**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**




**x**
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT
                  OF1934
                  FOR THE QUARTERLY PERIOD ENDED**MARCH
                  31, 2006**o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT
                  OF1934
                  FOR THE TRANSITION PERIOD FROM _________________ TO
                  _________________





**ALTAIR
      N** **ANOTECHNOLOGIES
      I** **NC.**





(Exact
      name of registrant as specified in its charter)







**Canada**
            
            **1-12497**
            
            **33-1084375**(State
                or other jurisdiction
            
            (Commission
                File No.)
            
            (IRS
                Employerof
                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 [ X] NO
      [  ]




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





Large
                accelerated filer [  ]
            Accelerated
                filer [X]
            Non-accelerated
                filer [  ]




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 May 3, 2006 the registrant had 59,403,018 Common Shares
      outstanding.**













**PART
                I - FINANCIAL INFORMATION****Item
                1. Financial Statements****ALTAIR
                NANOTECHNOLOGIES INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS****(Expressed
                in United States Dollars)****(Unaudited)****March
                31,**
            
            **December
                31,****2006**
            
            **2005****ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            1,133,678
            
            $
            2,264,418Investment
                in available for sale securities
            
            
            17,028,676
            
            
            20,789,656Accounts
                receivable
            
            
            692,664
            
            
            602,168Prepaid
                expenses and other current assets
            
            
            346,868
            
            
            254,067Total
                current assets
            
            
            19,201,886
            
            
            23,910,309**Investment
                in Available for Sale Securities**
            
            
            469,000
            
            
            423,000**Property,
                Plant and Equipment, net**
            
            
            9,119,988
            
            
            8,169,445**Patents,
                net**
            
            
            868,859
            
            
            890,062**Other
                Assets**
            
            
            21,261
            
            
            71,200**Total
                Assets**
            
            $
            29,680,994
            
            $
            33,464,016**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**Trade
                accounts payable
            
            $
            919,653
            
            $
            808,905Accrued
                salaries and benefits
            
            
            899,596
            
            
            709,349Accrued
                liabilities
            
            
            436,518
            
            
            309,289Note
                payable, current portion
            
            
            600,000
            
            
            600,000Total
                current liabilities
            
            
            2,855,767
            
            
            2,427,543**Note
                Payable, Long-Term Portion**
            
            
            1,800,000
            
            
            2,400,000**Stockholders'
                Equity**Common
                stock, no par value, unlimited shares authorized;59,380,019
                and 59,316,519 shares issued andoutstanding
                at March 31, 2006 and December 31, 2005
            
            
            92,117,327
            
            
            92,126,714Additional
                paid in capital
            
            
            746,869
            
            
            -Accumulated
                deficit
            
            
            (67,712,969
            )
            
            (63,152,905
            )Deferred
                compensation expense
            
            
            -
            
            
            (165,336
            )Accumulated
                other comprehensive loss
            
            
            (126,000
            )
            
            (172,000
            )**Total
                Stockholders' Equity**
            
            
            25,025,227
            
            
            28,636,473**Total
                Liabilities and Stockholders' Equity**
            
            $
            29,680,994
            
            $
            33,464,016See
                notes to the consolidated financial
                statements.




2


**ALTAIR
                NANOTECHNOLOGIES INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(Expressed
                in United States Dollars)****(Unaudited)****Three
                Months Ended****March
                31,****2006**
            
            **2005****Revenues**License
                fees
            
            $
            -
            
            $
            695,000Product
                sales
            
            
            8,018
            
            
            23,108Commercial
                collaborations
            
            
            330,270
            
            
            96,266Contracts
                and grants
            
            
            207,008
            
            
            213,206Total
                revenues
            
            
            545,296
            
            
            1,027,580**Operating
                Expenses**Cost
                of product sales
            
            
            1,266
            
            
            3,546Research
                and development
            
            
            1,948,387
            
            
            781,535Sales
                and marketing
            
            
            393,161
            
            
            730,438General
                and administrative
            
            
            2,611,304
            
            
            1,565,435Depreciation
                and amortization
            
            
            316,871
            
            
            244,630Total
                operating expenses
            
            
            5,270,989
            
            
            3,325,584**Loss
                from Operations**
            
            
            (4,725,693
            )
            
            (2,298,004
            )**Other
                Income (Expense)**Interest
                expense
            
            
            (45,500
            )
            
            (50,700
            )Interest
                income
            
            
            211,303
            
            
            103,276Loss
                on foreign exchange
            
            
            (174
            )
            
            (531
            )Total
                other income, net
            
            
            165,629
            
            
            52,045**Net
                Loss**
            
            $
            (4,560,064
            )
            $
            (2,245,959
            )**Loss
                per common share - Basic and diluted**
            
            $
            (0.08
            )
            $
            (0.04
            )**Weighted
                average shares - Basic and diluted**
            
            
            59,222,352
            
            
            54,237,653See
                notes to the consolidated financial
                statements.




3





**ALTAIR
                NANOTECHNOLOGIES INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY****(Expressed
                in United States Dollars)****(Unaudited)****Accumulated****Other****Deferred**
            
            **Compre-****Additional**
            
            
            
            **Compen-**
            
            **hensive****Common
                Stock**
            
            **Paid
                In**
            
            **Accumulated**
            
            **sation**
            
            **Income****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Expense**
            
            **(Loss)**
            
            **Total**BALANCE,
                JANUARY 1, 2006
            
            
            59,316,519
            
            $
            92,126,714
            
            $
            -
            
            $
            (63,152,905
            )
            $
            (165,336
            )
            $
            (172,000
            )
            $
            28,636,473Comprehensive
                loss:Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,560,064
            )
            
            -
            
            
            -
            
            
            (4,560,064
            )Other
                comprehensive income,net
                of taxes of $0
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            46,000
            
            
            46,000Comprehensive
                loss:
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,514,064
            )Share-based
                compensation
            
            
            -
            
            
            101,974
            
            
            746,869
            
            
            -
            
            
            -
            
            
            -
            
            
            848,843Exercise
                of stock options
            
            
            27,500
            
            
            53,975
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            53,975Issuance
                of restricted stock
            
            
            36,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Elimination
                of deferredcompensation
                expense
            
            
            -
            
            
            (165,336
            )
            
            -
            
            
            -
            
            
            165,336
            
            
            -
            
            
            -BALANCE,
                MARCH 31, 2006
            
            
            59,380,019
            
            $
            92,117,327
            
            $
            746,869
            
            $
            (67,712,969
            )
            $
            -
            
            $
            (126,000
            )
            $
            25,025,227See
                notes to the consolidated financial statements.




4





**ALTAIR
                NANOTECHNOLOGIES INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Expressed
                in United States Dollars)****(Unaudited)****Three
                Months Ended****March
                31,****2006**
            
            **2005****Cash
                flows from operating activities:**Net
                loss
            
            $
            (4,560,064
            )
            $
            (2,245,959
            )Adjustments
                to reconcile net loss to net cashused
                in operating activities:Depreciation
                and amortization
            
            
            316,871
            
            
            244,630Variable
                accounting on stock options
            
            
            -
            
            
            648,339Securities
                received in payment of license fees
            
            
            -
            
            
            (595,000
            )Amortization
                of discount on note payable
            
            
            -
            
            
            50,700Share-based
                compensation
            
            
            848,843
            
            
            -Loss
                on disposal of fixed assets
            
            
            21,100
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            (90,496
            )
            
            206,498Prepaid
                expenses and other current assets
            
            
            (92,801
            )
            
            97,274Other
                assets
            
            
            49,939
            
            
            -Trade
                accounts payable
            
            
            (12,953
            )
            
            193,098Accrued
                salaries and benefits
            
            
            190,247
            
            
            138,800Accrued
                liabilities
            
            
            127,229
            
            
            594,711**Net
                cash used in operating activities**
            
            
            (3,202,085
            )
            
            (666,909
            )**Cash
                flows from investing activities:**Sale
                of available for sale securities
            
            
            3,760,980
            
            
            -Purchase
                of property and equipment
            
            
            (1,143,610
            )
            
            (264,710
            )**Net
                cash provided (used) by investing activities**
            
            
            2,617,370
            
            
            (264,710
            )*(continued)*


5





**ALTAIR
                NANOTECHNOLOGIES INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Expressed
                in United States Dollars)****(Unaudited)****Three
                Months Ended****March
                31,****2006**
            
            **2005****Cash
                flows from financing activities:**Issuance
                of common shares for cash, net ofissuance
                costs
            
            $
            -
            
            $
            19,320,400Proceeds
                from exercise of stock options
            
            
            53,975
            
            
            1,625,990Proceeds
                from exercise of warrants
            
            
            -
            
            
            4,259,672Payment
                of notes payable
            
            
            (600,000
            )
            
            -**Net
                cash (used) provided by financing activities**
            
            
            (546,025
            )
            
            25,206,062**Net
                (decrease) increase in cash and cash equivalents**
            
            
            (1,130,740
            )
            
            24,274,443**Cash
                and cash equivalents, beginning of period**
            
            
            2,264,418
            
            
            7,357,843**Cash
                and cash equivalents, end of period**
            
            $
            1,133,678
            
            $
            31,632,286**Supplemental
                disclosures:**Cash
                paid for interest
            
            $
            105,000
            
            
            NoneCash
                paid for income taxes
            
            
            None
            
            
            None**Supplemental
                schedule of non-cash investing and financing
                activities:****For
                the three months ended March 31, 2006:**-
                We issued 36,000 shares of restricted stock to employees having a
                fair
                value of approximately $122,400 for which no cash will be received.-
                We made property and equipment purchases of $123,701 which are included
                in
                trade accounts payable at March 31, 2006.-
                We had an unrealized gain on available for sale securities of
                $46,000.**For
                the three months ended March 31, 2005:**-
                None*(concluded)*See
                notes to the consolidated financial
                statements.


6


**ALTAIR
      NANOTECHNOLOGIES INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





**Note
      1. Basis of Preparation of Consolidated Financial
      Statements**





These
      unaudited interim consolidated financial statements of Altair Nanotechnologies
      Inc. and its subsidiaries (collectively, “Altair”, “we” or the “Company”) have
      been prepared in accordance with the rules and regulations of the United States
      Securities and Exchange Commission (the “Commission”). Such rules and
      regulations allow the omission of certain information and footnote disclosures
      normally included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America, so long as the
      statements are not misleading. In the opinion of Company management, these
      consolidated financial statements and accompanying notes contain all adjustments
      (consisting of only normal recurring items) necessary to present fairly the
      financial position and results of operations for the periods shown. These
      interim consolidated financial statements should be read in conjunction with
      the
      audited consolidated financial statements and notes thereto contained in
      our  Annual
      Report on Form 10-K for the year ended December 31, 2005, as filed with the
      Commission on March 16, 2006.




The
      results of operations for the three-month period ended March 31, 2006 are not
      necessarily indicative of the results to be expected for the full year.








**Note
      2. Summary of Significant Accounting Policies**




**Cash,
      Cash Equivalents and Investment in Available for Sale Securities (short-term)
      -** Cash,
      cash equivalents and **** investment
      in available for sale securities (short-term) consist principally of bank
      deposits, institutional money market funds and corporate notes. Short-term
      investments which are highly liquid, have insignificant interest rate risk
      and
      maturities of 90 days or less are classified as cash and cash equivalents.
      Investments which do not meet the definition of cash equivalents are classified
      as held-to-maturity or available-for-sale in accordance with the provisions
      of
      Statement of Financial Accounting Standards No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities* .
      Our
      cash balances are maintained in bank accounts that are insured by the Federal
      Deposit Insurance Corporation (“FDIC”) up to a maximum of $100,000. At March 31,
      2006 and December 31, 2005, we had cash deposits of approximately $0.9 million
      and $1.9 million, respectively, in excess of FDIC insurance limits.





**Investment
      in Available for Sale Securities (long-term) -** Available
      for sale securities (long-term) **** includes
      publicly-traded equity investments which are classified as available for sale
      and recorded at market using the specific identification method. Unrealized
      gains and losses (except for other than temporary impairments) are recorded
      in
      other comprehensive income (loss), which is reported as a component of
      stockholders’ equity. We evaluate our investments on a quarterly basis to
      determine if a potential other than temporary impairment exists. Our evaluation
      considers the investees’ specific business conditions as well as general
      industry and market conditions.





**Accumulated
      Other Comprehensive Loss -** Accumulated
      other comprehensive loss consists entirely of unrealized loss on the investment
      in available for sale securities. The components of comprehensive loss for
      the
      three-month periods ended March 31, 2006 and 2005 are as follows:





**Three
                Months Ended****March
                31, 2006****2006**
            
            **2005**Net
                loss
            
            $
            4,560,064
            
            $
            2,245,959Unrealized
                gain on investment in availablefor
                sale securities, net of taxes of $0
            
            
            (46,000
            )
            
            -Comprehensive
                loss
            
            $
            4,514,064
            
            $
            2,245,959





7





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





**Deferred
      Income Taxes -** We
      use
      the asset and liability approach for financial accounting and reporting for
      income taxes. Deferred income taxes are provided for temporary differences
      in
      the bases of assets and liabilities as reported for financial statement purposes
      and income tax purposes. We have recorded a valuation allowance against all
      net
      deferred tax assets. The valuation allowance reduces deferred tax assets to
      an
      amount that represents management’s best estimate of the amount of such deferred
      tax assets that more likely than not will be realized.





**Revenue
      Recognition** - We
      recognize revenue when persuasive evidence of an arrangement exists, delivery
      has occurred or service has been performed, the fee is fixed and determinable,
      and collectibility is probable.  During 2005, our revenues were derived
      from license fees, product sales, commercial collaborations and contracts and
      grants.  License fees are recognized when the agreement is signed, we have
      performed all material obligations related to the particular milestone payment
      or other revenue component and the earnings process is complete. Revenue for
      product sales is recognized at the time the purchaser has accepted delivery
      of
      the product. Based on the specific terms and conditions of each contract/grant,
      revenues are recognized on a time and materials basis, a percentage of
      completion basis and/or a completed contract basis. Revenue under contracts
      based on time and materials is recognized at contractually billable rates as
      labor hours and expenses are incurred. Revenue under contracts based on a fixed
      fee arrangement is recognized based on various performance measures, such as
      stipulated milestones.  As these milestones are achieved, revenue is
      recognized.  From time to time, facts develop that may require us to revise
      our estimated total costs or revenues expected.  The cumulative effect of
      revised estimates is recorded in the period in which the facts requiring
      revisions become known.  The full amount of anticipated losses on any type
      of contract is recognized in the period in which it becomes known.





**Overhead
      Allocation** -
      Facilities overhead, which is comprised primarily of occupancy and related
      expenses, is allocated to research and development based on labor
      costs.





**Net
      Loss Per Common Share**  -
      Basic
      loss per share is computed using the weighted average number of common shares
      outstanding during the period.  Diluted loss per share is computed using
      the weighted average number of common and potentially dilutive shares
      outstanding during the period.  Potentially dilutive shares consist of the
      incremental common shares issuable upon the exercise of stock options and
      warrants.  Potentially dilutive shares are excluded from the computation if
      their effect is antidilutive.  We had a net loss for all periods presented
      herein; therefore, none of the stock options and warrants outstanding during
      each of the periods presented were included in the computation of diluted loss
      per share as they were antidilutive.





**Recent
      Accounting Pronouncements** - On
      November 10, 2005, the Financial Accounting Standards Board ("FASB") issued
      FASB
      Staff Position No. FAS 123R-3,*Transition
      Election Related to Accounting for Tax Effects of Share-Based Payment
      Awards*("FSP
      123R-3"). The alternative transition method includes simplified methods to
      establish the beginning balance of the additional paid-in capital pool ("APIC
      pool") related to the tax effects of employee stock-based compensation, and
      to
      determine the subsequent impact on the APIC pool and consolidated statements
      of
      cash flows of the tax effects of employee stock-based compensation awards that
      are outstanding upon adoption of Statement of Financial Accounting Standards
      No.
      123 (revised 2004),*Share
      Based Payment,*(“SFAS
      123R”).We
      are currently evaluating the available transition alternatives of FSP 123R-3.
      We
      do not believe the adoption of this FSP 123R-3 will have a material impact
      on
      our financial position, results of operations or cash flows.




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




8


**Note
      3. Investment in Available for Sale Securities**





Investments
      in available for sale securities (short-term) consist of auction rate corporate
      notes. The notes are long-term instruments with expiration dates through 2043.
      Interest is settled and the rate is reset every 7 to 28 days.





Investment
      in available for sale securities (long-term) consists of 100,000 shares of
      Spectrum Pharmaceuticals, Inc. (“Spectrum”) common stock received in January
      2005. Although the shares are eligible for resale under Rule 144, the Company
      currently intends to hold them indefinitely. The shares were received as partial
      payment of licensing fees when Spectrum entered into a license agreement for
      RenaZorb. On receipt, the shares were recorded at their market value of $595,000
      as measured by their closing price on the Nasdaq Capital Market. At March 31,
      2006, their fair value was approximately $469,000, representing an unrealized
      holding loss of approximately $126,000. We evaluated this investment to
      determine if there is an other than temporary impairment at March 31, 2006.
      Our
      evaluation took into consideration published investment analysis, a recent
      substantial increase in institutional ownership of the investee’s common stock
      and other factors. Based on our evaluation and our ability and intent to hold
      the investment for a reasonable period of time sufficient for an expected
      recovery of fair value, we do not consider this investment to be other than
      temporarily impaired at March 31, 2006.





**Note
      4. Notes Payable**





March
                31, 2006
            
            December
                31, 2005Note
                payable to BHP MineralsInternational,
                Inc.
            
            $
            2,400,000
            
            $
            3,000,000Less
                current portion
            
            
            (600,000
            )
            
            (600,000
            )Long-term
                portion of notes payable
            
            $
            1,800,000
            
            $
            2,400,000





The
      note
      payable to BHP Minerals International, Inc., in the face amount of $3,000,000,
      was entered into on August 8, 2002 and is secured by the property we acquired.
      Interest on the note did not begin to accrue until August 8, 2005. As a result,
      we imputed the interest at a rate of 11% and reduced the face amount of the
      note
      payable by $566,763 at the date of issuance, then amortized that amount to
      interest expense from August 8, 2002 through August 8, 2005. The first payment
      of $600,000 of principal plus accrued interest was due and paid February 8,
      2006. Additional payments of $600,000 plus accrued interest are due annually
      on
      February 8, 2007 through 2010.







**Note
      5. Patents**





Our
      patents are associated with the nanomaterials and titanium dioxide pigment
      technology. We are amortizing these assets over their useful lives. The
      amortized patents balances as of March 31, 2006 and 2005 were:





**March
                31,****2006**
            
            **2005**Patents
                and patent applications
            
            $
            1,517,736
            
            $
            1,517,736Less
                accumulated amortization
            
            
            (648,877
            )
            
            (564,063
            )Total
                patents and patent applications
            
            $
            868,859
            
            $
            953,673





The
      weighted average amortization period for patents is approximately 16.5 years.
      Amortization expense, which represents the amortization relating to the
      identified amortizable patents, was $21,203 and $21,204 for the three months
      ended March 31, 2006 and 2005, respectively. For each of the next five years,
      amortization expense relating to patents is expected to be approximately $85,000
      per year. Management believes the net carrying amount of patents will be
      recovered by future cash flows generated by commercialization of the titanium
      processing technology.




9


**Note
      6.** **Share-Based
      Compensation**





We
      have a
      stock incentive plan, administered by the Board of Directors, that provides
      for
      the granting of options and restricted shares to employees, officers, directors
      and other service providers of the Company. Options granted under the plan
      generally are granted with an exercise price equal to the market value of a
      common share at the date of grant, have five- or ten-year terms and typically
      vest over periods ranging from immediately to three years from the date of
      grant. The total number of shares authorized to be granted under the plan is
      3,000,000. Prior stock option plans, which are now terminated, authorized a
      total of 6,600,000 shares, of which options for 5,745,500 were granted and
      options for 2,260,200 are outstanding unexercised at March 31,
      2006.





Effective
      January 1, 2006, we implemented the provisions of SFAS 123R. Under the
      provisions of SFAS 123R, we are required to measure the cost of services
      received in exchange for an award of equity instruments based on the grant-date
      fair value of the award. That cost is recognized over the period during which
      services are provided in exchange for the award, known as the requisite service
      period (usually the vesting period). We have made the transition to SFAS 123R
      using the modified prospective method. Under the modified prospective method,
      SFAS 123R is applied to new awards and to awards modified, repurchased, or
      cancelled after January 1, 2006.  Additionally, compensation cost for the
      portion of awards for which the requisite service has not been rendered (such
      as
      unvested options) that are outstanding as of January 1, 2006 are being
      recognized over the period that the remaining requisite services are
      rendered.  The compensation cost relating to unvested awards at January 1,
      2006 is based on the grant-date fair value of those awards. Under this method
      of
      implementation, no restatement of prior periods has been made.





The
      estimated fair value of equity-based awards, less expected forfeitures, is
      amortized over the awards’ vesting period on a straight-line basis. Share-based
      compensation expense recognized in the consolidated statements of operations
      for
      the quarter ended March 31, 2006 related to stock options and restricted stock
      was $848,843. This amount includes $180,413 related to restricted stock that
      would have been included in the consolidated statements of operations under
      the
      provisions of Accounting Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      We have
      not recorded income tax benefits related to equity-based compensation expense
      as
      deferred tax assets are fully offset by a valuation allowance. The
      implementation of SFAS 123R did not have a significant impact on cash flows
      from
      operations during the quarter ended March 31, 2006.





**Stock
      Options**





In
      calculating compensation related to stock option grants, the fair value of
      each
      stock option is estimated on the date of grant using the Black-Scholes
      option-pricing model and the following weighted average
      assumptions:





**Three
                Months Ended****March
                31, 2006**Dividend
                yield
            
            
            NoneExpected
                volatility
            
            
            93
            %Risk-free
                interest rate
            
            
            4.7
            %Expected
                life (years)
            
            
            4.67








A
      summary
      of the changes in stock options outstanding under our equity-based compensation
      plans during the quarter ended March 31, 2006 is presented below:





**Weighted****Weighted**
            
            **Average****Average**
            
            **Remaining**
            
            **Aggregate****Exercise**
            
            **Contractual**
            
            **Intrinsic****Shares**
            
            **Price**
            
            **Term
                (Years)**
            
            **Value**Outstanding
                at January 1, 2006
            
            
            2,533,200
            
            $
            2.69
            
            
            4.8
            
            $
            810,650Granted
            
            
            1,050,131
            
            
            3.38Exercised
            
            
            (27,500
            )
            
            1.24Canceled/Expired
            
            
            (34,000
            )
            
            2.15Outstanding
                at March 31, 2006
            
            
            3,521,831
            
            $
            3.02
            
            
            6.2
            
            $
            3,148,268Exercisable
                at March 31, 2006
            
            
            2,341,706
            
            $
            3.06
            
            
            3.6
            
            $
            2,380,303




10


The
      weighted average grant date fair value of options granted during the quarter
      ended March 31, 2006 was $2.33. The total intrinsic value of options exercised
      during the quarter ended March 31, 2006 was $63,325.





A
      summary
      of the status of nonvested shares at March 31, 2006 and changes during the
      quarter ended March 31, 2006 is presented below:




**Weighted****Average****Grant
                Date****Shares**
            
            **Fair
                Value**Non-vested
                shares at January 1, 2006
            
            
            793,875
            
            $
            1.87Granted
            
            
            1,050,131
            
            
            2.33Vested
            
            
            (657,881
            )
            
            2.41Canceled/Expired
            
            
            (6,000
            )
            
            1.96Non-vested
                shares at March 31, 2006
            
            
            1,180,125
            
            $
            1.98




As
      of
      March 31, 2006, there was $1,641,790 of total unrecognized compensation cost
      related to nonvested options granted under the plans. That cost is expected
      to
      be recognized over a weighted average period of 1.1 years. The total fair value
      of shares vested during the quarter ended March 31, 2006 was $1,582,880. Cash
      received from stock option exercises was $53,975 during the quarter ended March
      31, 2006.





**Restricted
      Stock**





The
      2005
      Stock Incentive Plan provides for the granting of other incentive awards in
      addition to stock options. During the quarter ended March 31, 2006, the Board
      of
      Directors granted 36,000 shares of restricted stock under the plan with a
      weighted average fair value of $3.39 per share. The shares vest over a
      three-year period and are subject to the employee’s continued service to the
      Company. Prior to the implementation of SFAS 123R, we recorded the issuance
      of
      restricted stock with an offsetting entry to a contra-equity account and
      amortized the balance over the vesting period. Effective January 1, 2006, we
      changed our accounting method to comply with SFAS 123R and eliminated the
      contra-equity account. Compensation cost for restricted stock is now recognized
      in the financial statements on a pro rata basis over the vesting
      period.





A
      summary
      of the changes in restricted stock outstanding during the quarter ended March
      31, 2006 is presented below:





**Weighted****Average****Grant
                Date****Shares**
            
            **Fair
                Value**Non-vested
                shares at January 1, 2006
            
            
            96,500
            
            $
            2.82Granted
            
            
            36,000
            
            
            3.39Vested
            
            
            -Canceled/Expired
            
            
            -Non-vested
                shares at March 31, 2006
            
            
            132,500
            
            $
            2.98





As
      of
      March 31, 2006, we had $164,523 of total unrecognized compensation expense,
      net
      of estimated forfeitures, related to restricted stock which will be recognized
      over the weighted average period of 1.8 years.





**Pro
      Forma Information for Periods Prior to 2006**





In
      periods prior to the fiscal year ending December 31, 2006, we followed the
      disclosure-only provisions of SFAS 123, *Accounting
      for Stock-Based Compensation* ,
      (“SFAS
      123”). The following table illustrates the effect on net income and earnings per
      share for the quarter ended March 31, 2005 as if the fair value recognition
      provisions of SFAS 123 had been applied to options granted during the
      period:


11





**Three
                Months****Ended****March
                31, 2005**Net
                loss (basic and diluted) as reported
            
            $
            2,245,959Deduct:
                stock-based employee compensation expense included inreported
                net loss, net of income taxes of $0
            
            
            (648,339
            )Add:
                total stock-based employee compensation expense determinedunder
                fair value based method for all awards, net of income taxes of $0
            
            
            347,036Pro
                forma net loss applicable to shareholders
            
            $
            1,944,656Loss
                per common share (basic and diluted):As
                reported
            
            $
            0.04Pro
                forma
            
            $
            0.04





In
      calculating pro forma compensation related to employee stock option grants,
      the
      fair value of each stock option is estimated on the date of grant using the
      Black-Scholes option-pricing model and the following weighted average
      assumptions:





**Three
                Months****Ended****March
                31, 2005**Dividend
                yield
            
            
            NoneExpected
                volatility
            
            
            103
            %Risk-free
                interest rate
            
            
            3.86
            %Expected
                life (years)
            
            
            2.83








**Note
      7. Related Party Transactions**





On
      December 31, 2003, we entered into a consulting agreement with Advanced
      Technology Group LLC (“ATG”), whose managing partner is David King, a director
      of the Company. The agreement stipulates that ATG will furnish consulting
      services in reviewing potential federal grant opportunities and providing
      proposal development assistance on selected programs. Under the terms of the
      agreement, ATG is paid on a contingency basis at a rate of 6% of the first
      $1,000,000 in grant monies secured from applications prepared in any calendar
      year plus 3.5% of any cumulative amounts over $1,000,000. ATG also agreed to
      provide consulting services at a rate of $200 per hour upon request of the
      Company. During the quarter ended March 31, 2006, we paid ATG $7,600 in
      connection with our National Science Foundation Phase II grant application
      and
      we accrued $18,200 for certain consulting services.








**Note
      8. Business Segment Information**





Management
      views the Company as operating in three business segments: Performance
      Materials, Advanced Materials and Power Systems (“AMPS”) and Life Sciences.
      Reportable segment data reconciled to the consolidated financial statements
      as
      of and for the three-month periods ended March 31, 2006 and March 31, 2005
      is as
      follows:


12





**(Income)**
            
            **Depreciation****Loss
                From**
            
            **and****Three
                Months Ended**
            
            **Net
                Sales**
            
            **Operations**
            
            **Amortization**
            
            **Assets****March
                31, 2006:**Performance
                Materials
            
            $
            434,370
            
            $
            928,893
            
            $
            254,048
            
            $
            5,691,822AMPS
            
            
            110,926
            
            
            887,838
            
            
            32,814
            
            
            2,436,236Life
                Sciences
            
            
            -
            
            
            136,527
            
            
            2,353
            
            
            598,727Corporate
                and other
            
            
            -
            
            
            3,317,731
            
            
            27,656
            
            
            20,954,209Consolidated
                Total
            
            $
            545,296
            
            $
            5,270,989
            
            $
            316,871
            
            $
            29,680,994**March
                31, 2005:**Performance
                Materials
            
            $
            299,247
            
            $
            994,179
            
            $
            220,897
            
            $
            4,992,143AMPS
            
            
            33,333
            
            
            96,550
            
            
            -
            
            
            33,333Life
                Sciences
            
            
            695,000
            
            
            (604,491
            )
            
            2,690
            
            
            706,739Corporate
                and other
            
            
            -
            
            
            1,811,766
            
            
            21,043
            
            
            34,402,557Consolidated
                Total
            
            $
            1,027,580
            
            $
            2,298,004
            
            $
            244,630
            
            $
            40,134,772





In
      the
      table above, corporate and other expense in the (Income) Loss From Operations
      column includes such expenses as investor relations, business consulting,
      general legal expense, accounting and audit, general insurance expense,
      shareholder information expense and general office expense.





For
      the
      three months ended March 31, 2006, we had sales to three major customers, each
      of which accounted for 10% or more of revenues. Total sales to these customers
      for the three months ended March 31, 2006 and the balance of their accounts
      receivable at March 31, 2006 were as follows:





**Sales
                - 3 Months****Ended**
            
            **Accounts
                Receivable at****Customer**
            
            **March
                31, 2006**
            
            **March
                31, 2006****Performance
                Materials Division:**Western
                Oil Sands
            
            $
            279,630
            
            $
            253,111UNLV
                Research Foundation
            
            $
            80,806
            
            $
            53,850**AMPS
                Division:**National
                Science Foundation
            
            $
            81,406
            
            $
            85,489





For
      the
      three months ended March 31, 2005, we had sales to two major customers, each
      of
      which accounted for 10% or more of revenues. Total sales to these customers
      for
      the three months ended March 31, 2005 and the balance of their accounts
      receivable at March 31, 2005 were as follows:





**Sales
                - 3 Months Ended**
            
            **Accounts
                Receivable at****Customer**
            
            **March
                31, 2005**
            
            **March
                31, 2005****Performance
                Materials Division:**Western
                Michigan University
            
            $
            109,709
            
            $
            30,938**Life
                Sciences Division:**Spectrum
                Pharmaceuticals, Inc.
            
            $
            695,000
            
            $
            -





13


Revenues
      for the three-month periods ended March 31, 2006 and 2005 by geographic area
      were as follows:





**Revenues
                -**
            
            **Revenues
                -****3
                Months Ended**
            
            **3
                Months Ended****Geographic
                information (a):**
            
            **March
                31, 2006**
            
            **March
                31, 2005**United
                States
            
            $
            212,614
            
            $
            931,893Canada
            
            
            282,802
            
            
            95,381Other
                foreign countries
            
            
            49,880
            
            
            305Total
            
            $
            545,296
            
            $
            1,027,580(a)
                Revenues are attributed to countries based on location of
                customer.







14





**Item** **2.** **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION** **AND RESULTS OF OPERATIONS**







**Forward-Looking
      Statements**




This
      Quarterly Report on Form 10-Q (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
      in
“Item 1A. Risk Factors” 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.




**Overview**





The
      following discussion summarizes the material changes in our financial condition
      between December 31, 2005 and March 31, 2006 and the material changes in our
      results of operations and financial condition between the three-month periods
      ended March 31, 2006 and March 31, 2005. This discussion should be read in
      conjunction with Management’s Discussion and Analysis of Financial Condition and
      Results of Operations included in the Company’s Annual Report on Form 10-K for
      the year ended December 31, 2005.





We
      are a
      Canadian company, with principal assets and operations in the United States,
      whose primary business is developing and commercializing nanomaterial and
      titanium dioxide pigment technologies. We are organized into three divisions,
      a
      Performance Materials Division, an Advanced Materials and Power Systems Division
      and a Life Sciences Division. Our research, development, production and
      marketing efforts are currently directed toward six market applications that
      utilize our proprietary technologies:





·
            Advanced
                Materials


o
            The
                marketing and licensing of titanium dioxide pigment production
                technology.


o
            The
                marketing and production of nano-structured ceramic powders for thermal
                spray applications.


o
            The
                development of nano-structured ceramic powders for nano-sensor
                applications.


o
            The
                development of titanium dioxide electrode structures in connection
                with
                research programs aimed at developing a lower-cost process for producing
                titanium metals and related alloys. Development of this product is
                largely
                inactive as we seek a business
                partner.


·
            Air
                and Water Treatment


o
            The
                development, production and sale of photocatalytic materials for
                air and
                water cleansing.


o
            The
                marketing****of
                Nanocheck products for phosphate binding to prevent or reduce algae
                growth
                in recreational and industrial
                water.


·
            Alternative
                Energy


o
            The
                development, production and sale of nano-structured lithium titanate
                spinel, lithium cobaltate and lithium manganate spinel materials
                for high
                performance lithium ion batteries.


o
            The
                design and development of power lithium ion battery cells, batteries
                and
                battery packs as well as related design and test services.


o
            The
                development of materials for photovoltaics and transparent electrodes
                for
                hydrogen generation and fuel cells.


·
            Lanthanum
                based Pharmaceutical Products


o
            The
                co-development of RenaZorb, a test-stage active pharmaceutical ingredient,
                which is designed to be useful in the treatment of elevated serum
                phosphate levels in patients undergoing kidney
                dialysis.


o
            The
                testing of Renalan, a development-stage active pharmaceutical ingredient,
                which is designed to be useful in the treatment of elevated serum
                phosphate levels in companion animals suffering from chronic renal
                disease.





15


·
            Chemical
                Delivery Products


o
            The
                research and development of TiNano Spheres, which are rigid, hollow,
                porous, high surface area ceramic micro structures that are derived
                from
                Altair’s proprietary process technology for the delivery of chemicals,
                drugs and biocides.


·
            Biocompatible
                Materials


o
            The
                research and development of nanomaterials for use in various products
                for
                dental implants, dental fillings and dental products, as well as
                biocompatible coatings on implants.





We
      also
      provide contract research services on select projects where we can utilize
      our
      resources to develop intellectual property and/or new products and technology.





Our
      revenues have been, and we expect them to continue to be, generated by license
      fees, product sales, commercial collaborations and contracts and grants. We
      currently have agreements in place to (1) provide research involving a
      technology used in the detection of chemical, biological and radiological
      agents, (2) license and evaluate our pigment production process for the
      production of titanium dioxide  pigment
      and pigment-related products from titanium-bearing oil sands, (3) supply
      nano-sized anode and cathode materials for design and development of high
      capacity lithium ion battery and super capacitor applications, and (4) provide
      research utilizing nanotechnology processes for the production and
      commercialization of solar-based hydrogen technologies. In addition, we have
      entered into a licensing agreement for RenaZorb, our potential pharmaceutical
      product, and we have made product sales consisting principally of battery
      materials and thermal spray products. Future revenues will depend on the success
      of our contracted projects, the results of our other research and development
      work, the success of the RenaZorb  licensee
      in obtaining FDA approval for the drug, and the success of our marketing efforts
      with respect to both product sales and technology licenses.





**General
      Outlook**





We
      have
      generated net losses in each fiscal year since incorporation. In fiscal 2005,
      revenues from product sales, commercial collaborations and contracts and grants
      increased significantly, but operating expenses also increased as we added
      employees and committed additional funds to our customer contracts, battery
      initiative, pigment process technology and sales and marketing efforts. Our
      gross
      profit margins on customer contracts for research and development work are
      very
      low, and in order that we may be profitable in the long run, our business plan
      focuses on the development of products and technologies that we expect will
      eventually bring a substantial amount of higher-margin revenues from licensing,
      manufacturing, product sales and other sources. We expect our advanced battery
      materials to be a source of such higher-margin revenues. Consequently, during
      2005, we greatly expanded the scope of our battery initiative by (1) hiring
      thirteen highly qualified advanced battery scientists, engineers, manufacturing
      and marketing specialists, (2) leasing office, laboratory and production space
      in Indiana, and (3) acquiring test and production equipment.  During
      2006, we will continue to make substantial battery initiative expenditures
      for
      the acquisition of equipment and production of batteries, battery cells and
      battery packs for test and development.





As
      we
      attempt to significantly expand our revenues from licensing, manufacturing,
      sales and other sources, some of the key near-term events that will affect
      our
      long term success prospects include the following:





·
            We
                must continue the development work on our advanced battery materials,
                produce sufficient quantities of batteries and battery cells for
                test
                purposes, obtain satisfactory test results and successfully market
                the
                materials. Toward that end, we have hired additional employees, are
                constructing test and production facilities and are purchasing equipment.
                Our intent is to initially market our battery materials to the automotive,
                power tool, stationary power and military specialty battery industries
                where we must be able to demonstrate to prospective customers that
                our
                lithium battery materials offer significant advantages over existing
                technologies.





·
            Spectrum
                must begin the testing and application processes necessary to receive
                FDA
                approval of our RenaZorb product. Animal testing of RenaZorb was
                completed
                in September 2005 and, although we have been informed that the results
                were positive and we have received a copy of the test results, Altair
                has
                not received the milestone payment of 100,000 shares of Spectrum
                Pharmaceuticals, Inc. stock called for in the agreement. Altair and
                Spectrum entered the early stages of an arbitration dispute resolution
                process as required by our license agreement. This process will likely
                delay the product development process and our receipt of our next
                milestone payment.





16


·
            Licensing
                and product purchase commitments for our Nanocheck swimming pool
                product
                are currently under discussion. Successful completion of potential
                license
                agreement(s) and product purchase commitments are essential for the
                commercialization of the Nanocheck product, which could bring
                manufacturing and licensing revenue during 2006.





·
            The
                initial phase of work for the Western Oil Sands license agreement
                has been
                expanded and will run through December 31, 2006. We must successfully
                complete the initial phase, and Western Oil Sands must decide to
                proceed
                with phase 2 work for this project to continue to move toward
                commercialization.





·
            In
                April 2005, we entered into a joint venture with Bateman Engineering
                NV
                (“Bateman”) to combine our hydrochloride pigment process technology with
                Bateman’s engineering, design and construction expertise. The joint
                venture, Altair-Bateman Titania, Inc., will offer customers an integrated
                resource for technology development, engineering, design and construction
                of pigment processing projects. We anticipate that the joint venture
                will
                be funded entirely by Altair and Bateman, with each having equal
                shareholding and Altair having voting control. We expect to make
                a
                significant capital investment in the venture and, in order to recover
                our
                investment, we must be successful in licensing the pigment process
                technology.





Although
      it is not essential that all of these projects be successful in order to permit
      substantial long-term revenue growth, we believe that full commercialization
      of
      several of our technologies will be necessary in order to expand our revenues
      enough to create a likelihood of our becoming profitable in the long term.
      We
      are optimistic with respect to our current key projects, as well as others
      we
      are pursuing, but recognize that, with respect to each, there are development,
      marketing, partnering and other risks to be overcome.





**Recent
      Business Developments**





**Advanced
      Materials and Power Systems Division**





On
      March
      7, 2006, we entered into a four-year joint development agreement with Electro
      Energy, Inc. (“Electro Energy”) for the design, manufacture and marketing of
      high power lithium ion batteries and battery systems. Under the terms of the
      agreement, Altair and Electro Energy plan to jointly develop a new generation
      of
      rechargeable batteries based on our advanced nano-structured electrode materials
      and Electro Energy's bipolar cell design. Target markets will initially be
      portable devices, including hand-held power tool applications. We believe that
      the combined technologies will create a range of new lithium ion batteries
      that
      are expected to enable hand-held power tool manufacturers to deliver end user
      products with improved functionality and cost performance. If the companies
      are
      successful in developing these new lithium ion battery products, power tools
      using these batteries are expected to weigh less, recharge in minutes versus
      hours, and have a significantly improved cycle life.





On
      March
      8, 2006, we entered into a two-year joint development agreement with Boshart
      Engineering (“Boshart”) for the design and engineering of a full-speed electric
      vehicle (EV) to be powered by an Altair rechargeable advanced lithium ion
      battery system. Under the terms of the agreement, Altair and Boshart plan to
      jointly develop a prototype EV utilizing Altair's battery technology and
      Boshart's engineering, conversion and vehicle testing services. The
      Altair-Boshart EV program is expected to include long distance drives at
      conventional highway speeds, testing the EV's endurance in high altitudes and
      extreme weather conditions. Road testing of the EV is expected to begin by
      the
      fourth quarter of 2006.





**Performance
      Materials Division**





*Thermal
      Spray Grade Powders*





On
      March
      27, 2006 we entered into a supply and distribution agreement with Sulzer Metco,
      a publicly-traded Swiss company involved in the design, manufacture and supply
      of thermal spray materials, equipment and integrated system solutions for the
      industrial market. Under the terms of the agreement, the companies plan to
      jointly select and manage the commercialization of licensed products comprising
      or incorporating Altair nano-structured titanium dioxide and nano-structured
      yttria stabilized zirconium oxide. The parties will also develop a five-year
      marketing and distribution plan outlining projected purchase quantities,
      pricing, and marketing plans for the products. When an Altair nano-structured
      powder is designated to be supplied under the agreement, Sulzer Metco has the
      right to be the exclusive distributor of that product in the spray coating
      field
      assuming that certain purchase and other commitments are met.





17


**Life
      Sciences Division**





We
      entered into a collaborative research, license and commercialization agreement
      with the Elanco Animal Health Division of Eli Lilly and Company (“Elanco”) on
      May 2, 2006. Under the terms of the agreement, Elanco has exclusive rights
      to
      develop animal health products using our nanotechnology-based products. Payments
      may be made to us as predefined development and testing milestones are met,
      including submission to the FDA, FDA approval, market introduction and product
      sales. The agreement gives Altair specific rights with respect to the
      manufacture of products for Elanco.




**Liquidity
      and Capital Resources**




**Current
      and Expected Liquidity**





Historically,
      we have financed operations primarily through the issuance of equity securities
      (common shares, convertible debentures, stock options and warrants) and by
      the
      issuance of debt. We do not presently have any plans to pursue additional debt
      or equity financing during 2006 but may do so if deemed necessary or appropriate
      in light of market conditions and business needs. We
      do not
      have any commitments with respect to future financing and may, or may not,
      be
      able to obtain such financing on reasonable terms, or at all. We have a single
      note payable in the principal amount of $3,000,000 that does not contain any
      restrictive covenants with respect to the issuance of additional debt or equity
      securities by Altair. The first principal payment of $600,000 plus accrued
      interest was due and paid on February 8, 2006, and future payments are due
      annually on February 8, 2007 through 2010.





Our
      cash
      and short-term investments decreased by $4,891,720, from $23,054,074 at December
      31, 2005 to $18,162,354 at March 31, 2006, due primarily to the incurrence
      of
      operating expenses (approximately $3,200,000) purchases of property and
      equipment (approximately $1,200,000) and payment of notes payable ($600,000).





During
      the quarter ended March 31, 2006, our cash used in operations was $3,202,085.
      Unusual or infrequently occurring payments made during the first quarter of
      2006
      included approximately $400,000 of facility repair costs associated with a
      flood
      at our Reno, Nevada headquarters and annual employee bonus payments of $418,000.
      The amount of cash we use in operations is dependent on the amount and mix
      of
      revenues we generate. In the first quarter of 2006, revenues were $545,296,
      which included $8,018 of product sales. Although we expect quarterly revenues
      to
      increase during the remainder of the year, and we expect product sales to become
      a larger percentage of the sales mix, we cannot be certain that this will occur.





Our
      objective is to manage cash expenditures in a manner consistent with rapid
      product development that leads to the generation of revenues in the shortest
      possible time. We believe we have adequate cash resources, and availability
      of
      additional capital if needed, to continue product development until
      higher-margin revenues and positive cash flow can be generated.





At
      May 3,
      2006, we had 59,403,018 common shares issued and outstanding. As of that same
      date, there were outstanding warrants to purchase up to 1,318,556 shares of
      common stock and options to purchase up to 3,503,832 shares of common
      stock.




18




Capital Commitments


We
        intend to purchase equipment for both our Reno,
        Nevada and Anderson, Indiana facilities for use in the development of advanced
        battery materials and production of prototype batteries and battery packs.
        We
        expect to spend approximately $800,000 for this equipment and related facility
        upgrades during the quarter ended June 30, 2006.
  The
        following table discloses aggregate information
        about our contractual obligations and the periods in which payments are due
        as
        of March 31, 2006:


**Less
                Than**
            
            
            
            
            
            **After****Contractual
                Obligations**
            
            **Total**
            
            **1
                Year**
            
            **1-3
                Years**
            
            **4-5
                Years**
            
            **5
                Years**Notes
                Payable
            
            $
            2,400,000
            
            $
            600,000
            
            $
            1,200,000
            
            $
            600,000
            
            $
            -Interest
                on Notes Payable
            
            
            420,000
            
            
            168,000
            
            
            210,000
            
            
            42,000
            
            
            -Contractual
                Service Agreements
            
            
            739,767
            
            
            739,767
            
            
            -
            
            
            -
            
            
            -Facilities
                and Property Leases
            
            
            277,404
            
            
            109,742
            
            
            167,662
            
            
            -
            
            
            -Unfulfilled
                Purchase Orders
            
            
            1,224,947
            
            
            1,224,947
            
            
            -
            
            
            -
            
            
            -Total
                Contractual Obligations
            
            $
            5,062,118
            
            $
            2,842,456
            
            $
            1,577,662
            
            $
            642,000
            
            $
            -




**Off-Balance
      Sheet Arrangements**





There
      were no off-balance sheet arrangements at March 31, 2006.




**Critical
      Accounting Policies and Estimates**




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




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




·
            Long-Lived
                assets. Our long-lived assets consist principally of the nanomaterials
                and
                titanium dioxide pigment assets, the intellectual property (patents
                and
                patent applications) associated with them, and a building.Included
                in these long-lived assets are those that relate to our research
                and
                development process.  These assets are initially evaluated for
                capitalization based on Statement of Financial Accounting Standards
                No. 2,*Accounting
                for Research and Development Costs*. 
                If the assets have alternative future uses (in research and development
                projects or otherwise), they are capitalized when acquired or constructed;
                if they do not have alternative future uses, they are expensed as
                incurred.At
                March 31, 2006, the carrying value of these assets was $9,664,740,
                or 33%
                of total assets. We evaluate the carrying value of long-lived assets
                when
                events or circumstances indicate that an impairment may exist. In
                our
                evaluation, we estimate the net undiscounted cash flows expected
                to be
                generated by the assets, and recognize impairment when such cash
                flows
                will be less than the carrying values. Events or circumstances that
                could
                indicate the existence of a possible impairment include obsolescence
                of
                the technology, an absence of market demand for the product, and/or
                the
                partial or complete lapse of technology rights protection.





19


·
            Share-Based
                Compensation. We have a stock incentive plan which provides for the
                issuance of common stock options to employees and service providers.
                We
                calculate compensation expense under SFAS 123R using a Black-Scholes
                option pricing model. In so doing, we estimate certain key assumptions
                used in the model. We believe the estimates we use, which are presented
                in
                Note 6 of Notes to Consolidated Financial Statements, are appropriate
                and
                reasonable.





·
            Revenue
                Recognition.We
                recognize revenue when persuasive evidence of an arrangement exists,
                delivery has occurred or service has been performed, the fee is fixed
                and
                determinable, and collectibility is probable.  Historically, our
                revenues have been derived from four sources: license fees, commercial
                collaborations, contract research and development and product sales. 
                License fees are recognized when the agreement is signed, we have
                performed all material obligations related to the particular milestone
                payment or other revenue component and the earnings process is complete.
                Revenue for product sales is recognized at the time the purchaser
                has
                accepted delivery of the product. Based on the specific terms and
                conditions of each contract/grant, revenues are recognized on a time
                and
                materials basis, a percentage of completion basis and/or a completed
                contract basis. Revenue under contracts based on time and materials
                is
                recognized at contractually billable rates as labor hours and expenses
                are
                incurred. Revenue under contracts based on a fixed fee arrangement
                is
                recognized based on various performance measures, such as stipulated
                milestones.  As these milestones are achieved, revenue is
                recognized.  From time to time, facts develop that may require us to
                revise our estimated total costs or revenues expected.  The
                cumulative effect of revised estimates is recorded in the period
                in which
                the facts requiring revisions become known.  The full amount of
                anticipated losses on any type of contract is recognized in the period
                in
                which it becomes known.





·
            Overhead
                Allocation. Facilities overhead, which is comprised primarily of
                occupancy
                and related expenses, is initially recorded in general and administrative
                expenses and then allocated monthly to research and development expense
                based on labor costs. Facilities overhead allocated to research and
                development projects may be chargeable when invoicing customers under
                certain research and development
                contracts.





·
            Allowance
                for Doubtful Accounts. The allowance for doubtful accounts is based
                on our
                assessment of the collectibility of specific customer accounts and
                the
                aging of accounts receivable.  We analyze historical bad debts, the
                aging of customer accounts, customer concentrations, customer
                credit-worthiness, current economic trends and changes in our customer
                payment patterns when evaluating the adequacy of the allowance for
                doubtful accounts.  From period to period, differences in judgments
                or estimates utilized may result in material differences in the amount
                and
                timing of our bad debt expenses.





·
            Deferred
                Income Taxes. Income taxes are accounted for using the asset and
                liability
                method.  Deferred income tax assets and liabilities are recognized
                for the future tax consequences attributable to differences between
                the
                financial statement carrying amounts of existing assets and liabilities
                and their respective tax bases and operating loss and tax credit
                carryforwards.  Deferred income tax assets and liabilities are
                measured using enacted tax rates expected to apply to taxable income
                in
                the years in which those temporary differences are expected to be
                recovered or settled.  The effect on deferred income tax assets and
                liabilities of a change in tax rates is recognized in income in the
                period
                that includes the enactment date.  Future tax benefits are subject to
                a valuation allowance when management is unable to conclude that
                its
                deferred income tax assets will more likely than not be realized
                from the
                results of operations.  The Company has recorded a valuation
                allowance to reflect the estimated amount of deferred income tax
                assets
                that may not be realized. The ultimate realization of deferred income
                tax
                assets is dependent upon generation of future taxable income during
                the
                periods in which those temporary differences become deductible. Management
                considers projected future taxable income and tax planning strategies
                in
                making this assessment. Based on the historical taxable income and
                projections for future taxable income over the periods in which the
                deferred income tax assets become deductible, management believes
                there is
                insufficient basis for projecting that the Company will realize the
                benefits of these deductible differences as of March 31, 2006. 
                Management has, therefore, established a full valuation allowance
                against
                its net deferred income tax assets as of March 31,
                2006.





**Results
      of Operations**





*Three
      Months Ended March 31, 2006 Compared to Three Months Ended March 31,
      2005*





The
      net
      loss for the quarter ended March 31, 2006, which was the first quarter of our
      2006 fiscal year, totaled $4,560,064 ($.08 per share) compared to a net loss
      of
      $2,245,959 ($.04 per share) in the first quarter of 2005.





20


Total
      revenues for the three months ended March 31, 2006 were $545,296 compared to
      $1,027,580 for the same period of 2005. During
      the first quarter of 2005, we recorded $695,000 of license fee revenue in
      connection with the license of Renazorb to Spectrum Pharmaceuticals, Inc. There
      were no comparable license fee revenues in the first quarter of 2006.





Revenues
      from commercial collaborations increased by $234,004, from $96,266 in the first
      quarter of 2005, to $330,270 in the first quarter of 2006. Revenues from Western
      Oil Sands increased by approximately $184,000 due to the expanded scope of
      the
      project. In addition, we invoiced $50,000 to Avireco in connection with an
      agreement to test ore samples using our pigment processing
      technology.





Research
      and development (“R&D”) expenses increased by $1,166,852, from $781,535 in
      the first quarter of 2005 to $1,948,387 in the same quarter of 2006. Labor
      and
      overhead costs increased by approximately $462,000 due to the addition of 22
      new
      employees. Expenditures for materials, supplies and other operating costs
      (exclusive of labor) for the battery initiative increased by approximately
      $603,000, and other R&D operations increased by approximately
      $102,000.





Sales
      and
      marketing expenses decreased by $337,277, from $730,438 in the first quarter
      of
      2005 to $393,161 in the first quarter of 2006. In the first quarter of 2005,
      we
      paid a $500,000 fee to RBC Capital Markets in connection with the Renazorb
      licensing agreement; no comparable fees were paid in 2006. Expenses otherwise
      increased due to the addition of five new employees.





General
      and administrative expenses increased by $1,045,869, from $1,565,435 in first
      quarter of 2005 to $2,611,304 in the first quarter of 2006. We incurred
      approximately $400,000 of expenses associated with a flood at our headquarters
      in Reno, Nevada in January 2006. Legal fees increased by approximately $173,000
      due to an increase in patent work and general corporate matters. Share-based
      compensation expense, a non-cash item, increased by approximately $201,000,
      primarily as a result of implementing SFAS 123R as of January 1, 2006. Employee
      additions had the effect of increasing expense by approximately $91,000, and
      general corporate expenses increased by a net amount of approximately $180,000.





Interest
      income increased by $108,027, from $103,276 in the first quarter of 2005 to
      $211,303 in the first quarter of 2006 due to the significant increase in cash
      available for investment that was generated through the sale of common shares
      in
      February 2005, the exercise of warrants and options in early 2005 and a higher
      rate of return on invested cash.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures about Market Risk**





We
      do not
      have any derivative instruments, commodity instruments, or other financial
      instruments for trading or speculative purposes, nor are we presently at
      material risk for changes in interest rates on foreign currency exchange rates.





**Item
      4.**  **Controls
      and Procedures**





(a)  Based
      on
      the evaluation of our "disclosure controls and procedures" (as defined in the
      Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by
      paragraph (b) of Rules 13a-15 or 15d-15, our chief executive officer and our
      chief financial officer have concluded that, as of March 31, 2006, our
      disclosure controls and procedures were effective in ensuring that information
      required to be disclosed by the Company in reports that it files under the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods required by governing rules and forms.




(b)  There
      have been no changes in our internal control over financial reporting identified
      in connection with the evaluation required by paragraph (d) of Exchange Act
      Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.




21


**PART
      II - OTHER INFORMATION**





***Item
      1A. Risk Factors***





**Material
      Changes in Risk Factors**




The
      Risk
      Factors set forth below do not reflect any material changes from the “Risk
      Factors” identified in our Annual Report on Form 10-K for the fiscal year ended
      December 31, 2005 (the “Form 10-K”), except as follows: In the Form 10-K,
      certain of the Risk Factors identified risks associated with a particular
      agreement or project, such as our license of Renazorb to Spectrum
      Pharmaceuticals, our development agreement with Advanced Battery Materials
      or
      our license agreement with Western Oil Sands. As we enter into additional
      license, supply and collaboration agreements with our business partners, and
      as
      we achieve greater diversity in our product platform and the identity and type
      of our business partners, we believe that it is more appropriate to identify
      risks associated with a type of project or type of relationship, rather than
      on
      a project-by-project basis. Accordingly, the Risk Factors set forth in this
      Report do not include the project-specific risk factors identified above, but
      include additional Risk Factors captioned as follows:




·
            ***Because
                our products are generally components of end products, the viability
                of
                many or our products is tied to the success of third parties’ existing and
                potential end products.***





·
            ***The
                commercialization of many of our technologies is dependent upon the
                efforts of commercial partners and other third parties over which
                we have
                no or little control.***





·
            ***We
                will not generate substantial revenues from our life science products
                unless proposed products receive FDA approval and achieve substantial
                market penetration.***




·
            ***As
                manufacturing becomes a larger part of our operations, we will become
                exposed to accompanying risks and liabilities.***





We
      have
      also included immaterial edits and updates to other Risk Factors.





**Risk
      Factors**





***We
      may continue to experience significant losses from
      operations*** .





We
      have
      experienced a loss from operations in every fiscal year since our inception.
      Our
      losses from operations were $10,481,853 in 2005 and $4,725,693 in the three
      months ended March 31, 2006. We
      will
      continue to experience a net operating loss until, and if, the applications
      of
      our nanomaterials and titanium dioxide pigment technology begin generating
      revenues in excess of our operating expenses. Even if any or all applications
      of
      the nanomaterials and titanium dioxide pigment technology begin generating
      significant revenues, the revenues may not exceed our costs of production and
      operating expenses. We may not ever realize a profit from
      operations.




***Our
      patents and other protective measures may not adequately protect our proprietary
      intellectual property, and we may be infringing on the rights of others.***





We
      regard
      our intellectual property, particularly our proprietary rights in our
      nanomaterials and titanium dioxide pigment technology, as critical to our
      success. We have received various patents, and filed other patent applications,
      for various applications and aspects of our nanomaterials and titanium dioxide
      pigment technology and other intellectual property. In addition, we generally
      enter into confidentiality and invention agreements with our employees and
      consultants. Such patents and agreements and various other measures we take
      to
      protect our intellectual property from use by others may not be effective for
      various reasons, including the following:





·
            Our
                pending patent applications may not be granted for various reasons,
                including the existence of conflicting patents or defects in our
                applications;


·
            The
                patents we have been granted may be challenged, invalidated or
                circumvented because of the pre-existence of similar patented or
                unpatented intellectual property rights or for other
                reasons;


·
            Parties
                to the confidentiality and invention agreements may have such agreements
                declared unenforceable or, even if the agreements are enforceable,
                may
                breach such agreements;





22


·
            The
                costs associated with enforcing patents, confidentiality and invention
                agreements or other intellectual property rights may make aggressive
                enforcement cost prohibitive;


·
            Even
                if we enforce our rights aggressively, injunctions, fines and other
                penalties may be insufficient to deter violations of our intellectual
                property rights; and


·
            Other
                persons may independently develop proprietary information and techniques
                that, although functionally equivalent or superior to our intellectual
                proprietary information and techniques, do not breach our patented
                or
                unpatented proprietary rights.





Because
      the value of our company and common stock is rooted primarily in our proprietary
      intellectual property rights, our inability to protect our proprietary
      intellectual property rights or gain a competitive advantage from such rights
      could have a material adverse effect on our business.





In
      addition, we may inadvertently be infringing on the proprietary rights of other
      persons and may be required to obtain licenses to certain intellectual property
      or other proprietary rights from third parties. Such licenses or proprietary
      rights may not be made available under acceptable terms, if at all. If we do
      not
      obtain required licenses or proprietary rights, we could encounter delays in
      product development or find that the development or sale of products requiring
      such licenses is foreclosed.





***Because
      our products are generally components of end products, the viability of many
      or
      our products is tied to the success of third parties’ existing and potential end
      products.***





None
      of
      the existing or potential products being developed with our nanomaterials and
      titanium dioxide pigment technology is designed for direct use by the ultimate
      end user. Phrased differently, all such products are components of other
      products. For example, our lithium titanate spinel battery materials and battery
      design services are designed to improve the performance of lithium ion
      rechargeable batteries expected to be produced and distributed by third parties.
      In turn, these batteries will be designed for use in end-user products such
      as
      power tools, hybrid electric vehicles and other potential products. Other
      potential products and processes we and our partners are developing using our
      technology, such as titanium dioxide pigments, life science materials, air
      and
      water treatment products, and coatings, are similarly expected to be components
      of third-party products. As a result, the market for our products is dependent
      upon third parties creating or expanding markets for their end-user products
      that utilize our products. If such end-user products are not developed, or
      the
      market for such end-user products contracts or collapses, the market for our
      component products would be expected to similarly contract or collapse.





***The
      commercialization of many of our technologies is dependent upon the efforts
      of
      commercial partners and other third parties over which we have no or little
      control.***





We
      do not
      have the expertise or resources to commercialize all potential applications
      of
      our nanomaterials and titanium dioxide pigment technology. For example, we
      do
      not have the resources necessary to complete the testing of, and obtain FDA
      approval for, Renazorb and other potential life sciences products or to
      construct a commercial facility to use our titanium dioxide pigment production
      technology. Other potential applications of our technology, such as those
      related to our lithium titanate spinel battery materials, coating materials
      and
      dental materials, are likely to be developed in collaboration with third
      parties, if at all. With respect to these and substantially all other
      applications of our technology, the commercialization of a potential application
      of our technology is dependent, in part, upon the expertise, resources and
      efforts of our commercial partners. This presents certain risks, including
      the
      following:





·
            We
                may not be able to enter into development, licensing, supply and
                other
                agreements with commercial partners with appropriate resources, technology
                and expertise;





·
            Our
                commercial partners may not place the same priority on a project
                as we do,
                may fail to honor contractual commitments, may not have the level
                of
                resources, expertise, market strength or other characteristic necessary
                for the success of the project, may dedicate only limited resources
                and/or
                may abandon a development project for reasons (such as a shift in
                corporate focus) unrelated to its
                merits;





·
            Our
                commercial partners may terminate joint testing, development or marketing
                projects on the merits of the projects for various reasons, including
                determinations that a project is not feasible, cost-effective or
                likely to
                lead to a marketable end product.





23


·
            At
                various stages in the testing, development, marketing or production
                process, we may have disputes with our commercial partners, which
                may
                inhibit development, lead to an abandonment of the project or have
                other
                negative consequences.





·
            Even
                if the commercialization and marketing of jointly developed products
                is
                successful, our revenue share may be limited and may not exceed our
                associated development and operating costs.





As
      a
      result of the actions or omissions of our commercial partners, or our inability
      to identify and enter into suitable arrangements with qualified commercial
      partners, we may be unable to commercialize apparently viable products on a
      timely and cost-effective basis, or at all. Our business is not dependent upon
      a
      single application of our technology; however, a failure to commercialize
      several of our potential products would have a material adverse effect on our
      business, operations and financial condition.




***Our
      competitors have more resources than we do, which may give them a competitive
      advantage.***





We
      have
      limited financial and other resources and, because of our early stage of
      development, have limited access to capital. We compete or may compete against
      entities that are much larger than we are, have more extensive resources than
      we
      do and have an established reputation and operating history. Because of their
      size, resources, reputation, history and other factors, certain of our
      competitors may be able to exploit acquisition, development and joint venture
      opportunities more rapidly, easily or thoroughly than we can. In addition,
      potential customers may choose to do business with our more established
      competitors, without regard to the comparative quality of our products, because
      of their perception that our competitors are more stable, are more likely to
      complete various projects, are more likely to continue as a going concern and
      lend greater credibility to any joint venture.




***We
      may not generate substantial revenues from our life science products unless
      proposed products receive FDA approval and achieve substantial market
      penetration.***





We
      have
      entered into development and license agreements with respect to RenaZorb, a
      potential drug candidate for humans with kidney disease, and other life science
      products, and expect to enter into additional licensing and/or supply agreements
      in the future. Most of the potential life sciences applications of our
      technologies are subject to regulation by the FDA and similar regulatory bodies.
      In general, license agreements in the life sciences area call for milestone
      payments as certain milestones related to the development of the products and
      the obtaining of regulatory approval are met; however, the receipt by the
      licensor of substantial recurring revenues is generally tied to the receipt
      of
      marketing approval from the FDA and the amount of revenue generated from the
      sale of end products. There are substantial risks associated with the
      arrangements, including the following:





·
            further
                testing of potential life science products using our technology may
                indicate that such products are less effective than existing products,
                unsafe, have significant side effects or are otherwise not
                viable;





·
            the
                licensee may be unable to obtain FDA or other regulatory approval
                for
                technical, political or other reasons or, even if it obtains such
                approval, may not obtain such approval on a timely basis; and





·
            end
                products may fail to obtain significant market share for various
                reasons,
                including questions about efficacy, need, safety and side effects
                or
                because of poor marketing by the
                licensee;





If
      any of
      the foregoing risks, or other risks associated with our life science products
      were to occur, we would not receive substantial, recurring revenue from our
      life
      science division, which would adversely affect our overall business, operations
      and financial conditions.




***As
      manufacturing becomes a larger part of our operations, we will become exposed
      to
      accompanying risks and liabilities.***





We
      have
      not produced any pigments, nanoparticles or other products using our
      nanomaterials and titanium dioxide pigment technology and equipment on a
      sustained commercial basis. We expect, however, that in-house or outsourced
      manufacturing will become an increasing part of our business in the future.
      If
      and as manufacturing becomes a larger part of our business, we will become
      increasingly subject to various risks associated with the manufacturing and
      supply of products, including the following:





·
            If
                we fail to supply products in accordance with contractual terms,
                including
                terms related to time of delivery and performance specifications,
                we may
                become liable for direct, special, consequential and other damages,
                even
                if manufacturing or delivery was
                outsourced;





24


·
            Raw
                materials used in the manufacturing process, labor and other key
                inputs
                may become scarce and expensive, causing our costs to exceed projections
                and associated revenues;





·
            Manufacturing
                processes typically involve large machinery, fuels and chemicals,
                any or
                all of which may lead to accidents involving bodily harm, destruction
                of
                facilities and environmental contamination and associated liabilities.





·
            We
                may have, and may be required to, make representations as to our
                right to
                supply and/or license intellectual property and to our compliance
                with
                laws. Such representations are usually supported by indemnification
                provisions, requiring us to defend our customers and otherwise make
                them
                whole if we license or supply products that infringe on third-party
                technologies or violate government regulations.





Any
      failure to adequately manage risks associated with the manufacture and supply
      of
      materials and products could lead to losses (or small gross profits) from that
      segment of our business and/or significant liabilities, which would adversely
      effect our business, operations and financial condition.




***We
      have issued a $3,000,000 note to secure the purchase of the land and the
      building where our nanomaterials and titanium dioxide pigment assets are
      located.***





In
      August
      2002, we entered into a purchase and sale agreement with BHP Minerals
      International Inc. to purchase the land, building and fixtures in Reno, Nevada
      where our nanomaterials and titanium dioxide pigment assets are located. In
      connection with this transaction, we issued to BHP a note in the amount of
      $3,000,000, at an interest rate of 7%, secured by the property we acquired.
      The
      first payment of $600,000 of principal plus accrued interest was due and paid
      February 8, 2006. Additional payments of $600,000 plus accrued interest are
      due
      annually on February 8, 2007 through 2010. If we fail to make the required
      payments on the note, BHP has the right to foreclose and take the property.
      If
      this should occur, we would be required to relocate our primary operating assets
      and offices, causing a significant disruption in our business.




***We
      may not be able to raise sufficient capital to meet future obligations.***





As
      of May
      3, 2006, we had approximately $17.0 million in cash, an amount sufficient to
      fund our ongoing operations for approximately two years at
      current working capital expenditure levels .
      In the
      last few quarters, however, our recurring expenses have increased significantly,
      and we have made various significant capital commitments. As we take additional
      steps to enhance our commercialization and marketing efforts, or respond to
      acquisition opportunities or potential adverse events, our use of working
      capital may increase significantly. In any such event, absent a comparatively
      significant increase in revenue, we will need to raise additional capital in
      order to sustain our ongoing operations, continue unfinished testing and
      additional development work and, if certain of our products are commercialized,
      produce and market such products.





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





·
            market
                factors affecting the availability and cost of capital
                generally;


·
            the
                price, volatility and trading volume of our shares of common stock;


·
            our
                financial results, particularly the amount of revenue we are generating
                from operations;


·
            the
                amount of our capital needs;


·
            the
                market’s perception of nanotechnology and/or chemical
                stocks;


·
            the
                economics of projects being pursued;
                and


·
            the
                market’s perception of our ability to generate revenue through the
                licensing or use of our nanoparticle technology for pharmaceutical,
                pigment production, nanoparticle production and other
                uses.





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





25




***Our
      past and future operations may lead to substantial environmental
      liability.***





Virtually
      any prior or future use of our nanomaterials and titanium dioxide pigment
      technology is subject to federal, state and local environmental laws. In
      addition, we have constructed a pilot plant on, and are in the process of
      reclaiming mineral property that we leased in Tennessee. Under such laws, we
      may
      be jointly and severally liable with prior property owners for the treatment,
      cleanup, remediation and/or removal of any hazardous substances discovered
      at
      any property we use. In addition, courts or government agencies may impose
      liability for, among other things, the improper release, discharge, storage,
      use, disposal or transportation of hazardous substances.




***Certain
      of our experts and directors reside in Canada and may be able to avoid civil
      liability.***





We
      are a
      Canadian corporation, and three of our directors and our Canadian legal counsel
      are residents of Canada. As a result, investors may be unable to effect service
      of process upon such persons within the United States and may be unable to
      enforce court judgments against such persons predicated upon civil liability
      provisions of the U.S. securities laws. It is uncertain whether Canadian courts
      would (i) enforce judgments of U.S. courts obtained against us or such
      directors, officers or experts predicated upon the civil liability provisions
      of
      U.S. securities laws or (ii) impose liability in original actions against us
      or
      our directors, officers or experts predicated upon U.S. securities
      laws.




***We
      are dependent on key personnel.***





Our
      continued success will depend to a significant extent on the services of Dr.
      Alan J. Gotcher, our Chief Executive Officer and President, Edward Dickinson,
      our Chief Financial Officer, Douglas Ellsworth and Roy Graham, our Senior Vice
      Presidents and Dr. Bruce Sabacky, our Vice President of Research and
      Engineering. The loss or unavailability of any or all of these individuals
      could
      have a material adverse effect on our business and the market price of our
      shares of common stock. We have key man insurance on the lives of Dr. Gotcher
      and Dr. Sabacky. We do not have agreements requiring any of our key personnel
      to
      remain with our company.




***We
      may issue substantial amounts of additional shares without stockholder
      approval.*** ******





Our
      articles of incorporation authorize the issuance of an unlimited number of
      shares of common stock that may be issued without any action or approval by
      our
      stockholders. In addition, we have various stock option plans that have
      potential for diluting the ownership interests of our stockholders. The issuance
      of any additional shares of common stock would further dilute the percentage
      ownership of our company held by existing stockholders.




***We
      have a substantial number of warrants and options outstanding and may issue
      a
      significant number of additional shares upon exercise
      thereof.***





As
      of May
      3, 2006, there were outstanding warrants to purchase up to 1,318,556 shares
      of
      common stock and options to purchase up to 3,503,832 shares of common
      stock. **** The
      existence of such warrants and options, and any additional warrants and options
      we issue in the future, may hinder future equity offerings, and the exercise
      of
      such warrants and options may further dilute the interests of all shareholders.
      The shares of common stock issuable upon the exercise of many of our outstanding
      warrants are subject to resale registration statements, and all of our options
      are subject to a registration statement on Form S-8. Accordingly, future resale
      of the shares of common stock issuable on the exercise of such warrants and
      options in most cases occurs immediately after exercise and may have an adverse
      effect on the prevailing market price of the shares of common stock.




***The
      market price of our common stock may increase or decrease dramatically at any
      time for any or no reason.***





The
      market price of our common stock, like that of the securities of other early
      stage companies, may be highly volatile. Our stock price may change dramatically
      as the result of announcements of product developments, new products or
      innovations by us or our competitors, u ncertainty
      regarding the viability of the nanomaterials and titanium dioxide pigment
      technology, significant customer contracts, significant litigation or other factors or
      events that would be expected to affect our business, financial condition,
      results of operations and future prospects. In addition, the market price for
      our common stock may be affected by various factors not directly related to
      our
      business or future prospects, including the following:





·
            Intentional
                manipulation of our stock price by existing or future shareholders
                or a
                reaction by investors to trends in our stock rather than the fundamentals
                of our business;





26


·
            A
                single acquisition or disposition, or several related acquisitions
                or
                dispositions, of a large number of our shares, including by short
                sellers
                covering their position;


·
            The
                interest of the market in our business sector, without regard to
                our
                financial condition, results of operations or business prospects;


·
            Positive
                or negative statements or projections about our company or our industry,
                by analysts, stock gurus and other
                persons;


·
            The
                adoption of governmental regulations or government grant programs
                and
                similar developments in the United States or abroad that may enhance
                or
                detract from our ability to offer our products and services or affect
                our
                cost structure; and


·
            Economic
                and other external market factors, such as a general decline in market
                prices due to poor economic indicators or investor
                distrust.




***We
      have never declared a cash dividend and do not intend to declare a cash dividend
      in the foreseeable future.***





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




***We
      are subject to various regulatory regimes, and may be adversely affected by
      allegations that we have not complied with governing rules and
      laws.***





In
      light
      of our status as a public company and our lines of business, we are subject
      to a
      variety of laws and regulatory regimes in addition to those applicable to all
      businesses generally.  For example, we are subject to the reporting
      requirements applicable to Canadian and United States reporting issuers, such
      as
      the Sarbanes-Oxley Act of 2002, the rules of the Nasdaq Capital Market and
      certain state and provincial securities laws. We are also subject to state
      and
      federal environmental, health and safety laws, and rules governing department
      of
      defense contracts. Such laws and rules change frequently and are often
      complex.  In connection with such laws, we are subject to periodic audits,
      inquiries and investigations.  Any such audits, inquiries and
      investigations may divert considerable financial and human resources and
      adversely affect the execution of our business plan.   In addition,
      through such audits, inquiries and investigations, we or a regulator have from
      time to time determined, and may in the future determine, that we are out of
      compliance with one or more governing rules or laws.  Remedying such
      non-compliance may divert additional financial and human resources.  In
      addition, in the future, we may be subject to a formal charge or determination
      that we have materially violated a governing law, rule or regulation.  Any
      charge, and particularly any determination, that we had materially violated
      a
      governing law would likely have a material adverse effect on the market price
      of
      our stock, our ability to execute our business plan and our ability to retain
      and attract qualified management.





**Item
      6. Exhibits**





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





27





**SIGNATURES**





Pursuant
      to the requirements 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.May
                10, 2006
            
            By:
                /s/ Alan J. GotcherDate
            
            Alan
                J. Gotcher, Chief Executive OfficerMay
                10, 2006
            
            By:
                /s/ Edward H. DickinsonDate
            
            Edward
                H. Dickinson, Chief Financial
                Officer




28




**EXHIBIT
                INDEX****Exhibit
                No.**
            
            **Exhibit**
            
            **Incorporated
                by Reference/ Filed Herewith**3.1
            
            Articles
                of Continuance
            
            Incorporated
                by reference to the Current Report on Form 8-K filed with the SEC
                on July
                18, 2002.3.2
            
            Bylaws
            
            Incorporated
                by reference to the Annual Report on Form 10-K for the year ended
                December
                31, 2004 filed with the SEC on March 9, 200531.1
            
            Section
                302 Certification of Chief Executive Officer
            
            Filed
                herewith31.2
            
            Section
                302 Certification of Chief Financial Officer
            
            Filed
                herewith32.1
            
            Section
                906 Certification of Chief Executive Officer
            
            Filed
                herewith32.2
            
            Section
                906 Certification of Chief Financial Officer
            
            Filed
                herewith