ALTI Update: Improved Q3, Still Waiting for Meaningful Contract Signings

11/10/2009

MDB issued a research update today on Altair Nanotechnologies, Inc. (ALTI) reiterating its NEUTRAL recommendation and $1.00 Price Target.

Altairnano Inc. posted financial results for the third quarter of calendar 2009 with revenues of $1.7 million – the highest level in the past three sequential quarters. This result was above our previous estimate of $0.7 million for the quarter. Management attributes the improvement in revenues to increased product sales, a higher level of contract and grant work, and the receipt of license fees from the Spectrum Pharmaceuticals agreement. The company continues to reduce its operating expenses in an effort to reduce the cash utilization rate until larger orders materialize. Operating expenses totaled $5.9 million, down 47% versus the 3rd quarter of 2008 and 9% sequentially. As a result, the GAAP net loss for the quarter came in at $3.3 million or $0.03 per share, compared to a net loss of $9.1 million and $6.4 million in the year ago period and previous quarter, respectively. The non-GAAP net loss for the quarter was about $2.3 million or $0.02 per share. Other highlights from the conference call include:

• the company received license fees of $750,000 from the Spectrum Pharmaceuticals agreement and may receive royalties of 10% of revenues from this technology sublicensing agreement;
• the recent demonstration of Proterra’s electric hybrid, rapid charge bus (utilizing Altairnano supplied battery pack modules) to Washington policy makers;
• the receipt of final signed contracts for both the $3.8 million Office of Naval Research development program and a $1.8 million Department of Defense nano-sensor project; and
• the signing of a research agreement with the U.S. Army RDECOM Acquisition Center to develop selective and sensitive nano-sensors – a contract that could be worth up to $1.75 million.

Altairnano posted a modest improvement in revenues this quarter and made solid progress in reducing operating costs in its Science and Materials business segments. The company is now solely focused on the battery business for both transportation and stationary power markets. Although there is still very little visibility into the timing of future revenues, we anticipate that the increased level of customer requests in the past couple of months, is likely to materialize into new contract agreements starting FY2010. We are leaving our earnings model unchanged for this year and for calendar 2010. Thus, we are maintaining our investment rating of Neutral and price target of $1.00.