---

---



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



|☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
|- | ----------------------------------------------------------------------------------

| | 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2016
| | ------------------------------------------------------



|☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
|- | -----------------------------------------------------------------------------------



| | 1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________
| | --------------------------------------------------------------------------





ALTAIRNANOTECHNOLOGIESINC.



---



(Exact name of registrant as specified in its charter)





|Delaware                     | 1-12497               | 33-1084375         
|---------------------------- | --------------------- | -------------------
|(State or other jurisdiction | (Commission File No.) | (IRS Employer      
|of incorporation)            |                       | Identification No.)



204 Edison Way

Reno, Nevada 89502



---



(Address of principal executive offices, including zip code)



Registrant’s telephone number, including area code: (775) 856-2500



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 ☒.



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☐    NO ☒.





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):



|Large accelerated filer [  ]

Non-accelerated filer [  ] | Accelerated filer [  ]

Smaller reporting company [ X ] | 
|-------------------------------------------------------- | ------------------------------------------------------- | 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): YES [ ] NO [X]



As of November 15, 2016the registranthad11,606,735 sharesof Common Stockoutstanding.



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ALTAIR NANOTECHNOLOGIES INC.



FORM 10-Q



For TheQuarterEndedSeptember30, 2016

TABLE OF CONTENTS



|                              |                                                                                                                                                            | Page
|----------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|                              |                                                                                                                                                            |     
|PART I. FINANCIAL INFORMATION
|                              |                                                                                                                                                            |     
|ITEM 1.                       | QUARTERLY FINANCIAL STATEMENTS                                                                                                                             | 3   
|                              |                                                                                                                                                            |     
|                              | Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015                                                           | 3   
|                              |                                                                                                                                                            |     
|                              | Condensed  Consolidated Statements of Operations and Comprehensive Loss for the three months and nine months ended September 30, 2016 and 2015 (unaudited) | 4   
|                              |                                                                                                                                                            |     
|                              | Condensed  Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)                                         | 5   
|                              |                                                                                                                                                            |     
|                              | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                           | 6   
|                              |                                                                                                                                                            |     
|ITEM 2.                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                      | 21  
|                              |                                                                                                                                                            |     
|ITEM 3.                       | Quantitative and Qualitative Disclosures About Market Risk                                                                                                 | 29  
|                              |                                                                                                                                                            |     
|ITEM 4.                       | Controls and Procedures                                                                                                                                    | 29  
|                              |                                                                                                                                                            |     
|PART II. OTHER INFORMATION   
|                              |                                                                                                                                                            |     
|ITEM 1                        | Legal Proceedings                                                                                                                                          | 30  
|                              |                                                                                                                                                            |     
|ITEM 1A.                      | Risk Factors                                                                                                                                               | 30  
|                              |                                                                                                                                                            |     
|ITEM 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                | 30  
|                              |                                                                                                                                                            |     
|ITEM 3.                       | Defaults Upon Senior Securities                                                                                                                            | 30  
|                              |                                                                                                                                                            |     
|ITEM 4.                       | Mine Safety Disclosures                                                                                                                                    | 30  
|                              |                                                                                                                                                            |     
|ITEM 5.                       | Other Information                                                                                                                                          | 30  
|                              |                                                                                                                                                            |     
|ITEM 6.                       | Exhibits                                                                                                                                                   | 30  








ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars, except shares and per share amounts)





September30,
2016


December 31,
2015(Unaudited)ASSETSCurrent assetsCash and cash equivalents

$
4,043


$
2,088Restricted cash


475



231Short-term investment


-



25,410Accounts receivable, net


860



523Amount due from related parties


1



15,923Notes receivable


-



74Product inventories, net


17,311



7,671Prepaid expenses and other current assets


13,551



7,728Deferred contract costs


-



3,454Total current assets


36,241



63,102Prepaid expenses, non-current


1,688



3,792Property, plant and equipment, net


67,562



36,395Patents, net


-



47Other non-current asset


3,395



4,138Land use right, net


25,561



26,685Total Assets

$
134,447


$
134,159LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesTrade accounts payable

$
18,014


$
7,107Amount due to related parties


66,393



25,459Accrued salaries and benefits


1,821



1,914Accrued warranty


87



168Accrued liabilities


1,296



1,169Deferred revenues and customer deposit


228



3,776Deferred income - Grant Incentives


558



551Warrant liabilities


-



1Capital leaseobligation


345



-Current portion of long term note payable


7,251



25,564Other current liabilities


277



266Short term note payable


850



44,973Total current liabilities


97,120



110,948Long term note payable


14,356



6,622Other non-current liabilities


3,260



3,565Deferred income - Grant Incentives - non-current


25,683



26,192Capital lease obligation- non-current


8,828



-Total Liabilities


149,247



147,327Commitments and contingenciesStockholders' deficitCommon stock, $0.001 par value, 200,000,000 shares authorized; 11,606,735 shares issued and outstanding at September 30, 2016 and December 31, 2015


12



12Additional paid in capital


259,121



259,102Accumulated deficit


(273,953
)


(272,495
)Accumulated other comprehensive income


20



213Total stockholders' deficit


(14,800
)


(13,168
)Total Liabilities and Stockholders' Deficit

$
134,447


$
134,159




See notes to unaudited condensed consolidated financial statements








ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in thousands of United States Dollars, except shares and per share amounts)

(Unaudited)



Three Months EndedSeptember30,


NineMonths EndedSeptember30,2016


2015


2016


2015RevenuesProduct sales

$
6,874


$
876


$
8,293


$
3,005Product sales –Related Party


8,941



703



24,485



2,013License fees


100



100



300



232Commercial collaborations


-



29



83



137Total revenues


15,915



1,708



33,161



5,387Cost of goods soldProduct costs


6,585



840



7,573



2,289Cost to related party sales


6,633



641



16,388



2,563Total cost of goods sold


13,218



1,481



23,961



4,852Gross Profit


2,697



227



9,200



535Operating expensesResearch and development


182



218



502



590Sales and marketing


40



294



124



670General and administrative


3,696



3,064



9,834



7,755Depreciation and amortization


265



370



825



1,186Loss (gain) on disposal of assets


-



-



(29
)


-Total operating expenses


4,183



3,946



11,256



10,201Lossfrom operations


(1,486
)


(3,719
)


(2,056
)


(9,666
)Other (expense) incomeInterest expense, net


(988
)


(290
)


(2,552
)


(1,886
)Change in market value of warrants


1



-



1



5Gain (loss) on foreign exchange


(2
)


1



88



-Other income -buses


5



1,981



16



11,519Other expense - buses


-



(1,847
)


-



(13,666
)Other income


131



131



3,045



495Total other (expense) income


(853
)


(24
)


598



(3,533
)NetLoss


(2,339
)


(3,743
)


(1,458
)


(13,199
)Other Comprehensive IncomeForeign Currency Translation Adjustments


3



(482
)


(193
)


(363
)ComprehensiveLoss

$
(2,336
)

$
(4,225
)

$
(1,651
)

$
(13,562
)Loss per common share - basic and diluted

$
(0.20
)

$
(0.32
)

$
(0.13
)

$
(1.14
)Weighted average shares - basic and diluted


11,606,735



11,606,735



11,606,735



11,606,735




See notes to unaudited condensed consolidated financial statements








ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of United States Dollars)

(Unaudited)



NineMonths EndedSeptember30,2016


2015CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(1,458
)

$
(13,199
)Adjustment to Reconcile Net loss to Net Cash Provided by (Used in) Operating ActivitiesDepreciation and amortization


825



1,186Accretion


13



(111
)Share-based compensation


-



69Changes in other receivable reserves


-



(6,081
)Change in fair value of warrants


(1
)


(5
)Change in inventory reserves


47



-Changes in Operating Assets and LiabilitiesAccounts receivable, net


(263
)


(140
)Product inventories, net


(9,687
)


(3,059
)Prepaid expenses and other current assets


(4,509
)


26,603Deferred contract costs


3,454



(877
)Trade accounts payable


14,048



(2,732
)Accrued salaries and benefits


(93
)


344Accrued warranty


(81
)


75Accrued liabilities


127



62Deferred revenue and customer deposit


(3,548
)


(1,116
)Deferred income - Grant Incentive


(502
)


(589
)Other liabilities


(547
)


3,443Amounts due from related parties


2,324



19,739Amounts due to related parties


14,012



5,993Other non-current asset


1,157



(3,636
)Net CashProvided byOperating Activities


15,318



25,969CASH FLOWS FROM INVESTING ACTIVITIESPlacement of term deposit


-



(20,238
)Maturity of term deposit


25,080



-Purchase of property, plant and equipment


(24,748
)


(10,739
)Purchase of land use right


-



(2,001
)Repayment from related parties


275



468Net CashProvided by (Usedin)Investing Activities


607



(32,510
)CASH FLOWS FROM FINANCING ACTIVITIESIncrease in restricted cash


-



347Proceeds from trade acceptance


685



5,293Repayment of trade acceptance


(5,072
)


-Proceeds from notes payable including sale lease-back financing


20,181



38,776Repayment of note payable


(69,327
)


(22,800
)Proceeds (repayment) of related party notes


40,245



(3,310
)Net CashProvided by (Usedin)Financing Activities


(13,288
)


18,306Effect of exchange rate changes on cash and cash equivalents


(682
)


(1,692
)NET INCREASEIN CASH AND CASH EQUIVALENTS


1,955



10,073CASH AND CASH EQUIVALENTS, beginning of period

$
2,088


$
1,001CASH AND CASH EQUIVALENTS, end of period

$
4,043


$
11,074SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the period for:Income taxes

$
-


$
-Interest


4,185



3,957NONCASH INVESTING AND FINANCING ACTIVITIESEquipment acquired through capital lease

$
9,173


$
-Related parties debt settlement

$
13,323


$
-




See notes to unaudited condensed consolidated financial statements








ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States Dollars)





Note1–Basis of Presentation and Going Concern  Description of the Company and Business  Altair Nanotechnologies Inc., (the “Company”) is a Delaware corporation that develops, manufactures and sells nano lithium titanate batteries and energy storage systems. The Company’s nano lithium titanate battery systems offer higher power density, longer cycle life, rapid charge and discharge capabilities, a wider operating temperature range and higher levels of safety than conventional lithium-ion batteries. The Company targets applications that utilize the key attributes of its technology with product applications mainly found in the electric grid, transportation (commercial vehicles), and industrial market segments.  Basis of Presentation  The interim condensed consolidated financial statements of Altair Nanotechnologies Inc. and its subsidiaries (the “Company”) are unaudited. These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. The 2015 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Form 10-Q (this “Report”) should be read in conjunction with the Company’s Comprehensive Report on Form 10-K for the years ended December 31, 2015, which includes all disclosures required by GAAP.  Going Concern  The Company anticipates to continue to have negative cash flows from operations as it ramps up production at their new manufacturing facilities. If the Company is not able to refinance its debt or obtain additional capital, the Company will not be able to pay off its current debt obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The company condensed financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately generate revenues at a level that will result in profitability and positive cash flows from operations. To address these matters, we are taking actions to refinance existing loans if needed, obtain capital leases, obtain additional loans collateralized by the Land Use Rights, third party guarantees and other assets, and obtain approval for additional grant incentives from the government of Wu’an, China. However, there can be no assurance that additional grant funds to support our capital needs will be available to us and that we will be able to refinance existing loans, obtain additional loans, or raise further funds through other sources such as through an equity offering. Even if we are able to obtain additional financing, it may contain undue restrictions, be on terms that are not satisfactory to us, or contain covenants on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of convertible debt and equity financing.  Principles of Consolidation  The condensed consolidated financial statements include the accounts of the Company and its subsidiaries which include (1) Altair U.S. Holdings, (2) Altairnano, Inc., (3) Altair Nanotechnologies (China) Co., Ltd., and (4) Northern Altair Nanotechnologies Co., Ltd. All of the subsidiaries are either incorporated in the United States of America or China. Inter-company transactions and balances have been eliminated in consolidation.  Recently Adopted and Recently Issued Accounting Guidance  Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s financial position, results of operations or cash flows.











ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States Dollars)





Note 2–Restricted Cash  As of September 30, 2016 and December 31, 2015, cash of $0.23 million and $0.23 million are restricted as performance guarantee for China State Grid Project, respectively.  As of September 30, 2016 and December 31, 2015, cash of $0.25 million and $nil are restricted as settlement fee for legal counselling, respectively.










Note 3–Fair Value Measurements and Other Financial Measurements  The carrying amounts of cash,accounts receivable,accounts payable, and notes payable approximate fair value due to the short-term nature of these instruments. The carrying amounts of the Company’s short term credit obligations approximate fair value because the effective yields on these obligations are comparable to rates of returns for instruments of similar credit risk. The Company performs recurring fair-value measurements for its warrant liabilities.  The fair values and corresponding classifications under the appropriate level of the fair value hierarchy of outstanding warrants recorded as recurring liabilities in the consolidated balance sheet were recorded using level 3 inputs based on a Monte Carlo option simulation model, which uses prevailing interest rates, Company’s stock price volatility and expected warrant term. Based on the valuation model used by the Company, the value of the warrant liability was determined to be $nil for the quarter ended September 30, 2016 and the year ended December 31, 2015, respectively. The change in the fair value of the warrants are recorded in Other (expense) income for each of the periods presented.  During the years ended December 31, 2014 and 2015, the Company has entered into several agreements to provide financial guarantees in relation to the EV Bus sales (See Note 4). The Company engaged a third party valuation expert to determine the fair value of the financial guarantees. Fair value (level 3) of the financial guarantee at September 30, 2016 and December 31, 2015 amounted to $nil and $0.21 million, respectively.






NOTE 4 – ELECTRIC BUS SALES  On April 19, 2012, the Company entered into an Agreement (the “Agreement") with Wu’an Municipal People's Government ("Wu'an") and Handan Municipal People's Government ("Handan Government") regarding the establishment by Altair China of a manufacturing facility in the City of Wu'an, in Hebei Province in China. The Agreement also indicates the purchase by Wu'an and Handan of EV Buses beginning in late 2012 and continuing over five years, and the future purchase of electric taxis and energy storage systems.  No EV Buses were sold during the nine months ended September 30, 2016.  In connection with the bus sales to Handan, the Company agreed to provide to a third-party leasing entity a security deposit equals to 20% of the contract price. The security deposit is refundable over a ten-year period when Handan completes its obligations to the third-party leasing entity. The difference between the present value of the refundable security deposit and the gross amount was recorded as current period expense and unearned interest income to the security deposit. The unearned interest income is being amortized straight line over the refund period of 10 years.  In addition, the Company agreed to pay an initial 8% of the contract price for rebates and to make subsequent quarterly payments, for a ten-year period, to a third-party leasing company as an incentive. The net present value of the quarterly payments is recorded as current period expense. The difference between the present value of subsequent quarterly payments and the gross amount was recorded as unrecognized interest expense and then amortized over ten-year period.











ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States Dollars)





Note 5–PRODUCT Inventories  Inventory relates to the production of battery systems targeted at the electric grid, transportation, and industrial markets, which consisted of the following (in thousands of dollars):  September30, 2016


December31, 2015Raw materials

$
2,603


$
2,800Work in process


3,426



1,041Finished goods


11,282



3,830Total product inventories

$
17,311


$
7,671
  The Company recorded reserve for inventories of $0.05 million as of September 30, 2016 and $0.13 million as of December 31, 2015, respectively.










Note 6–PREPAID expenses AND oTHER Assets  Prepaid expenses and other current and non-current assets consist of the following (in thousands of dollar):  September30, 2016


December 31, 2015Prepaid inventory purchases

$
444


$
623Prepaid Service Fee


2,272



1,016Prepaid VAT


7,779



3,207Current portion of long term receivable


1,500



1,603Electric bus for resale (Note 4)


128



132Other receivable – EV Bus (Note 4)


426



437Other receivable – lease deposit


-



-Deposits


23



97Prepaid insurance


180



221Others


799



392Total prepaid expenses and other current assets

$
13,551


$
7,728Prepaid equipment purchases, non-current

$
1,688


$
3,792Refundable security deposit (Note 4)


2,429



4,138Sale leaseback deposit (Note 12)


750



-Capital lease deposit (Note 7)


216



-Total Other assets, non-current

$
3,395


$
4,138
   Other receivable - EV Bus consists of amount due from Wu’an for the EV Buses sold in prior periods.  The following lists the components of the net present value of long term receivable (refundable security deposit): (In thousands of dollars)   September30, 2016


December 31, 2015Gross long term receivable

$
5,972


$
8,243Less: unearned interest income


(2,043
)


(2,502
)Net present value of long term receivable


3,929



5,741Less: Current portion of long term receivable


(1,500
)


(1,603
)Net present value of long term receivable, net of current portion

$
2,429


$
4,138
  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  Future collections of long-term receivable (refundable security deposit) as of September 30, 2016(In thousands of dollars):  Year Ended December 31,Remaining of
2016


2017


2018


2019


2020


After
2020


TotalNet long term receivable

$
-


$
1,871


$
-


$
144


$
1,497


$
2,460


$
5,972Less: unearned interest income


(98
)


(333
)


(258
)


(282
)


(231
)


(841
)


(2,043
)Net present value of long term receivable

$
(98
)

$
1,538


$
(258
)

$
(138
)

$
1,266


$
1,619


$
3,929
  Other receivable consist of due from a third party bus company, which were incurred when the Company agreed to resell the EV Buses to the third party bus company.  Prepaid equipment purchase consists of other costs related to the Company’s China operations, which will be transferred to property, plant and equipment once such assets are placed in service.  Deferred contract costs were incurred, under the completed contract method, for multiple large scale projects for which revenue has not been recognized. The balances of deferred contract costs are $nil and $3.45 million as of September 30, 2016 and December 31, 2015 respectively.  Patents  Patents are associated with the nanomaterials and titanium dioxide pigment technology, which the Company is amortizing on a straight-line basis over their useful lives and is summarized as follows (in thousands of dollars):  September30, 2016


December 31,2015Patents

$
1,366


$
1,366Less accumulated amortization


(1,366
)


(1,319
)Total patents

$
-


$
47
  During the nine months ended September 30, 2016 and 2015, amortization expense relating to patents is approximately $0.06 million and $0.06 million, respectively. During the three months ended September 30, 2016 and 2015, amortization expense relating to patents is approximately $0.02 million and $0.02 million, respectively.






NOTE 7 – CAPTIAL LEASESOBLIGATION  On August 8, 2016, the Company entered into a financing arrangement with a third party to purchase machinery and equipment utilized in production and then lease the assets to the Company. The lease term is initially for five years and contingent upon the occurrence of certain events, the lessor has the rights to (i) reduce the lease term from five years to three years or (ii) upon default by the Company, the lessor has the right to convert the remaining balance owed under the financing arrangement into the equity of the Company. As of September 30, 2016, the Company assessed the probability of the occurrence of the event to be remote and hence had no impact on the lease accounting.  In connection with the financing arrangement, the Company pledged the leased equipment as collateral to the lessor and the following related parties individually entered into a guaranty contract with the lessor to provide joint liability guarantee for the lease payments :.  1.
Zhuhai Yinlong New Energy Co., Ltd, 2.
Shijiazhuang Zhongbo Auto Co., Ltd, 3.
Hebei Yinlong New Energy Co.,  In addition, Hebei Yinlong New Energy Co. pledged its accounts receivable with the lessor.  In connection with the financing arrangement, the Company entered into a consulting agreement with the lessor. The consulting agreement stipulated an additional consulting fee of 6% of the total purchase price of the equipment by the lessor. The Company accounted for the consulting agreement as down payment for the capital lease as in substance those payments resemble required return by the lessor.  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  The following lists the components of the net present value of capital leases obligation: (In thousands of dollars) September30, 2016


December 31, 2015Gross capital lease obligation


11,886



-Less: Discount on capital lease obligation


(2,713
)


-Net present value of capital lease obligation


9,173



-Less: Current portion of capital lease obligation


(345
)


-Net present value ofcapital lease obligation, net of current portion


8,828



-
   As of September 30, 2016, the aggregate effective rate on amortized discount on capital lease obligation is in the range of 9.68% to 10.19% per annum.  Capital lease was commenced at the end of September and no amortization for discount on capital lease obligation incurred.   The present value of the net minimum payments on capital leases as of September 30, 2016 is as follows: (In thousands of dollars)   2016


2017


2018


2019


2020


Thereafter
**2020**


TotalTotal minimum lease payments


-



1,189



2,377



2,971



2,971



2,377



11,885Less: Discount on capital lease obligation


(213
)


(836
)


(741
)


(538
)


(298
)


(86
)


(2,712
)Net present value of capital lease obligation


(213
)


353



1,636



2,433



2,673



2,291



9,173








Note 8–PROPERTY, Plant and Equipment  Property, plant and equipment in operations consist of the following (in thousands of dollars):  September30, 2016


December 31, 2015Machinery and equipment

$
37,531


$
11,049Building and improvements


16,419



13,498Furniture, office equipment & other


1,719



1,844Leased assets


16,473



1,68272,142



28,073Less: accumulated depreciation


(11,572
)


(12,864
)Subtotal


60,570



15,209Add: construction in process


6,992



21,186Total property, plant and equipment

$
67,562


$
36,395
  Depreciation expense for the three months ended September 30, 2016 and 2015, the nine months ended September 30, 2016 and 2015, were approximately $0.11 million, $0.21 million, $0.35 million, and $0.72 million, respectively. Capital leased assets were commenced at the end of September and no depreciation for capital leased asset incurred.








ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars) **** Note 9–LAND Use Right  The following summarizes Land Use Rights for the following periods (in thousands of dollars):  September 30, 2016


December 31, 2015Land use right

$
27,370


$
28,119Less accumulated amortization


(1,809
)


(1,434
)Total land use right, net

$
25,561


$
26,685
  The following summarizes the carrying amount pledged (in thousands of dollars):  September 30, 2016


December 31,2015Pledged for bank loan

$
-


$
20,222Pledged for guarantee provided to related party


6,194



3,671Total

$
6,194


$
23,893
   The Land Use Rights were recorded at cost and are being amortized on a straight-line basis over its 50-year useful life. The amortization expense for the three months ended September 30, 2016 and 2015, the nine months ended September 30, 2016 and 2015 were approximately $0.14 million, $0.14 million, $0.42 million, and $0.41 million, respectively.










NOTE 10 – ACCRUED WARRANTY  Accrued warranty consisted of the following (in thousands of dollars):  September 30, 2016


December 31, 2015Beginning Balance

$
168


$
173Charges for accruals in the current period


91



265Reductions for warranty services provided


(172
)


(270
)Ending Balance

$
87


$
168








NOTE 11 – GRANT INCENTIVES  In conjunction with the Land Use Rights obtained by Northern Altair (Note 9), Northern Altair applied for and received various incentives and grants from the Wu’an China Government. Such grants and incentives are required to be used to support the construction of planned facilities in Wu’an China and the purchase of related manufacturing equipment. Grant amounts received are included in the balance sheet as deferred income and are recognized as income over the useful life of the related assets upon placing such assets into service. The following summarizes grant incentives (in thousands of dollars):  September 30, 2016


December 31, 2015Beginning balance

$
26,743


$
25,505Grants received in the current period


671



3,216Foreign currency exchange reserve


(714
)


(1,429
)Grants recognized in other income during the current period


(459
)


(549
)Ending balance

$
26,241


$
26,743Less: current portion of deferred income – grant incentive


(558
)


(551
)Deferred income – grant incentive - non current


25,683



26,192







ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States Dollars)





NOTE 12 – NOTES PAYABLE  Note payable is consisted of trade acceptance, and bank loans and sale-leaseback financing as discussed below:  Trade Acceptance  The Company issued trade acceptances to suppliers. Trade acceptances are presented to certain suppliers as a payment against the outstanding trade payable. These trade acceptances are non-interest bearing and mature within six months. Trade acceptances are secured by certificate of deposit in the bank for the amount of $5.39 million as of December 31, 2015. The balance of trade acceptances included in notes payable were $nil million as of September 30, 2016 and $4.45 million as of December 31, 2015, respectively.  Short Term Bank Loans (in thousands of dollars)  September 30, 2016


December 31, 2015Weighted average interest rate


5.65
%


7.06%Maturities


December 2016


May 2016
to
September 2016Balance

$
850


$
40,528Weighted average balance

$
40,776


$
20,502
   Long Term Bank Loans (in thousands of dollars)  September 30, 2016


December 31, 2015Weighted average interest rate


10.93
%


11.03%Maturities


September 2017


September 2016
to
September 2017Balance

$
6,746



$32,186Less: current maturities


(6,746
)


(25,564)Balance, net

$
-



$6,622Weighted average balance

$
25,759



$33,015
   FailedSale- Leaseback-FinancingObligation(in thousands of dollars)  On July 26, 2016, the Company entered into a contract with a third party to sell the 55 pieces of equipment currently in use to the third party and simultaneously leased it back. The Company regains the ownership of the assets at the end of the lease term and the Company also retained all risks of damages to the assets and continued to manage, control, administrate, and operate the assets. These rights and obligations constitute continuing involvement, which results in a failed sale-leaseback (financing) accounting. Under failed sale-leaseback accounting, the Company is deemed owner of the assets and the transaction was recorded as a financing arrangement.  In connection with the financing arrangement, the Company pledged the 55 pieces of equipment with carrying amount to $14.05 million as of September 30, 2016 as collateral to the lessor and the following related parties individually entered into a guaranty contract with the lessor to provide joint liability guarantee for the payments under the financing arrangement:  1.
Zhuhai Yinlong New Energy Co., Ltd, 2.
Zhuhai Guangtong Auto Co., Ltd, 3.
Shijiazhuang Zhongbo Auto Co., Ltd, 4.
Hebei Yinlong New Energy Co.,  The following lists the components of the net present value of financing obligation: September 30,
2016


December 31,
2015Gross leaseback payments

$
17,643


$
-Less: Discount on leaseback payments


(2,782
)


-Net present value of leaseback payments


14,861



-Less: Current portion of leaseback payments


(505
)


-Net present value ofleaseback payments, net of current portion

$
14,356


$
-
  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  As of September 30, 2016, the aggregate effective interest rate on failed sales leaseback (financing) is approximately 7.13% per annum.  The present value of the net minimum payments on sales leaseback (financing) as of September 30, 216 is as follows (in thousands of dollars):  2016


2017


2018


2019


2020


Thereafter
2020


TotalTotal minimum lease payments

$
-


$
1,521


$
4,735


$
6,555


$
2,641


$
2,192


$
17,644Less: Discount on sales leaseback


(257
)


(1,006
)


(823
)


(451
)


(202
)


(44
)


(2,783
)Net present value of sales leaseback

$
(257
)

$
515


$
3,912


$
6,104


$
2,439


$
2,148


$
14,861
   Interest expense for the three months ended September 30, 2016 and 2015, the nine months ended September 30, 2016 and 2015 were approximately $0.99 million, $0.29 million, $2.55 million, and $1.89 million, respectively.










NOTE 13 – WARRANTS  Warrants Issued to Investors  The fair value of the warrants was determined using the Monte Carlo simulation model and the following weighted average assumptions were used:  2011 WarrantSeptember30, 2016


December 31, 2015Stock Price


0.08



0.08Exercise Price


-



15.36Expected Volatility


-



88%Expected Dividend Yield


-



NoneExpected Term (in years)


-



0.8Risk-free Interest Rate


0.57%



0.57%
   2016WeightedAverageExerciseWarrants


PriceOutstanding at January 1,


412,779



14.93Expired


(412,779
)


-Outstanding at September 30,


-



-Currently exercisable


-



-
   Based on the valuation model used by the Company, the value of the warrant liability was determined to be $nil for year ended 2015 and $nil for nine month ended September 30, 2016. The change in the fair value of the warrants were recorded in Other (expense) income for each of the periods presented in the Company’s condensed consolidated statements of operations. The warrants expire on various dates through September 2016.











ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States Dollars)





NOTE 14 – GEOGRAPHIC INFORMATION AND CONCENTRATION  Beginning September 30, 2013, Chief Operating Decision Maker decided to combine both segments into the PEG segment because resource allocation and performance assessment would be concentrated as one operating level and the Company started to manage its business primarily on a geographic basis.  Sales to customers which accounted for more than 10% of Revenues:  Customers

Percentageof Total RevenueThreemonthsendedSeptember 30, 2016:Hebei Yinlong New Energy Co., Ltd, a related party


49
%Hawaii Natural Energy Inst.


23
%NinemonthsendedSeptember 30, 2016:Hebei Yinlong New Energy Co., Ltd, a related party


62
%Zhuhai Yinlong New Energy Co., Ltd, a related party


12
%Hawaii Natural Energy Inst.


11
%ThreemonthsendedSeptember 30,2015:Hebei Yinlong New Energy Co., Ltd, a related party


31
%Hybricon


26
%Cargotec Finland Oy


12
%NinemonthsendedSeptember 30,2015:Hebei Yinlong New Energy Co., Ltd, a related party


28
%Nano power a.s


15
%Hybricon


14
%Cargotec Finland Oy


11
%
  Sales to customers which accounted for more than 10% of Accounts Receivable:  Customers

Percentage of Total Accounts ReceivableSeptember 30, 2016:Isoloader Australia Pty Ltd


55
%Nano power a.s


36
%December 31, 2015:Maui Electric Company, Ltd.


47
%Hybricon


33
%
  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  Revenues for the three-month ended September 30, 2016, and 2015 by geographic area based on location of customers were as follows (in thousands of dollars):  Three Months endedCountry

September 30, 2016


September 30, 2015Belgium

$
-


$
95China


8,991



703Czech Republic


444



8Denmark


-



-Finland


904



204Spain


-



15Sweden


-



446U.S.A


5,576



163United Kingdom


-



74Grand Total

$
15,915


$
1,708
  Nine Months endedCountry

September 30, 2016


September 30, 2015Belgium

$
263


$
403China


24,553



2,011Czech Republic


602



811Denmark


-



2Finland


1,617



578Spain


8



74Sweden


143



747U.S.A


5,975



644United Kingdom


-



117Grand Total

$
33,161


$
5,387
  Geographic information for long-lived assets, which was based on physical location of the assets, was as follows (in thousands of dollars):  Country

September 30, 2016


December 31, 2015United States

$
1,909


$
1,867China


96,297



69,190Total

$
98,206


$
71,057
  Geographic information for revenue, which was based on physical location of operations, was as follows (In thousands of dollars):  Three months ended


Ninemonths endedSeptember30


September302016


2015


2016


2015United States

$
5,577


$
1,006


$
7,138


$
3,375China


10,338



702



26,023



2,012Total

$
15,915


$
1,708


$
33,161


$
5,387








NOTE 15 – RELATED PARTY BALANCES AND TRANSACTIONS  Related Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, stockholder, or a related corporation.  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  During the periods presented, the details of the related party balances were as follows (in thousands of dollars):  a. Balance Note

September30, 2016


December 31, 20151. Accounts receivableZhuhai Yinlong New Energy Co., Ltd
a


-



203
  During the periods presented, the Company sold products to the related party (listed above), mainly engaged in businesses of technological development of new energy related fields, production and selling of lithium-ion power batteries and energy storage batteries.  Note

September30, 2016


December 31, 20152. Other receivableZhuhai Yinlong New Energy Co., Ltd
a

$
-


$
308Zhuhai Guangtong Auto Co., Ltd (Handan Branch)
c


1



274Subtotal


$
1


$
582
  During the periods presented, the Company would receive refund from Zhuhai Yinlong due to prior prepayment of purchase orders which have been canceled.   During the periods presented, the Company paid operation expense on behalf of Zhuhai Guangtong Auto.   Note

September30, 2016


December 31, 20153. Note receivableHebei Yinlong New Energy Co., Ltd
b

$
-


$
1,540
  Related Party (listed above) issued trade acceptances to the Company. Trade acceptances are presented to the Company as a payment against the outstanding trade payable. These trade acceptances are non-interest bearing and mature within six months.  Note

September30, 2016


December 31, 20154. Loans receivableGuangdong Yintong Investment Holdings Group Co., Ltd
e

$
-


$
2,772Zhuhai Guangtong Auto Co., Ltd (Handan)
c


-



10,826Subtotal


$
-


$
13,598
  During the periods presented, the Company provided the non-interest bearing loans to related parties (listed above) and all loans are due on demand  Total Amount due from related parties

$
1


$
15,923
   Note

September30, 2016


December 31, 20151. Trade accounts payable and other payableHebei Yinlong New Energy Co., Ltd
b

$
708


$
3Zhuhai Guangtong Auto Co., Ltd
c


658



676Subtotal


$
1,366


$
679
  During the periods presented, the Company had trade payable and other payable to related parties (listed above), mainly engaged in purchasing of electric cells from Hebei Yinlong New Energy and purchasing of electric buses from Zhuhai Guangtong Auto.  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  Note

September30, 2016


December 31, 20152. Sales deposit received in advanceHebei Yinlong New Energy Co., Ltd
b

$
5,887


$
1,426Zhuhai Yinlong New Energy Co., Ltd
a


8,864



-14,751



1,426
  During the periods presented, the Company sold products to related parties (listed above), mainly engaged in production and selling of lithium-ion power batteries and energy storage batteries. The Company received deposit in advance to the sales.  Note

September30, 2016


December 31, 20153. Borrowing payableHebei Yinlong New Energy Co., Ltd
b

$
40,184


$
14,033Zhuhai Yinlong New Energy Co., Ltd
a


1,188



1,529Zhuhai Guangtong Auto Co., Ltd
c


-



5,698Shijiazhuang Zhongbo Auto Co., Ltd
d


8,904



2,094Subtotal


$
50,276


$
23,354
  During the periods presented, the Company issued the non-interest bearing loans to related parties (listed above) and all loans are due on demand.  Total Amount due to related parties

$
66,393


$
25,459
   b. Transaction


Threemonths ended1a. Sales
Note

September30, 2016


September30, 2015Hebei Yinlong New Energy Co., Ltd
b

$
7,841


$
538Zhuhai Yinlong New Energy Co., Ltd
a


1,100



165Subtotal


$
8,941


$
703
  Nine months endedNote

September30, 2016


September30, 20151b. SalesHebei Yinlong New Energy Co., Ltd
b

$
20,613


$
1,497Zhuhai Yinlong New Energy Co., Ltd
a


3,872



516Subtotal


$
24,485


$
2,013
  During the periods presented, the Company sold products to related parties (listed above), mainly engaged in production and selling of lithium-ion power batteries and energy storage batteries.  Threemonths ended2a. Purchase
Note

September30, 2016


September30, 2015Hebei Yinlong New Energy Co., Ltd
b

$
718


$
3Zhuhai Yinlong New Energy Co., Ltd
a


-



(1
)Zhuhai Guangtong Auto Co., Ltd
c


-



(53
)Subtotal


$
718


$
(51
)
  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  Nine months endedNote

September30, 2016


September30, 20152b. PurchaseHebei Yinlong New Energy Co., Ltd
b

$
718


$
3Zhuhai Yinlong New Energy Co., Ltd
a


-



156Zhuhai Guangtong Auto Co., Ltd
c


-



7,256Subtotal


$
718


$
7,415
  During the periods presented, the Company purchased from related parties (listed above), mainly engaged in purchasing of electric cells from Hebei Yinlong New Energy and purchasing of electric bus from Zhuhai Yinlong New Energy and Zhuhai Guangtong Auto.  Threemonths ended3. Borrowing from related party
Note

September30, 2016


September30, 2015Hebei Yinlong New Energy Co., Ltd
b

$
57,821


$
12,769Zhuhai Yinlong New Energy Co., Ltd
a


-



1,091Shijiazhuang Zhongbo Auto Co., Ltd
d


(41
)


-Subtotal


$
57,780


$
13,860
  Nine months endedNote

September30, 2016


September30, 20153. Borrowing from related partyHebei Yinlong New Energy Co., Ltd
b

$
94,058


$
21,203Zhuhai Yinlong New Energy Co., Ltd
a


459



29,293Shijiazhuang Zhongbo Auto Co., Ltd
d


6,962



-Subtotal


$
101,479


$
50,496
  During the periods presented, the Company issued the non-interest bearing loans to related parties (listed above) and all loans are due on demand.  As of September 30, 2016, the Company used the Land Use Right as pledge for the carrying amount of $6.19 and provided guarantee to Shijiazhuang Zhongbo Auto Co., Ltd to secure financing from commercial banks. (Note 9)  In May 2016, the Company and related party creditors agreed to settle the amount due to related parties by transferring debt obligation to related party debtors and netting off the amount due from related parties for the amount of $13.32 million. Hence, the Company is released from debt obligation for total amount of $13.32 million.  Related parties involved in settlement are presented in the following table (in thousands of dollars):  Note

May 20161. Loans receivable for settlementGuangdong Yintong Investment Holdings Group Co., Ltd
e

$
2,755Zhuhai Guangtong Auto Co., Ltd (Handan)
c


10,568Subtotal


$
13,323
  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States Dollars)  Note

May 20162. Borrowing payable for settlementHebei Yinlong New Energy Co., Ltd
b

$
7,662Zhuhai Guangtong Auto Co., Ltd
c


5,661Subtotal


$
13,323
  a. Zhuhai Yinlong New Energy Co., Ltd (“Zhuhai Yinlong”) is the parent company of Altair Nanotechnologies Inc.b. Hebei Yinlong New Energy Co., Ltd (“Hebei Yinlong”) is the wholly owned subsidiary of Zhuhai Yinlong New Energy Co., Ltd, hence Hebei Yinlong New Energy Co., Ltd and Altair Nanotechnologies Inc. are companies commonly controlled by the same parent company.c. Zhuhai Guangtong Auto Co., Ltd. (and its Handan Branch) is the wholly owned subsidiary of Zhuhai Yinlong New Energy Co., Ltd, hence Zhuhai Guangtong Auto Co., Ltd and Altair Nanotechnologies Inc. are companies commonly controlled by the same parent company.d. Zhuhai Yinlong New Energy Co., Ltd indirectly holds 100% ownership of Shijiazhuang Zhongbo Auto Co., Ltd, hence Shijiazhuang Zhongbo Auto Co., Ltd and Altair Nanotechnologies Inc., are the companies commonly controlled by the same parent company.e. Guangdong Yintong Investment Holdings Group Co., Ltd is owned by Wei Yinchang, chairman of the Company.f. Mr. Sun Guohua is the Chief Executive Officer of the Company.g. Mr. Wei Guohua is the Director of Board of the Companyh. Mr. Wei Yincang is the Chairman of the Companyi. Yintong Energy (“YTE”) is an affiliate of Hui Neng Investment Holding Limited (“Hui Neng”) formerly known as Canon Investment Holding, Ltd, (“Canon”). Hui Neng owns 57.5% of Zhuhai YinLong.


|
|





NOTE 16 – COMMITMENTS AND CONTINGENCIES  Fixed Assets  As discussed further in Note 9, in conjunction with the Land Use Rights obtained by Northern Altair, the Company agreed to make fixed asset investments on the land of approximately $314.85 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50-year life of the Land Use Rights, with initial construction occurring in 2013. The remaining commitment as of September 30, 2016 is $230.11 million.  Lease  The Company leased a 70,000 square feet facility in Flagship Business Accelerator Building located at 3019 Enterprise Drive, Anderson, Indiana under a triple net lease with Flagship Enterprise Center, Inc. The facility was used for the production of prototype batteries and battery systems.  The lease amended on January 27, 2015 will expire on June 30, 2017. Any lease renewal options will be negotiated no less than six (6) months prior to the expiration of this lease. Annual rent under this lease is $0.26 million plus IT fees, utilities and maintenance. Effective May 1, 2016, the Company agreed to pay $0.14 million as a payment to terminate the lease effective by the end of May 2016. Use of the facility has been agreed upon until a new tenant is found. The landlord will give the Company thirty days notice at their discretion to vacate the premises. The Company expects to find new office space for the current employees in the general Anderson, Indiana area at a reduced rate and space requirement by the end of the second quarter of 2017.  The Company also finances the purchase of certain equipment under capital lease arrangements.  Capital Commitment- Fixed Assets  The Company has contractual obligations to vendors of machine and equipment related to future capital expenditures as of September 30, 2015. The Company's commitment for minimum payment under these contractual obligations as of September 30, 2016 is $18.60 million. From the contract, the Company noted that all of these contractual obligations would be fulfilled in 2016 and 2017. The Company's commitment for minimum payment under these contractual obligations as of September 30, 2016 is as follow:  
  ALTAIR NANOTECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)  Minimum future commitments under capital agreements payable (in thousands of dollars):  Capital commitmentsUSDThree months ended December 31, 2016


15,867Year ended December 31, 2017


2,731Total


18,598
  Defined contribution plan  Full-time employees of the Company in the People Republic China (“PRC”) participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that PRC operating entities make contributions to the government for these benefits based on certain percentages of the employees’ salaries. Except for the required contributions mentioned above, the Company has no legal obligation for the benefits beyond the contributions made.  The total amounts for such employee benefits were $0.57 million and $0.63 million for the nine months ended September 30, 2016 and 2015, respectively.  Litigation  We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Legal expenses associated with the contingency are expensed as incurred. Material legal proceedings that are currently pending are as follows:  In re Altair Nanotechnologies Shareholder Derivative Litigation,1:14-cv-09418, 1:14-cv-09958 (S.D.N.Y.): In late 2014, two shareholder derivative actions were filed against certain current and former officers and directors of the Company in the United States District Court for the Southern District of New York.  Altair was named as a nominal defendant. The two cases, which were consolidated on May 15, 2015, allege violations of Section 14(a) of the Securities Exchange Act of 1934, as well as breaches of fiduciary duty and unjust enrichment based on substantially the same facts underlying the putative securities litigation. As of the balance sheet date, the Company did not have reasonable estimation of settlement amount. In July 2016, certain parties executed a stipulation of settlement, without defendants admitting liability, whereby Altair agreed to adopt certain governance proposals and pay an amount not exceeding $150,000 in plaintiffs’ attorneys’ fees and expenses. The court entered an order preliminarily approving the settlement on August 22, 2016, and has scheduled a settlement hearing for January 9, 2017.  If the settlement receives final approval, this action will be dismissed in its entirety.  Notice of the proposed settlement is available on Altair’s website.  A summary notice has also been published online.  In the Matter of Altair Nanotechnologies, Inc. (LA-4452): In or around January 2015, SEC opened an investigation into the resignation of Crowe Horwath LLP (“Crowe”) as Altair’s independent auditor in August 2014.  As part of its investigation, the SEC issued several subpoenas to the Company and its current and former officers relating to Crowe’s resignation and a Form 8-K filed by the Company on March 13, 2015.  On May 4, 2016, the SEC sent Altair a Wells Notice identifying possible violations of Sections 13(a) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 thereunder.  On August 29, 2016, the Company made an offer of settlement to the SEC whereby it consented to the entry of an order, without admitting or denying the findings therein except as to the SEC’s jurisdiction, that the Company:  (i) cease and desist from committing or causing violations of Sections 13(a) and 13(b)(2)B) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder; (ii) make certain filings with the SEC by November 15, 2016 or have the registration of its securities under the Exchange Act revoked; and (iii) pay a civil money penalty in the amount of $250,000 within 10 days of the entry of the order.  Such offer of settlement was accepted by the SEC and resulted in a Release No. 78997 dated September 29, 2016 with respect to the same. As of the balance sheet date, the Company did not have reasonable estimation of settlement amount. In August 2016, the Company accrued $250,000 and deposited the funds into escrow which was paid from escrow to the SEC in October 2016.


NOTE 17 – SUBSEQUENT EVENT





The Company has evaluated subsequent events through the date of issuance of this condensed consolidated financial statements report and has not identified events with material financial impact on the Group’s condensed consolidated financial statements.








Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations



Forward-Looking Statements



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



We are a Delaware corporation that develops, manufactures and sells nano lithium titanate batteries and energy storage systems. Our nano lithium titanate battery systems offer higher power density, longer cycle life, rapid charge and discharge capabilities, a wider operating temperature range and higher levels of safety than conventional lithium-ion batteries. We target applications that effectively utilize the key attributes of our technology, and these applications can be found primarily in the electric grid, transportation (commercial vehicles), and industrial market segments.



In April 2012, we formed Altair Nanotechnologies (China) Co., Ltd. (“Altair China”) and Northern Altair Nanotechnologies Co., Ltd. (“Northern Altair”) in order to aggregate key elements of our supply chain and expand into the Chinese market. In January 2014, our Board of Directors approved plans to consolidate all U.S. manufacturing operations and transition manufacturing to Wu’an, China. Effective in early 2016, the majority of our principal assets and operations are now located in China.



In 2013, we transferred the production of our nLTO material to the New Energy Industrial Park in Wu’an city, Hebei province, China. We built, installed and further improved the manufacturing of our nLTO. In 2013, a 150 metric ton per year manufacturing line was completed and put into production as our phase one nLTO production line. In the same year, to meet the high demand of Lithium batteries in the China market, we completed the business process of sourcing the equipment to be procured for the phase two nLTO production line, under the joint efforts of the Altair U.S. and Altair China teams. This nLTO line was put into production in fourth quarter of 2015 and has reached an annual production capacity of 2,250 metric tons during 2016, with an expected annual capacity of 3,000 metric tons. We built a phase three nLTO production line and it was completed and installed in the fourth quarter of 2016 with an annual production capacity of 3,500 metric tons.








As of January 2016, the module production was transferred from Anderson, Indiana to our manufacturing location in Wu’an, China. In the U.S., we are maintaining some of our core R&D personnel, who provide technical transfer and services to our China entities in the areas of core R&D, engineering operational capabilities and technologies that influence our manufacturing in Wu’an, China.



In 2014, in order to further cut the cost of our products, improve product chain management efficiencies, and effectively serve the large market in China, we built two battery module production lines with an expected total capacity of approximately 6,000 modules per year. In the first quarter of 2016, we transferred the U.S. module production line to China. We are expecting the three battery module production lines to reach an estimated total capacity of 9,000 modules per year by the end of 2016.



We have completed the technology and production validation of our Gen 4 modules with China produced nLTO and China made module parts. The Gen 2 modules is still be available in 2016. Both Gen 2 and Gen 4 products have passed the United Nations (“UN”), International Standards Organization (“ISO”), SAE International (“SAE”) and International Electrochemical Commission (“IEC”) testing and reports are being generated by TÜV SÜD (“TUV”). TUV, a German based company, who has a test facility in China and results are generally accepted by the UN and U.S. In December 2015, our battery module production line in the U.S. was discontinued. We were able to maintain a very stable period of time overlapping production while transferring the battery module production from the U.S. to China, without any impact on customer order delivery. Our battery modules have been generally used in EV Buses, trolley buses and hoisting equipment in the Europe and the U.S markets. Our OEM cell producer’s capacity can reach 70,000 Altair format cells per year. Sometime in the near future, we expect to validate another OEM cell producer to reduce dependency on one supplier, which will provide competition between suppliers and reduce costs for Altair.



We plan on building and validating ALTI-ESS (energy storage systems) production capabilities in China and export them to Europe, the U.S. and to other countries of the world.



We now have a battery management system (“BMS”) distribution center in Europe to provide improved efficiency and timely delivery of our supply of the BMS units to our European customers. Our BMS supplier has a production base in China, which we believe will meet the demand of the China market.



By building manufacturing and assembly facilities in Wu’an, China for our nLTO material, battery cells and modules, and soon our energy storage systems, we have centered the whole supply chain in China. In adopting this strategy, we expect to significantly reduce costs, shorten lead times, reduce cash flow pressures, improve the quality and production management efficiency and increase our profit.





Results of Operations



The following summarizes our revenue, operating expenses, and net loss for all periods presented below. You should read the following in conjunction with our unaudited condensed consolidated financial statements, including quarterly information, presented elsewhere in this Quarterly Report.








The table below sets forth line items from the Company’s unaudited condensed consolidated Statement of Operations (in thousands):



|                                 |  | Three Months Ended September 30, |        |   |      |   |        |            |  |   |                        |   | Nine Months Ended September 30, |      |      |   |      |   |        |            |  |  
|-------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | ---------- |  | - | ---------------------- | - | ------------------------------- | ---- | ---- | - | ---- | - | ------ | ---------- |  | -
|                                 |  | 2016                             |        |   | 2015 |   |        | Inc.(Dec.) |  |   | Percentage Inc. (Dec.) |   |                                 | 2016 |      |   | 2015 |   |        | Inc.(Dec.) |  |  
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Revenues                         |  | $                                | 15,915 |   |      | $ | 1,708  |            |  | $ | 14,207                 |   |                                 |      | 832  | % |      | $ | 33,161 |            |  | $
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Cost of goods sold               |  |                                  | 13,218 |   |      |   | 1,481  |            |  |   | 11,737                 |   |                                 |      | 793  | % |      |   | 23,961 |            |  |  
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Gross profit (loss)              |  |                                  | 2,697  |   |      |   | 227    |            |  |   | 2,470                  |   |                                 |      | 1088 | % |      |   | 9,200  |            |  |  
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Operating expenses               |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Research and development         |  |                                  | 182    |   |      |   | 218    |            |  |   | (36                    | ) |                                 |      | -17  | % |      |   | 502    |            |  |  
|Sales and marketing              |  |                                  | 40     |   |      |   | 294    |            |  |   | (254                   | ) |                                 |      | -86  | % |      |   | 124    |            |  |  
|General and administrative       |  |                                  | 3,696  |   |      |   | 3,064  |            |  |   | 632                    |   |                                 |      | 21   | % |      |   | 9,834  |            |  |  
|Depreciation and amortization    |  |                                  | 265    |   |      |   | 370    |            |  |   | (105                   | ) |                                 |      | -28  | % |      |   | 825    |            |  |  
|Gain on disposal of assets       |  |                                  | -      |   |      |   | -      |            |  |   | -                      |   |                                 |      | -    |   |      |   | (29    | )          |  |  
|Total operating expenses         |  |                                  | 4,183  |   |      |   | 3,946  |            |  |   | 237                    |   |                                 |      | 6    | % |      |   | 11,256 |            |  |  
|Loss from operations             |  |                                  | (1,486 | ) |      |   | (3,719 | )          |  |   | 2,233                  |   |                                 |      | -60  | % |      |   | (2,056 | )          |  |  
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Other (expense) income           |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Interest expense, net            |  |                                  | (988   | ) |      |   | (290   | )          |  |   | (698                   | ) |                                 |      | 241  | % |      |   | (2,552 | )          |  |  
|Change in fair value of warrants |  |                                  | 1      |   |      |   | -      |            |  |   | 1                      |   |                                 |      | 100  | % |      |   | 1      |            |  |  
|Gain (loss) on foreign exchange  |  |                                  | (2     | ) |      |   | 1      |            |  |   | (3                     | ) |                                 |      | -300 | % |      |   | 88     |            |  |  
|Other income - buses             |  |                                  | 5      |   |      |   | 1,981  |            |  |   | (1,976                 | ) |                                 |      | -100 | % |      |   | 16     |            |  |  
|Other expense - buses            |  |                                  | -      |   |      |   | (1,847 | )          |  |   | 1,847                  |   |                                 |      | -100 | % |      |   | -      |            |  |  
|Other income (expense)           |  |                                  | 131    |   |      |   | 131    |            |  |   | -                      |   |                                 |      | -    |   |      |   | 3,045  |            |  |  
|Total other (expense) income     |  |                                  | (853   | ) |      |   | (24    | )          |  |   | (829                   | ) |                                 |      | 3454 | % |      |   | 598    |            |  |  
|                                 |  |                                  |        |   |      |   |        |            |  |   |                        |   |                                 |      |      |   |      |   |        |            |  |  
|Net loss                         |  | $                                | (2,339 | ) |      | $ | (3,743 | )          |  | $ | 1,404                  |   |                                 |      | -37  | % |      | $ | (1,458 | )          |  | $



Three Months Ended September 30, 2016 compared with the Three Months Ended September 30, 2015



Revenues: The consolidated revenues for the three months ended September 30, 2016 increased $14.21 million, or 832%, to $15.92 million from $1.71 million for the three months ended September 30, 2015. The increase was primarily due to $9.64 million increase in China which was caused by the increase in nLTO materials sales to related parties, and $4.57 million increase in the U.S. due to ESS projects during the three months ended September 30, 2016 compared to the same period in 2015.








Cost of goods sold: The consolidated costs of goods sold for the three months ended September 30, 2016 was $13.22 million, an increase of $11.74 million or 793% from $1.48 million for the three months ended September 30, 2015. The increase in China operations was $7.60 million which is caused by increased product sales and the increase in U.S. operations was $4.14 million which is caused by ESS projects during the three months ended September 30, 2016 as compared to the same period in prior year.



Research and development: The consolidated research and development costs increased by $0.04 million, or 17%, to $0.18 million for the three months ended September 30, 2016 from $0.22 million for the three months ended September 30, 2015. The research and development expenses was due to lower headcount in the U.S. operations.



Sales and marketing: The consolidated sales and marketing expenses decreased by $0.25 million, or 86%, to $0.04 million for the three months ended September 30, 2016 from $0.29 million for the three months ended September 30, 2015. The decrease was mainly attributable to the decrease of $0.21 million in China operations caused by decrease in travel expenses and lower headcount during the three months ended September 30, 2016 compared to the same period in 2015, and the sales and marketing expense in the U.S. operations decreased by $0.04 million as U.S. no longer has sales personnel beginning the second quarter of 2016.



General and administrative: The consolidated general and administrative expenses increased by $0.63 million, or 21%, to $3.70 million for the three months ended September 30, 2016 from $3.06 million for the three months ended September 30, 2015. The increase was attributable to the China operations which general and administrative expenses increased by $0.36 million due to higher professional fees related to regulatory filings in 2016. The general and administrative expenses in the U.S. operations increased by $0.27 million mainly due to class action settlement penalties in 2016.



Depreciation and amortization: Depreciation and amortization decreased by $0.10 million, or 28%, to $0.27 million from $0.37 million for the three months ended September 30, 2016 and 2015, respectively. The decrease was primarily due to the portion of fixed assets were fully depreciated and fixed assets sold in 2016.



Interest expense, net: Interest expense, net increased to $0.99 million for the three months ended September 30, 2016, from $0.29 million for the three months ended September 30, 2015, an increase of $0.70 million or 241%. The increase was mainly attributable to the China operations which interest expense increased by $0.74 million due to the higher debt balances and new capital leases during the three months ended September 30, 2016. The interest expense in the U.S. operations decreased by $0.04 million due to lower loan balances.



Change in fair value of warrants: During the three months ended September 30, 2016 and 2015, we recorded a gain of $1 thousand and nil, respectively, due to the change in the fair value of warrants outstanding that we previously issued.



Gain (loss) on foreign exchange: Transaction gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than our functional currency were a loss of $2 thousand and a gain of $1 thousand for the three months ended September 30, 2016 and 2015, respectively.



Other income - buses: Other income - buses amounted to $0.01 million and $1.98 million for the three months ended September 30, 2016 and 2015, respectively. The decrease was mainly due to no bus sales incurred and $0.01 million was the amortization of financial guaranty premium during the three months ended September 30, 2016 on buses sold in prior periods as compared to 28 buses sold during the three months ended September 30, 2015.



Other expenses - buses: Other expenses - buses amounted to nil and $1.85 million for the three months ended September 30, 2016 and 2015, respectively. This was due to no bus sales during the three months ended September 30, 2016 compared to the cost of 28 bus sold during the three months ended September 30, 2015.



Other income: Other income amounted to $0.13 million and $0.13 million for the three months ended September 30, 2016 and 2015. The other income remained steady during the three months ended September 30, 2016 and 2015.



Net loss: Net loss decreased by $1.40 million, or 37%, to $2.34 million for the three months ended September 30, 2016 from $3.74 million for the three months ended September 30, 2015. The decrease was driven by increase of $2.47 million in gross profit, offset by $0.83 increase in total other expense during the three months ended September 30, 2016 compared to the same period in 2015.








Nine Months Ended September 30, 2016 compared with the Nine Months Ended September 30, 2015



Revenues: The consolidated revenues for the nine months ended September 30, 2016 increased $27.77 million, or 516%, to $33.16 million for the nine months ended September 30, 2016 from $5.39 million for the nine months ended September 30, 2015. The increase was due to $24.01 million increase in China caused by increased sales of nLTO materials to related parties and $3.76 million increase in the U.S. caused by increased sales in ESS projects during the nine months ended September 30, 2016 as compared to the same period in the prior year.



Cost of goods sold: The consolidated costs of goods sold for the nine months ended September 30, 2016 was $23.96 million, an increase of $19.11 million or 394% from $4.85 million for the nine months ended September 30, 2015. The increase was primarily due to $15.47 million of increase in China operations attributed byincreased product sales. The increase of $3.64 million in the U.S. operations is due to recognition of deferred cost of ESS projects during the nine months ended September 30, 2016 compared to the same period in 2015.



Research and development: The consolidated research and development costs decreased by $0.09 million, or 15%, to $0.50 million for the nine months ended September 30, 2016 from $0.59 million for the nine months ended September 30, 2015. The decrease was related mainly to lower headcount in the U.S.



Sales and marketing: Sales and marketing expenses decreased by $0.55 million, or 81%, to $0.12 million for the nine months ended September 30, 2016 from $0.67 million for the nine months ended September 30, 2015. The decrease was mainly attributable to the China operations which sales and marketing expenses decreased by $0.42 million which is caused by decreased traveling expenses and lower headcount during the nine months ended September 30, 2016. The sales and marketing expenses in the U.S. operation’s decreased by $0.13 million as the U.S. no longer has sales personnel beginning the second quarter of 2016.



General and administrative: The consolidated general and administrative expenses increased by $2.08 million, or 27%, to $9.83 million for the nine months ended September 30, 2016 from $7.76 million for the nine months ended September 30, 2015. The increase was attributable to the China operations which general and administrative expenses increased by $1.77 million due to higher professional fees related to regulatory filings during the nine months ended September 30, 2016 compared to the same period in 2015. The general and administrative expenses in the U.S. operations increased by $0.31 million mainly due to class action settlement penalty during the nine months ended September 30, 2016 compared to the same period in 2015.



Depreciation and amortization: Depreciation and amortization decreased by $0.36 million, or 30%, to $0.83 million for the nine months ended September 30, 2016, from $1.19 million for the nine months ended September 30, 2015. The decrease was primarily related to the portion of fixed assets were fully depreciated and fixed assets sold in 2016.



(Gain) loss on disposal of fixed assets: Loss on disposal of fixed assets amounted to $0.03 million for the nine months ended September 30, 2016. The Company received proceeds on the fixed assets sold during the nine months ended September 30, 2016 and did not have sell any fixed assets during the nine months ended September 30, 2015.



Interest expense, net: Interest expense, net increased to $2.55 million for the nine months ended September 30, 2016, from $1.89 million for the nine months ended September 30, 2015, an increase of $0.66 million or 35%. The increase was mainly attributable to the interest expense in the China operations increased by $0.75 million due to higher debt balances and new capital leases during the nine months ended September 30, 2016 compared to the same period in 2015.The U.S. operations which interest expense decreased by $0.09 million due to lower loan balances during the nine months ended September 30, 2016 compared to the same period in 2015.



Change in fair value of warrants: During the nine months ended September 30, 2016 and 2015, we recorded a gain of $1 thousand and a gain of $5 thousand, respectively, due to the change in the fair value of warrants outstanding that we previously issued.



Gain (loss) on foreign exchange: Transaction gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than our functional currency represented a gain of $0.09 million for the nine months ended September 30, 2016.



Other income - buses: Other income - buses amounted to an income of $0.02 million and $11.52 million for the nine months ended September 30, 2016 and 2015, respectively, a decrease of $11.50 million or 100%. The decrease was mainly due to no bus sales incurred and $0.02 million was amortization of financial guaranty during the nine months ended September 30, 2016 on buses sold in prior periods as compared to 75 buses sold during the same period in 2015.








Other expenses - buses: Other expenses - buses amounted to nil and $13.66 million for the nine months ended September 30, 2016 and 2015, respectively. This was due to no bus sales recognized during the nine months ended September 30, 2016 compared to 75 buses sold in same period in 2015.



Other income: Other income amounted to $3.05 million and $0.50 million for the nine months ended September 30, 2016 and 2015, an increase of $2.55 million or 515%. The increase is primarily due to $2.90 million grant incentives recognized during the nine months ended September 30, 2016.



Net loss: Net loss decreased by $11.74 million, or 89%, to $1.46 million for the nine months ended September 30, 2016 from $13.20 million for the nine months ended September 30, 2015. The decrease in net loss was driven by an increase of $8.67 million in gross profit and an increase of $4.13 million in total other income during the nine months ended September 30, 2016 compared to the same period in 2015.








Liquidity and Capital Resources



Our working (deficit) capital is as follows (In thousands of dollars):



|                              |  | As of September 30,
2016 |         |   | As of December 31,
2015 |  
|----------------------------- |  | ------------------------ | ------- | - | ----------------------- | -
|Current Assets                |  | $                        | 36,241  |   |                         | $
|Current Liabilities           |  |                          | (97,121 | ) |                         |  
|Net Working (Deficit) Capital |  | $                        | (60,880 | ) |                         | $



At September 30, 2016, we had a working deficit of $60.88 million compared to working deficit of $47.85 million at December 31, 2015. The increase in net working deficit was primarily related to a decline in short term investment of $25.41 million and an increase of $40.93 million in amount due to related parties.



A summary of our cash flow activities is as follows (In thousands of dollars):



|                                                             |  | Nine Months Ended September 30, 2016 |         |   | Nine Months Ended September 30, 2015 |  
|------------------------------------------------------------ |  | ------------------------------------ | ------- | - | ------------------------------------ | -
|Net cash provided by Operating Activities                    |  | $                                    | 15,318  |   |                                      | $
|Net cash provided by (used in) Investing Activities          |  |                                      | 607     |   |                                      |  
|Net cash provided by (used in) Financing Activities          |  |                                      | (13,288 | ) |                                      |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                      | (682    | ) |                                      |  
|Increase (Decrease) in Cash during the period                |  |                                      | 1,955   |   |                                      |  
|Cash, Beginning of Period                                    |  |                                      | 2,088   |   |                                      |  
|Cash, End of Period                                          |  | $                                    | 4,043   |   |                                      | $



Nine Months Ended September 30, 2016 as Compared to Nine Months Ended September 30, 2015



Net cash provided by operating activities was $15.32 million for the nine months ended September 30, 2016 as compared to $25.97 million for the nine months ended September 30, 2015. The net decrease in cash from operations resulted from a net increase of $4.51 million in prepaid expenses and other current assets due to the increase of prepaid VAT during the nine months ended September 30, 2016 compared to the net decrease of $26.60 million in prepaid expenses and other current assets due to the collection of other receivables related to bus sales in the same period of 2015, offset by $1.46 million in net loss during the nine months ended September 30, 2016 compared to the net loss of $13.20 million in 2015.



Net cash provided in investing was $0.61 million for the nine months ended September 30, 2016 as compared to net cash used of $32.51 million for the nine months ended September 30, 2015. Cash provided in investing activities was driven by the amount of matured time deposit in China, offset by our purchases of production equipment and construction of production facilities during the nine months ended September 30, 2016.



Net cash used by financing activities was $13.29 million for the nine months ended September 30, 2016 as compared to a net cash provided of $18.31 million for the nine months ending September 30, 2015. The decrease in cash from financing activities primarily related to repayments on notes payable, offset by the proceeds received on notes payable to related parties.



Going Concern



We incurred a net loss of $1.46 million for nine months ended September 30, 2016, and we had an accumulated deficit of $273.95 million and a negative working capital of $60.88 million as of September 30, 2016. In addition, the Company anticipates to continue to have negative cash flows from operations as it ramps up production at their new manufacturing facilities. If the Company is not able to refinance its debt or obtain additional capital, the Company will not be able to pay off its current debt obligations. The company financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.








The Company’s ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately generate revenues at a level that will result in profitability and positive cash flows from operations. To address these matters, we are taking actions to pay off loans when due, refinance existing loans if needed, obtain capital leases, obtain additional loans collateralized by the Land Use Rights, third party guarantees and other assets, and obtain approval for additional grant incentives from the government of Wu’an, China. However, there can be no assurance that additional grant funds to support our capital needs will be available to us and that we will be able to refinance existing loans, obtain additional loans, or raise further funds through other sources such as through an equity offering. Even if we are able to obtain additional financing, it may contain undue restrictions, be on terms that are not satisfactory to us, or contain covenants on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of convertible debt and equity financing.



Off-Balance Sheet Arrangements



As of September 30, 2016, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC’s Regulation S-K.



Capital Commitments- Fixed Assets



The Company has contractual obligations to suppliers of machine and equipment related to future capital expenditures as of September 30, 2015. The Company's commitment for minimum payment under these contractual obligations as of September 30, 2015 is $18.60 million. As of September 30, 2016, $15.87 million and $2.73 million of these contractual obligations would be fulfilled in 2016 and 2017, respectively.



Debt

As of September 30, 2016, we are required to pay principal amounts of $8.10 million within next year and the remainder of $14.36 million payable in five years.



Capital Commitments - Production Plant



As discussed further in Note 9, in conjunction with the Land Use Rights obtained by Northern Altair, the Company agreed to make fixed asset investments on the land of approximately $314.85 million, subject to loan guarantees and other incentives from Wu’an, China, over an unspecified period of time up to the 50-year life of the Land Use Rights, with initial construction occurring in 2013. As of September 30, 2016, the remaining commitment is $230.11 million.



Lease



The Company leases a 70,000 square feet facility in Flagship Business Accelerator Building located at 3019 Enterprise Drive, Anderson, Indiana under a triple net lease with Flagship Enterprise Center, Inc. The facility was used for the production of prototype batteries and battery systems.  The lease amended on January 27, 2015 will expire on June 30, 2017. Any lease renewal options will be negotiated no less than six (6) months prior to the expiration of this lease. Annual rent under this lease is $0.26 million plus IT fees, utilities and maintenance. Effective May 1, 2016, the Company agreed to pay $0.14 million as a payment to terminate the lease effective by the end of May 2016. Use of the facility has been agreed upon until a new tenant is found. The landlord will give the Company thirty-day notice at their discretion to vacate the premises. The Company expects to find new office space for the current employees in the general Anderson, Indiana area at a reduced rate and space requirement by the end of the second quarter of 2017.



Capital Lease Obligations



On August 8, 2016, the Company entered into a financing arrangement with a third party to purchase machinery and equipment utilized in production. The lease term is initially for five years and contingent upon the occurrence of certain events, the lessor has the rights to (i) reduce the lease term from five years to three years or (ii) upon default by the Company, the lessor has the right to convert the remaining balance owed under the financing arrangement into the equity of the Company. At September 30, 2016, the total present value of the net minimum payments on capital leases is $9.17 million. The net present value of capital lease obligation, less current portion is $8.83 million as of September 30, 2016.








Item 3.Quantitative and Qualitative Disclosures about Market Risk



As a smaller reporting company, we are not required to provide the information required by this item.





Item 4.     Controls and Procedure



Disclosure Controls and Procedures.  Based on an evaluation required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, as of September 30, 2016 and December 31, 2015 which is the end of the interim quarter and annual periods covered by this Quarterly Report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(d-e) of the Securities Exchange Act of 1934, as amended) are not effective and there is as of such dates a material weakness in our disclosure controls and procedures. This material weakness is rooted in the material weakness in internal control over financial reporting, as a result of which we were late, and prior to this Quarterly Report, have not filed any required periodic reports since 2013.



Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(d-f) under the Securities Exchange Act of 1934, as amended.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.  Internal control over financial reporting includes those written policies and procedures that:



| | ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;
| | ● | provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and                                                          
| | ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our consolidated financial statements.        



Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.








PART II – OTHER INFORMATION



Item 1. Legal Proceedings.



With respect to previously reported legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations or financial position, there were no material developments during the quarter ended September 30, 2016 except as follows:



In re Altair Nanotechnologies Shareholder Derivative Litigation, 1:14-cv-09418, 1:14-cv-09958 (S.D.N.Y.):In late 2014, two shareholder derivative actions were filed against certain current and former officers and directors of the Company in the United States District Court for the Southern District of New York.  Altair was named as a nominal defendant. The two cases, which were consolidated on May 15, 2015, allege violations of Section 14(a) of the Securities Exchange Act of 1934, as well as breaches of fiduciary duty and unjust enrichment based on substantially the same facts underlying the putative securities litigation. In July 2016, certain parties executed a stipulation of settlement, without defendants admitting liability, whereby Altair agreed to adopt certain governance proposals and pay an amount not exceeding $150,000 in plaintiffs’ attorneys’ fees and expenses. The court entered an order preliminarily approving the settlement on August 22, 2016, and has scheduled a settlement hearing for January 9, 2017.  If the settlement receives final approval, this action will be dismissed in its entirety.  Notice of the proposed settlement is available on Altair’s website.  A summary notice has also been published online.



In the Matter of Altair Nanotechnologies, Inc. (LA-4452):In or around January 2015, SEC opened an investigation into the resignation of Crowe Horwath LLP (“Crowe”) as Altair’s independent auditor in August 2014.  As part of its investigation, the SEC issued several subpoenas to the Company and its current and former officers relating to Crowe’s resignation and a Form 8-K filed by the Company on March 13, 2015.  On May 4, 2016, the SEC sent Altair a Wells Notice identifying possible violations of Sections 13(a) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 thereunder.  On August 29, 2016, the Company made an offer of settlement to the SEC whereby it consented to the entry of an order, without admitting or denying the findings therein except as to the SEC’s jurisdiction, that the Company:  (i) cease and desist from committing or causing violations of Sections 13(a) and 13(b)(2)B) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder; (ii) make certain filings with the SEC by November 15, 2016 or have the registration of its securities under the Exchange Act revoked; and (iii) pay a civil money penalty in the amount of $250,000 within 10 days of the entry of the order.  Such offer of settlement was accepted by the SEC and resulted in a Release No. 78997 dated September 29, 2016 with respect to the same. In August 2016, the Company accrued $250,000 and deposited the funds into escrow which was paid from escrow to the SEC in October 2016.



Item 1A. Risk Factors



Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2015.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



None.



Item 3. Defaults upon Senior Securities



None.



Item 4. Mine Safety Disclosures



None.



Item 5. Other Information



None



Item 6. Exhibits



|a) | See Exhibit Index attached hereto following the signature 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.



| |     | ALTAIR NANOTECHNOLOGIES INC. | 
| | --- | ---------------------------- | 
| |     |                              | 
| | By: | /s/ Guohua Sun               | 
| |     |                              | 
| |     | Chief Executive Officer      | 



Date: November 15, 2016










|EXHIBIT INDEX
|-------------



|            |  |         |  |                                            
|----------- |  | ------- |  | -------------------------------------------
|Exhibit No. |  | Exhibit |  | Incorporated by Reference/ Filed Herewith**



|31.1 |  | Rule 13a-14(a)/15d-14(a)Certification of Chief Executive Officer  |  | Filed herewith
|---- |  | ----------------------------------------------------------------- |  | --------------
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |  | Filed herewith
|32.1 |  | Section 1350 Certification of Chief Executive Officer             |  | Filed herewith
|32.2 |  | Section 1350 Certification of Chief Financial Officer             |  | Filed herewith





** SEC File No. 1-12497.





31