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

                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, 1996

|_|      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 Stock, no par value
                                (Title of Class)

         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 |_| NO |X|

         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. |X|

         The aggregate  market value of the Common Stock held by  non-affiliates
of the Registrant on February 28, 1997, based upon the closing sale price of the
Common Stock on the Alberta  Stock  Exchange of $11.75 per share on February 27,
1997, was  approximately  $140,587,375.  Shares of the Common Stock held by each
officer and  director and by each person who may be deemed to be an affiliate of
the Registrant have been excluded.

         As of February 28, 1997, the Registrant had 15,110,245 shares of Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------



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

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

Item 1.    Business...................................................................................  1
           --------
           General....................................................................................  1
           Target Markets.............................................................................  2
           Technology and Proprietary Rights..........................................................  3
           Competition................................................................................  4
                  Alternative Technologies............................................................  4
                  Competing Products..................................................................  4
           Plan of Operation..........................................................................  5
                  Business Development................................................................  5
                  Research, Testing and Development...................................................  5
           Subsidiaries...............................................................................  7
           TMI Merger.................................................................................  7
           Government Regulation and Environmental Concerns...........................................  8
           Employees..................................................................................  8
           Glossary of Terms..........................................................................  8

Item 2.    Properties.................................................................................  9
           ----------

Item 3.    Legal Proceedings..........................................................................  9
           -----------------

Item 4.    Submission of Matters to a Vote of Security Holders........................................  9
           ---------------------------------------------------

PART II    ........................................................................................... 10

Item 5.    Market for the Registrant's Common Stock and Related Shareholder Matters................... 10
           ------------------------------------------------------------------------
           Market Price............................................................................... 10
           Dividends.................................................................................. 11
           Restrictions on Transfer................................................................... 11
           Transfer Agent and Registrar............................................................... 12
           Canadian Taxation Considerations........................................................... 12
           Recent Sales of Unregistered Securities.................................................... 12

Item 6.    Selected Financial Data.................................................................... 13
           -----------------------

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...... 14
           -------------------------------------------------------------------------------------
           Overview................................................................................... 14
           Results of Operations...................................................................... 15
           Liquidity and Capital Resources............................................................ 16

Item 8.    Financial Statements and Supplementary Data................................................ 17
           -------------------------------------------

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 17
           ------------------------------------------------------------------------------------

PART III   ........................................................................................... 18

Item 10.   Directors and Executive Officers of the Registrant......................................... 18
           --------------------------------------------------

Item 11.   Executive Compensation..................................................................... 19
           ----------------------
           Summary Compensation Table................................................................. 19
           Option Grants in 1996...................................................................... 20
           Options Exercised and Aggregate Remaining at Year-end...................................... 20
           Compensation of Directors.................................................................. 21
           Employment Agreements...................................................................... 21

Item 12.   Security Ownership of Certain Beneficial Owners and Management............................. 21
           --------------------------------------------------------------

Item 13.   Certain Relationships and Related Transactions............................................. 22
           ----------------------------------------------

PART IV    ........................................................................................... 24

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 24
           ---------------------------------------------------------------
           (a)    Documents Filed..................................................................... 24
                  ---------------
                  1.       Financial Statements....................................................... 24
                  2.       Financial Statement Schedule............................................... 24

                                        i

<PAGE>



                  3.       Exhibit List............................................................... 25
           (b)    Reports on Form 8-K................................................................. 26
                  -------------------
           (c)    Exhibits............................................................................ 26
                  --------
           (d)    Financial Statement Schedule........................................................ 26
                  ----------------------------

SIGNATURES ........................................................................................... 27
</TABLE>



                                       ii

<PAGE>



                            EXCHANGE RATE INFORMATION


           Except as otherwise indicated,  all dollar amounts herein,  including
amounts set forth in the  Financial  Statements  appearing  on pages F-1 to F-18
hereof, are expressed in Canadian dollars. In addition, the Financial Statements
have been prepared in accordance with accounting  principles  generally accepted
in Canada, which differ in certain respects from those generally accepted in the
United  States.  See Note 13 to the Financial  Statements  which appears on page
F-15 hereof.

           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
Canadian  dollar in exchange for U.S.  currency for the years  indicated  below,
based on the noon buying rates.
<TABLE>
<CAPTION>


                                                                         Year Ended December 31,
                                    ------------------------------------------------------------------------------------------------

                                       1996             1995             1994             1993             1992             1991
                                    -----------      -----------      -----------      -----------      -----------      -----------

                                                                     (US dollar per Canadian dollar)

<S>                                    <C>              <C>              <C>            <C>              <C>              <C>
High...............................    .7513            .7527            .7632          .8046            .8757            .8926

Low................................    .7235            .7023            .7103          .7439            .7761            .8587

Average............................    .7329            .7305            .7299          .7729            .8235            .8726

 Year End..........................    .7301            .7323            .7128          .7544            .7865            .8652

</TABLE>

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





                                       iii

<PAGE>



                                     PART I


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. (the "Company" or "Altair") was incorporated
under the laws of the province of Ontario,  Canada in April 1973 for the purpose
of acquiring and  developing  mineral  properties.  Since 1994,  the Company has
increasingly  shifted its emphasis from  acquisition  and development of mineral
properties to the  acquisition,  development  and testing of mineral  processing
equipment for use in the recovery of fine,  heavy mineral  particles,  including
gold and environmental contaminants. In furtherance of this purpose, during 1996
the Company  acquired  the rights to the  Campbell  Centrifugal  Jig,  through a
merger involving the Company,  Fine Gold Recovery Systems,  Inc., a wholly owned
subsidiary  of the  Company,  and Trans  Mar,  Inc.,  a  Washington  corporation
("TMI").  See  "--TMI  Merger."  The  Campbell  Centrifugal  Jig (the "CJ") is a
patented  device  capable of segregating  and recovering  extremely fine mineral
particles  or  contaminants  which are not  presently  commercially  recoverable
utilizing   conventional   techniques  or  processes.   See   "--Technology  and
Proprietary Rights."

         Management of the Company views the acquisition of TMI as strategically
significant.  As a result of the  acquisition,  the  Company  now owns  patented
technology  believed  to be  state-of-the-art  in  the  commercial  recovery  of
extremely  fine,  heavy  particulate  matter.  The  acquisition has added to the
Company's  historical  minerals   acquisition  and  exploration   operations  an
opportunity to become a developer of unique minerals processing technology.

         The CJ segregates  particles  based on  differences  in their  specific
gravity.  Such technology may be categorized as a "gravity  separation" process.
Gravity  separators are widely used in minerals  beneficiation  because of their
relative  simplicity,  low cost of operation and ability to  continuously  treat
large tonnage throughput.  What makes the CJ unique, in management's opinion, is
the ability to  economically  recover  smaller  particles  than can be presently
recovered  by  competing  gravity  technologies  due to the  fact  that  density
variations are  accentuated  when particles are subjected to centrifugal  force.
While not yet confirmed through actual  operations,  the cost to manufacture and
operate  the  CJ  is  expected  to be  substantially  similar  to  the  cost  to
manufacture  and operate  competing  gravity  separators  which can only process
particles  larger than 100 mesh. In contrast,  the Company's tests indicate that
the CJ can process feeds as small as 400 mesh. See  "--Competition."  CJ testing
to date has yielded product quality (grade and contaminates) equivalent to those
technologies processing larger particles. See "--Target Markets."

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

         Most recently,  the Company has focused on testing of its Series 12 CJ,
designed to be capable of processing 120 tons of solids per day. A demonstration
unit of the  Series 30 CJ,  designed  to be capable  of  processing  500 tons of
solids per day, is  currently  in the final  design stage and testing is planned
for the first half of 1997. See "--Plan of Operation."  The volume of solids per
day that the Series 12 and Series 30 CJs are actually  capable of processing has
not yet been  established  through  testing;  however,  the Company expects that
planned  testing  over the next  twelve  months  will  confirm  that the CJs can
actually process the volumes they have been designed to process. Larger CJ units
may be designed and, the Company  believes,  can be readily  constructed.  Also,
multiple units may be used in series or parallel  configurations to process high
volume operations.



                                        1

<PAGE>



         Demonstration  tests conducted by the Company and TMI suggest  economic
potential for the use of the CJ in a number of applications, including:

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

         The  Company  is a  development  stage  firm  and has  been  since  its
inception.  The Company to date has derived no revenues  from  product  sales or
otherwise.

Target Markets

         The Company's  present  focus is on developing  markets for the CJ that
have the greatest near-term profit potential--  minerals recovery,  coal washing
and  environmental  remediation.  In the minerals arena,  the Company is seeking
royalty or limited  licensing  agreements with mineral  producers where there is
potential for value added to the beneficiation process, especially heavy mineral
sands and placer gold operations. Verification testing with the CJ has confirmed
the CJ's  potential  for  recovery of zircon from heavy  minerals  sand dry mill
tails in Florida and titanium dioxide (TiO2) from a pigment  processing plant in
the southern United States. Phase 1 and 2 trials conducted by the Company during
1996 have separated  commercial grade zircon products while withdrawing a larger
portion of zircon from the feed ore than other high volume processing  equipment
in use today. Tests on zircon/contaminate feeds conducted by the Company in 1996
have yielded greater than 90% zircon concentrates and recovered up to 75% of the
zircon fed to the unit.  Comparisons  of these  results to  existing  commercial
zircon  spiral  circuit  results,  must be qualified  because the CJ results are
based on a single pass through the unit while results from conventional circuits
typically  include  processing  through 6 or more  successive  banks of spirals.
Without disclosure of proprietary spiral  performance  information,  the Company
believes  the CJ's  recovery  rate is higher than other high  volume  processing
equipment  currently  available,  while  delivering  a  commercial  grade zircon
product.

         At the pigment  processing plant in the southern United States,  the CJ
is being tested for installation  into an intermediate step in the plant process
in the function of a "scavenger  circuit"  designed to recover  titanium dioxide
and  thereby  mitigate  losses.  Preliminary  testing  results  have  yielded an
upgraded titanium dioxide product which is suitable for reintroduction  into the
plant processing stream. There can be no assurance that testing will demonstrate
the CJ to be economically attractive to end users. See "--Plan of Operation."

         Zircon is used  primarily for foundry molds and in the  manufacture  of
certain  types of glass and  ceramics.  Titanium  is used  primarily  as a basic
component of paint. 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.  There is also a
market for "bag  material,"  often  traded as a  spot-priced  product.  The U.S.
Geologic Survey has reported that  production of titanium  dioxide in the United
States  during 1995 was  approximately  1,280,000  metric tons,  representing  a
market value of approximately  $2.6 billion.  The U.S.  Geologic Survey does not
report  zirconium  production for the United States,  however,  according to the
1993  Mineral  Commodities  Summaries  prepared  by the U.S.  Department  of the
Interior,  Bureau of Mines, consumption of zirconium in the United States during
1992 was  approximately  75,000  metric  tons,  representing  a market  value of
approximately $16.1 million.

         Additionally, the Company believes there are a number of proven mineral
deposits in the United  States which have not been  developed  because they have
very fine particle  sizes which current  gravity  separation  technology  cannot
recover economically.  The Company intends to acquire and process these deposits
with the CJ, and believes  that  acquisition  costs will be  relatively  low, as
these  deposits have limited value without an economical  means to process them.
To this end, the Company has recently leased  approximately  3,600 acres of land
containing fine heavy minerals near Camden, Tennessee. The Company has commenced
mineral  deposit  characterization  studies.  Work on the  property has included
geologic mapping,  sampling,  and an initial series of four auger holes. Initial
test drilling has encountered  high grades of various heavy minerals,  including
zircon, rutile and ilmenite.


                                        2

<PAGE>



The first drill holes were on 200 foot centers and intersected a 95 foot average
sand thickness.  Samples were collected for each 5 foot drill interval, screened
to  remove  slimes   (extremely   fine  particles)  and  heavy  mineral  content
determined.  The full sand section contains concentrations of heavy minerals and
all holes cut a 15 to 25 foot  thick  sand bed in which  heavy  mineral  content
exceeds 10 percent by weight. Select sample intervals were:

                                                           Weight %
                  Hole #          Interval Feet     (Total Heavy Minerals)
                  MR 101            25-90 ft                 4.4%
                  MR 104            45-95 ft                 5.8%
                  MR 103            40-70 ft                 7.1%

As a point of reference, most heavy mineral sand operations today process 2 to 3
percent total heavy mineral feeds.  The Company intends to use the CJ to extract
the minerals from this site. The Company has previously  processed heavy mineral
sands  similar in  character  to the deposits  located on the  Company's  leased
property,  and  believes  the CJ is an  appropriate  technology  for this  site.
Verification  testing with the CJ at the Company's test facility in Reno, Nevada
is planned to  commence in the first half of 1997.  Such  testing is designed to
evaluate the CJ's potential to recover the valuable heavy minerals  contained in
the leased property. There can be no assurance that testing will demonstrate the
CJ to be able to economically  process the fine heavy minerals at this site. See
"--Plan of Operation" and "Item 2. Properties."

         The Company has commenced  testing of the CJ to evaluate its ability to
remove  fine  pyrite  particles  and ash from coal  fines,  creating  a saleable
product from material currently discharged as mine waste. Tests conducted during
1990 in  Montana  removed  about 85% of the pyrite and about 50% of the ash from
high sulphur coals. Based on these test results,  the Company believes utilities
in the  eastern  United  States may be able to use the CJ to remove  pyrite from
high sulphur eastern coals,  potentially  reducing the need to incur the expense
of transporting  low-sulphur  western coals. The cost of transporting  coal from
Wyoming coal mining areas to the midwestern  United States  typically  comprises
75% of the cost of the delivered coal product. In addition,  removal of ash from
coal offers other  benefits to  utilities,  as ash reduces the thermal  value of
coal and causes undesirable environmental impacts. Verification testing with the
CJ to  demonstrate  its  ability  to remove  fine  pyrite  particles  and ash is
currently underway at Southern Illinois University with the participation of the
Company  and a  United  States  coal  producer.  The CJ has been  installed  and
extensive testing will take place over the next several months. In approximately
50 individual tests run to date, the CJ substantially  reduced the amount of ash
and pyrite  from the fine  coals  tested.  Tests  which  emphasized  combustible
recovery  yielded  combustible  recoveries of 94% and 89%, ash rejections of 59%
and 71% and product ash at 7.3% and 5.4%,  respectively.  Tests which emphasized
machine throughput yielded combustible  recoveries of 87% an 69%, ash rejections
of 64% and 77%, and product ash at 5.5% and 5.5%,  respectively.  See "--Plan of
Operation." There can be no assurance that testing will demonstrate the CJ to be
economically attractive to end users.

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

Technology and Proprietary Rights

         In operation,  the CJ utilizes a combination of standard mechanical jig
and centrifugal  technologies.  The CJ is a simple,  yet sophisticated  piece of
equipment.  Containing only one moving part, the CJ is relatively  economical to
manufacture and management believes production machines,  if completed,  will be
capable of sustaining high reliability and low maintenance costs in a production
environment.  See  "--Plan of  Operation."  Use of the CJ  requires  no chemical
additives.  The Series 12 CJ stands about six feet tall, requires floor space of
about 25 square feet and weighs  approximately  2,000 lbs. Recently  constructed



                                        3

<PAGE>



jigs are  mounted on a metal  frame  along with jig  auxiliary  equipment--pulse
water pump and tank and control panel--for  transport by truck and rapid on-site
installation.

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

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

         Initial patents on the CJ have been issued in the United States,  South
Africa, United Kingdom,  Australia,  and Canada. A second patent has been issued
with respect to a critical component of the CJ in the United States,  Australia,
Canada, Great Britain,  General European, and South Africa. There are patents in
process on the CJ in Germany,  France, and Japan.  Application is underway for a
third  patent,  which is based  on  recent  changes  to the CJ which  are  being
developed by the Company.

Competition

         Alternative   Technologies.   Minerals   processing   technologies  are
predicated on the physical and chemical  characteristics  of the materials being
processed.   Contrasts   in   size,   specific   gravity,   hardness,   magnetic
susceptibility,  and electrical  conductivity are physical  characteristics that
the  processor   exploits  to  selectively   extract  and  concentrate   mineral
constituents.  Variations in chemical reactivity and molecular affinity are also
used to selectively segregate feed components.

         The CJ competes in an arena in which particle  specific  gravity is the
primary  criteria for particle  segregation  and capture.  Spirals and cones are
mechanical gravity separation devices commercially used in the recovery of heavy
minerals from sand-sized feeds and are most effective when feed sizes are larger
than 100 mesh.  Recovery efficiency falls  dramatically,  however,  with smaller
feeds.  In contrast,  the  Company's  tests  indicate  that the CJ will separate
particles sized from 20 to 400 mesh.

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

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

         Competing Products.  The  Company  believes  that  the CJ currently has
limited competition  in  the commercial segregation of dense particles contained



                                        4

<PAGE>



in feeds between 100 and 400 mesh. A second  centrifugal jig device,  the Kelsey
jig, has been developed in Australia  subsequent to the invention of the CJ. The
Kelsey machine is more  complicated in design,  which the Company believes makes
it  more  expensive  to  manufacture,  operate  and  maintain  in  a  production
environment.  As of  mid-1995,  according  to  the  Kelsey  jig's  manufacturer,
Geologics  Pty.  Ltd.,  36 Kelsey  jigs were in service  at 28 sites  worldwide,
including  two machines at one site in the United  States.  In  addition,  there
exists another device that separates dense particles from feeds sized between 50
and 400 mesh,  the Knelsen Bowl. The Knelsen unit is a batch  concentrator  best
suited to small  volumes.  Knelsen units have been  installed in various  mining
applications, primarily gold, throughout the world.

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

Plan of Operation

         Business  Development.   Testing  conducted  to  date  by  the  Company
indicates  the CJ may have economic  potential in a wide variety of  industries,
and  management  believes  the CJ can be used for finely  sized  heavy  minerals
recovery, coal cleaning and environmental remediation.  See "-- Target Markets".
During the upcoming 12 months,  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 CJ to improve
                  operating  design  for  specific  applications.  In  addition,
                  sustained  operational  testing  is critical in determining if
                  any  material  design problems reside in the CJ technology, if
                  the CJ is capable of sustained operation with little downtime,
                  and if its maintenance costs are low. See "--Research, Testing
                  and Development."

         (2)      Development of royalty, rental or limited licensing agreements
                  with  prospective  industrial  users and  introduction  of the
                  Company's products into targeted markets.

         (3)      Development of the Company's Camden,  Tennessee  heavy mineral
                  sand resource property.

         (4)      Acquisition  and  development  of  undervalued  proven mineral
                  deposits  for  which the  Company's  patented  technology  may
                  provide an economic means of recovery.

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

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

         (1)      The Company plans to  construct,  install and test a Series 30
                  CJ  at a  large  heavy  minerals  sand  processor  located  in
                  Northern  Florida for  recovery of zircon from dry mill tails.
                  The Series 30 CJ is  designed  to process 500 tons per day and
                  is  considered to be  commercial  sized for this  application.
                  Future  testing will seek to verify  increased  CJ  processing
                  capacity and improve other operating design parameters.  Also,
                  sustained operational testing is intended to determine whether


                                        5

<PAGE>



                  the  CJ  is  capable  of  sustained   operations  with  little
                  downtime.  Access to the Florida test site is  controlled by a
                  large  heavy   minerals   sand  producer  that  supplies  test
                  materials for processing.  On-site testing,  which is expected
                  to be  completed  during 1997, is being conducted  by a single
                  Company  employee.  In  addition,   two   additional   Company
                  employees provide  periodic  testing  analysis and engineering
                  services at the site. A Series 12 CJ unit will also be used to
                  perform  testing for removal of  titanium dioxide  (TiO2) from
                  the  tails  stream  of  a  pigment   processing  plant located
                  in  Mississippi.  TiO2 to be processed  from the pigment plant
                  is  extremely  finely  sized (from less than 10   mesh to less
                  than  400  mesh)  and   testing   is  required   to  determine
                  amenability of the material to processing by the CJ.   Testing
                  of this application  is being  performed  by Company personnel
                  at sites  controlled  by  the  owner  of  the  pigment  plant.
                  Completion of this testing is scheduled to  occur  during  the
                  first half of 1997.

         (2)      A newly  constructed  Series 12 CJ has recently been installed
                  at  the  Southern  Illinois  University  high  bay  coal  test
                  facility to test the CJ's  capability to remove of fine pyrite
                  and ash  from  high  sulfur  coals.  A large,  respected  coal
                  producer is co-sponsoring this testing effort,  which is being
                  performed by two Southern  Illinois  University  test facility
                  employees with periodic reviews conducted by Company employees
                  as  required.   Altair  management  has  planned  the  testing
                  procedure  and monitors test  performance.  Completion of this
                  testing is scheduled to occur during the first half of 1997.

         (3)      The Company has  commenced  mineral  deposit  characterization
                  studies at its eastern U.S. minerals resource property.  These
                  studies should be completed during the first half of 1997. The
                  Company  intends to test the ore  amenability to processing by
                  the CJ at the Company's test facility located in Reno, Nevada.
                  The Company's  studies are being  conducted by two independent
                  consultants with periodic geologic  characterization  analysis
                  provided  by a Company  employee.  Altair  plans to  utilize a
                  combination  of Company  employees  and  consultants  for this
                  testing.  Amenability  testing is  scheduled  to be  completed
                  during the first half of 1997.

         (4)      The Company has  established a CJ testing  facility near Reno,
                  Nevada to test samples supplied by mineral companies and other
                  geographically   diverse   users.   The  facility  will  allow
                  demonstrations of the CJ technology,  will provide amenability
                  testing  for a variety  of mineral  ores,  and will serve as a
                  test site for on-going  equipment design. The test facility is
                  equipped  with the  latest  version of the Series 12 CJ and is
                  being 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  centrifugal  jig.
                  Concentrate  and  tails  streams  produced  by the  jig may be
                  accessed for sampling prior to recombination and return to the
                  feed circuit.

         (5)      Additional  testing of fine gold recovery in placer operations
                  is planned  during  1997.  The  Company  plans to use  Company
                  personnel,  located at operating mine sites,  to perform these
                  tests.

         (6)      The  Company  is  currently  in  the  final  design  stage  of
                  constructing a Series 30 CJ which the Company  believes may be
                  capable of more efficiently handling larger processing volumes
                  than the smaller Series 12 CJ. The Company  currently  intends
                  to retain the  current  manufacturer  of  the  Series 12 CJ to
                  manufacture  the Series 30 CJ;  however,  the Company has  not
                  entered  into a  formal  manufacturing  agreement. The Company
                  presently anticipates that construction  of the new CJ will be
                  completed  during the first half of 1997 and the Company plans
                  to install  and test the  machine at  a large  heavy  minerals
                  sand  processing  facility  located in Northern Florida.

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



                                        6

<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:  (i) Fine Gold Recovery Systems, Inc. ("Fine Gold") and (ii)
Mineral Recovery Systems, Inc., a Nevada corporation ("MRS").

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

         MRS2 was  incorporated by the Company in April 1987. 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 manufacture or arrange
for  the  manufacture  of  the  CJ  for  commercial  sales,  rental  or  royalty
arrangements with end users. In addition the Company intends that MRS will lease
or acquire and develop mineral properties,  particularly properties that contain
mineral resources that may be processed with the CJ.

TMI Merger

         The Company's  acquisition of TMI was effected  through a merger of TMI
with and into Fine Gold (the "TMI Merger"). See "--Subsidiaries." The TMI Merger
was effected pursuant to the terms and conditions of a Merger  Agreement,  dated
as of February 8, 1996, entered into by and among the Company, Fine Gold and TMI
(the "TMI  Merger  Agreement"),  and  approved by the  shareholders  of TMI at a
special meeting of shareholders held on February 29, 1996.

          As  a  result  of the TMI Merger: (i) TMI was merged with Fine Gold in
accordance with the laws of the States of Washington and Nevada,  with Fine Gold
surviving as a wholly  owned  subsidiary  of the  Company;  (ii) the Articles of
Incorporation of Fine Gold became the Articles of Incorporation of the surviving
corporation  and the officers and directors of Fine Gold became the officers and
directors  of the  surviving  corporation,  (iii)  all  outstanding  options  to
purchase TMI stock were terminated and, in exchange therefor, the Company issued
580,000  Series E warrants,  each  entitling the holder  thereof to purchase one
share of the Common Stock,  no par value,  of the Company (the "Common  Stock"),
for $2.00 until  January 31, 1997;  (iv) all shares of the capital  stock of TMI
were  converted  into and exchanged  for  1,919,957  shares of the Common Stock,
which were issued and deposited into escrow  pursuant to the terms of two escrow
agreements.  Of the 580,000  Series E Warrants  issued,  561,586 were  exercised
prior to January 31, 1997;  the  remaining  18,414 have been  cancelled.  Of the
1,919,957 shares of the Common Stock deposited into escrow,  1,170,000 are to be
released  dependent upon Altair receiving revenues from the assets formerly held
by TMI. The basis for share  release is one share of Common Stock for each $1.80
in cash flow  received by Altair,  provided  that no more than  one-third of the
original  number of shares of Common  Stock  escrowed may be released in any one
year over the first three years of the escrow.  Shares of Common  Stock still in
escrow at the end of five years may be canceled by the Alberta  Stock  Exchange.
The  remaining  749,957  shares of Common Stock will be released  from escrow to
each former TMI  shareholder  at a rate equal to the greater of 15,000 shares or
5% of such  shareholder's  total  escrowed  holdings each calendar  quarter.  In
addition,  each former TMI  shareholder  or warrant  holder is  restricted  from
selling more than the greater of 15,000 shares or 10% of such holder's  holdings
in any calendar quarter.
--------
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.


                                        7

<PAGE>




Government Regulation and Environmental Concerns

         The Company's  activities are subject to extensive  federal,  state and
local laws and  regulations  controlling  the  exploration and mining of mineral
properties as well as the processing and production of mineral products, and the
possible effects of Company  activities upon the environment.  In addition,  the
Company's activities in the manufacture, development and testing of CJ equipment
are also subject to extensive federal, state and local regulation.  Permits from
a variety  of  regulatory  authorities  are  required  for many  aspects of mine
operation  and  reclamation,   and  equipment   manufacture  and   distribution.
Environmental and other government  regulations at the federal,  state and local
level  pertaining  to the Company's  business and  properties  may include:  (1)
surface  impact,  (2) water  acquisition  and  discharge,  (3) site access,  (4)
reclamation,  (5) wildlife  preservation,  (6)  licenses  and  permits,  and (7)
maintaining fees for unpatented mining claims.

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

Employees

         The  business  of  the  Company  is currently managed by Dr. William P.
Long,  President  and Chief  Executive  Officer of the  Company,  Mr. C. Patrick
Costin,  Vice  President of the Company and President of MRS and Fine Gold,  and
Mr.  Edward  Dickinson,  Director of Finance of MRS. In addition,  MRS employs a
senior process  engineer,  a technician and one 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,  there are no employment  agreements between the Company or its
subsidiaries and their respective  executive  officers.  See "Item 11. Executive
Compensation -- Employment  Agreements."  The future success of the Company will
depend,  in  part,  on its  ability  to  attract  and  retain  highly  qualified
technical, marketing and management personnel. There is no assurance the Company
will be successful in retaining or attracting  highly  qualified  individuals in
key positions.

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.

         Benificiate means to improve the grade of ore by processing.

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

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

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

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

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

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



                                        8

<PAGE>



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

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

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

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

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

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

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


Item 2.  Properties

         The Company  maintains a registered  office at 67 Richmond Street West,
Suite 500,  Toronto,  Ontario M5H 1Z5. In  addition,  the Company  maintains  an
office at 1725 Sheridan Avenue,  Suite 140, Cody, Wyoming 82414, which serves as
the corporate  headquarters for the Company and its Subsidiaries.  Fine Gold and
MRS maintain offices at 230 South Rock Boulevard,  Suite 21, Reno, Nevada 89502.
All three of these offices are leased from unrelated parties and are believed by
management to be adequate for the  Company's  current  needs.  In the event that
alternative or additional office space is required, the Company believes it will
be readily available.

         The  Company  has leased  approximately  3,600  acres of real  property
containing  heavy  minerals in the  eastern  United  States,  pursuant to leases
entered into by MRS and multiple  owners of the real property.  The 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 certain  production  royalties  to the lessors for
minerals  mined and sold  from the  property.  The  leases  typically  are for a
minimum term of ten years, and may be extended indefinitely provided the Company
is actively conducting exploration, development or mining operations. The leases
are cancelable by MRS at any time, and are cancelable by the lessor in the event
of MRS's breach of the terms of the lease.


Item 3.  Legal Proceedings

         The  Company  is from  time  to time  involved  in  routine  litigation
incidental  to the  conduct  of its  business.  Currently,  the  Company  is 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

         During the fourth quarter of the fiscal year ended December 31, 1996, a
special meeting of the shareholders of the Company was held on November 6, 1996,
to  consider  and vote  upon  changing  the  name of the  Company  from  "Altair
International Gold Inc." to "Altair International Inc." The proposed name change
was approved by the  shareholders,  with  5,050,832  votes cast in favor,  5,366
votes cast against, zero abstentions and zero broker non- votes.




                                        9

<PAGE>



                                     PART II


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

Market Price

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


                                                Low                   High
                                          ---------------      -----------------

Fiscal Year Ended
December 31, 1996:

         1st Quarter...................        1.78                   4.25
         2nd Quarter...................        2.70                   6.50
         3rd Quarter...................        3.98                   6.20
         4th Quarter...................        5.30                  11.40

Fiscal Year Ended
December 31, 1995:
         1st Quarter...................         .10                    .48
         2nd Quarter...................         .195                   .70
         3rd Quarter...................         .42                    .87
         4th Quarter...................         .60                   2.20




         In the United States,  as of March 24, 1997, the shares of Common Stock
were listed under the symbol ALTIF on the Nasdaq SmallCap Market. Previously the
shares  of  Common   Stock  were   quoted   under  the   symbol   AIGDF  on  the
over-the-counter  Bulletin  Board  maintained  by the  National  Association  of
Securities  Dealers.  The prices  listed below are stated in U.S.  dollars,  the
currency in which they are quoted,  and  represent  the closing high and low bid
prices for shares of the Common  Stock on the  over-the-counter  Bulletin  Board
during each quarter of 1996. No  information  on bid prices for the Common Stock
prior to such time is  available.  In addition,  quotes for the first quarter of
1996  represent  only trading from March 27 through March 29. The bid prices are
market quotations based on interdealer bid prices,  without markup,  markdown or
commission, and may not represent actual transactions.


                                                Low                  High
                                        -----------------      -----------------

Fiscal Year Ended
December 31, 1996:

         1st Quarter...................         2.30                 2.30
         2nd Quarter...................         1.375                4.125
         3rd Quarter...................         2.85                 4.625
         4th Quarter...................         3.89                 3.31



         As of February 28, 1997,  there were 15,110,245  outstanding  shares of
Common Stock, held by 360 holders of record. During the period from December 31,
1996, the date of the most recent  financial  statements,  to February 28, 1997,
301,229 Series E warrants,  50,000 Series F warrants,  and 40,000 options issued
pursuant to the Option Plan were exercised.


                                       10

<PAGE>




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.

Restrictions on Transfer

         None of the shares of Common  Stock or warrants  to purchase  shares of
Common Stock issued by the Company have been registered under the Securities Act
of 1933,  as  amended  (the  "Securities  Act").  Accordingly,  such  shares and
warrants  constitute  restricted  securities  and may not be resold or otherwise
transferred in the United States unless they are registered under the Securities
Act or an exemption from such registration is available.  The Transfer Agent and
Registrar for the Common Stock has been  instructed  that all shares sold by the
Company in the United States must bear a legend  advising the holder  thereof of
the foregoing restrictions.  In addition, transfer of the shares of Common Stock
in Canada are  subject  to  Canadian  provincial  securities  laws and  exchange
regulations,  which  may  impose a holding  period  on  shares  of Common  Stock
acquired in certain private sales transactions.

         Certain  shares of Common Stock are held in escrow in  accordance  with
the terms and  conditions of the TMI Merger and the Fine Gold Merger,  and their
transfer  and  release  from  escrow  are  subject  to the  terms of the  escrow
agreements  governing  such  shares.  Pursuant  to the  terms of the TMI  Merger
Agreement,  all of the 1,919,957 shares of Common Stock issued in the TMI Merger
were deposited into escrow (the "TMI Escrowed Shares"),  and are governed by the
terms of two escrow  agreements dated as of February 27, 1996 and February 29th,
respectively,  among the Company, Hage Corporate Services,  Inc., and the former
TMI shareholders (collectively,  the "TMI Escrow Agreements"). Of such 1,919,957
TMI Escrowed  Shares,  1,170,000 (the  "Performance  Shares") are to be released
based on the revenues,  if any, received by the Company from the assets formerly
held by TMI. For each $1.80 in revenue received by Altair from such assets,  one
TMI  Escrowed  Share  will be  released;  provided,  however,  that no more than
one-third of the original  number of TMI Escrowed  Shares may be released in any
one year during the first three years of the escrow.  As of December  31,  1996,
none of such  1,170,000  Performance  Shares had been released from escrow.  The
remaining 749,957 TMI Escrowed Shares (the "Principal Shares") are released from
escrow in  increments  of the greater of 15,000  shares or 5% of each former TMI
shareholder's  total escrowed holdings each calendar quarter. As of December 31,
1996,  approximately  542,202 of such 749,957 Principal Shares had been released
from escrow. Except as may be required by reason of the death or bankruptcy of a
holder  of TMI  Escrowed  Shares,  holders  may not sell,  assign  or  otherwise
transfer TMI Escrowed  Shares  without the prior written  consent of the Alberta
Stock  Exchange  and  in  accordance  with  all  applicable  U.S.  and  Canadian
securities laws.

         In connection with the Company's  acquisition of Fine Gold, the Company
and the  former  shareholders  of Fine Gold  entered  into the Fine Gold  Escrow
Agreement,  pursuant to which 650,000 shares of Common Stock of Altair issued to
the former  shareholders  of Fine Gold were deposited in escrow  pursuant to the
terms of the Fine Gold Escrow Agreement (the "Fine Gold Escrowed  Shares").  The
Fine Gold Escrow  Agreement  provides that one Fine Gold  Escrowed  Share may be
released  for each $0.45 of (i) cash flow (as defined  therein) or (ii)  certain
expenditures  incurred by Fine Gold to maintain  its assets.  As of December 31,
1996, no Fine Gold Escrowed Shares had been released from escrow.  Other than as
may be  required by reason of the death or  bankruptcy  of a holder of Fine Gold
Escrowed Shares, such shares may not be sold, assigned or otherwise transferred.
Holders of Fine Gold Escrowed  Shares are entitled to exercise all voting rights
accorded to such shares,  but do not receive  dividends,  if any,  declared with
respect to such shares.

         In  addition,  the TMI  Merger  Agreement  imposes  certain  additional
limitations on the transferability of shares of Common Stock received in the TMI
Merger.  The TMI Merger  Agreement  limits the number of such shares that may be
transferred by any holder thereof in any calendar quarter for one year after the
closing of the TMI Merger to the greater of (i) 15,000 shares or (ii) the sum of
(a) 5% of the  aggregate  number of shares  received  by such  holder in the TMI
Merger plus 10% of the aggregate  number of Warrant Shares (shares acquired upon
exercise of the Series E warrants  issued in the TMI  Merger)  then held by such
holder.  Commencing  one year from the closing of the TMI merger,  the number of
shares  described  in  subsection  (ii)(a)  of the  foregoing  sentence  will be
increased to 10%.



                                       11

<PAGE>



Transfer Agent and Registrar

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

Canadian Taxation Considerations

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

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

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

Recent Sales of Unregistered Securities

         Following is a summary of all securities of the Company sold during the
fiscal  year  ended  December  31,  1996  that  were not  registered  under  the
Securities  Act  of  1933,  as  amended  (the  "Securities   Act"),  other  than
unregistered sales made in reliance on Regulation S. Unless otherwise indicated,
all amounts set forth below are stated in Canadian dollars.

         On February 8, 1996, the Company entered into the TMI Merger Agreement,
pursuant to which the Company issued  1,920,000 shares of Common Stock to the 45
shareholders of TMI (10 of which were  accredited  investors) and issued 580,000
Series E warrants to purchase one share of Common  Stock.  The  transaction  was
effected in reliance upon the exemption  from  registration  provided by Section
4(2), based on a number of considerations, including the following.

         Each  former  shareholder  of TMI  received  a  proxy  statement  which
contained,  among other things,  descriptions of (i) the business and management
of Altair, (ii) the shares of Common Stock to be issued in the TMI Merger, (iii)
the terms and conditions of the TMI Merger Agreement,  (iv) certain risk factors
associated  with the TMI  Merger,  (v) the  reasons  for and  effects of the TMI
Merger and the favorable  recommendation of the Board of Directors regarding the
TMI Merger, (vi) the tax consequences of the TMI Merger,  (vii) the restrictions
on  transferability  of the  shares of Common  Stock to be  received  in the TMI
Merger,  including  those  imposed by securities  laws,  the escrow to which the
shares would be subject and the additional sale restrictions  imposed by the TMI
Merger  Agreement  itself,  and (viii) the  dissenters'  rights  afforded to the
shareholders by Washington law.


                                       12

<PAGE>



Audited  financial  statements of Altair for the year ended December 31, 1995, a
copy  of the  TMI  Merger  Agreement,  and  the  Washington  dissenters'  rights
provisions  were  included,  among  other  things,  as  exhibits  to  the  proxy
statement.  The former TMI Shareholders voted to approve the TMI Merger; none of
the former TMI Shareholders exercised dissenters' rights.

         No general advertising or solicitation preceded the distribution of the
Common  Stock  in the TMI  Merger.  Rather,  the  TMI  Merger  was a  negotiated
agreement   which  developed  as  a  natural   outgrowth  of  the   pre-existing
relationship  between  Altair and TMI.  At the time the TMI Merger  negotiations
commenced,  Altair was working with TMI on the development of the CJ pursuant to
a license  granted to Altair by TMI.  It was this prior  business  relationship,
rather than any general form of solicitation, that resulted in the TMI Merger.

         In  connection  with the TMI Merger,  each former TMI  shareholder  was
required to execute a subscription agreement and questionnaire,  which solicited
information as to each  shareholder's  status as an accredited  investor  and/or
background,   education  and  experience  which  would  enable  the  shareholder
individually, or with the assistance of a qualified purchaser representative, to
effectively evaluate the merits and risks of acquiring shares of Common Stock in
the TMI Merger. Each subscription  agreement included customary  representations
and  warranties  regarding  the  shareholder's  intent to acquire  the shares of
Common  Stock as an  investment,  and  covenants  not to serve as a conduit  for
further distribution of the Common Stock.

         On March 27, 1996, the Company privately placed with one U.S. corporate
accredited investor, 100,000 units, each consisting of one share of Common Stock
and a Series F warrant to  purchase  one share of Common  Stock,  for total cash
consideration of $350,000.  Through December 31, 1996,  50,000 additional shares
of Common Stock have been issued  pursuant to the exercise of Series F warrants.
The  transaction  was effected in reliance upon the exemption from  registration
provided by Section 4(2).

         On June  27,  1996,  the  Company  privately  placed  with  seven  U.S.
accredited investors,  including the two owners of the U.S. corporate accredited
investor that purchased  shares of Common Stock in the March 27, 1996 placement,
an aggregate of 494,027 units,  each consisting of one share of Common Stock and
a Series G  warrant  to  purchase  one  share of Common  Stock,  for total  cash
consideration  of  $1,729,095.  Through  December 31, 1996,  239,337  additional
shares of Common  Stock have been issued  pursuant  to the  exercise of Series G
warrants. The placements were effected in reliance upon Section 4(2).


Item 6.  Selected Financial Data

         The  following  table  sets  forth  selected   consolidated   financial
information with respect to the Company 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  13  to  the
consolidated financial statements included herein for certain reconciliations to
accounting  principles  generally accepted in the United States ("US GAAP"). The
selected financial data should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial  Condition and Results of  Operation,"  and
the consolidated  financial  statements and accompanying  notes included herein.
The TMI Merger was  consummated  in February 1996, and treated as a purchase for
accounting  purposes.  Accordingly,  the following  selected  financial data was
derived solely from the consolidated  financial statements of the Company, which
were  audited  for  the  years  1992-1996  by  McGovern,   Hurley,   Cunningham,
independent chartered accountants.



                                       13

<PAGE>

<TABLE>
<CAPTION>



                                                  Year Ended December 31,
                             --------------------------------------------------------------------

                                1996          1995           1994          1993           1992
                             ----------     ---------     ----------     ---------     ----------
Statements of Operations:
<S>                           <C>           <C>            <C>          <C>            <C>
  Revenues from
    Operations...............  $    -0-     $     -0-      $     -0-     $     -0-     $      -0-
  Operating Expenses......... 1,825,867       589,212        169,022       120,850        178,818
  Interest Expense...........    26,415           -0-            -0-           -0-            -0-
  Interest Income............    38,112         1,370          1,342         3,173            -0-
  Net Loss................... 1,814,169       599,097        784,078       317,952        572,431
  Loss per Common Share......     (0.16)       (0.09)         (0.17)        (0.08)         (0.15)
  Cash Dividends declared
    per Common Share.........       -0-           -0-            -0-           -0-            -0-
  Deficit, Beginning
    of Year.................. 4,566,930     3,967,833      3,183,755     2,865,803      2,288,818
  Net Loss................... 1,814,169       599,097        734,078       317,952        576,985
  Other Expense
    (Income) ................ (958,166)           -0-            -0-           -0-            -0-
  Deficit, End of Year....... 5,422,933     4,566,930      3,967,833     3,183,755      2,865,803

Balance Sheet Data:
  Working Capital ........... 4,077,469       429,682      (155,035)        28,591        175,323
  Total Assets...............11,023,518     1,336,691        527,574       670,100        757,174
  Long-term Obligations......   369,630           -0-            -0-           -0-            -0-
  Current Liabilities........   423,194       124,605        224,791       161,848         56,250
  Net Stockholders'
    Equity...................10,230,694     1,212,086        302,783       508,252        700,924
</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  acquisition  and  development of mineral  properties.
During 1994, the Company's focus changed as it became  primarily  engaged in the
acquisition,  development and testing of mineral processing equipment for use in
the recovery of fine, heavy mineral particles,  including gold and environmental
contaminants.

         On November  15,  1994,  the Company  executed an option  agreement  to
acquire Trans Mar, Inc., a development  stage  enterprise which owned all patent
rights to the CJ, an apparatus for the  separation  and recovery of fine,  heavy
mineral  particles.  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 Trans
Mar, Inc. The acquisition was accounted for as a purchase by the Company,  which
agreed to issue to Trans Mar's shareholders 1,920,000 shares of its common stock
over a five-year  period and 580,000  warrants  entitling the holder to purchase
one common share of Altair for $2.00 until March 1, 1997.

         The effective  purchase price of Trans Mar, Inc. was  $5,115,693.  This
consisted of $3,455,923 of stock issuance to Trans Mar  shareholders  (1,919,557
Altair  shares  with a deemed  value of $1.80 per share) and the  absorption  of
Trans  Mar's  assets  and  liabilities,  with  liabilities  exceeding  assets by
$1,659,770 at February 29, 1996. The purchase price was allocated to centrifugal
jig patents and development costs.

         Prior to  1994,  the  Company  operated  its  minerals  business  as an
exploration  stage company,  in that it intended to receive 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. At
present, there are no business arrangements or joint venture prospects involving



                                       14

<PAGE>



the Company's  properties,  or potential  property  sales from which the Company
expects to receive  income.  No royalty  income has been received in the past by
the Company.

Results of Operations

         Years ending December 31, 1994, 1995, and 1996

         The Company has earned no revenues  to date.  Operating  losses  before
extraordinary  items  totaled  $1,814,169  ($0.16 per share) for the year ending
December 31, 1996,  $599,097 ($.09 per share) for 1995, and $784,078  ($0.17 per
share) for 1994.  Principal  factors  contributing  to the losses  during  these
periods  were  the  absence  of  revenue,   coupled  with  the   incurrence   of
operating expenses  and the  write-off  of  mineral exploration  properties  and
related mineral exploration expenses.

         Aside from the write-off of mineral properties and related  exploration
expenses, which  are  discussed in the following  paragraph, operating  expenses
increased from $169,022 during 1994 to  $589,212  during  1995 and to $1,825,867
during 1996. Of the  $1,825,867  total operating  expenses incurred during 1996,
$523,617,  representing  29%  of  the  total operating  expenses, was related to
amortization of the company's  assets, as compared to amortization of $4,319 and
$1,408  during  1995  and  1994,  respectively  (less than 1% of total operating
expenses in each  year).  Increases  in 1996  amortization  are due primarily to
amortization of CJ patent and development costs acquired in the 1996 TMI merger.
Operating expenses,  exclusive of amortization  and mineral property write-offs,
increased  from   $167,614  in  1994  to  $584,893  during  1995  and $1,302,250
in  1996  due  to  increased  activity  in  acquiring,  testing  and  developing
the CJ and its potential  applications.  In this regard, during 1996 the Company
expanded into new leased office space in Reno,  Nevada and increased  the  level
of  staffing  at this  location  from one to four  personnel. Also, finalization
of  the  TMI  purchase  required  increased  levels of  professional, accounting
and  corporate  services  beyond  the  level  of  similar costs  incurred during
earlier periods.

         Write-offs of mineral properties reflect the Company's changed emphasis
during the period from mineral  property  exploration  to development of mineral
property  equipment.  All of  the  Company's  mineral  properties  and  deferred
exploration  expenditures  were written off during the years ending December 31,
1993 through 1995, as follows:
<TABLE>
<CAPTION>

                                             Ponte                 McEwen              Others             Total
                                          ----------             ----------           ---------        ----------

<S>                                         <C>                    <C>                 <C>               <C>
Balance, December 31, 1992                  $118,539               $199,756            $206,457          $524,752
  Additions during 1993                       49,762                 (3,388)            100,923           147,297
  Write-off during 1993                            0                      0             200,275           200,275
Balance, December 31, 1993                   168,301                196,368             107,105           471,774
  Additions during 1994                       70,186                 72,145               2,294           144,625
  Write-off during 1994                      238,487                268,513             109,398           616,398
Balance, December 31, 1994                         0                      0                   1                 1
  Additions during 1995                            0                      0              11,254            11,254
  Write-off during 1995                            0                      0              11,255            11,255
Balance, December 31, 1995                         0                      0                   0                 0
</TABLE>



         Ponte Lease. Pursuant to an agreement dated March 1, 1989 (as amended),
the Company leased the mineral rights on property  located in Calaveras  County,
California,  subject to  royalties  ranging from 3% to 5%. The  Company's  field
exploration  work  included  excavation  of  multiple  trenches,   sampling  and
assaying.  The Company's joint venture partner,  Freeport MacMoran Gold Company,
drilled 18 exploration holes on the property. Mineralization was encountered but
grades  were too low to  support  commercial  production,  and the  claims  were
written off during 1994.

         McEwen  Lease.  Pursuant  to an  agreement  dated  January  5, 1990 (as
amended),  the Company leased the mineral rights on property  located in Malheur
County,  Oregon and staked  additional  claims  surrounding  the  property.  The
Company performed geological field exploration, including rock chip sampling and
geo-chemical  analysis.  The Company's joint venture partner, BHP Minerals,  did
extensive   geo-chemical   analysis  and  drilled  20  exploration   holes.  The
exploration  holes  encountered  pervasive  low  grade  mineralization,  but  no



                                       15

<PAGE>



sections of minable  grade were cut. BHP withdrew from the joint  venture.  As a
result, the Company determined the property was not economically viable, and the
claims were written off during 1994.

         Other  Leases and Claims.  During the three years  ending  December 31,
1994,  1993 and 1992,  the  Company  held  mineral  leases and claims in several
additional areas including the District of Kenora, Ontario; Mayo District, Yukon
Territory;  Calaveras County,  California; and South Eastern Oregon. The Company
conducted  successive  phased  exploration  work on each  property  until it was
determined that the likelihood of encountering economic mineralization was slim.
Following  such  determination,  all of these leases and claims were written off
during 1993, 1994 and 1995.

         As a result of the Company's  acquisition of TMI, Fine Gold assumed all
of  TMI's   liabilities.   During  1996,   Fine  Gold  entered  into  agreements
extinguishing certain of the TMI accounts payable and notes payable at less than
the book amounts of such debt. The net of such  forgiveness of debt was $958,166
and resulted in an extraordinary gain of $0.08 per  share  for 1996. There  were
no extraordinary items during 1994 and 1995.

Liquidity and Capital Resources

         The Company has financed its operations  since  inception  primarily by
the issuance of equity securities  (Common Stock and warrants to purchase Common
Stock) with  aggregate net proceeds of  $15,653,627 as of December 31, 1996. The
Company received cash proceeds from the sale of Common Stock and the exercise of
options  and  warrants  to acquire  Common  Stock of $180,000 in the year ending
December  31,  1994;  $1,508,400  in 1995;  and  $9,874,611  in 1996,  including
$3,692,053  deemed  value of Common  Shares  issued for the  acquisition  of TMI
($6,182,558 without such deemed value).

         The Company has earned no revenues and has incurred recurring losses in
operations.  At  December  31,  1996,  the  Company's  accumulated  deficit  was
$5,422,933.  However,  due to proceeds  from the issuance of common  stock,  the
Company has  significantly  increased  its  operating  capital and  improved its
financial  condition and resources  during the last three years.  From a working
capital  deficit of $155,035 at year end 1994,  the  Company's  working  capital
position  improved to a positive $429,682 at year end 1995. This trend continued
in 1996 as working  capital at  December  31,  1996 rose to  $4,077,469  and the
Company's  cash  position  increased  from  $424,185  at  December  31,  1995 to
$4,482,083 at December 31, 1996.

         As of  December  31,  1996,  the  Company  had  $4,482,083  in cash and
short-term investments available to meet its near-term development and operating
needs. In addition,  the Company has issued and outstanding warrants to purchase
shares of Common Stock at various prices,  which expire at various dates through
December 26, 1997. Proceeds in the amount of $1,474,728 would be received by the
Company pursuant to the exercise of warrants,  if all outstanding  warrants were
exercised. There can be no assurance,  however, as to the number of warrants, if
any, that may be exercised.  The Company has not yet earned  revenues,  although
revenue  from the sale or  rental  of CJs now being  fabricated  is  anticipated
during  1997.  This  anticipation  of  revenues is based upon "proof of process"
tests  completed  during the fourth  quarter  of 1996  which  indicate  the CJ's
suitability  in a titanium  dioxide  scavenger  circuit of a pigment  processing
plant and discussions which are currently underway with pigment plant management
personnel  regarding  utilization  of the CJ. See "Item 1. Plan of  Operation --
Research,  Testing and Development."  There can be no assurance,  however,  that
such discussions will result in an agreement or generation of revenue. While the
Company hopes to derive  additional  liquidity from the exercise of warrants and
revenue  generated  from the CJ, cash and short term  investments  on hand as of
December  31, 1996 are  expected to be  adequate to continue  current  levels of
testing and staffing through approximately  December 31, 1998. If the Company is
not  successful  in raising  additional  capital to fund its  operations  beyond
December  31, 1998,  product  revenues  would be required to fund the  Company's
operations  beyond that date. There can be no assurance that the Company will be
successful in its efforts to raise additional  capital or that the Company would
be able to generate  product sales  necessary to fund the  Company's  operations
beyond December 31, 1998.

         Currently,  the  Company  is  considering  raising  up to  $10  million
additional  capital  through  private  placements of its Common Stock during the
next six months.  Such proceeds would allow the Company to expand and accelerate
its  activities  to  develop,  test and  market the CJ, and to invest in mineral
properties suitable for development and processing with the CJ. Such funds would
likely be targeted  for  specific  testing  efforts at several  test sites,  for
development of commercial  marketing  opportunities  and for the acquisition and
development  of proven  mineral  deposits.  See "Item 1.  Plan of  Operation  --



                                       16

<PAGE>



Research,  Testing  and  Development."  While  the  Company  believes  that  the
additional  funds  necessary to continue the full scope of activities to develop
and market its products for the next twelve months will be available,  there can
be no assurance that the Company's planned capital efforts will be successful.


Item 8.  Financial Statements and Supplementary Data

         The financial  statements  required by this Item appears on  pages  F-1
through F-18 of this Form 10-K.


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

         None.


                                       17

<PAGE>



                                    PART III


Item 10. Directors and Executive Officers of the Registrant

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

<TABLE>
<CAPTION>

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

<S>                                    <C>                                                                     <C>
William P. Long................        President, Chief Executive Officer and Director                         1988

C. Patrick Costin..............        Vice President                                                          1996

Christopher D. Proud...........        Director                                                                1990

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

George E. Hartman..............        Director                                                                1997
</TABLE>



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

         William P. Long, 50, has been the President,  Chief  Executive  Officer
and a director of the Company  since 1988,  and the  Secretary and a director of
Fine Gold since the Merger.  Dr. Long also served as the Vice  President  of the
wholly  owned  subsidiary  of the  Company  formerly  known as Mineral  Recovery
Systems,  Inc.  which was merged with and into Fine Gold in June 1996.  Dr. Long
has been an  executive  officer and  director of Carlin Gold  Company,  now MRS,
since its formation in April 1987. From 1987 to 1988, Dr. Long was a mineral and
energy  consultant,  providing  various  services  to  clients in the mining and
energy industries,  including  arranging  precious metal property  acquisitions,
supervising  mineral  evaluations,  and providing market analyses.  From 1980 to
1986,  Dr. Long  served as the  Executive  Vice  President  and Chief  Financial
Officer of Thermal Exploration Company. From 1974 to 1980, Dr. Long was employed
by Amax  Exploration,  Inc. in various  capacities,  including Systems Engineer,
Business Analyst and Business Manager.  Dr. Long is affiliated with the American
Institute of Chemical  Engineers and the American Institute of Mining Engineers.
He obtained a bachelors  degree in Chemical and Petroleum  Refining  Engineering
and a Ph.D. in Mineral  Economics from the Colorado  School of Mines in 1969 and
1974, respectively.

         C. Patrick Costin, 53, was appointed a Vice President of the Company in
June 1996,  and also  currently  serves as the  President and a director of Fine
Gold and MRS.  Mr.  Costin  also  served as the  President  of the wholly  owned
subsidiary of the Company formerly known as Mineral Recovery Systems,  Inc. from
March 1995 until its merger with and into Fine Gold in June 1996.  Mr. Costin is
the chief  executive  officer of Costin and  Associates,  a minerals  consulting
organization  founded by Mr. Costin in 1992 which  specializes in identification
and  evaluation  of  North  American  mine  and  mineral   deposit   acquisition
opportunities.  From 1982 to 1992,  Mr.  Costin  served as the  manager  of U.S.
exploration for Rio Algom Ltd. Mr. Costin's additional  experience in the mining
and  minerals  industry  includes  Senior  Mineral  Economist  for the  Stanford
Research  Institute from 1977 to 1982,  Senior  Geologist for Chevron  Resources
from 1975 to 1976,  Senior  Geologist for Newmont  Mining  Corporation of Canada
from 1967 to 1975,  and  Geologist  for United Keno Hill Mines Ltd. from 1965 to
1967. Mr. Costin  obtained a bachelors  degree in Geological  Engineering  and a
masters degree in Minerals  Economics from the Colorado  School of Mines in 1965
and 1975,  respectively.  He is a member  of the  American  Institute  of Mining
Engineers, and a member of the Colorado Mining Association,  for which he served
as director from 1987 to 1992.

         Christopher   D.  Proud,  50,  has been a director of the Company since
1990. Mr. Proud is President of Proud Enterprises  Inc., an Ontario  corporation
engaged in executive  counseling  and relocation  services,  which he founded in
1977. He is also currently  Vice President of Belmont Rose Granite  Corporation,



                                       18

<PAGE>



an  industrial  minerals  corporation  located  in  Canada. Mr. Proud  has  been
employed  in  the  Canadian  mining  industry  since 1967 in various capacities,
including geology, engineering and production.

         James I. Golla, 64, was appointed  Secretary of the Company in November
1996 and has been a  director  of the  Company  since  February,  1994.  He also
currently  serves as a director of Nova Beaucage  Resources  Ltd., and Thornburg
Capital Ltd. Mr. Golla has been a journalist  with the Globe and Mail, a Toronto
business newspaper,  since 1954, specializing in business news for the past five
years.

         George E.  Hartman,  48, was elected a director of the Company in March
1977.  Since 1995,  Mr.  Hartman  has served as  President  of Planvest  Pacific
Financial Corporation ("Planvest Pacific"), a Vancouver-based financial planning
firm with over 250  representatives,  27,500  clients  and $1  billion of assets
under  management.  Mr.  Hartman  also is on the Board of  Directors of Planvest
Capital  Corp.,  the  parent of  Planvest  Pacific.  In  addition,  Mr.  Hartman
continues to serve as  President  of Hartman & Company,  Inc., a firm founded by
Mr. Hartman in 1991 which provides consulting services to the financial services
industry.  Mr.  Hartman is the author of Risk is a Four-Letter  Word--The  Asset
Allocation Approach to Investing,  a Canadian best-seller  published in 1992 and
now in its fifth printing,  and host of a weekly personal finance radio program,
"Money Matters," aired on AM 1040 in Vancouver, British Columbia.

Compliance with Section 16(a) of the Exchange Act

         Section  16(a) of the  Securities  Exchange Act of 1934 (the  "Exchange
Act") requires the Company's  officers and directors to file reports  concerning
their  ownership  of the Common  Stock of the Company  with the  Securities  and
Exchange  Commission  and to furnish  the Company  with copies of such  reports.
During the fiscal year ended  December  31,  1996,  the  Company's  officers and
directors were not yet subject to Section 16(a).  Beginning January 24, with the
effectiveness  of the Company  registration  of the Common  Stock under  Section
12(g) of the Exchange Act, the Company's  officers and directors  became subject
to Section 16(a).


Item 11. Executive Compensation

Summary Compensation Table

         The following  table sets forth all annual and  long-term  compensation
for  services  rendered in all  capacities  to the Company for the fiscal  years
ended December 31, 1996,  1995 and 1994 by William P. Long, the President of the
Company.  The Company had no other  executive  officers  whose total  salary and
bonuses during the fiscal year ended December 31, 1996 exceeded $100,000.
<TABLE>
<CAPTION>

                              Annual Compensation (1)                   Long Term Compensation
                       --------------------------------------   --------------------------------------
                                                                          Awards              Payouts
                                                                ---------------------------  ---------
                                                     Other     Restricted
              Fiscal                                Annual       Stock     Securities Under     LTIP     All Other
 Name and      Year                                Compensa-     Awards     Options Granted   Payouts    Compensa-
   Title      Ended   Salary ($)(2)  Bonus ($)       tion         ($)            (3)            ($)        tion
-----------   ------   -----------   -----------   ----------   ---------   ---------------  ---------  -----------

<S>            <C>     <C>              <C>           <C>          <C>         <C>             <C>         <C>
William        1996    90,000           9,120         -0-          -0-          250,000         -0-         -0-
P. Long        1995    91,200           9,120         -0-          -0-          166,000         -0-         -0-
               1994    91,200           9,120         -0-          -0-          221,000 (4)     -0-         -0-
</TABLE>


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

(1)      All compensation paid is stated in United States dollars.
(2)      Bonus  and  salary  amounts  reflect amounts accrued and payable to Dr.
         Long  for  each  fiscal  year  in  accordance  with  the  terms  of his
         employment agreement with the Company.   See "--Employment Agreements."
         Amounts actually paid to Dr. Long in fiscal years 1996, 1995,  and 1994
         were  U.S.  $60,000,  $110,000  and  U.S.  $120,200, respectively. Such
         payments include payment of earned but unpaid salary and bonus for 1992
         of  U.S.  $16,720.   At   December  31,  1996  U.S.  $115,360  remained
         outstanding  and  payable  to  Dr.  Long,  including interest on unpaid
         bonuses ($2,763).
(3)      Options  to  purchase  shares  of  Common Stock granted pursuant to the
         Altair International Inc. Stock Option Plan (the "Option Plan").


                                       19

<PAGE>



(4)      These  options  were  granted  following  the  cancellation  of 143,333
         options granted in 1993. The 1993 options were canceled and new options
         granted in 1994 in order that the exercise  price of the options  would
         more closely reflect the then-current market price of the Common Stock.


Option Grants in 1996

         The following table provides detailed information  regarding options to
purchase  shares of Common  Stock  granted  to Dr.  Long  during  the year ended
December 31, 1996:
<TABLE>
<CAPTION>

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

                                                                                            5% ($)      10% ($)
                                                                                          ----------   ----------

<S>                             <C>                 <C>        <C>           <C>           <C>          <C>
William P. Long,                250,000 (1)         50%        4.00 (2)      5/27/01       276,282      610,510
President and Director
</TABLE>



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

(1)      Represents options granted on May 27, 1996 pursuant to the Option Plan.
         The options become exercisable on May 27, 1997.
(2)      The market value of the  underlying  shares of Common Stock as reported
         by the Alberta  Stock  Exchange on May 26,  1996,  the day prior to the
         grant date, was $4.00.


Options Exercised and Aggregate Remaining at Year-end

         The following table provides  detailed  information  regarding  options
held by Dr. Long as of December 31, 1996, and options  exercised during the year
ended December 31, 1996.
<TABLE>
<CAPTION>

                      Securities
                       Acquired     Aggregate          Number of Securities
                          on          Value           Underlying Unexercised         Value of Unexercised In-the-
                       Exercise      Realized        Options at December 31,               Money Options at
       Name              (#)           ($)                   1996 (#)                  December 31, 1996 ($) (1)
-------------------   ----------   ------------   ------------------------------   --------------------------------

                                                   Exercisable    Unexercisable    Exercisable     Unexercisable
                                                  -------------   --------------   -------------   ----------------

<S>                    <C>          <C>               <C>        <C>                   <C>          <C>
William P. Long,       387,000      3,021,300          -0-         250,000 (2)          -0-           1,850,000
President and
Director
</TABLE>


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

(1)      Based on the closing price of the Common Stock on December 31, 1996, as
         reported by The Alberta Stock Exchange, of $11.40.
(2)      Will  be  exercisable at $4.00 per share commencing May 27, 1997, until
         5:00 p.m. (Toronto time) on May 1, 2001.




                                       20

<PAGE>



Compensation of Directors

          Directors who are not officers of the Company are not  currently  paid
any fees for their  services as  directors.  Directors  who are not officers are
entitled to receive compensation to the extent that they provide services to the
Company at rates that would be charged by such  directors  for such  services to
arm's length parties.  Christopher D. Proud, a director of the Company, was paid
an aggregate of $20,000 in 1996 for management  consulting  services rendered to
the Company during the period from April through August of 1996.

         Directors  also have been and currently are entitled to  participate in
the Option Plan. As of December 31, 1996, the Company had outstanding options to
purchase 745,000 Common Shares pursuant to the Option Plan, 270,000 of which are
held by directors of the Company.

Employment Agreements

         William  P.  Long,  President  of the  Company,  has  entered  into  an
employment agreement with the Company dated January 1, 1988, as amended June 30,
1990  and  April  1,  1996  (the  "Employment  Agreement").  The  1990  and 1996
amendments  have not been  reflected in a written  amendment  to the  Employment
Agreement.  Pursuant to the Employment  Agreement,  Dr. Long is paid a salary of
$7,600 per month and an annual  bonus,  determined  by the board of directors of
the Company,  of not less than 10% of Dr.  Long's  annual  compensation.  In the
event of a takeover,  merger or  consolidation  of the Company and provided that
(i) the voting control of over 35% of the issued and outstanding Common Stock is
acquired  by an  individual  or  group,  and (ii) the  Employment  Agreement  is
terminated by the Company within 180 days before or one year  thereafter,  or by
Dr.  Long  within one year  thereafter,  then Dr.  Long shall be issued  200,000
shares of Common Stock.

         C. Patrick Costin, a Vice President of the Company and the President of
Fine Gold,  is  employed  by Fine Gold  pursuant  to the terms of an  employment
agreement  entered into August 15, 1994.  Unless sooner terminated in accordance
with the terms of the  agreement,  the agreement  will terminate on December 31,
1997. The agreement  provides that Mr. Costin shall be paid a salary of at least
$5,000 per month and may be  entitled to bonuses as  determined  by the Board of
Directors of Fine Gold.


Item 12. Security Ownership of Certain Beneficial Owners and Management

         Following is information with respect to beneficial ownership of shares
of the Common Stock as of February  28, 1997 by persons  known to the Company to
own  more  than  5% of the  outstanding  Common  Stock,  each  of the  Company's
executive  officers and  directors,  and by all  officers  and  directors of the
Company as a group. Unless otherwise  indicated,  each of the shareholders named
in the table has sole  voting and  investment  power with  respect to the shares
identified as beneficially  owned. The Company is not aware of any arrangements,
the operation of which may at a subsequent date result in a change in control of
the Company.
<TABLE>
<CAPTION>

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

<S>                    <C>                                                   <C>                              <C>
    Common             William P. Long                                       2,097,529 (3)                    13.8%
                         57 Sunset Rim
                         Cody, Wyoming  82414

    Common             C. Patrick Costin                                     1,025,833 (4)                    6.7%
                        1850 Aquila Avenue
                        Reno, Nevada  89509

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



                                       21

<PAGE>





    Common             Christopher D. Proud                                        0                            *
                         7225 Woodbine Avenue, Suite 115A
                         Markham, Ontario L3K 1A3

    Common             All Directors and Officers as a Group                 3,145,362 (6)                    20.5%
                       (4 persons)

</TABLE>

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

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

(1)      Includes all shares issuable  pursuant to the exercise or conversion of
         options and warrants that are exercisable within 60 days.
(2)      Based on 15,110,245 shares  outstanding as of February 28, 1997. Shares
         of Common Stock underlying options or other convertible  securities are
         deemed to be  outstanding  for purposes of  calculating  the percentage
         ownership  of the owner of such  securities,  but not for  purposes  of
         calculating any other person's percentage ownership.
(3)      Includes 56,000 shares held by Dr. Long's minor daughter, 57,500 shares
         held by Dr. Long's minor son, and  162,000  shares  held  by  the  MBRT
         Trust,  an  irrevocable  trust for the benefit of the minor children of
         Dr. Long.  Dr. Long  disclaims  any beneficial interest in such 275,500
         shares.
(4)      Includes  617,500  shares held in escrow and to be  released  dependent
         upon net income  adjusted for non-cash items ("Cash Flow"),  as defined
         in the escrow  agreement,  generated by Fine Gold.  The basis for share
         release  is one share of Common  Stock for $0.45 of Cash  Flow.  Shares
         still in escrow on April 21,  1999 are subject to  cancellation  by the
         Company.   Mr.  Costin  is  entitled  to  exercise  all  voting  rights
         applicable  to the escrowed  shares.  As of February 28, 1997,  none of
         such  shares  had been  released  from  escrow.  See "Item 13.  Certain
         Relationships and Related  Transactions".  Also includes 185,000 shares
         subject to presently exercisable options granted to Mr. Costin pursuant
         to the Option Plan.
(5)      Includes 20,000 shares subject to presently exercisable options granted
         to Mr. Golla pursuant to the Option Plan.
(6)      Includes  205,000  shares  subject  to  presently  exercisable  options
         granted to officers and directors pursuant to the Option Plan.



Item 13. Certain Relationships and Related Transactions

         Included in accounts payable and accrued liabilities of the Company for
fiscal years 1996 and 1995 are approximately $115,360 and $64,000, respectively,
owing to Dr.  William  P. Long,  the  President  of the  Company.  Such  amounts
represent  accrued salary and bonuses payable to Dr. Long. No terms of repayment
have been negotiated with respect to such amounts.

         In May 1994, the Company effected a private placement of 600,000 shares
of Common Stock with Dr. Long for  aggregate  proceeds of $180,000.  The private
placement was approved by the  shareholders  of the Company at a special meeting
of shareholders held June 22, 1995.

         Pursuant to an  agreement  dated  April 21,  1994,  the Company  issued
750,000  shares of Common  Stock,  with a deemed value of $0.47  ($352,500)  per
share for all of the  outstanding  common shares of Fine Gold.  Mr. Costin owned
95% of the Fine Gold common shares and, as a result,  was issued  712,500 shares
of Common Stock. Of the shares of Common Stock issued to Mr. Costin, 617,500 are
held in escrow, to be released  dependent upon cash flow generated by Fine Gold,
pursuant to the terms of an escrow agreement among the Company,  Equity Transfer
Services, Inc., Thomas P. Campbell and Mr. Costin, dated June 1, 1994 (the "Fine
Gold Escrow Agreement").  See "Item 12. Security Ownership of Certain Beneficial
Owners and Management".

         During  the  1995  fiscal  year,  the  Company  advanced  to  Dr.  Long
approximately  $45,000,  which does not bear  interest  and is not  subject to a
repayment  schedule.  This  amount was paid to Dr.  Long as an  advance  against
expenses to be incurred by Dr. Long on behalf of the Company. As of December 31,



                                       22

<PAGE>



1996, none of this amount remained  outstanding.  Other than the 1995 advance to
Dr. Long, no officer or director of the Company,  nor any associate thereof, has
been  indebted  to the Company or its  subsidiaries  at any time during the last
three years.




                                       23

<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, 1996 and  1995

                           o        Consolidated  Balance Sheets at December 31,
                                    1996 and 1995

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

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

                           o        Notes to Consolidated Financial Statements


                  2.       Financial Statement Schedule.  Not applicable.




                                       24

<PAGE>



                  3.       Exhibit List
<TABLE>
<CAPTION>

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

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

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

  3.2     Bylaws of the Registrant                                        (1)

  4.1     Form of Common Stock Certificate                                (1)

  4.2     Form of Series D Warrant Certificate                            (1)

  4.3     Form of Series E Warrant Certificate                            (1)

  4.4     Form of Series F Warrant Certificate                            (1)

  4.5     Form of Series G Warrant Certificate                            (1)

  4.6     Form of Series H Warrant Certificate                            (1)

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

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

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

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

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

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

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

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

 10.3     Employment Agreement between Altair International
          Inc. and William P. Long dated January 1, 1988                  (1)

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

 10.5     Altair International Inc. Stock Option Plan adopted by
          shareholders May 10, 1996                                       (1)

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



                                       25

<PAGE>





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

  22      Subsidiaries of the Registrant                                  (2)

  27      Financial Data Schedule                                                      (3)
</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)  Filed  herewith  and  attached to this Annual Report on Form 10-K following
     page F-18 hereof.

         (b)      Reports on Form 8-K

                  The  Company did not file a report on Form 8-K during the last
                  quarter of the fiscal year ended December 31, 1996.

         (c)      Exhibits

                  Exhibits to this  Report  are  attached  following  page  F-18
                  hereof.

         (d)      Financial Statement Schedule

                  Not applicable.


                                       26

<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 31, 1997.

                                        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.
<TABLE>
<CAPTION>


                    Signature                                         Title                                Date


<S>                                                    <C>                                       <C>
/s/ William P. Long
William P. Long                                        President and Chief Executive             March 31, 1997
                                                       Officer and Director (Principal
                                                       Executive Officer)



/s/ C. Parick Costin                                   Vice President (Principal                 March 31, 1997
C. Patrick Costin                                      Financial and Accounting
                                                       Officer)



/s/ James I. Golla                                     Secretary and Director                    March 31, 1997
James I. Golla




/s/ Christopher D. Proud                               Director                                  March 31, 1997
Christopher D. Proud
</TABLE>


================================================================================



                                      27


<PAGE>













                                AUDITORS' REPORT


To the Shareholders of
Altair International Inc.


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

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

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


                      /S/  McGOVERN, HURLEY, CUNNINGHAM





                                                    Chartered Accountants

North York, Canada
March 18, 1997



                                      F-1

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
                                                                                           1996                1995
(Expressed in Canadian Dollars)                                                             $                   $
=====================================================================================================================
                                                       ASSETS
CURRENT
<S>                                                                                    <C>                  <C>
   Cash and term deposits                                                              4,482,083            424,185
   Advances and accounts receivable                                                       18,580            130,102
                                                                                    ------------        -----------
                                                                                       4,500,663            554,287
CAPITAL (Note 3)
   Office equipment, vehicles and mining equipment,
      net of accumulated amortization                                                    351,047             33,365

CENTRIFUGAL JIG (Note 4)                                                               5,984,808            733,430

MINERAL PROPERTIES AND RELATED DEFERRED
   EXPLORATION EXPENDITURES (Note 5)                                                     172,213              -

GOODWILL, net                                                                             14,787             15,609
                                                                                    ------------        -----------

<CAPTION>
                                                                                      11,023,518          1,336,691
                                                                                      ==========         ==========
                                                     LIABILITIES
CURRENT
<S>                                               <C>                                    <C>                <C>
   Accounts payable and accrued liabilities (Note 8)                                     213,443            124,605
   Current portion of notes payable                                                      209,751              -
                                                                                     -----------        -----------
                                                                                         423,194            124,605
NOTES PAYABLE (Note 6)                                                                   369,630              -
                                                                                     -----------        -----------
                                                                                         792,824            124,605
<CAPTION>
                                                                                     -----------        -----------
                                                SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 7)
   Issued
<S>                                                                                   <C>                 <C>
      14,686,296 Common shares (1995 - 8,497,849)                                     15,588,187          5,779,016

COMMON SHARES TO BE ISSUED (Note 7)                                                       65,440              -

DEFICIT                                                                               (5,422,933)        (4,566,930)
                                                                                      ----------         ----------

TOTAL SHAREHOLDERS' EQUITY                                                            10,230,694          1,212,086
                                                                                      ----------         ----------

                                                                                      11,023,518          1,336,691
                                                                                      ==========          =========
</TABLE>

APPROVED ON BEHALF OF THE BOARD:

         "CHRISTOPHER J. PROUD"        , Director

         "WILLIAM P. LONG"             , Director

                                     F-2

<PAGE>



ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
=====================================================================================================================
                                                                                           1996                1995
(Expressed in Canadian Dollars)                                                             $                   $
=====================================================================================================================
OPERATING EXPENSES
<S>                                                                                      <C>                 <C>
   Professional fees                                                                     439,267             91,257
   Wages and administration                                                              305,406            141,494
   Research and development                                                              218,856            222,350
   General and office                                                                    107,291             29,379
   Shareholders' meetings                                                                 52,666              6,946
   Public relations                                                                       48,336             28,812
   Occupancy costs                                                                        37,005              -
   Travel                                                                                 31,991              1,027
   Transfer agent's fees                                                                  19,161              9,378
   Insurance                                                                              16,047             11,457
   Patent maintenance                                                                     12,237              -
   Accounting and corporate services                                                       9,182              8,348
   Government fees and taxes                                                               5,763              2,650
   Stock exchange fees                                                                     4,800              5,091
   Bank charges                                                                            1,041              -
   Loss (gain) on foreign exchange                                                        (6,799)             8,894
   Financing fees                                                                          -                 17,810
   Write-off of mineral properties and
      related exploration expenditures                                                     -                 11,255
   Amortization                                                                          523,617              4,319
                                                                                      ----------         ----------
                                                                                       1,825,867            600,467
   Add: Interest on notes payable                                                         26,415              -
   Less: Interest income                                                                 (38,113)            (1,370)
                                                                                     -----------        ------------

Loss from operations                                                                   1,814,169            599,097

Gain on forgiveness of debt (Note 11)                                                  (958,166)              -
                                                                                     -----------      -------------

NET LOSS for the year                                                                    856,003            599,097

DEFICIT, beginning of year                                                             4,566,930          3,967,833
                                                                                       ---------          ---------

DEFICIT, end of year                                                                   5,422,933          4,566,930
                                                                                       =========          =========


Net loss per share from operations
   Basic (Note 9)                                                                         $(0.16)            $(0.09)
                                                                                           =====              =====

Net income per share from gain on
   forgiveness of debt                                                                     $0.08              $0.00
                                                                                            ====               ====
</TABLE>
                                      F-3

<PAGE>



ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
====================================================================================================================
                                                                                           1996               1995
(Expressed in Canadian Dollars)                                                             $                  $
====================================================================================================================
CASH WAS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
<S>                                                                                    <C>                <C>
Net loss for the year                                                                   (856,003)          (599,097)
   Charges not involving cash:
      Amortization                                                                       523,617              4,319
      Write-off of mineral properties and
         related exploration expenditures                                                  -                 11,255
                                                                                    ------------         ----------
                                                                                        (332,386)          (583,523)
                                                                                       ---------         ----------
Changes in noncash working capital balances:
   Decrease (increase) in advances and
      accounts receivable                                                                111,522            (70,162)
   Increase (decrease) in accounts payable and
      accrued liabilities                                                                 88,838           (100,186)
                                                                                     -----------         ----------
                                                                                         200,360           (170,348)
                                                                                      ----------         ----------

                                                                                        (132,026)          (753,871)
                                                                                      ----------         ----------
FINANCING ACTIVITIES
   Issuance of common shares for cash                                                    305,000              -
   Issuance of common shares pursuant to
      a private placement                                                              1,939,095          1,200,000
   Issuance of common shares for shares of subsidiary                                  3,455,923              -
   Common shares to be issued                                                             65,440              -
   Exercise of stock options                                                             722,100             73,400
   Exercise of warrants                                                                3,387,053            235,000
   Notes payable                                                                         579,381              -
                                                                                     -----------         ----------
                                                                                      10,453,992          1,508,400
                                                                                      ----------         ----------
INVESTING ACTIVITIES
   Mineral properties and deferred exploration expenditures                             (172,213)           (11,255)
   Purchase of capital assets                                                           (349,104)           (31,232)
   Centrifugal Jig patents and related expenditures                                   (5,742,751)            (5,965)
   Option agreement costs                                                                   -              (291,708)
                                                                                   --------------        ----------
                                                                                      (6,264,068)          (340,160)
                                                                                      ----------         ----------

Increase (decrease) in cash                                                            4,057,898            414,369
Cash, beginning of year                                                                  424,185              9,816
                                                                                     -----------        -----------

Cash and term deposits, end of year                                                    4,482,083            424,185
                                                                                      ==========        ===========
</TABLE>
                                      F-4

<PAGE>



ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Expressed in Canadian Dollars)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES

      Consolidation:
         The  financial  statements  include the accounts of the company and its
         subsidiaries,  Mineral  Recovery  Systems,  Inc. (MRS) (formerly Carlin
         Gold Company) (100% owned),  Intercontinental  Development  Corporation
         (66% owned), Fine Gold Recovery Systems,  Inc. (Fine Gold) (100% owned)
         and 660250 Ontario Limited (100% owned).  During 1996, Fine Gold merged
         with the company previously known as MRS and Trans Mar, Inc. (TMI) (see
         Note 2(b)) and  continued  under the name Fine Gold.  Subsequent to the
         merger,  Carlin  Gold  Company  changed  its name to  Mineral  Recovery
         Systems, Inc.

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

      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 in are deferred
         until the properties are brought into production at which time they are
         amortized on a  unit-of-production  basis.  Other  general  exploration
         expenses are charged to operations as incurred.

         The cost of the mineral  properties  abandoned  or sold and the related
         deferred  exploration  costs are charged to  operations  in the current
         year.

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




                                                                    Continued...
                                      F-5
<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
===========================================================-====================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

              Furniture and office equipment            20% declining balance
              Mining equipment                          20% declining balance
              Vehicles                                  20% declining balance
              Centrifugal Jig equipment                  7 year straight line

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

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

              Royalty agreement (Note 2(c))         -    15 year straight line
              Licence agreement                     -    No amortization as the
                                                         company intends to sell
                                                         the licence
              Mineral recovery technology rights    -    Costs are deferred
                                                         until the jig
                                                         technology produces
                                                         revenue

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

      Goodwill:
         Goodwill is the excess of the cost of investment in  subsidiaries  over
         the estimated  fair value of 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.




                                                                    Continued...
                                      F-6

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
      Translation of Foreign Currency:
         The operations of the company's subsidiaries are determined to be of an
         integrated nature. The accounts of the U.S. subsidiaries are translated
         using the temporal method,  under which monetary assets and liabilities
         are  translated  at the rate of  exchange  prevailing  at the year end;
         capital  assets  are   translated  at  the  rates   prevailing  at  the
         acquisition  dates;  and,  revenue  and  expenses  at average  rates of
         exchange during the year, with the exception of amortization,  which is
         translated at historical exchange rates.  Exchange gains and losses are
         included in the consolidated  statement of administrative  expenditures
         and deficit.

      Transactions Involving Non-Cash Consideration:
         When exchanging its shares of common stock for non-cash  consideration,
         the company values its exchanged shares at contemporaneous trade prices
         on the Alberta  Stock  Exchange,  with larger  transactions  subject to
         arm's length discounting in order to arrive at fair market value.

2. ACQUISITIONS

      (a)   Fine Gold Recovery Systems, Inc. (Fine Gold)
            Pursuant to an  agreement  dated  April 21, 1994 the company  issued
            750,000 common shares,  with a deemed value of $0.47  ($352,500) per
            share  for all of the  outstanding  common  shares of Fine  Gold,  a
            corporation  incorporated in the State of Nevada and involved in the
            development of a "Centrifugal Jig", an apparatus designed to recover
            fine gold from mineral properties. Pursuant to an Agreement dated as
            of 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 Jig at  specified  target
            sites and utilize  the Jig in the  exploitation  of such sites,  and
            obtained the agreement of Mr. Campbell to provide  certain  services
            and  assistance  to Fine  Gold in  doing so  during  the term of the
            Agreement and  throughout  the world  excepting (i) areas subject to
            patents held by Trans Mar, Inc. and (ii) the Republic of Costa Rica,
            and certain areas in Mexico and Guiana, South America.

            A total of 650,000  shares issued  pursuant to the  acquisition  are
            subject to a  Performance  Escrow  Agreement  which  states that one
            share can be released  from  escrow for each U.S.  $0.45 of (i) cash
            flow  generated  by or from the  centrifugal  jig, or (ii)  Deferred
            Expenditures incurred on the assets of Fine Gold. As at December 31,
            1996, 650,000 common shares remain in escrow.

            As at  December  31,  1996,  Fine Gold was still in the  development
            stage  in  that  no  operating  revenues  have  been  earned  and no
            operating expenses have been incurred. (See Note 4).



                                                                    Continued...
                                      F-7

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
2. ACQUISITIONS (Continued)
      (b)   Trans Mar, Inc. (TMI)
            In  March  1996,  the  company  acquired  100%  of  the  issued  and
            outstanding common stock of TMI for total consideration of 1,919,957
            common  shares  at  $1.80  each   ($3,455,923)   the  assumption  of
            $1,659,770 of net  liabilities,  and 580,000 Series E share purchase
            warrants (Note 7(v)).

            TMI is  incorporated  in the State of Washington  and is involved in
            the development of the patented Campbell  Centrifugal Jig. TMI holds
            patent rights to the  centrifugal  jig technology  (subject to a 10%
            royalty - See Note 2(c)) in the United States, South Africa,  United
            Kingdom,  Australia and Canada.  This transaction has been accounted
            for using the  purchase  method.  The excess  paid over the net book
            value  (which  approximates  fair value) of the assets  acquired has
            been allocated to the centrifugal  jig patents.  TMI was merged with
            Fine Gold immediately after the acquisition.

            The 1,919,957  common shares were deposited into escrow  pursuant to
            the terms of two escrow agreements as follows:

            i) 1,170,000  shares  are  to  be  released  dependent  upon  Altair
               receiving revenues from the sale of the centrifugal jigs formerly
               held by TMI.  The  basis  of  the  share  release  is  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  cancelled by the
               Alberta Stock Exchange.

            ii)The remaining 749,957 shares will be released from escrow to each
               former TMI  shareholder  at a rate equal to the greater of 15,000
               shares or 5% of such  shareholder's  total escrowed holdings each
               calendar  quarter.  in addition,  each former TMI  shareholder or
               warrant  holder is restricted  from selling more than the greater
               of 15,000 shares or 10% of such holder's holdings in any calendar
               quarter.

            The net value of the assets acquired is as follows:

               Working capital deficiency                           $(1,710,980)
               Capital assets, mining equipment                           13,003
               Centrifugal jig patent - expires December, 1998           685,750
               Centrifugal jig patent - expires December, 2008         4,468,150
                                                                       ---------
               Issuance of 1,919,957 common shares                    $3,455,923
                                                                       =========


                                                                    Continued...
                                      F-8

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
2. ACQUISITIONS (Continued)
      (c)   Intercontinental Development Corporation (INDECO)
            During 1996, the company purchased 66% of the issued and outstanding
            shares of Indeco for total consideration of $437,096 (U.S.$319,298).
            This  acquisition has been accounted for using the purchase  method.
            Indeco is a dormant company whose sole asset is a royalty  agreement
            entitling the  corporation to 10% of the cost of  manufacturing  any
            centrifugal  jigs which are placed in production,  sold or exploited
            for profit  worldwide.  The entire amount of the purchase  price has
            been allocated to the centrifugal jig royalty agreement.

3. CAPITAL ASSETS
<TABLE>
<CAPTION>
                                                                         Accumulated          Net             Net
                                                            Cost        Amortization         1996            1995
                                                          --------      ------------       --------        ------
                                                             $              $                 $               $
<S>                                                         <C>                <C>           <C>              <C>
         Furniture and office equipment                     46,513             9,607         36,906           3,702
         Vehicles                                          101,087            14,487         86,600          29,662
         Mining equipment                                   13,003             1,300         11,703           -
         Centrifugal jig equipment                         228,533            12,692        215,838           -
                                                           -------           -------        -------          ------

                                                           389,136            38,086        351,047          33,365
                                                           =======           =======        =======         =======
</TABLE>

4. CENTRIFUGAL JIG PATENTS AND RELATED EXPENDITURES
<TABLE>
<CAPTION>

<S>                                                                                   <C>               <C>
      Royalty Agreement (Note 2(c))                                                    $ 437,096
      Less:  Accumulated amortization                                                    (14,511)       $   422,585
                                                                                      ----------

      Patents (Note 2(b))                                                              5,613,021
      Less:  Accumulated amortization                                                   (476,862)         5,136,159
                                                                                      ----------

      Mineral recovery technology rights (Note 2(a))                                                        336,069

      License agreement                                                                                      89,995

                                                                                                         $5,984,808
</TABLE>

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




                                                                    Continued...
                                      F-9

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
5.    Mineral  Properties  and Related  Deferred  Exploration  Expenditures  The
      company's  subsidiary,  Mineral Recovery Systems,  Inc. (MRS), has entered
      into various  mineral  leases for a 100% interest in  approximately  3,600
      acres of land in Benton  County,  State of  Tennessee,  United  States for
      U.S.$18,712  (U.S.$14,237 paid during the year) and minimum annual advance
      royalty payments as follows:

            1997                                         U.S.$18,712
            1998                                         U.S.$18,712
            1999                                         U.S.$32,348
            2000                                         U.S.$36,423
            2001                                         U.S.$36,423
            2002 and each year thereafter                U.S.$91,058

      The mineral leases are subject to a 5% production  royalty,  however,  MRS
      will receive a credit for all advance  royalties  paid against  production
      royalties.  The lessors can only  terminate the leases upon the failure of
      MRS to make the  required  minimum  payments  as  required  by the leases.
      During the year approximately $150,000 was incurred on exploration.

6. NOTES PAYABLE
<TABLE>
<CAPTION>
                                                                                          1996               1995
                                                                                          ----               ----
                                                                                           $                  $
<S>                                                                                      <C>                 <C>
      Notes payable to former  shareholders of Trans Mar, Inc., interest payable
      at 10% per anum, unsecured, principal
      and interest due December 31, 1999                                                 272,340              -

      Notes payable to former shareholders of Trans Mar, Inc.,
      non-interest bearing, unsecured, principal due
      December 31, 1999                                                                  241,010              -

      Note payable, interest payable at 10% per annum, blended
      payments of U.S.$2,000 per month, due April 1, 1999                                 66,031              -
                                                                                        --------        -------
                                                                                         579,381              -
      Less: Current portion                                                              209,751              -
                                                                                         -------        -------
      Long-term portion of notes payable                                                 369,630              -
                                                                                         =======        =======
</TABLE>

      Notes payable to former shareholders of Trans Mar, Inc. (TMI), are subject
      to a repayment agreement with Altair dated March 3, 1996. Altair agreed to
      retire U.S.$50,000 per month of the Trans Mar, Inc. debt assumed by Altair
      in the purchase of TMI.


                                                                    Continued...

                                      F-10
<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
<TABLE>
<CAPTION>
7. CAPITAL STOCK
      The capital stock is as follows:
      Authorized
         Unlimited common shares
      Issued
         14,686,296 common shares                                    $15,588,187
                                                                      ==========

      Transactions during the years are as follows:
                                                                                        Shares             Amount
                                                                                          #                  $
<S>                                                                                    <C>                <C>
         Balance, December 31, 1995                                                    8,497,849          5,779,016

         Private placements                                                              554,027          1,939,095

         Exercise of stock options                                                       702,000            722,100

         Exercise of warrants                                                          2,912,463          3,387,053

         Common shares issued for cash (Note 7(vi))                                      100,000            305,000

         Common shares issued for the acquisition of TMI
            (Note 2(b))                                                                1,919,957          3,455,923
                                                                                      ----------         ----------

         Balance, December 31, 1996                                                   14,686,296         15,588,187
                                                                                      ==========         ==========

      Common shares to be issued from exercise
         of Series E warrants (Note 7(v))                                                 32,720             65,440
                                                                                     ===========        ===========
</TABLE>

      Stock Options
      As at December 31, 1996,  745,000  common shares are reserved for issuance
      to  directors,  officers and employees  under the  company's  stock option
      plan.  The exercise  price and expiry dates of options  outstanding  as of
      December 31, 1996 are as follows:
                          Number            Price
                        of Shares             $               Expiry Date
                           75,000             0.60            August 8, 1998
                          145,000             3.70            March 7, 2001
                           80,000             5.00            March 14, 1998
                          250,000             4.00            May 27, 2001
                           75,000             4.20            July 29, 2001
                           50,000             4.50            July 31, 2001
                           20,000             8.40            November 6, 2001
                           50,000             9.40            December 31, 2001




                                                                    Continued...
                                      F-11

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)

      Warrants
      i)      Series A
                 Issued and outstanding, beginning of the year       1,000,000
                 Exercised during the year                          (1,000,000)

                 Issued and outstanding, end of year                     Nil

                 Total proceeds received                            $  200,000
                                                                     =========

      ii)Series B
                 Issued and outstanding, beginning of the year         100,000
                 Exercised during the year                            (100,000)

                 Issued and outstanding, end of year                     Nil

                 Total proceeds received                            $   75,000
                                                                     =========

      iiiSeries C
                 Issued and outstanding, beginning of the year         250,000
                 Exercised during the year                            (250,000)

                 Issued and outstanding, end of the year                Nil

                 Total proceeds received                            $  200,000
                                                                     =========

      iv)     Series D
                 Issued and outstanding, beginning of the year       1,000,000
                 Exercised during the year                          (1,000,000)

                 Issued and outstanding, end of the year                Nil

                 Total proceeds received                            $  825,000
                                                                     =========



                                                                    Continued...
                                      F-12

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)
<TABLE>
<CAPTION>

      v) Series E
<S>                                                                                                         <C>
                 Issued and outstanding, beginning of the year                                              580,000
                 Exercised during the year - common shares issued                                          (227,636)
                 Exercised during the year - common shares to be issued                                     (32,720)
                                                                                                          ---------

                 Issued and outstanding, end of the year                                                    319,644
                                                                                                          =========

                 Total proceeds received                                                                 $  520,712
                                                                                                          =========
</TABLE>

              See Note  2(b).  Each  warrant  entitles  the  holder  thereof  to
              purchase one common share at $2.00 per share on or before March 1,
              1997.  Subsequent to the year end, an additional  301,229 warrants
              were exercised for total proceeds of $602,458.

<TABLE>
<CAPTION>
      vi)     Series F
<S>                                                                                                         <C>
                 Issued and outstanding, beginning of the year                                              100,000
                 Exercised during the year                                                                  (50,000)

                 Issued and outstanding, end of the year                                                     50,000
                                                                                                          =========

                 Total proceeds received                                                                 $  350,000
                                                                                                          =========
</TABLE>

              Pursuant to a subscription  agreement,  the company issued 100,000
              units at $3.05 per unit for total proceeds of $305,000.  Each unit
              consists  of one  common  share  and one  Series F share  purchase
              warrant.  Each Series F share purchase warrant entitles the holder
              to  purchase  one  common  share at a price of $7.00  per share to
              December 5, 1996  provided  that only 50% of the  warrants  may be
              exercised  during the  initial  period,  and at a price of $10 per
              share to  September 5, 1997  provided  that the number of warrants
              that may be  exercised  after  December 5, 1996 may not exceed the
              number of warrants  exercised prior to December 5, 1996.  Prior to
              December  5,  1996,  50,000  warrants  were  exercised  for  total
              proceeds of  $350,000.  Subsequent  to the year end an  additional
              50,000 warrants were exercised for total proceeds of $500,000.



                                                                    Continued...

                                      F-13
<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
7. CAPITAL STOCK (Continued)
<TABLE>
<CAPTION>
      vii)    Series G
<S>                                                                                                         <C>
                 Issued during the year                                                                     494,027
                 Exercised during the year                                                                 (284,827)
                 Expired during the year                                                                   (209,200)
                                                                                                         ----------

                 Issued and outstanding, end of year                                                          Nil

                 Total proceeds received                                                                 $1,281,722

      viii)   Series H
                 Issued and outstanding, end of year                                                         60,000
</TABLE>

              Pursuant to a  subscription  agreement  the company  issued 60,000
              units at $3.50 per unit for total proceeds of $210,000.  Each unit
              consists  of one  common  share  and one  Series  H  common  share
              purchase  warrant.  Each Series H common  share  purchase  warrant
              entitles  the holder to  purchase  one common  share at a price of
              $4.50 per share on or before December 26, 1997.

8. COMMITMENT

      In the event of a takeover, merger or consolidation whereby voting control
      of over 35% of the issued stock is acquired by an individual or a group of
      individuals,  then under the current compensation  agreement the president
      shall be given 200,000 shares of the company's common  stock.  Included in
      accounts  payable  and  accrued  liabilities  is  U.S. $115,361  (1995  -
      U.S.$64,385) owing to the president.

9. NET LOSS PER SHARE

      The existence of stock options  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
      calculated.



                                                                    Continued...

                                      F-14
<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
10.   INCOME TAXES
      As at December 31, 1996, the company has  approximate  non-capital  losses
      carried  forward for income tax  purposes  which are  available  to reduce
      certain future year's income for tax purposes as follows:

                         1997                            $   76,000
                         1998                               138,000
                         1999                                93,000
                         2000                                44,000
                         2001                                54,000
                         2002                                76,000
                         2003                               300,000
                                                            -------
                                                           $781,000

11.   FORGIVENESS OF DEBT
      During 1996, U.S.$868,493 of debt to former Trans  Mar,  Inc. shareholders
      was retired with payments of U.S.$165,767.  The remaining U.S.$702,726 due
      was forgiven by the former Trans Mar, Inc. shareholders.

12.   CONCENTRATION OF CREDIT RISK
      As at December  31,  1996,  MRS had  U.S.$895,652  in cash  deposits  with
      Western Bank of Cody in Wyoming,  United  States.  This amount exceeds the
      insurance limitation of U.S.$100,000 per banking institution.

13.    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.

       Statement of Changes in Financial Position
       The U.S. Financial Accounting Standards Board (FASB) issued its Statement
       of Financial  Accounting  Standards  No. 95 (SFAS No. 95)  effective  for
       years  ending  after  July 15,  1988.  SFAS  No.  95,  which is  entitled
       "Statement of Cash Flows",  established standards for cash flow reporting
       with its  primary  purpose  being to provide  information  about the cash
       receipts  and cash  payments  of an entity  during the  period.  Canadian
       Generally  Accepted   Accounting   Principles  (GAAP)  dealing  with  the
       statement of changes in financial  position is based on a broad  concept,
       embracing  all  changes in  financial  position.  The  following  are the
       Statements of Cash Flow prepared in accordance with U.S. GAAP for each of
       the two years ended December 31, 1996:


                                                                    Continued...

                                      F-15
<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13.    DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
       GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)
<TABLE>
<CAPTION>

=====================================================================================================================
                                                                                           1996               1995
   (Expressed in Canadian Dollars)                                                          $                  $
=====================================================================================================================
   CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                    <C>                <C>
   Net loss for the year                                                                (856,003)          (599,097)
   Adjustments to reconcile net loss for the
      year to net cash (used):
         Amortization                                                                    523,617              4,319
         Write-off of mineral property and
            related exploration expenditures                                               -                 11,255
         Changes in assets and liabilities:
         Advances and accounts receivable                                                111,522            (70,162)
         Accounts payable and accrued liabilities                                         88,838           (100,186)
                                                                                     -----------        ----------
   NET CASH (USED IN) OPERATING ACTIVITIES                                              (132,026)          (753,871)
                                                                                     ----------         ----------

   CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of mineral properties and related
         deferred exploration expenditures                                              (172,213)           (11,255)
      Purchase of capital assets                                                        (349,104)           (31,232)
      Purchase of centrifugal Jig                                                     (5,742,751)            (5,965)
      Option agreement costs                                                              -                (291,708)
                                                                                    ------------        ----------
   NET CASH (USED IN) INVESTING ACTIVITIES                                            (6,264,068)          (340,160)
                                                                                     ----------         ----------

   CASH FLOWS FROM FINANCING ACTIVITIES
      Issuance of common shares for cash                                                 305,000          1,200,000
      Proceeds from exercise of stock options                                            722,100             73,400
      Proceeds from exercise of warrants                                               3,387,053            235,000
      Notes payable                                                                      579,381              -
      Issuance of common shares pursuant to a
         private placement                                                             1,939,095              -
      Common shares to be issued                                                          65,440              -
      Issuance of common shares for shares
         of subsidiary                                                                 3,455,923              -
                                                                                      ----------         ----------
   NET CASH PROVIDED BY FINANCING ACTIVITIES                                          10,453,992          1,508,400
                                                                                      ----------         ----------

   NET INCREASE (DECREASE) IN CASH                                                     4,057,898            414,369
   CASH, beginning of year                                                               424,185              9,816
                                                                                      ----------       ------------

   CASH AND TERM DEPOSITS, end of year                                                 4,482,083            424,185
                                                                                      ==========        ===========
</TABLE>



                                                                    Continued...
                                      F-16

<PAGE>




ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES  (Continued)

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

      The cash and term deposits on hand as at December 31, 1996  represent cash
      and term  deposits  with  maturity  dates of less  than 30 days  which are
      considered cash equivalents under U.S. GAAP.

      Development Stage Company
      As  of  December  31,  1996,  the  company  would  be  characterized  as a
      "development  stage  enterprise"  under  U.S.  GAAP  due to  Statement  of
      Financial  Accounting Standards No. 7 (SFAS 7). Under Canadian GAAP, there
      are no requirements  for the indication or reporting of development  stage
      entities.

      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. In the U.S. an integrated subsidiary would remeasure its
      books and records into the functional  currency prior to translation  into
      the reporting  currency.  The U.S.  subsidiaries  maintain their books and
      records in U.S. dollars,  however,  their functional  currency is Canadian
      dollars due to the dependency on the Canadian parent. The remeasurement of
      the U.S. subsidiaries'  financials 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,  income taxes are  accounted for under the deferred
      method.  Under  U.S.  GAAP,  companies  must  follow the  requirements  of
      Statement  of  Financial  Accounting  Standards  No.  109 (SFAS 109) which
      required  the use of the  asset/liability  method for  measurement  of tax
      liabilities,  wherein  deferred  tax  assets  are  recognized  as  well as
      deferred tax liabilities.



                                                                    Continued...
                                      F-17

<PAGE>



ALTAIR INTERNATIONAL INC.
(FORMERLY ALTAIR INTERNATIONAL GOLD INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Expressed in Canadian Dollars)
================================================================================
13.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES  (Continued)

      The company has significant  non-capital loss carryforwards (Note 8). SFAS
      109 would require the  recognition of a long-term tax asset for the future
      benefit  expected from the  application of these  carryforwards  to future
      profitable  years. If it is expected that the entire amount of non-capital
      loss  carryforwards  will not be utilized,  then a valuation  allowance is
      applied to the asset to reasonably  state the asset at its expected value.
      Under  SFAS 109,  disclosure  of the  amount  of  valuation  allowance  is
      required.  As at December 31, 1996,  the  valuation  allowance is equal to
      100% of the deferred tax asset. Changes in the value of the deferred asset
      are recognized each year as income tax expense.

      Stock Options
      Of the common share stock options  outstanding  at December 31, 1996,  all
      745,000  (1995 - 677,000) are  currently  exercisable.  As at December 31,
      1996,  723,630 (1995 - 172,785)  common shares were available for granting
      of  options.  The  following  summary  sets out the  activity in the stock
      options.

                                                      1996               1995
                                                      ----               ----
                                                       $                  $
          Outstanding at beginning of year           677,000            438,000
          Granted                                    770,000            486,000
          Exercised at an average price of
            $1.03 (1995 - $0.30)                    (702,000)          (247,000)
                                                     -------            -------

          Outstanding at end of year                 745,000            677,000
                                                     =======            =======

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

      For the fiscal years ended  December 31, 1996 and 1995 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.

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

14.   CHANGE OF NAME

      Pursuant  to  articles  of  amendment  dated November 5, 1996, the company
      changed   its   name  from   Altair  International  Gold  Inc.  to  Altair
      International Inc.

                                      F-18