pre-concentration and scavenging. Their principal applications to date have been
in the gold and  tantalum  industries.  There also  exists a batch  concentrator
known as the Knelsen  Bowl,  which  management  believes is best suited to small
volumes. (A batch concentrator  differs from the Jig in that it process a finite
"batch" of material,  is completely emptied, and then processes a completely new
finite batch,  while the Jig processes a continuous flow of materials).  Knelsen
Bowls  have been  installed  in various  mining  applications,  primarily  gold,
throughout  the  world.  Both  the  Falcon  and  Knelsen  concentrators  utilize
different technologies than the technologies employer by the Jig.

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

Competition--the Mineral Properties.

         Based on the  exploratory  work done to date,  the Company  anticipates
that the saleable products which may be produced from the Mineral Properties are
ilmenite,  rutile and zircon.  Ilmenite,  which may contain 40% to 70%  titanium
dioxide,  is used in the  production of titanium  dioxide  pigment,  a specialty
chemical used  principally  as a whitener and opacifier for paper,  plastics and
paint. Ilmenite is the most abundant naturally occurring,  commercially produced
titanium  mineral  and  supplies  approximately  90% of  the  world  demand  for

                                        8

<PAGE>

titaniferous material. Such demand is projected to increase at an annual rate of
2%-3% for the foreseeable future. The United States imports approximately 60% of
total ilmenite consumed. There are presently three entities in the United States
which produce  ilmenite  concentrate  from heavy mineral sands and virtually all
production is used by five 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. The Company believes that, if it can  economically  mine the
Mineral  Properties  and  produce  satisfactory  products  for  sale to  pigment
producers,  it may have a  competitive  advantage  in being a domestic  producer
operating in close proximity to its primary markets.

         Rutile,  which generally contains greater than 95% titanium dioxide, is
also used in the production of titanium  dioxide  pigment.  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 Mineral Properties.

         Zircon is used in ceramic, refractory and foundry applications.  Zircon
sand is currently being produced at three mines in the southeastern  U.S. and in
several  countries  around the world. The U.S.  Geological  Survey believes that
long-term  supply  shortages may occur unless new  production  sources of zircon
concentrates are developed.

Plan of Operation.

         Business  Development-the Jig. Testing conducted to date by the Company
indicates the Jig may have economic  potential in a wide variety of  industries,
and  management  believes  the Jig can be used for finely  sized heavy  minerals
recovery, coal cleaning and environmental  remediation.  See "--Target Markets".
During 1999,  the Company  plans to continue  developing  these target  markets,
which  may  have  near-term  profit  potential,  through  implementation  of the
following critical steps:

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

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

         (3)      Initial  engineering  and  design  work for a Jig that will be
                  larger than the Series 30 Jig.  See  "--Research,  Testing and
                  Development."

         (4)      Separation  testing on potential new ore applications  such as
                  tin and iron ore fines.

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

         Business Development-the Mineral Properties.
         --------------------------------------------

         The Company  believes  that,  with the  discovery of the Little  Benton
Deposit,  the value of the  Tennessee  Mineral  Property has been  significantly
enhanced.  Accordingly, the Company is seeking to identify strategic options and
potential  sources of capital for  development of the property.  The Company has
initiated a feasibility  study with respect to developing the Tennessee  Mineral
Property; completion is expected by mid-2000.

         The  Company  intends to continue  its  exploration  of the  California
Mineral Property. If the results of this work are positive,  the Company expects
to  commence  mining  on the  property  as  soon  as it  obtains  the  necessary
financing, permits and governmental approvals.


                                        9

<PAGE>

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

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

         (1)      The Company has installed and commenced testing of a Series 30
                  Jig at a mineral  recovery plant located in Northern  Florida.
                  Tests  conducted  by the  Company  indicate  that  the  Jig is
                  capable of yielding  greater than 90% zircon  concentrates and
                  recovering up to 75% of the zircon fed to the unit. The Series
                  30  Jig is  designed  to  process  500  tons  per  day  and is
                  considered  to be  commercial-  sized  for  this  application.
                  Testing scheduled during the first half of 1999 is intended to
                  verify Jig  processing  capacity and improve  other  operating
                  design  parameters.  Also,  sustained  operational  testing is
                  intended  to  determine  the Jig's  capability  for  sustained
                  operations with limited downtime. To this end, the high-volume
                  testing will be done on a stream in the normal plant operating
                  environment.  Jig  concentrate  and tailings  products will be
                  commingled  with other  plant  outputs.  Access to the Florida
                  test  site  is  controlled  by a  large  heavy  minerals  sand
                  producer that supplies test materials for processing.  On-site
                  testing  is  being   conducted   by  two  Company   employees.
                  Additional Company employees provide periodic testing analysis
                  and engineering services at the site. A Series 12 Jig unit has
                  also  been  installed  at  the  sand  processing  facility  in
                  Northern  Florida.  This  unit is being  used to test  various
                  other plant titanium and zircon  feedstreams and to test heavy
                  mineral  sand  feeds  from other  Florida  locations.  Testing
                  utilizing  the  Series 12 Jig is being  performed  by  Company
                  personnel.

         (2)      A  joint  coal  wash  test  program  with  Southern   Illinois
                  University and Kerr-McGee  Coal Corp. was  established  during
                  late 1997 at Kerr-McGee's  Galatia Coal Preparation Plant near
                  Harrisburg, Illinois. During 1998, Kerr-McGee sold its Galatia
                  coal   operations  to  American  Coal  Company,   who  assumed
                  Kerr-McGee's  role in the test  program.  A Series  12 Jig was
                  installed in the Galatia Plant and testing was conducted  with
                  the Jig  treating  feeds  from  the  plant's  coal  processing
                  streams to remove fine  particles  of ash and pyrite.  Testing
                  was  performed  by  two  Southern  Illinois   University  test
                  facility  employees with periodic reviews conducted by Company
                  employees.  The  testing  has been  completed  and the Company
                  expects  the  results to be  published  by the  University  of
                  Southern  Illinois in the second  quarter of 1999. The Company
                  will  evaluate  these  results,  together  with the results of
                  operational and field testing, to determine a course of action
                  for future coal wash programs.

         (3)      The Company has established a Jig testing  facility near Reno,
                  Nevada to test samples supplied by mineral companies and other
                  potential   users  of  the  Jig.  The  facility  is  used  for
                  demonstrations  of the Jig  technology,  provides  amenability


                                       10

<PAGE>

                  testing  for a variety of mineral  ores,  and serves as a test
                  site for  on-going  equipment  design.  The test  facility  is
                  equipped  with a Series  12 Jig,  placed  in a  "closed  loop"
                  circuit  designed to take an initial  charge of solids (0.5 to
                  2.0 tons) which can be continuously  fed in slurry form to the
                  Jig.  Concentrate and tails streams produced by the Jig may be
                  accessed for sampling prior to recombination and return to the
                  feed  circuit.  Amenability  testing  performed  at  the  test
                  facility  during 1998  included  heavy mineral sand feeds from
                  the  Mineral  Properties  and ores  which  may have  near term
                  commercial  potential for recovery using the Jig. Operation of
                  the Jig test  facility  is  performed  exclusively  by Company
                  personnel.

         (4)      Engineering  and  design  work will  continue  on a Jig having
                  approximately  twice the processing  capacity of the Series 30
                  Jig. The Company  anticipates that it will be able to complete
                  construction of the first unit by the end of 1999.

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

         Research,  Testing  and  Development  of  the  Mineral  Properties.  As
discussed in "--Tennessee  Mineral Property" above, in July 1998, an independent
consulting  group completed a technical  pre-feasibility  study of approximately
4,700 acres of the Tennessee  Mineral  Property  known as the "Camden  Deposit."
Based on the positive results of the consultant's  report, the Company initiated
a final  feasibility  study in August  1998 which it  anticipates  will  involve
additional  drilling  to  further  define  resource  characteristics,   detailed
analysis of mineralogical  characteristics and mine processing  methods,  larger
scale testing of the Series 30 Jig, analysis of product markets,  and evaluation
of possible  strategic  alliances.  The Company expects that a feasibility study
will  be  completed  by  mid-2000.   If  the  feasibility  study  suggests  that
cost-effective  mining of the  Tennessee  Mineral  Property is feasible,  mining
could begin within 24-36 months after completion of the study, subject to, among
other things,  the price of, and demand for  extractable  heavy minerals and the
Company's  ability  to  obtain  necessary  financing,  permits,  and  government
approvals

         During  1998,  the Company  incurred  $724,907 in deferred  exploration
expenditures on the Tennessee  Mineral  Property.  Expenditures were incurred on
leasehold  minimum  advance  royalty  payments,  auger hole drilling,  sampling,
sample analysis and assay,  geological and mineralized deposit  characterization
studies and other related exploration activities.

         As discussed in  "--California  Mineral  Propertys"  above,  in October
1998, the Company  entered into an  exploration  license with respect to a heavy
mineral sand  stockpile  near Ione,  California.  The license,  which allows the
Company to explore and test for heavy minerals, has a one-year term and includes
an option to enter into a  production  agreement  with the  licensee  to extract
heavy minerals from the sand stockpile. See "Item 2 Properties." The Company has
drilled 23 auger holes in the  property;  preliminary  testing of the  resulting
samples indicates that the sands grade from 14% to 31% total heavy minerals with
approximately 250,000 tons of ilmenite present. During 1999, the Company intends
to drill  additional  holes to define the heavy mineral  stockpile area,  assess
potential  environmental  implications of processing the stockpile,  and conduct
mineral processing tests to determine product marketability.  If the exploratory
work on the  property  indicates  that  it can be  economically  developed,  the
Company intends to exercise its option with respect to the production  agreement
and  commence  processing  in late 1999 or early 2000,  subject to,  among other
things, the price of and demand for extractable heavy minerals and the Company's
ability to obtain necessary financing, permits and governmental approvals.

         During  1998,  the Company  incurred  $68,344 in  deferred  exploration
expenditures on the California Mineral Property.  Expenditures were incurred for
the  exploration  license,  auger hole drilling,  sampling,  sample analysis and
assay, and related exploration activities.


                                       11

<PAGE>

Subsidiaries.

         Altair  International  Inc.1  was  incorporated  under  the laws of the
province  of  Ontario,  Canada in April  1973.  The  Company  currently  has two
wholly-owned   subsidiaries,   Fine  Gold  Recovery  Systems,   Inc.,  a  Nevada
corporation  ("Fine  Gold"),  and  Mineral  Recovery  Systems,  Inc.,  a  Nevada
corporation  ("MRS"),  and four indirect wholly owned  subsidiaries,  California
Recovery  Systems,  Inc., a Nevada  corporation,  Altair  Technologies,  Inc., a
Nevada corporation,  Tennessee Valley Titanium, Inc., a Nevada corporation,  and
660250  Ontario  Limited,  and  Ontario  Corporation.   The  Company  also  owns
approximately  99%  of  the  capital  stock  of   Intercontinental   Development
Corporation. "-Technology and Proprietary Rights"

         Fine Gold was acquired by the Company in April 1994.  Fine Gold is, for
accounting  purposes,  a development  stage  company with no operating  revenues
earned to date.  The Company's  acquisition of TMI in February 1996 was effected
by merging  TMI with and into Fine Gold (the "TMI  Merger").  Fine Gold also now
includes the  operations of a  wholly-owned  subsidiary of the Company  formerly
known as Mineral  Recovery  Systems,  Inc.,  which was merged with and into Fine
Gold in June 1996. As discussed below,  another  wholly-owned  subsidiary of the
Company,  formerly known as Carlin Gold Company,  is now operated under the name
Mineral Recovery Systems,  Inc. The Company intends that Fine Gold will hold and
maintain Jig technology rights, including patents, and will enter into a royalty
arrangements to allow MRS to develop and commercially utilize the Jig.

         MRS was incorporated by the Company in April, 19872. MRS previously has
been  involved in the  exploration  for minerals and  development  of unpatented
mining claims in Nevada, Oregon and California.  All mining claims have now been
abandoned.  The  Company  currently  intends  that  MRS  will  arrange  for  the
manufacture of the Jig for commercial sales, rental or royalty arrangements with
end users. In addition, MRS currently holds, directly or indirectly,  all of the
Company's interest in the Mineral  Properties,  and the Company intends that MRS
will continue to lease or acquire and develop mineral  properties in the future,
particularly  properties  that contain  mineral  resources that may be processed
with the Jig.

         California  Recovery  Systems,  Inc.  holds the  company's  exploratory
rights with respect to the California  Mineral Property.  The remaining indirect
100% owned subsidiaries do not presently have any assets or operations.

Government Regulation and Environmental Concerns.

         Government  Regulation.   The  Company's  exploration  of  the  Mineral
Properties and testing of the Jig are, and any future  testing,  construction or
mining activities of the Company 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 the Company 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.  These laws are continually  changing
and, as a general matter, are becoming more restrictive.

         Compliance with federal, state, or local laws or regulations represents
a small part of the Company's present budget; nevertheless, continued compliance
may be extremely costly, especially if the Company actually commences extraction
operations on the Tennessee Mineral Property or the California Mineral Property.
If the Company fails to comply with any such laws or  regulations,  a government
entity  may levy a fine on the  Company or require  the  Company to take  costly
measures to ensure compliance. Any such fine or expenditure may adversely affect
the Company's development.

         The Company is committed to complying with and, to its knowledge, is in
compliance with all governmental regulations. The Company's primary product, the
Jig,  does not require the addition of chemicals in its  processing of minerals.
The Company cannot, however,  predict the extent to which future legislation and
regulation could cause

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

         1 The Company was incorporated in April 1973 under the name Diversified
Mines  Limited,  which was  subsequently  changed to Tex-U.S.  Oil & Gas Inc. in
February 1981, then to Orex Resources Ltd. in November 1986, then to Carlin Gold
Company Inc. in July 1988, to Altair  International Gold Inc. in March 1994, and
to Altair International Inc. in November 1996.

         2 MRS was formerly  known as Carlin Gold  Company.  The name change was
effective in June 1996.

                                       12

<PAGE>

the Company to incur additional operating expenses, capital expenditures, and/or
restrictions  and  delays  in the  development  of the  Company's  products  and
properties.

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


Employees.

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

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

Glossary of Terms.

         Amenability means responsiveness of an ore deposit to processing.

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

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

         Beneficiate means to improve the grade of ore by processing.

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

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

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

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

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


                                       13

<PAGE>

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

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

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

         Mineralized  Deposit or Mineral Deposit means a mineralized  body which
has been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metals. Such a deposit does
not qualify as a reserve until a comprehensive  evaluation based upon unit cost,
grade,  recoveries  and other  material  factors  conclude  legal  and  economic
feasibility.

         Placer means  deposits of sand,  gravel and other  detrital or residual
material  containing a valuable mineral which has accumulated through weathering
and natural mechanical  concentration  processes.  A placer mine is an operation
that  recovers  certain  valuable  minerals  based on  differences  in  specific
gravity.

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

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

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

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

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 this section and
other  cautionary  statements  throughout this Form 10-K and the Company's 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,  the Company's actual results may vary materially
from those anticipated, estimated, projected, or intended.

         Among the key factors that may have a direct  bearing on the  Company's
operating results are risks and uncertainties  described under "Factors That May
Affect Future Results," including those attributable to the absence of operating
revenues   or   profits,    uncertainties    regarding   the   development   and
commercialization  of the Jig,  development  risks  associated  with the Mineral
Properties,  and uncertainties regarding the Company's ability to obtain capital
sufficient to continue its operations and pursue its proposed business strategy.

Factors that May Affect Future Results.

---------------------------------------------
Risk Factors Related to the Company Generally
---------------------------------------------

                                       14

<PAGE>
         Absence of Operating Revenues or Profits.  The Company is a development
stage company.  To date, the Company has not generated  revenues from operations
or realized a profit. The Company is presently investing  substantial  resources
in the testing and  development  of the Jig and the  exploration  of the Mineral
Properties.  There can be no assurance that the Jig, the Mineral Properties,  or
any other  project  undertaken  by the  Company  will ever enable the Company to
generate  revenues  or that the Company  will at any time  realize a profit from
operations.

         Possibility of Continuing Operating Losses. The Company has experienced
a loss from  operations in every fiscal year since its inception.  The Company's
losses from operations in 1997 were $1,831,471 and its losses from operations in
1998 were  $1,762,088.  Consistent  with its  history,  the  Company  expects to
experience a net loss from operations  during 1999. The Company will continue to
experience  a net  operating  loss  until,  and if, the Jig  and/or the  Mineral
Properties  begin  generating  revenues for the Company.  Even if the Jig or the
Mineral Properties begin generating  revenues,  such revenues may not exceed the
costs of production.  Accordingly,  the Company cannot provide assurance that it
will ever realize a profit from operations.

         Risks Associated With  Sufficiency and Price of Capital.  The Company's
existing  capital may prove  insufficient to complete testing and development of
the Jig or  exploration of the Mineral  Properties.  This  insufficiency  may be
caused by numerous factors, including without limitation, unanticipated expenses
associated  with  developing  the Jig or exploring the Mineral  Properties,  the
Company's  inability to locate and reach an agreement with a company  willing to
manufacture  the Jig at a reasonable  price, or the need for a radical change in
the design of the Jig.

                  If the Company  determines  to construct and operate a mine on
the Tennessee Mineral Property or the California Mineral Property, the Company's
existing  capital will be  inadequate to complete  construction  of the mine and
commencement of operations. In addition, the Company may need additional capital
for  necessary  or   discretionary   acquisitions   of  equipment,   properties,
intellectual  property rights or companies.  General and industry market factors
or other  unforeseen  events may also affect the  Company's  use of and need for
capital.

                  If the Company needs additional capital, it may not to 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, without limitation, the following:

      o  market  factors   affecting  the   availability  and  cost  of  capital
         generally;
      o  the performance of the Company;
      o  the size of the Company's capital needs;
      o  the market's perception of mining, technology, and or minerals stocks;
      o  the economics of projects being pursued; and
      o  industry  perception of the Company's  ability to recover minerals with
         the Jig or otherwise.

If the Company is unable to obtain sufficient capital or is forced to pay a high
price for capital,  the Company may be unable to complete testing and production
of the Jig, exploration and development of the Mineral Properties,  or otherwise
pursue  and fully  exploit  existing  or future  development  opportunities.  In
addition,  because of their size, resources,  history and other factors, certain
competitors  of the Company may have better  access to capital  than the Company
and, as a result, may be able to exploit opportunities more easily or thoroughly
than the Company.

         Government  Regulation.   The  Company's  exploration  of  the  Mineral
Properties and testing of the Jig are, and any future  testing,  construction or
mining activities of the Company 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 the Company 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.  These laws are continually  changing
and, as a general matter, are becoming more restrictive.

                  Compliance  with federal,  state, or local laws or regulations
represents a small part of the Company's present budget; nevertheless, continued
compliance may be extremely costly, especially if the Company actually commences
mining  operations on the Tennessee  Mineral Property or the California  Mineral
Property.  If the Company fails to comply with any such laws or  regulations,  a

                                       15

<PAGE>

government  entity may levy a fine on the Company or require the Company to take
costly measures to ensure compliance. Any such fine or expenditure may adversely
affect the Company's development.

         Enforceability  of  Civil  Liabilities  Against  Foreign  Persons.  The
Company is an Ontario corporation, and a majority of its directors are residents
of  Canada.  In  addition,  certain  of the  Company's  experts  (including  its
principal  accountants  and 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  the  Company  or  such
directors, officers or experts predicated upon the civil liability provisions of
United  States  securities  laws or (ii) impose  liability  in original  actions
against the  Company or its  directors,  officers,  or experts  predicated  upon
United States securities laws.

         Dependence on Key Personnel.  The continued success of the Company will
depend to a significant extent on the services of Dr. William P. Long, President
and Chief  Executive  Officer of the Company,  and Mr. C. Patrick  Costin,  Vice
President  of the  Company  and  President  of Fine  Gold and  MRS.  The loss or
unavailability of Mr. Long or Mr. Costin could have a material adverse effect on
the Company.  The Company does not carry key man  insurance on the lives of such
key officers.

                  In addition to the individuals  identified  above, the Company
employs a Vice President of Marketing,  Director of Finance, controller,  senior
process engineer, process engineer, metallurgist,  geologist, and administrative
assistant. The Company has no other employees.  Aside from Dr. Long, Mr. Costin,
the Vice President of Marketing, and the Director of Finance, the Company has no
employment agreements with any of its personnel.  Competition for such personnel
is intense,  and the Company  can provide no  assurance  that it will be able to
attract and maintain all personnel  necessary for the  development and operation
of its business.

         Acquisition  Risks. The Company is currently  evaluating,  and plans to
continue to  evaluate,  licensing  or acquiring  additional  mining  products or
properties.  The Company also plans to remain open to  acquiring,  or developing
strategic  relations  with,  other  companies that have products,  manufacturing
capabilities, or other qualities that are compatible with the Company's business
objectives.  The Company must compete for  attractive  acquisition  or strategic
alliance   candidates  with  numerous  other   companies,   many  of  whom  have
significantly greater financial and technological resources than the Company. In
addition, to the extent the Company is in a competitive position, it may fail to
identify or consummate acquisition or strategic alliance opportunities.

                  Even if the Company  identifies and completes such  alliances,
consummation  thereof may require the Company to incur additional debt, amortize
expenses  related to goodwill and intangible  assets,  or issue dilutive  equity
securities,  all of which could adversely affect the Company's operating results
or financial  condition.  In addition, a failure by the Company to integrate its
operations  with that of an ally or  acquisition  target  may  adversely  affect
operating results.  Disruptions in operations are likely to be especially severe
during the fiscal  quarters  immediately  following any  acquisition or alliance
transaction, while the operations of the acquired or combined business are being
integrated into the Company's operations.

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

         Volatility  of Stock Price.  The Common Stock was listed on the Alberta
Stock Exchange through April 23, 1998 and has been listed on the Nasdaq National
Market since January 26, 1998.  Between March 24, 1997 and January 23, 1998, the
Common  Stock was listed on the Nasdaq  SmallCap  Market.  Trading in the Common
Stock has been characterized by a high degree of volatility. See "Price Range of
Common Stock." Trading in the Common Stock may continue to be  characterized  by
extreme volatility for numerous reasons, including the following:


                                       16

<PAGE>

         o   The continued absence of any revenues from the Jig;

         o   Uncertainty regarding the viability of mining the Tennessee Mineral
             Property or the California Mineral Property;

         o   Continued  dominance  of  trading  in the  Common  Stock by a small
             number of firms;

         o   Positive   or  negative   announcements   by  the  Company  or  its
             competitors;

         o   Industry trends,  general economic  conditions in the United States
             or  elsewhere,  or  the  general  markets  for  equity  securities,
             minerals, and commodities;

         o   The  announcement of financial or research and development  results
             that differ from analyst and investor  expectations,  regardless of
             the health of the Company;

         o   Significant changes in future prospects of the Company; and

         o   Speculation  by short  sellers  of shares of Common  Stock or other
             persons  who stand to profit  from a rapid  increase or decrease in
             the price of the Common Stock.

         Shares Eligible for Future Sales. The resale of "restricted securities"
as well as securities held by "affiliates" of the Company,  is generally subject
to the provisions of Rule 144 ("Rule 144")  promulgated under the Securities Act
of 1993,  as amended  (the  "Securities  Act").  In  general,  under Rule 144 as
currently in effect,  a person (or persons whose shares are  aggregated) who has
beneficially  owned  restricted  securities for at least one year (including the
holding  period of any prior owner except an affiliate),  including  persons who
may be deemed "affiliates" of the Company,  would be entitled to sell within any
three-month  period a number of shares that does not exceed the greater of 1% of
the number of shares of common  shares then  outstanding  or the average  weekly
trading volume of the Common Stock during the four calendar weeks  preceding the
filing of a Form 144 with respect to such sale. In addition, a person who is not
deemed to have been an  affiliate  of the Company at any time during the 90 days
preceding a sale, and who has beneficially  owned the shares proposed to be sold
for at least two years  (including the holding period of any prior owners except
an  affiliate),  would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above. The Company is unable to predict the
effect that future sales under Rule 144 may have on the then  prevailing  market
price of the Common Stock.

                  In addition,  shares issued upon  exercise of options  granted
pursuant to the Company's  employee stock option plans are presently  registered
under  the  Securities  Act.  Subject  to  certain  restrictions  on  resale  by
affiliates,  such  shares  may be  sold  without  restriction.  The  sale of any
substantial  number of shares of Common Stock will have a  depressive  effect on
the market price of the Common Stock.

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

--------------------------------------------------------
Risk Factors Primarily Related to Development of the Jig
--------------------------------------------------------

         Capacity  Limitations  of the Series 12 Jig.  To date,  the Company has
developed and tested a lower-capacity Series 12 Jig and a higher-capacity Series
30 Jig. Test results on the Series 12 Jig,  designed to be capable of processing
approximately  120 tons of solids per day,  suggest that  commercial  use of the
Series 12 Jig is technically  feasible.  Nevertheless,  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  performs  to design
specifications  in  subsequent  tests or at a commercial  facility,  the Company
believes  that,  because of its small  capacity,  the  potential  market for the
Series 12 Jig is limited.

         Testing  Status of the Series 30  Jig--Mineral  Sands  Processing.  The
Series 30 Jig is designed to process  approximately  500 tons of solids per day.


                                       17

<PAGE>
The Company believes that this designed capacity is sufficient for heavy mineral
sands  processing  and  many  other  intended  commercial  applications.  Having
completed an initial set of tests on the Series 30 Jig at a heavy  minerals sand
processing  facility in Northern  Florida,  the Company  hopes that it can begin
marketing  the  Series 30 Jig for heavy  mineral  sands  recovery  during  1999.
Nevertheless,  the Company can provide no assurance  that the Series 30 Jig will
prove  attractive to potential  end users.  Even if the Company is successful in
leasing the Series 30 Jig to end users,  the  Company  can provide no  assurance
that, once installed in uncontrolled operational environments, the Series 30 Jig
will  prove  efficient,   durable,  or  cost-effective  enough  to  satisfy  the
expectations of end users. In addition,  the introduction of new technologies by
competitors   could  render  the  Series  30  Jig  or  larger  Jig  obsolete  or
unmarketable or require costly alterations to make it marketable.

         Testing Status of the Series 30 Jig--Coal Washing. With respect to coal
washing, the larger volume series 30 Jig has not yet been tested to evaluate its
ability to operate at a commercial  production facility.  The Company expects to
have installed a Series 30 Jig at an independent coal production facility during
1999, and expects that testing will take a minimum of six months. Depending upon
the results of such testing,  the Company hopes to begin marketing the Series 30
Jig for coal  washing  within three months of the date such testing is complete.
Nevertheless,  the test  results  may  indicate  that the  Series  30 Jig is not
capable of processing the volume of coal it is designed to process or capable of
removing  fine  pyrite  particles  and  ash  from  coal  fines  with  acceptable
efficiency or with  reasonable  maintenance  costs.  If not, the Company expects
that marketing of the Series 30 Jig for coal washing will be delayed.  Moreover,
even if the Series 30 Jig or larger Jig performs to design  specifications  in a
controlled  test in a production  facility,  the Series 30 Jig may not wash coal
fines  in  a  cost-effective   manner  outside  the  test   environment,   prove
sufficiently  durable,  or otherwise prove attractive to end users. In addition,
the introduction of new  technologies by competitors  could render the Series 30
Jig or larger Jig obsolete or unmarketable or require costly alterations to make
it marketable.

         Risks Upon Completion of Testing. Although test results from controlled
tests on the Series 30 Jig  suggest  that it is capable of  separating  valuable
heavy  minerals from mineral  sands and removing  fine pyrite  particles and ash
from coal  fines,  the Series 30 Jig has not been  operated as part of an actual
commercial mineral processing or coal production facility.  When integrated into
an actual commercial operations, the Series 30 Jig:

         o   may not be able to process sand or coal at its design capacity;

         o   may not recover a commercially valuable end product at a commercial
             viable rate when processing mineral sands or coal;

         o   may break down frequently or otherwise be too costly to operate and
             maintain;

         o   may be  displaced  or  rendered  obsolete  by the  introduction  of
             competing  technologies  or  jigs  and  may  be  incompatible  with
             developing mining or extraction processes; and

         o   may be  rendered  obsolete  by the  absence  of  demand  for  heavy
             minerals, coal, or other end product of processing.

         Competition From Alternative Technologies.  The centrifugal jig process
may not prove  superior,  either  technically  or  commercially,  to alternative
technologies. As explained in "Competition--Alternative Technologies" on page 7,
various  mineral  processing  technologies  perform  many  functions  similar or
identical to those for which the Jig is designed.  The Company believes that, in
certain  applications,  the Jig may prove more  efficient,  cost  effective,  or
adaptable  than  spirals  and cones,  froth  flotation  devices,  or heavy media
separation  devices.   Nevertheless,   results  from  further  tests  or  actual
operations may reveal that these alternative  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 technologies as
technically superior to, or more cost effective than, the Jig.

         Competition From Other Jig-like Products. The Company believes that the
Jig currently  faces several forms of competition in the commercial  segregation
of dense  particles  contained in feeds between 150 and 400 mesh,  including the
Kelsey Jig, Falcon  concentrators and the Knelsen batch concentrator unit, which
are  currently  being  used  worldwide.  See  "Factors  That May  Affect  Future
Results--Competing  Products and Alternative  Technologies." Another centrifugal
jig device,  the Kelsey jig, has been  developed in Australia  subsequent to the
invention of the Jig.  According to the Kelsey  jig's  manufacturer,  Geo Logics

                                       18

<PAGE>

Pty.  Ltd.,  Kelsey  jigs are in service at 20 plants  worldwide.  In  addition,
Falcon,  a Canadian  company,  produces a small batch  concentrator as well as a
machine  which  is used  mainly  for  pre-concentration  and  scavenging.  Their
principal  applications  to date have been in the gold and tantalum  industries.
There also exists a batch  concentrator known as the Knelsen Bowl. Knelsen units
have been installed in various mining applications,  primarily gold,  throughout
the world. Competitors, many of whom may have significant capital and resources,
may  develop,  or be in the process of  developing,  superior or less  expensive
alternatives to the Jig.

         Dependence on Commodities Markets. If the Jig is successfully developed
and manufactured,  the Company intends 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  the  control  of the  Company.  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  being  produced or expected  to be produced on the  Tennessee  Mineral
Property or California Mineral Property could have a significant negative effect
on the viability of a mine or processing  facility on either such  property.  In
addition,  because the  Company  intends to market the Jig  primarily  to mining
companies,  a general economic downturn in the mining or mineral  industries may
have a material adverse effect on the Company.

         Dependence  on  Third  Party   Manufacturers.   The  Company  currently
contracts on a per-unit  basis with a machine shop located in central  Tennessee
for assembly of the Jig but has no long-term  contract with such entity.  If the
Company  completes testing of the Jig and develops a final production model, the
Company does not  currently  have the know-how or resources to establish its own
manufacturing facility. Management is considering options for manufacture of the
Jig, including  manufacturing under a long-term contract or through an exclusive
licensing  arrangement or joint  venture.  The Company may not be able to obtain
adequate manufacturing  capacity.  Moreover, even if a manufacturer is found, it
may not be able  to  cost-effectively  produce  affordable,  high-quality  units
capable of sustaining  continuous  operations  with low  maintenance  costs in a
production environment.

         Patents for the Centrifugal  Jig.  Initial patents on the Jig have been
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These  patents  expire on various  dates  between May 1999 and December  2000. A
series of second  patents have been issued with respect to a critical  component
of the Jig 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.  The Company filed an application in the
United States seeking a third patent for a recently  developed  component of the
Jig on May 15, 1997.  Patents on the same  component have been issued in Europe,
Australia,  Japan, South Africa, Canada and Brazil with expiration dates between
April and November 2018.

                  The Company  can  provide no  assurance  that  pending  patent
applications  will be granted.  In  addition,  persons in countries in which the
Company has not patented the Jig or certain critical  components may develop and
market an infringing  product.  The cost of enforcing  patents  outside of North
America,  and similar obstacles,  may limit the Company's ability to enforce its
patents and keep infringing products out of the market for the Jig.

------------------------------------------------------------------------
Risk Factors Primarily Related to Development of the Minerals Properties
------------------------------------------------------------------------

                  Exploratory Stage of Development--Tennessee  Mineral Property.
The  Tennessee  Mineral  Property is  currently  in the  exploratory  stage.  An
independent  consultant  hired by the  Company has  completed a  pre-feasibility
study on the Tennessee  Mineral  Property,  which study  concludes  sands on the
Tennessee Mineral property contain commercial quantities of heavy minerals.  The
preliminary study further concludes that the sands can be economically  mined to
produce  commercial grade products and that  established  markets exist for such
products.  Based on these  results,  the  Company has  determined  to commence a
feasibility study of the Tennessee Mineral Property.


                                       19

<PAGE>

         The feasibility  study,  commenced during August 1998, will involve the
actual design,  pricing,  and analysis of equipment and facilities that would be
used to mine the Tennessee Mineral Property. The Company expects that
completion  of a  feasibility  study  will take 12-18  months  and that,  if the
feasibility study suggests that  cost-effective  mining of the Tennessee Mineral
Property is  feasible,  a mine would not be  operational  for 24-36 months after
completion of the study. The  pre-feasibility  testing or the feasibility  study
may  indicate  that the  Tennessee  Mineral  Property  does not contain  minable
quantities  of  heavy  minerals  or  that  such  deposits  are not  amenable  to
large-scale,  low-cost  mining,  as  contemplated  by the  Company.  Even if the
testing  and  studies  suggest  that  mining  is  economically  feasible  on the
Tennessee Mineral Property, the Company can provide no assurance that it will be
able to  obtain  the  capital,  resources,  and  permits  necessary  to mine the
Tennessee Mineral Property.  Moreover,  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.

         Uncertainty  of  Obtaining  Environmental  Permits  for  the  Tennessee
Mineral  Property.  In order to begin  construction  and mining on the Tennessee
Mineral Property, the Company may have to obtain a number of federal, state, and
local permits,  none of which the Company has obtained.  Because the Company has
not yet commenced design of a mining facility in the Tennessee Mineral Property,
the Company is 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,  the Company  anticipates  that
compliance   with  the  Clean  Air  Act,  the  Clean  Water  Act,  the  Resource
Conservation  and Recovery  Act, and the  Comprehensive  Environmental  Response
Compensation  Liability  Act would be  necessary  if the Company  determined  to
commence construction and operation of a mine on the Tennessee Mineral Property.
See "--Government Regulation."

                  In addition to these federal laws and regulations, the Company
anticipates  that, if the Tennessee  Property is developed,  the Company will be
required to obtain a surface mining permit from the State of Tennessee under the
Tennessee  Mineral Surface Mining Law of 1972. The application for such a permit
must be preceded by public notice and must include, among other things, a filing
fee,  a  reclamation  and  revegetation  plan,  and a bond to cover the costs of
reclamation.  Moreover,  absent  definitive  plans for a mining operation on the
Tennessee Mineral  Property,  the Company cannot determine what such operation's
water needs or discharge levels would be. Nevertheless,  the Company anticipates
that it will be required to obtain a water discharge  permit under the Tennessee
Water Quality  Control Act. The Company can provide no assurance that it will be
able to obtain the federal and state permits  necessary to construct and operate
a mine on the Tennessee Mineral Property.

         The Company is not aware of any  existing  local land use  restrictions
that  would  prevent  or  affect  mining  operations  on the  Tennessee  Mineral
Property. Nevertheless, in the absence of a detailed plan for a mining operation
on the Tennessee  Mineral  Property,  the Company has not held  discussions with
State and local officials regarding land use issues and can provide no assurance
as to their response any proposed mining operation.

         Exploratory Stage of  Development--California  Mineral Property. Altair
acquired leasehold rights to the California Mineral Property during October 1998
and  immediately  commenced  initial  testing of the stockpiles  located on such
property.  Such initial testing  involves  drilling holes to collect samples for
use in defining the  stockpile  base and,  assuming the analysis of such samples
yields favorable results,  experiments regarding the ease with which constituent
heavy  minerals--particularly  ilmenite--can be separated out and extracted.  If
such initial tests suggest that valuable heavy minerals can be cost  effectively
extracted,  Altair plans to begin designing and pricing the equipment  necessary
to process minerals on the California Mineral Property.  Assuming Altair is able
to design and obtain all  necessary  equipment  at a  reasonable  price and in a
timely manner,  Altair  anticipates  that mineral  processing  operations on the
California  Mineral  Property  would commence as early as the end of 1999 or the
first  quarter of 2000.  Nevertheless,  the initial  testing may reveal that the
stockpiles on the California Mineral Property do not contain a sufficient volume
or density heavy minerals or that constituent valuable heavy minerals can not be
cost effectively extracted. Even if the testing suggests that mineral processing
is economically feasible,  Altair may be unable to obtain necessary equipment at
the projected price, and the revenues  generated by such mineral  processing may
be  insubstantial.  Moreover,  the Company may be unable to obtain the  capital,
resources,  and permits necessary to process minerals on the California  Mineral
Property,  and market factors, such as a decline in the price of, or demand for,
minerals  recoverable at the California  Mineral Property,  may adversely affect
the development of mineral processing operations on such property.


                                       20
<PAGE>
         Absence of Detailed  Plans for the  California  Mineral  Property.  The
Company is not aware of specific  circumstances which would significantly delay,
or increase the cost of, developing the California  Mineral  Property;  however,
the  Company  has not  obtained  sufficient  mineral  and  economic  feasibility

information to develop definitive

plans with  respect  to the  precise  design  and  nature of mineral  processing
operations,  if any, on the California Mineral Property. The specific details of
such plans will largely  determine  the cost and  difficulty  of complying  with
governing  environmental and land use laws.  Significant factors the Company has
not explored include the following:

         o        The  Company  has  not  commenced  any of  the  environmental,
                  cultural,    and   other   studies   required   by   governing
                  environmental  and regulatory  laws. Such studies are designed
                  to reveal the  existence of factors that may increase the cost
                  and difficulty of obtaining necessary permits and approvals.

         o        The  Company has not  reviewed  State of  California  or local
                  environmental  or land use  laws to  determines  what  permits
                  would be necessary to conduct mineral processing operations on
                  the  California  Mineral  Property  or what  restrictions  may
                  increase the cost of, or prevent,  planned mineral  processing
                  activities.   In   general,   land   use   and   environmental
                  restrictions   in  California  are  strict  and  may  be  cost
                  prohibitive.

         o        Absent definitive plans for a mineral processing  operation on
                  the California Mineral Property,  the Company cannot determine
                  what such  operation's  water needs or discharge  levels would
                  be.  Depending  on the  nature  of water  use at the  proposed
                  mineral processing site, the Company may be required to obtain
                  a water  discharge  permit under  California's  water  control
                  laws.

         Uncertainty  of  Obtaining  Environmental  Permits  for the  California
Mineral Property.  In order to begin processing the stockpiles on the California
Mineral Property, the Company may have to obtain a number of federal, state, and
local permits,  none of which the Company has obtained.  Because the Company has
not yet commenced design of a mineral processing facility, the Company is not in
a position to definitively  ascertain which federal,  state and local mining and
environmental laws or regulations would apply to a mineral  processing  facility
on the California Mineral Property.  Nevertheless,  the Company anticipates that
compliance   with  the  Clean  Air  Act,  the  Clean  Water  Act,  the  Resource
Conservation  and  Recovery  Act,  the  Comprehensive   Environmental   Response
Compensation  Liability  Act,  and  applicable  state  and local  laws  would be
necessary if the Company determined to commence  construction and operation of a
mineral   processing   facility  on  the  California   Mineral   Property.   See
"--Government Regulation."

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

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

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

                                       21

<PAGE>

         Fine Gold and MRS lease 5,700  square feet of office space at 230 South
Rock Boulevard,  Suite 21, Reno,  Nevada 89502.  The lease for the Reno,  Nevada
offices expires on January 31, 2000. MRS leases  approximately 1,550 square feet
of laboratory  space at 7950 Security  Circle,  Reno,  Nevada 89506, for its Jig
testing  operations.  The test facility  lease may be terminated by either party
upon eight weeks prior  written  notice.  Management  believes that the existing
offices and test facilities of the Company and its subsidiaries are adequate for
their current needs. In the event that alternative or additional office space is
required,  the Company  believes it could obtain  additional space on commercial
acceptable terms.

         The Tennessee Mineral Property  consists of approximately  13,600 acres
of real  property  located  near  Camden,  Tennessee,  which MRS  leases (or has
binding  commitments to lease) from multiple  owners of the real property.  Such
leases grant MRS certain exclusive rights, including the right to explore, test,
mine,  extract,  process,  and sell any minerals or other materials found on the
land, in exchange for the payment of minimum annual  advanced  royalty  payments
prior to commencement of production on the properties (or after  commencement of
production,  to the extent  production  royalty  payments  do not equal  nominal
royalty  payments) and,  thereafter,  production  royalty  payments in an amount
equal to a percentage of the value of minerals mined and sold from the property.
See Note 6 to the Consolidated  Financial  Statements for information  regarding
present and future minimum advanced royalty  payments.  The leases typically are
for a  minimum  term of ten  years,  and may be  extended  indefinitely  at MRS'
option, provided the Company is actively conducting exploration, development, or
mining  operations.  The  leases  are  cancelable  by MRS at any  time,  and are
cancelable  by the lessor in the event MRS breaches the terms of the lease.  The
mineralized deposit on the Tennessee Mineral Property has not yet proven to be a
reserve,  and the Company's  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 the  Company's
knowledge, has not been used in prior mining operations.

         The  California  Property  consists of a heavy  mineral sand  stockpile
located near Ione, California. A subsidiary of MRS, California Recovery Systems,
Inc.  ("CRS"),  has an exploration  license effective as of October 1, 1998 with
the  property  owner which gives CRS the right to prospect and explore for heavy
minerals and evaluate  the property as a situs of an operation  for  extracting,
processing  and shipping of heavy  minerals.  The license has a term of one year
and also  grants CRS the option to enter into a  production  agreement  with the
property  owner,  pursuant  to  which  CRS is  granted  a right to  process  the
stockpile in exchange for a fixed  mineral  royalty  payment plus an  additional
production  based royalty.  The  production  agreement has been executed by both
parties and placed in escrow.  CRS may  exercise  its option with respect to the
production  agreement at any time during the term of the license. The production
agreement  has a term of ten  years  with  options  to  extend  if CRS is not in
default  and  minerals  are  being  extracted  in  commercial  quantities.   The
mineralized  deposit on the California Mineral Property has not yet proven to be
a reserve and the Company's  operations and proposed plan with respect to it are
exploratory in nature. See "Item 1. Business--California  Mineral Property." The
California  Mineral  Property is accessed by public  roads and is a stockpile of
material  removed  from sand ores used by a glass sand mining  operation  in the
area.

         During  1997 and 1998,  the  Company  incurred  $480,244  and  $793,251
respectively  in deferred  exploration  expenditures  on the  Mineral  Property.
Expenditures were incurred on leasehold minimum advance royalty payments,  auger
hole drilling,  sampling,  sample analysis and assay, geological and mineralized
deposit characterization studies, and other related exploration activities.

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

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

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

         The Company  did not submit any  matters to a vote of security  holders
during the fourth quarter of the 1998 fiscal year.

                                       22

<PAGE>

                                     PART II

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

Market Price

         In the United  States,  prior to March 23,  1997,  the Common Stock was
listed under the symbol "AIGDF" on the over-the-counter  bulletin board maintain
by the National  Association  of Securities  Dealers the  ("OTCBB").  The prices
listed below  represent the closing high and low bid prices for the Common Stock
on OTCBB during the period from January 1, 1997 through March 23, 1997.  The bid
prices set forth below are market  quotations  based on interdealer  bid prices,
without  markup,   markdown  or  commission,   and  may  not  represent   actual
transactions.



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

    1st Quarter (through March 23, 1997)...         $6.50            $11.375


         From March 24, 1997 until January 23, 1998, the Common Stock was quoted
on the Nasdaq SmallCap Market under the symbol "ALTIF." The following table sets
forth, for the periods  indicated,  the high and low sales prices for the Common
Stock, as reported by the Nasdaq SmallCap Market:



Fiscal Year Ended December 31, 1997:                 Low               High
                                               ---------------   ---------------
         1st Quarter (beginning March 24,
         1997)..............................       $8.5625            $12.25
         2nd Quarter........................        4.75                9.625
         3rd Quarter........................        5.125               9.875
         4th Quarter........................        7.75               16.625



Fiscal Year Ended December 31,  1998

         1st Quarter (through January 23,   
         1998)..............................      $13.75              $15.625


         Beginning  on January 26, 1998,  the Common Stock began  trading on the
Nasdaq National Market under the symbol "ALTIF." The following table sets forth,
for the periods  indicated,  the high and low sales prices for the Common Stock,
as reported on the Nasdaq National Market.


Fiscal Year Ended December 31, 1998                   Low               High
                                                ---------------   --------------
         1st Quarter (beginning January 26, 
         1998)..............................       $8.125             $15.625
         2nd Quarter........................        7.00                9.625
         3rd Quarter........................        3.00               10.25
         4th Quarter........................        5.875               8.625


The last sale price of the Common  Shares,  as reported  on the Nasdaq  National
Market, on March 15, 1999 was $7.125 per share.


                                       23

<PAGE>

Outstanding Shares and Number of Shareholders.

         As of March 15, 1999, the number of shares of Common Stock  outstanding
was 15,174,915 held by 479 holders of record. In addition,  as of the same date,
the Company has reserved  3,418,000  shares of Common  Stock for  issuance  upon
exercise of options that have been, or may be,  granted under its employee stock
option plans.

Dividends

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

Transfer Agent and Registrar

         The  Transfer  Agent  and  Registrar  for the  Common  Stock is  Equity
Transfer Services, Inc., Suite 420, 120 Adelaide Street West, Toronto,  Ontario,
M5H 4C3.

Canadian Taxation Considerations

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

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

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


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

         The  following  table  sets  forth  selected   consolidated   financial
information  with  respect to the Company and its  subsidiaries  for the periods
indicated.  The data is derived from financial statements prepared in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP"), which
differ in certain respects from those in the United States. See Note 15 of Notes
to Consolidated Financial Statements included herein for certain reconciliations
to accounting  principles generally accepted in the United States ("U.S. GAAP").


                                       24

<PAGE>
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>
                                                                    Year Ended December 31,
                                              -------------------------------------------------------------------
                                                  1998          1997          1996         1995          1994
                                              ------------   -----------   ----------   -----------  ------------
<S>                                           <C>            <C>           <C>         <C>           <C>
Statements of Operations:
  Revenues from Operations................... $        -0-   $       -0-   $      -0-  $        -0-  $        -0-
  Operating Expenses..........................   2,064,960     1,858,033    1,335,725       438,103       573,049
  Interest Expense............................      32,165        43,497       19,373           -0-           -0-
  Interest Income.............................    (335,037)      (70,059)     (27,872)       (1,000)         (979)
                                              ------------   -----------   ----------   -----------  ------------
  Net Loss....................................$  1,762,088   $ 1,831,471   $1,327,226   $   437,103  $    572,070
                                              ============   ===========   ==========   ===========  ============
  Loss per Common Share.......................$      (0.13)  $     (0.13)  $    (0.12)  $     (0.07) $      (0.12)
                                              ============   ===========   ==========   ===========  ============
  Cash Dividends declared per Common Share....$        -0-   $       -0-   $      -0-   $       -0-  $        -0-
                                              ============   ===========   ==========   ===========  ============
  Deficit, Beginning of Year..................$  6,303,879   $ 3,956,564   $3,332,064   $ 2,894,961  $  2,322,891
  Net Loss....................................   1,929,539     1,831,471      624,500       437,103       572,070
  Other Expense (Income) .....................     411,603       515,844          -0-           -0-           -0-
                                              ------------   -----------   ----------   -----------  ------------
  Deficit, End of Year........................$  8,645,021   $ 6,303,879   $3,956,564    $3,332,064  $  2,894,961
                                              ============   ===========   ==========   ===========  ============
Balance Sheet Data:
  Working Capital ............................$  2,991,707   $ 7,480,153  $ 2,974,955  $    313,502  $   (113,116)

  Total Assets................................   8,712,052    13,125,804    8,042,888       975,259       384,923
  Long-term Obligations.......................         -0-       602,451      269,685           -0-           -0-
  Current Liabilities.........................     239,512       712,810      308,762        90,910       164,011
  Net Stockholders' Equity....................   8,472,540    11,810,543    7,464,441       884,349       220,219
</TABLE>

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

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

Overview

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

         On November  15,  1994,  the Company  executed an option  agreement  to
acquire TMI, a development stage enterprise which owned all patent rights to the
Campbell Centrifugal Jig, since modified and renamed the Altair Centrifugal Jig.
The  Company  funded  $373,955  of  option-related  costs  during 1994 and 1995.
Subsequently,  during  early 1996,  the  Company  renegotiated  the  acquisition
agreement  and  acquired  all  of the  outstanding  common  stock  of  TMI.  The
acquisition  was  accounted  for as a purchase by the  Company,  which agreed to
issue  to  TMI's  shareholders  1,919,957  shares  of the  Common  Stock  over a
five-year period and 580,000 warrants entitling the holder to purchase one share
of Common Stock for $2.00 (Canadian) until March 1, 1997. The effective purchase
price of TMI was  $3,732,450.  This  consisted of the issuance to the former TMI
shareholders  of Common Stock valued at $2,521,469  (1,919,957  shares of Common
Stock with a deemed value of $1.31 per share) and the assumption of TMI's assets
and liabilities, with liabilities exceeding assets by $1,210,981 at February 29,
1996. The purchase price was allocated to Jig patents and development costs.

         Of the 580,000 Series E Warrants  issued,  561,585 were exercised prior
to January 31, 1997; the remaining  18,415  warrants have been canceled.  Of the

                                       25

<PAGE>

1,919,957 shares of Common Stock initially  deposited into escrow, in connection
with the TMI Merger,  749,957 shares have been released pursuant to the terms of
the  governing  agreements,  180,765  were  released  pursuant  to a  settlement
agreement  dated March 19,  1998 (the  "Settlement"),  and  723,065  shares were
canceled  pursuant to the  Settlement.  The remaining  266,170  shares remain in
escrow  subject to a  Performance  Escrow  Agreement  dated  February  29,  1996
("Performance  Escrow  Agreement"),  which  provides for release of one share of
Common Stock for each $1.80 in cash flow  received by Altair,  provided  that no
more than  one-third of the original  number of shares of Common Stock  escrowed
may be released in any one year over the first three years of the escrow. Shares
of Common  Stock still in escrow at the end of five years may be canceled by the
Alberta Stock Exchange.

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

Results of Operations.

Fiscal Years 1998, 1997 and 1996

         The Company has earned no revenues  to date.  Operating  losses  before
extraordinary  items  totaled  $1,762,088  ($0.13 per share) for the 1998 fiscal
year,  $1,831,471  ($0.13 per share) for the 1997 fiscal  year,  and  $1,327,226
($0.12 per share) for the 1996 fiscal year.  Principal  factors  contributing to
the losses  during these  periods were the absence of revenues  coupled with the
incurrence of operating expenses.

         Operating  expenses increased from $1,335,725 during 1996 to $1,858,033
during 1997 and to $2,064,960 during 1998. Of these amounts, amortization of the
Company's  assets  (including Jig patents)  represented  $385,633,  $590,831 and
$556,626  during 1996,  1997 and 1998,  respectively.  During 1998,  the Company
increased the amount of test and development work on the Series 30/16 Jig, began
testing of potential new applications  for it, initiated the preliminary  design
work for a  larger  capacity  Jig,  commenced  exploration  in  California,  and
increased its  exploration  efforts in Tennessee.  This higher level of activity
caused a direct  increase  in  testing,  research,  and  development  costs from
$159,679  and $78,034 in 1996 and 1997,  respectively,  to $259,630 in 1998.  In
addition,  in order to  support  this  higher  level of  activity,  the  Company
increased the number of employees in its Reno,  Nevada office from four to eight
personnel and expanded into new leased office space.  The costs  associated with
this  additional  staffing and office space are reflected in increased  testing,
research and development  expenses,  general and office  expenses,  travel,  and
occupancy costs.  Operating  expenses,  exclusive of amortization,  increased in
1997 from 1996 due  primarily to increased  activity in  acquiring,  testing and
developing the Jig.

         In January 1998, the Common Stock began trading on the Nasdaq  National
Market  System.  As a result of the expanded  market for the Common  Stock,  the
expenses  associated  with  stock  exchange  fees,  shareholders'  meetings  and
reports,  and  shareholder  relations  combined  increased to $ 345,880 in 1998,
compared to $ 209,739 in 1997 and $ 77,330 in 1996.

         Interest income increased in 1998 over 1997 and 1996 principally due to
interest  earned  on  temporary  cash  investments  following  the  issuance  of
$5,000,000  of  5%  convertible   subordinated   debentures  (the   "Convertible
Debentures") in December 1997.

         As a  result  of the  TMI  Merger,  Fine  Gold  assumed  all  of  TMI's
liabilities.   During  1996  and  1998,   Fine  Gold  entered  into   agreements
extinguishing certain of the TMI accounts payable and notes payable at less than
the book amounts of such debt.  The net of such  forgiveness of debt in 1996 was
$702,726,  resulting in an  extraordinary  gain of $.06 per share.  In 1998, the
forgiveness  of debt was  $25,805 and had no  material  effect on  earnings  per
share.   During  1998,  the  Company  redeemed  $2,250,000  of  the  Convertible
Debentures,  incurring a redemption  premium of $193,256.  See  "--Liquidity and
Capital  Resources." This represents a net loss per share of $.01. There were no
extraordinary items during 1997.


                                       26

<PAGE>

Liquidity and Capital Resources.

         The Company has financed its operations  since  inception  primarily by
the issuance of equity securities  (Common Stock,  Convertible  Debentures,  and
options and warrants to purchase  Common  Stock) with  aggregate net proceeds of
$19,056,117 as of December 31, 1998. The Company received cash proceeds from the
sale of Common Stock and the exercise of options and warrants to acquire  Common
Stock of $7,156,846  in 1996  (including  $2,521,469  deemed value of the Common
Stock  issued  in the TMI  Merger  -  $4,635,377  without  such  deemed  value),
$2,569,194 in 1997 and $113,664 in 1998. In addition,  during 1997,  the Company
received net proceeds of $4,484,156 ($5,000,000 less $515,844 costs of issuance)
from the issuance of the Convertible Debentures and related warrants.

         The Company has earned no revenues  from  operations  and has  incurred
recurring  losses. At December 31, 1998, the Company's  accumulated  deficit was
$8,645,021,  or an  increase  of  $2,341,142  over the  accumulated  deficit  at
December  31,  1997.  This  increase  was due to the net  loss  for the  year of
$1,929,539 and $411,603 in costs  associated with the issuance and conversion of
the Convertible Debentures.

         During 1998, the Company's cash and  short-term  investments  decreased
from $8,161,770 to $3,100,577.  Of this $5,061,193  decrease in working capital,
$1,546,590 was expended on operating  activities  (compared  with  $1,186,833 in
1997 and  $795,410  in 1996) and  $1,105,034  was  expended  on the  purchase or
exploration of the Mineral  Properties,  the purchase of capital assets, and the
purchase  of rights  related  to the Jig  (compared  with  $764,232  in 1997 and
$714,407  in  1996).  Most  of the  remaining  decrease  was the  result  of the
Company's redemption of the Convertible  Debentures.  Between May and July 1998,
holders of the Convertible  Debentures elected to convert  $2,750,000  principal
amount of the Convertible  Debentures and accrued interest.  On August 28, 1998,
the Company used  $2,550,938  of the proceeds  from the initial  issuance of the
Convertible Debentures to redeem the remaining $2,250,000 principal amount (plus
interest) of the Convertible Debentures.  Although this redemption resulted in a
substantial  decrease in the Company's  working  capital,  the Company  believes
that, because of the apparent downward pressure the existence of the Convertible
Debentures was placing on the price of the Common Stock, the Company's long-term
ability to raise  money for working and  expansion  capital was  enhanced by the
redemption of the Convertible Debentures.

         The  Company  currently  maintains  working  capital  which  management
believes will be sufficient for the Company's  needs through the end of the 1999
fiscal  year  at  the  current  level  of  operations.  However,  the  Company's
exploration and development  program may result in business  opportunities  that
require  additional  capital  resources  for  the  development  of  the  Mineral
Properties  and  construction  of Jigs.  When and if such capital  resources are
required,  the Company  intends to assess equity and/or debt financing  sources.
Nevertheless,  there  can be no  assurance  that  the  Company  will  be able to
continue  to  raise  capital  to fund its  long-term  capital  requirements.  At
December 31, 1998, the Company had $3,100,577 in cash and short-term investments
available to meet its near-term development and operating needs.

         The  Company  continues  to use its  working  capital  to invest in the
testing and development of the Jig and to invest in mineral properties  suitable
for development  and processing with the Jig. During 1998, the Company  invested
$225,058 in  development  of the Jig,  $123,147 to  construct  additional  Jigs,
$724,907 in the exploration of the Tennessee  Mineral  Property,  and $68,344 in
deferred exploration expenditures on the California Mineral Property.

Year 2000 Issues.

         The Company has  conducted a preliminary  examination  of the potential
impact  of Year  2000  issues  on its  operations.  Based  on  this  preliminary
examination,  the  Company  does not  believe  the Year 2000  issue  will have a
significant  impact on the Company's internal  operations.  The Company is in an
early stage of development  and does not presently have any customer or supplier
relationships   that  management   believes  are  material  to  its  operations.
Accordingly,  the Company has not taken steps to verify the Year 2000  readiness
of any third parties with which it conducts or may conduct business. The Company
intends, however, to investigate the Year 2000 readiness of third parties as its
relationship  with any such party  becomes  material  to the  operations  of the
Company.  Despite the Company's  examination of its own operations and intent to
investigate  the Year 2000  readiness of  essential  suppliers,  customers,  and
service  providers,  there  can  be no  assurance  that  the  Company  will  not
experience interruptions of operations or become involved in disputes with third


                                       27

<PAGE>

parties  because  of  direct or  indirect  Year  2000  problems.  Such Year 2000
problems  could require the Company to incur  unanticipated  expenses,  and such
expenses  could have a material  adverse  effect  upon the  Company's  business,
financial condition and results of operations.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.
             -----------------------------------------------------------

         None.


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

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


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

         None.



                                    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.


                                       28

<PAGE>

                                     PART IV


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

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

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

                     o     Report of McGovern, Hurley, Cunningham, for the years
                           ended December 31, 1998, 1997, and 1996

                     o     Consolidated  Balance Sheets at December 31, 1998 and
                           1997

                     o     Consolidated Statements of Operations and Deficit for
                           the years ended December 31, 1998, 1997 and 1996

                     o     Consolidated  Statements of Changes of Cash Flows for
                           the years ended December 31, 1998, 1997 and 1996

                     o     Notes to Consolidated Financial Statements


             2.      Financial Statement Schedule.  Not applicable.


             3.      Exhibit List

<TABLE>
<CAPTION>
Exhibit                                                               Incorporated    Filed
  No.                              Exhibit                            by Reference   Herewith
-------   ---------------------------------------------------------   ------------   --------
<S>       <C>                                                             <C>         <C>
  3.1.1  Articles of Incorporation of the Registrant                      (1)

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

  3.2     Bylaws of the Registrant                                        (1)

  4.1     Form of Common Stock Certificate                                (1)

  4.3     Form of Warrant (related to Convertible Debentures)             (3)

  4.3     Shareholders Rights Plan Agreement dated November 27,                               
          1998, between Altair International Inc. and Equity                                  
          Transfer Services Inc.                                          (4)                 

  10.1    Performance Escrow Agreement dated February 27,                                    
          1996; Performance Escrow Release Schedule                       (1)                 

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

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

  10.4    Employment Agreement between Altair International Inc.                              
          and John W. Parsons dated July 6, 1998                          (6)                 
</TABLE>


                                               29

<PAGE>

<TABLE>
<CAPTION>
Exhibit                                                              Incorporated    Filed
  No.                          Exhibit                               by Reference   Herewith
  ---     ------------------------------------------------------     ------------   --------
<S>       <C>                                                             <C>         <C>
  10.5    Altair International Inc. Stock Option Plan adopted by                              
          shareholders on May 10, 1996                                    (7)                 
  10.6    1998 Altair International Inc. Stock Option Plan adopted                            
          by Shareholders on June 11, 1998.                               (8)                 
  10.7    Escrow Agreement among Altair International Inc.,                                   
          Equity Transfer Services Inc., Thomas P. Campbell and                               
          C. Patrick Costin dated June 1, 1994                            (1)                 
  10.8    Form of Mineral Lease                                           (5)
  10.9    Exploration License with Option dated October 1, 1998                        (9)
  23.1    Consent of McGovern, Hurley, Cunningham                                      (9)
  27      Financial Data Schedule                                                      (9)
-----------------------
</TABLE>

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

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

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

(4)  Incorporated by reference to the Company's Current Report on Form 8-K filed
     with the Commission on December 29, 1998.

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

(6)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter  ended  September  30, 1998,  filed with the  Commission on
     November 13, 1998.

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

(8)  Incorporated  by reference to the Company's  Definitive  Proxy Statement on
     Form 14A filed with the Commission on May 12, 1998.

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

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

                  The Company filed a Current Report on Form 8-K on December 29,
                  1998,  in  which  the  Company  reported  the  adoption  of  a
                  Shareholder  Rights  Plan  dated  November  27,  1998  and the
                  authorization of certain rights related thereto.

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

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


                                       30

<PAGE>

         (d)      Financial Statement Schedule

                  Not applicable.


                                       31

<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 17, 1999.

                                      ALTAIR INTERNATIONAL INC.



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



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


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

/s/ William P. Long
-----------------------
William P. Long                President and Chief Executive      March 17, 1999
                               Officer and Director (Principal
                               Executive Officer)

/s/ C. Patrick Costin          Vice President (Principal          March 17, 1999
-----------------------
C. Patrick Costin              Financial and Accounting
                               Officer)

/s/ James I. Golla             Secretary and Director             March 17, 1999
-----------------------
James I. Golla

/s/ George Hartman             Director                           March 17, 1999
-----------------------
George Hartman

/s/ Robert Sheldon             Director                           March 17, 1999
-----------------------
Robert Sheldon


                                       32

<PAGE>



                            ALTAIR INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1998



                       (Express in United States Dollars)



INDEX                                                                       PAGE

Auditors' Report                                                             F-2

Consolidated Balance Sheets                                                  F-3

Consolidated Statements of Operations and Deficits                           F-4

Consolidated Statements of Cash Flows                                        F-5

Notes to Financial Statements                                           F-6- F17


                                      F-1
<PAGE>

[Letterhead of McGovern, Hurley, Cunningham]



                                AUDITORS' REPORT



To the Shareholders of
Altair International Inc.


We have audited the consolidated  statements of Altair  International Inc. as at
December 31, 1998 and 1997 and the  consolidated  statements of  operations  and
deficit, and consolidated  statements of cash flows of Altair International Inc.
for the years ended December 31, 1998, 1997 and 1996. These 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.

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

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1998
and 1997 and the results of its operations and changes in its financial position
for the  years  ended  December  31,  1998,  1997  and 1996 in  accordance  with
generally accepted accounting principles in Canada.


                                             McGOVERN, HURLEY, CUNNINGHAM


                                                /s/ McGovern, Hurley, Cunningham


                                             Chartered Accountants

NORTH YORK, Canada
February 26, 1999


                                       F-2
<PAGE>

                            ALTAIR INTERNATIONAL INC.
                           CONSOLIDATED BALANCE SHEETS
                      (Expressed in United States Dollars)
<TABLE>
<CAPTION>
                                                                     December 31,
                                                             ----------------------------
                                                                 1998            1997
                                                             ------------    ------------
<S>                                                          <C>             <C>         
                            ASSETS
Current
     Cash and short-term investments                         $  3,100,577    $  8,161,770
     Other current assets                                         130,642          31,193
                                                             ------------    ------------
                                                                3,231,219       8,192,963

Capital
     Office equipment, vehicles, testing and mining
          equipment  (Cost, net of amortization) (Note 4)         462,417         397,723

Centrifugal jig patents and related expenditures
     (Cost, net of amortization) (Note 5)                       3,609,024       3,918,378

Mineral properties and related deferred exploration
     expenditures (Note 6)                                      1,399,802         606,551

Goodwill, net                                                       9,590          10,189
                                                             ------------    ------------

                         Total Assets                        $  8,712,052    $ 13,125,804
                                                             ============    ============

                          LIABILITIES
Current
     Accounts payable and accrued liabilities                $    165,979    $    227,439
     Current portion of notes payable (Note 7)                     73,533         253,890
     Current portion of convertible debentures - liability
element                                                              --           231,481
                                                             ------------    ------------
                                                                  239,512         712,810

Notes payable (Note 7)                                               --             5,901

Convertible debentures - liability element                           --           596,550
                                                             ------------    ------------
                       Total Liabilities                          239,512       1,315,261
                                                             ------------    ------------

                     SHAREHOLDERS' EQUITY
Capital stock issued (Note 8)
     15,174,915 and 15,492,745 common shares at
               December 31, 1998 and 1997, respectively        16,462,463      13,942,453

Convertible debentures - equity element                              --         4,171,969

Contributed surplus (Note 3(b))                                   655,098            --

Deficit                                                        (8,645,021)     (6,303,879)
                                                             ------------    ------------

                  Total Shareholders' Equity                    8,472,540      11,810,543
                                                             ------------    ------------

          Total Liabilities and Shareholders' Equity         $  8,712,052    $ 13,125,804
                                                             ============    ============
</TABLE>


        See accompanying Notes to the Consolidated Financial Statements.


                                      F-3
<PAGE>
<TABLE>

                            ALTAIR INTERNATIONAL INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                      (Expressed in United States Dollars)
<CAPTION>
                                                                   Year Ended December 31,
                                                         --------------------------------------------
                                                             1998           1997            1996
                                                         -------------  -------------   -------------
<S>                                                     <C>            <C>            <C>          
Operating Expenses
     Testing, research and development                  $   259,630    $    78,034    $     159,679
     Wages and administration                               251,798        256,033          223,987
     Professional fees                                      236,549        293,883          321,363
     Shareholder relations                                  165,063        105,993           22,480
     Shareholders' meetings and reports                     119,497         96,308           51,348
     General and office                                     108,785         74,266           87,647
     Travel                                                 106,661         87,777           23,416
     Occupancy costs                                         69,286         43,146           27,140
     Stock exchange fees                                     61,320          7,438            3,502
     Insurance                                               58,951         48,120           11,769
     Government fees and taxes                               23,123         25,447            4,208
     Loss (Gain) on foreign exchange                         17,109        123,612           (7,888)
     Transfer agent's fees                                   14,247         17,390           13,978
     Accounting and corporate services                       10,625          8,166            6,700
     Bank charges                                             2,272          1,589              763
     Loss on disposal of fixed assets                         4,418           --               --
     Amortization                                           555,626        590,831          385,633
                                                        -----------    -----------    -------------
                                                          2,064,960      1,858,033        1,335,725

Interest on long-term debt                                   32,165         43,497           19,373
Interest income                                            (335,037)       (70,059)         (27,872)
                                                        -----------    -----------    -------------

Loss from operations                                      1,762,088      1,831,471        1,327,226
Premium on redemption of convertible debentures             193,256           --               --
(Gain) on forgiveness of debt                               (25,805)          --           (702,726)
                                                        -----------    -----------    -------------
Net loss for the year                                     1,929,539      1,831,471          624,500
Deficit, beginning of the year                            6,303,879      3,956,564        3,332,064
Premium on conversion of convertible debentures             244,915           --               --
Accretion of equity element of convertible debentures       144,801           --               --
Convertible debenture issuance costs                         21,887        515,844             --
                                                        -----------    -----------    -------------
Deficit, end of the year                                $ 8,645,021    $ 6,303,879    $   3,956,564
                                                        ===========    ===========    =============

Basic net loss per share from operations (Note 11)      $     (0.13)   $     (0.13)   $       (0.12)
                                                        ===========    ===========    =============
Net loss per share from premium on redemption of
     convertible debentures                             $     (0.01)   $      --      $        --
                                                        ===========    ===========    =============
Net income per share from gain on forgiveness of debt   $      --      $      --      $        0.06
                                                        ===========    ===========    =============
</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.


                                      F-4
<PAGE>

<TABLE>
                            ALTAIR INTERNATIONAL INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Expressed in United States Dollars)
<CAPTION>

                                                                       Year Ended December 31,
                                                             -----------------------------------------
                                                                 1998           1997           1996
                                                             -----------    -----------    -----------
<S>                                                          <C>            <C>            <C>         
Cash flows from operating activities
     Net loss for the year                                   $(1,929,539)   $(1,831,471)   $  (624,500)
     Adjustments to reconcile net loss for the period
       to net cash (used):
               Amortization                                      555,626        590,831        385,633
               Gain on forgiveness of debt                       (25,805)          --         (702,726)
               Loss on disposal of fixed assets                    4,418           --             --
               Interest on long-term debt                          9,619           --             --
                                                             -----------    -----------    -----------
                                                              (1,385,681)    (1,240,640)      (941,593)

     Changes in assets and liabilities:

          Other current assets                                   (99,450)       (17,637)        81,367
          Accounts payable and accrued liabilities               (61,459)        71,444         64,816
                                                             -----------    -----------    -----------

Net cash used in operating activities                         (1,546,590)    (1,186,833)      (795,410)
                                                             -----------    -----------    -----------

Cash flows from investing activities
     Purchase of mineral properties and related
          deferred exploration expenditures                     (793,251)      (480,248)      (275,790)
     Purchase of capital assets                                 (146,211)      (237,283)       (87,114)
     Purchase of centrifugal jig patents and related
          expenditures                                          (168,572)       (46,701)      (351,503)
                                                             -----------    -----------    -----------

Net cash used in investing activities                         (1,108,034)      (764,232)      (714,407)
                                                             -----------    -----------    -----------

Cash flows from financing activities
     Issuance of common shares for cash                             --             --          222,530
     Proceeds from exercise of stock options                     113,664      1,530,406        526,850
     Proceeds from exercise of warrants                             --          991,042      2,411,219
     Payment of notes payable                                   (160,454)      (162,930)      (152,634)
     Issuance of common shares pursuant to private
     placement                                                      --             --        1,414,778
     Common shares to be issued                                     --             --           47,746
     Issuance of convertible debentures                             --        5,000,000           --
     Convertible debenture issuance costs                        (21,887)      (515,844)          --
     Redemption of convertible debentures                     (2,337,892)          --             --
                                                             -----------    -----------    -----------

Net cash provided by (used in) financing activities           (2,406,569)     6,842,674      4,470,489
                                                             -----------    -----------    -----------

Net increase (decrease) in cash and short-term investments    (5,061,193)     4,891,609      2,960,672

Cash and short-term investments, beginning of year             8,161,770      3,270,161        309,489
                                                             -----------    -----------    -----------

Cash and short-term investments, end of year                 $ 3,100,577    $ 8,161,770    $ 3,270,161
                                                             ===========    ===========    ===========
</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.

                                      F-5
<PAGE>

                 Notes to the Consolidated Financial Statements

Note 1.  Basis of Presentation
------------------------------
The United States dollar is the principal currency in which the Company conducts
business;  accordingly, these consolidated financial statements are expressed in
United States dollars.


Note 2.  Summary of Significant Accounting Policies
---------------------------------------------------
These  consolidated   financial  statements  are  prepared  in  accordance  with
accounting  principles  generally  accepted in Canada.  As described in Note 15,
these  principles  differ in certain  respects  from  principles  and  practices
generally  accepted in the United  States.  Summarized  below are those policies
considered particularly significant for the Company.

Consolidation
The  financial   statements   include  the  accounts  of  the  Company  and  its
subsidiaries,  Mineral  Recovery  Systems,  Inc. (100% owned),  Intercontinental
Development  Corporation  (99% owned),  Fine Gold Recovery  Systems,  Inc. (100%
owned), Altair Technologies, Inc (100% owned), California Recovery Systems, Inc.
(100% owned),  Tennessee Valley  Titanium,  Inc. (100% owned) and 660250 Ontario
Limited (100% owned).

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

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

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

The Company  reviews its mineral  properties  on an annual basis to determine if
events or changes in  circumstances  have  transpired  which  indicate  that the
carrying value of its assets may not be recoverable. The recoverability of costs
incurred on the mineral  properties is dependent upon numerous factors including
exploration results,  environmental risks, commodity risks, political risks, and
the Company's ability to attain profitable production.  In reviewing its mineral
properties,  the Company estimates the future cash flows expected to result from
each  asset  and  its  eventual  disposition.  If the  sum of the  undiscounted,
expected  future  cash flow is less than the  carrying  value of the  asset,  an
impairment  loss is  recognized.  It is reasonably  possible,  based on existing
knowledge,  that changes in future  conditions in the near-term  could require a
change in the determination of the need for and amount of any writedown.

Administrative Expenditures
Administrative expenditures are charged to operations as incurred.

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


                                      F-6
<PAGE>

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

          Furniture and office equipment - 3, 5 and 7 year straight-line
          Mining equipment - 7 year straight-line
          Vehicles - 5 year straight-line
          Centrifugal jig equipment - 7 year straight-line
          Test facility - 7 year straight-line

Effective  January 1, 1998, the Company  changed certain methods of amortization
from the declining balance method to the straight-line  method.  This change has
been  applied  prospectively.  The effect of the change on the reported net loss
for the year ended December 31, 1998 is not significant.

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

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

Royalty agreement (Note 3(c))         - 15 year straight-line
License agreement                     - Straight-line over the remaining life of
                                        the related patent
Mineral recovery technology rights    - Straight-line over the remaining life of
                                        the related patent

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

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

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

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

Use of Estimates
The  preparation  of  consolidated   financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  assets and liabilities at the date of the consolidated


                                       F-7
<PAGE>

financial  statements  and the related  reported  amounts of revenue and expense
during the report  period.  Actual  results  could differ from those  estimates.
Management believes that the estimates are reasonable.

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


Note 3.  Acquisitions
---------------------
(a)      Fine Gold Recovery Systems, Inc.
Pursuant to an agreement dated April 21, 1994, the Company issued 750,000 Common
Shares  with a  deemed  value  of  $0.34  per  share  ($255,000)  for all of the
outstanding  common shares of Fine Gold Recovery Systems,  Inc. ("Fine Gold"), a
corporation  incorporated in the State of Nevada and involved in the development
of a "Centrifugal  Jig," an apparatus designed to recover fine gold from mineral
properties.  Pursuant to an agreement  dated  January 1, 1994 between  Thomas P.
Campbell, the inventor of the Centrifugal Jig, and Fine Gold, Fine Gold acquired
the  rights to  develop  and  market  applications  for the  Centrifugal  Jig at
specified  target sites and utilize the Centrifugal  Jig in the  exploitation of
such sites,  and  further  obtained  the  agreement  of Mr.  Campbell to provide
certain  services and  assistance to Fine Gold during the term of the agreement.
The agreement is valid  throughout the world except (i) areas subject to patents
held by Trans Mar,  Inc.  (Note  3(b)),  and (ii) the Republic of Costa Rica and
certain areas in Mexico and Guyana, South America.

A total of 650,000 Common Shares issued pursuant to the acquisition were subject
to a  Performance  Escrow  Agreement.  As of December 31, 1998,  216,666  Common
Shares remain in escrow and are scheduled to be released on June 1, 1999.

As of December 31, 1998, Fine Gold was still in the development stage in that no
operating  revenues  have  been  earned  and no  operating  expenses  have  been
incurred.

(b)      Trans Mar, Inc.
In March 1996, the Company  acquired 100% of the issued and  outstanding  common
stock of Trans Mar, Inc.  ("TMI") for total  consideration  of 1,919,957  Common
Shares at $1.31 each  ($2,521,469),  580,000  warrants  entitling  the holder to
purchase one share of Common Stock for $2.00  (Canadian),  and the assumption of
$1,210,981 of net liabilities.

TMI was involved in the development of the patented Campbell Centrifugal Jig and
held patent rights to the Centrifugal Jig technology (subject to a 10% royalty -
see Note 3(c)) in the United States, South Africa, United Kingdom, Australia and
Canada.  The transaction was accounted for using the purchase method. The excess
paid over the net book  value  (which  approximates  fair  value) of the  assets
acquired was allocated to the Centrifugal Jig patents.  TMI was merged with Fine
Gold immediately after the acquisition. Of the 1,919,957 Common Shares initially
deposited  into escrow,  266,170  Common Shares remain  subject to a Performance
Escrow  Agreement  which  provides  for  release  based on the cash  flow of the
Company,  and 749,957 Common Shares have been released  pursuant to the terms of
the  governing  agreements.   The  remaining  903,830  Common  Shares  initially
deposited  into  escrow  were  subject  to the terms of the  Performance  Escrow
Agreement.  However, on March 19, 1998, the Alberta Stock Exchange approved (and
thereby  made  effective) a  settlement  agreement  with respect to such 903,830
Common  Shares.  Pursuant to the settlement  agreement,  180,765 of the affected
903,830 Common Shares were released to the  beneficial  owners  effective  March
19,1998  (subject to certain  resale  restrictions)  and the  remaining  723,065
Common Shares  subject to the settlement  agreement were canceled.  The canceled
Common  Shares  had  an  average   stated   capital  value  of  $655,098.   Upon
cancellation,   this  amount  was  transferred  from  capital  stock  issued  to
contributed surplus.


                                      F-8
<PAGE>

(c)      Intercontinental Development Corporation
In 1996,  the  Company  purchased  66% of the issued and  outstanding  shares of
Intercontinental  Development  Corporation ("INDECO") for total consideration of
$319,298. The acquisition was accounted for using the purchase method. INDECO is
a  dormant  company  whose  sole  asset is a  royalty  agreement  entitling  the
corporation to 10% of the cost of  manufacturing  any Centrifugal Jigs which are
placed in production,  sold or exploited for profit worldwide. The entire amount
of the  purchase  price  has  been  allocated  to the  Centrifugal  Jig  Royalty
Agreement.  During  1997,  the Company  acquired an  additional  17% interest in
INDECO for total consideration of $36,537, and during 1998, the Company acquired
an additional 16% interest for total  consideration  of $68,770.  The additional
cost of the  investment  has  been  allocated  to the  Centrifugal  Jig  Royalty
Agreement.


Note 4.  Capital Assets
-----------------------
<TABLE>
<CAPTION>
                                   December 31, 1998                      December 31, 1997
                           ----------------------------------     ----------------------------------
                                      Accumulated                            Accumulated
                             Cost     Amortization      Net         Cost     Amortization      Net
                           ----------------------------------     ----------------------------------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>     
Furniture and office
     equipment             $ 65,538     $ 28,325     $ 37,213     $ 42,473     $ 16,935     $ 25,538
Vehicles                     92,629       44,499       48,130       92,629       26,555       66,074
Mining equipment               --           --           --          9,501        4,917        4,584
Centrifugal jig
     equipment              333,028      111,674      221,354      333,028       70,182      262,846
Testing facility             45,128       12,555       32,573       45,128        6,447       38,681
Centrifugal jigs under
  construction              123,147         --        123,147         --           --           --
                           ----------------------------------     ----------------------------------
                           $659,470     $197,053     $462,417     $522,759     $125,036     $397,723
                           ==================================     ==================================
</TABLE>


Note 5.  Centrifugal Jig Patents and Related Expenditures
---------------------------------------------------------

                                           1998             1997
                                       -----------      -----------
Patents                                $ 4,182,262      $ 4,182,262
Less: accumulated amortization          (1,332,821)        (904,437)
                                       -----------      -----------
                                       $ 2,849,441      $ 3,277,825
Royalty agreement                          424,604          355,835
Less: accumulated amortization             (59,265)         (34,449)
                                       -----------      -----------
                                           365,339          321,386
Mineral recovery technology rights         243,000          243,000
Less: accumulated amortization             (18,692)            --
                                       -----------      -----------
                                           224,308          243,000
License agreement                          136,004           66,003
Less: accumulated amortization              (6,036)            --
                                       -----------      -----------
                                           129,968           66,003
Patent application                          39,968           10,164
                                       -----------      -----------
                                       $ 3,609,024      $ 3,918,378
                                       ===========      ===========

License Agreements
On June 10,  1996,  the Company  entered into an agreement to acquire the entire
right, title and interest in a license agreement related to the Centrifugal Jig.
The Company agreed to purchase the right for $75,000 with an initial  deposit of


                                      F-9
<PAGE>

$5,000 and monthly  payments of $2,000  commencing  July 1, 1996 over a 35-month
period.  On November 23, 1998, the Company  acquired  another license  agreement
related to the Jig for a cash payment of $70,000.


Note 6.  Mineral Properties and Related Deferred Exploration Expenditures
-------------------------------------------------------------------------
The Company's  subsidiary,  Mineral Recovery Systems,  Inc. ("MRS"), has entered
into various mineral leases for a 100% interest in approximately 13,600 acres of
land in the state of  Tennessee,  United  States  with  minimum  annual  advance
royalty payments as follows:

          Year                                      Amount
          ----                                      ------
          1999                                   $  83,306
          2000                                      89,101
          2001                                     150,664
          2002                                     190,929
          2003                                     208,705
          2004 and every year thereafter           421,172

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.  During the years ended December 31,
1998 and 1997, approximately $793,000 and $480,000,  respectively,  was incurred
on exploration.


Note 7.  Notes Payable
----------------------
Notes payable to former shareholders of TMI are subject to a repayment agreement
dated March 3, 1996.  Although the original  notes  payable are due December 31,
1999,  the Company agreed to retire $50,000 per month of the TMI debt assumed by
the Company.

                                                      1998         1997
                                                    --------     --------
Notespayable  assumed from Trans Mar, Inc.,
     interest  payable at various rates,
     unsecured, principal and interest due
     December 31, 1999                              $ 67,442     $190,559
Notes payable to former shareholders of
     Trans Mar, Inc., non-interest bearing,
     unsecured, principal due December 31, 1999         --         41,141
Note payable, interest payable at 10% per
     annum, unsecured, blended payments
     of $2,000 per month, due April 1, 1999            6,091       28,091
                                                    --------     --------
                                                      73,533      259,791
Less: Current portion                                 73,533      253,890
                                                    --------     --------

Long-term portion of notes payable                  $   --       $  5,901
                                                    ========     ========


                                      F-10
<PAGE>

Note 8.  Capital Stock
----------------------
Authorized  capital stock of the Company is comprised of an unlimited  number of
Common Shares. Details of issued and outstanding shares are as follows:
<TABLE>
<CAPTION>
                                                                      Shares              Amount
                                                                  ----------------    ---------------
<S>               <C> <C>                                               <C>            <C>          
Balance, December 31, 1995                                              8,497,849      $   4,216,413
Private placements                                                        554,027          1,414,778
Exercise of stock options                                                 702,000            526,850
Exercise of warrants                                                    2,912,463          2,471,219
Common shares issued for cash                                             100,000            222,530
Common shares issued for the acquisition of TMI (Note 3(b))             1,919,957          2,521,469
                                                                  ----------------    ---------------
Balance, December 31, 1996                                             14,686,296         11,373,259
Exercise of stock options                                                 362,500          1,530,406
Exercise of warrants                                                      411,229            991,042
Common shares issued on warrants exercised in December 1996                32,720             47,746
                                                                  ----------------    ---------------
Balance, December 31, 1997                                             15,492,745         13,942,453
Exercise of stock options                                                  17,500            113,664
Common shares issued on conversion of convertible debentures              387,735          3,061,444
Common shares canceled pursuant to settlement agreement
     with former TMI shareholders (Note 3(b))                            (723,065)          (655,098)
                                                                  ----------------    ---------------
Balance, December 31, 1998                                             15,174,915      $  16,462,463
                                                                  ================    ===============
</TABLE>

Stock Options
As of December 31, 1998,  1,965,000  Common  Shares are reserved for issuance to
directors,  officers and employees under the Company's  stock option plans.  The
exercise  price and expiry dates of options  outstanding as of December 31, 1998
are as follows:

   Number of Shares         Price               Expiry Date
   ----------------    ----------------      ----------------
       15,000              $ 7.38               June 29, 2000
      125,000                2.39               March 7, 2001
      250,000                2.58                May 27, 2001
       75,000                2.71               July 29, 2001
       15,000                5.42            November 6, 2001
       25,000                7.97              March 10, 2002
      200,000                6.62                May 14, 2002
       25,000                6.00                June 3, 2002
      150,000                6.98             August 26, 2002
       80,000                8.38           December 22, 2002
      120,000                8.38               March 2, 2003
      350,000                8.38                 May 6, 2003
      100,000                7.75               June 15, 2003
      200,000                9.00                July 6, 2003
       30,000                7.70              August 5, 2003
      150,000                7.15             August 13, 2003
       30,000                8.00           November 25, 2003
       25,000                7.25           December 22, 2003
   ----------------
    1,965,000
   ================

Warrants
As of December 31,  1998,  there were 105,000  Convertible  Debenture  Placement
Warrants  and  75,000  Convertible  Debenture  Transaction  Warrants  issued and
outstanding. See Note 9.


                                      F-11
<PAGE>

Note 9.  Convertible Debentures
-------------------------------
On December 29, 1997, the Company issued $5,000,000 in convertible  subordinated
debentures due December 29, 2001 (the  "Debentures")  bearing interest at 5% per
annum  payable  in  cash  or  Common  Shares  of the  Company  annually  or upon
conversion or maturity,  at the  discretion  of the Company.  Subject to certain
restrictions  during  the first 180 days  after  closing,  the  Debentures  were
convertible  by holders  into Common  Shares at a  conversion  rate equal to the
lesser of (i) 92% of the average price of the Common Shares for the five trading
days  prior to  submission  of a notice of  conversion  by the  holder,  or (ii)
$14.36875 per share. The purchasers of the Debentures also received  transaction
warrants  entitling  the holders to purchase  75,000  Common Shares on or before
December 29, 1999 at a price of $16.7188 per share.  In addition,  the placement
agent  received  105,000  placement  warrants  entitling  the agent to  purchase
105,000 Common Shares at $16.7188 per share on or before December 29, 1999.

During  the  period May 20,  1998  through  July 31,  1998,  the  holders of the
Debentures  elected  to  convert  $2,750,000  of  the  principal  amount  of the
Debentures  and  $66,528 of accrued  interest.  The  conversions  were made at a
conversion price rate equal to 92% of the average price of the Common Shares for
the five trading days prior to  submission  of the notice of  conversion  by the
holders. These conversions resulted in the issuance of 387,735 Common Shares.

On August 28, 1998,  the Company  elected to redeem the remaining  $2,250,000 of
Debentures using cash previously invested in short-term  instruments.  The total
cash required to redeem the Debentures, including the 10% redemption premium and
accrued interest, was $2,550,938.


Note 10.  Commitments
---------------------
Under the current  employment  agreement  between the Company and its president,
Dr. William P. Long,  Dr. Long is entitled to receive  payment of 200,000 Common
Shares  in the event  (i)  voting  control  of over 35% of the  issued  stock is
acquired  by a person or group of  persons  in a  merger,  takeover  or  similar
transaction  (a "change of  control")  and Dr.  Long's  employment  agreement is
terminated  within 180 days  before or at any time after such change of control,
or (ii)  absent a change of  control,  if Dr.  Long's  employment  agreement  is
terminated for any reason except by Dr. Long, by mutual consent,  by the Company
for cause, or at the end of the term.


Note 11.  Net Loss per Share
----------------------------
The  calculation  of basic net loss per share  from  operations  is based on the
weighted average number of Common Shares outstanding for the year. Net loss used
in the  calculation  is loss from  operations  increased by the accretion of the
equity element of convertible subordinated debentures.

<TABLE>
<CAPTION>
                                                 1998            1997            1996
                                             -----------     -----------     -----------
<S>                                          <C>             <C>             <C>        
Loss from operations                         $ 1,762,088     $ 1,831,471     $ 1,327,226
Accretion of equity element of
convertible debentures                           144,801            --              --
                                             -----------     -----------     -----------
                                             $ 1,906,889     $ 1,831,471     $ 1,327,226
                                             ===========     ===========     ===========
Weighted average number of
common shares                                 15,143,020      14,366,457      11,592,073
                                             ===========     ===========     ===========
Basic net loss per share from operations     $      0.13     $      0.13     $      0.12
                                             ===========     ===========     ===========
</TABLE>

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


                                      F-12
<PAGE>

Note 12.  Income Taxes
----------------------
As of December 31, 1998, the Company has approximately $5,900,000 of non-capital
losses   carried   forward  for  income  tax  purposes   which,   under  certain
circumstances,  are  available to reduce  future years' income for tax purposes.
Approximately  $5,700,000 of these losses are subject to expiration beginning in
2003.


Note 13.  Concentration of Credit Risk
--------------------------------------
As of December 31, 1998,  the Company had  $3,028,216  invested in a diversified
portfolio of United States  dollar-denominated  money market  instruments in the
United States.  This  portfolio is neither  insured nor guaranteed by the United
States Government.


Note 14.  Statements of Cash Flows
----------------------------------
Non-Cash Investing and Financing Activities
Year ended December 31, 1998:  Convertible  debentures having a principal amount
of $2,750,000 and accrued interest of $66,528 were converted into 387,735 Common
Shares with a fair market value of $3,061,444.

Year ended  December  31,  1997:  There were no non-cash  investing or financing
activities.

Year ended  December  31,  1996:  The  Company  acquired  100% of the issued and
outstanding  common stock of TMI for total  consideration  of  1,919,957  Common
Shares  at  $1.31  each  ($2,521,469),  the  assumption  of  $1,210,981  of  net
liabilities,  and the  issuance  of  580,000  warrants  entitling  the holder to
purchase one Common Share per warrant.

Cash and Cash Equivalents
The cash and  short-term  investments  on hand as of December 31, 1998 represent
cash,  short-term  investments with original maturity dates of less than 30 days
and a  diversified  portfolio of United States  dollar-denominated  money market
instruments which are considered cash equivalents.


Note 15.  Differences  Between  Canadian and United  States  Generally  Accepted
--------------------------------------------------------------------------------
Accounting Principles
---------------------
The Company  prepares  its accounts in  accordance  with  accounting  principles
generally  accepted in Canada ("Canadian  GAAP") which conform,  in all material
respects,  with accounting  principles  generally  accepted in the United States
("U.S. GAAP"), except as described below.

Development Stage Company
As of December 31, 1998 the Company  would be  characterized  as a  "development
stage  enterprise"  under U.S.  GAAP in accordance  with  Statement of Financial
Accounting  Standards  No. 7 ("SFAS  7").  Under  Canadian  GAAP,  there  are no
requirements for the indication or reporting of development stage entities.  The
following is a summary of the deficit  accumulated  during the development stage
prepared in accordance with SFAS 7:
                                                      Accumulated deficit
                                                           during the
                                                       development stage
                                                       -----------------
Professional fees                                         $ 1,352,212
Salaries and wages                                          1,872,230
Shareholders' expenses                                        971,910
Office and general                                          1,658,431
Loss on sale of mining claims                                 101,047
Amortization                                                1,537,552
Interest on long-term debt                                     95,035
Write off of mineral properties and related
     deferred exploration expenditures                      1,292,354



                                      F-13
<PAGE>

Write off of organization costs
                                                                8,563
                                                          -----------
                                                            8,889,334
Less:
     Interest income                                         (446,609)
     Gain on sale of marketable securities                    (35,773)
     Lease payments                                          (143,754)
     Gain on forgiveness of debt                             (728,531)
     Option payments                                          (70,906)
                                                          -----------
Total accumulated loss                                      7,463,761
Convertible debenture costs                                   537,731
Share issue costs                                              60,557
Accretion of equity element of convertible debentures         144,801
Premium on conversion of convertible debentures               244,915
Premium on redemption of convertible debentures               193,256
                                                          -----------
Accumulated deficit, December 31, 1998                    $ 8,645,021
                                                          ===========

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

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

The Company has significant  non-capital loss carryforwards  (Note 12). SFAS 109
would  require the  recognition  of a deferred tax asset for the future  benefit
expected from the application of these carryforwards to future profitable years.
If it is more likely than not that some portion or all of the deferred tax asset
will not be  realized,  then a  valuation  allowance  is applied to the asset to
reasonably  state it at its expected  value.  Under SFAS 109,  disclosure of the
amount of the  valuation  allowance  is required.  As of December 31, 1998,  the
valuation  allowance is equal to 100% of the deferred tax asset.  Changes in the
value of the deferred tax asset are recognized each year as income tax expense.

Stock Options
The number of Common  Shares  available  for the granting of options at December
31, 1998 and 1997 was 1,453,000 and 443,000,  respectively.  The following table
summarizes stock option activity for the years ended December 31, 1998 and 1997:

                                             1998            1997
                                          ----------      ----------
     Outstanding at beginning of year        962,500         745,000
     Granted during the year               1,020,000         580,000
     Exercised at an average price of
          $9.26 (1997 - $4.22)               (17,500)       (362,500)
                                          ----------      ----------
     Outstanding at end of year            1,965,000         962,500
                                          ==========      ==========
     Currently exercisable                 1,540,000         882,500
                                          ==========      ==========


                                      F-14
<PAGE>

Under Canadian  GAAP,  there is no  requirement  to record  compensation  on the
issuance  of  stock  options  to  employees  or  directors.   Under  U.S.  GAAP,
compensation would be accrued on the date of granting of the options, calculated
as the difference between the market price and exercise price on the date of the
grant. For the fiscal years ended December 31, 1998 and 1997, the exercise price
of all stock options  granted has been equal to or greater than the market price
on the date of the grant and  therefore  the  compensation  cost under U.S. GAAP
would be nil.

Reconciliation to Accounting Principles Generally Accepted in the United States
Convertible  debenture  issuance  costs are added to the deficit under  Canadian
GAAP,  but  would be  recorded  as  deferred  financing  costs (an  asset),  and
amortized to expense,  under U.S. GAAP. The Company  incurred  issuance costs of
$21,887 in 1998 and  $515,844  in 1997 that have been  charged to deficit  under
Canadian  GAAP.  Under U.S.  GAAP,  the balance sheet at December 31, 1997 would
include a deferred financing cost asset of $515,844 but this amount and the 1998
charges of $21,887 would be charged to expense in 1998 due to the redemption and
conversion  of the  Debentures  during the year (see Note 9).  Also,  under U.S.
GAAP,  the premium on conversion of  convertible  debentures  ($144,801) and the
accretion  of equity  element  of  convertible  debentures  ($244,915)  would be
expensed in the Statements of Operations.  The following  reflects  amounts that
would have been reported had the  Company's  consolidated  financial  statements
been prepared on the basis of U.S. GAAP:

Consolidated Balance Sheets
---------------------------
                                            1998            1997
                                       -------------   -------------
     Deferred convertible debenture
          financing costs               $      --       $   515,844
     Total assets                         8,712,052      13,641,648
     Deficit                              8,645,021       5,788,035
     Total shareholders' equity           8,472,540      12,326,387


Consolidated Statements of Operations and Deficit
-------------------------------------------------
<TABLE>
<CAPTION>
                                                 1998             1997             1996
                                             -----------      -----------      -----------
<S>                                          <C>              <C>              <C>      
Convertible debenture issuance costs         $   537,731      $      --        $      --
Premium on conversion of convertible
     debentures                                  244,915             --               --
Accretion of equity element of
     convertible debentures                      144,801             --               --
Net loss for the year                          2,856,986        1,831,471          624,500
Deficit, beginning of year                     5,788,035        3,956,564        3,332,064
Deficit, end of year                           8,645,021        5,788,035        3,956,564
Basic net loss per share from operations     $     (0.19)     $     (0.13)     $     (0.12)
</TABLE>

Under  U.S.  GAAP,   interest  expense  would  be  imputed  with  respect  to  a
non-interest  bearing note payable as in Note 7. The effect on net income of not
recording imputed interest is negligible.

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


Note 16. Uncertainty Due to the Year 2000 Issue
-----------------------------------------------
The Year 2000 Issue  arises  because  many  computerized  systems use two digits
rather than four to identify a year.  Date-sensitive  systems may  recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed.  In addition,  similar  problems may arise in some
systems  which use certain  dates in 1999 to  represent  something  other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000,  and, if not addressed,  the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's  ability to conduct  normal  business  operations.  It is not
possible  to be certain  that all aspects of the Year 2000 Issue  affecting  the
Company,  including  those  related to the efforts of customers,  suppliers,  or
third parties, will be fully resolved in a timely manner.


                                      F-15
<PAGE>

                             Additional Information

Common Stock
------------
United States
The Company's  Common Shares began trading through the Nasdaq National Market on
January 23, 1998 under the symbol "ALTIF". From March 24, 1997 until January 23,
1998,  the Common  Shares  traded  under the same symbol on the Nasdaq  SmallCap
Market.  Prior to March 24, 1997,  the Common  Shares traded on the OTC Bulletin
Board under the symbol  "AIDGF".  On  December  31,  1998,  the number of record
holders  was 479 and the  Company  estimates  that on that date there were 9,321
beneficial owners.

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

The following  table sets forth,  on a quarterly  basis,  the high and low sales
prices during the last two fiscal years for the Common  Shares as reported.  The
prices reported do not include retail mark-up,  mark-down or commissions and may
not reflect actual transactions.


For the Fiscal Year Ended:    December 31, 1998    December 31, 1997
(In U.S. Dollars)            -------------------  -------------------
                                High       Low       High       Low
First Quarter                $   15.63  $   8.13  $   12.25  $   6.00
Second Quarter               $    9.63  $   7.00  $    9.63  $   4.75
Third Quarter                $   10.25  $   3.00  $    9.88  $   5.19
Fourth Quarter               $    8.63  $   5.88  $   16.63  $   7.75

Canada
In Canada,  the Common  Shares were traded under the symbol "AIL" on the Alberta
Stock  Exchange  (the "ASE")  through  April 23, 1998.  The Company  voluntarily
removed the Common  Shares from the ASE on that date due to  increased  focus on
operations in the United States and diminishing trading volume on the ASE.


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

<TABLE>
<CAPTION>
For the Year Ended December 31,          1998       1997       1996       1995       1994
(Canadian Dollar per U.S. Dollar)        ----       ----       ----       ----       ----
<S>                                     <C>        <C>        <C>        <C>        <C>   
High                                    1.5770     1.4398     1.3822     1.4238     1.4078
Low                                     1.4075     1.3392     1.3310     1.3285     1.3103
Average                                 1.4894     1.3849     1.3638     1.3725     1.3664
Year-End                                1.5375     1.4288     1.3697     1.3655     1.4030
</TABLE>


Canadian Taxation Considerations
Dividends paid on Common Shares of the Company 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


                                      F-16
<PAGE>

X of the reciprocal  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 that owns at least 10% of the voting shares of the subject 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 are  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% rate  applicable  to  dividends
that are not so connected with a Canadian permanent establishment or fixed base.
Under the  provisions  of the treaty,  Canada is permitted to apply its domestic
law rules for differentiating dividends from interest and other disbursements.

A capital gain realized on the  disposition of Common Shares of the Company 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  Shares 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 arm's length, or by any combination thereof. If the
Company's   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.


                                      F-17