August 1, 2008 — Altair Nanotechnologies Inc. (www.altairnano.com), a provider of advanced nanomaterials technology for use in energy, life sciences and industrial applications, has signed a new Principles Of Agreement letter with Phoenix Motorcars, Inc. (www.PhoenixMotorcars.com).
Under the terms of the agreement, Altair will ship 47 battery packs purchased by Phoenix in 2007 to Phoenix for use exclusively in demonstration vehicles. The demonstration vehicles are expected to qualify for zero-emission vehicle (“ZEV”) credits under the California Air Resources Board (CARB) Type III program.
In addition, Altair entered into a letter of agreement with Phoenix formally terminating the existing supply agreement and mutually releasing each other from any claims under such agreement.
In the first quarter of 2008, Altair offered a warranty replacement of the 47 battery packs to Phoenix because computer modeling studies conducted by Altair suggested a remote chance of pack failure under certain conditions based on the configuration of the modules that comprised the packs.
“We are pleased to have worked with Phoenix to resolve this concern in a timely and practical manner that allows them to use the original batteries with a simple safety system addition,” commented Altair CEO Terry Copeland.
“We look forward to getting the 47 vehicles on the road by October,” said Phoenix CEO Daniel J. Elliott. “Phoenix remains convinced that consumers will accept this new product based on its game-changing performance, especially given their focus on gas prices and the country’s continued dependence on foreign oil. We are currently working with Altair to obtain battery modules for future vehicle production runs, and we are excited about our ongoing partnership.”
Based upon the Principles of Agreement letter, in the second quarter of 2008, Altair reversed the $2.8 million warranty liability associated with this transaction and wrote off a $1.7 million note payable due to Altair from Phoenix. The result of the transaction, which is outlined in the Principles of Agreement letter filed July 24, 2008 with a Form 8K, is a credit to cost of goods sold of $2.8 million and a debit to operating expense of $1.7 million for a net positive impact of $1.1 million to net income in the second quarter 2008 financial results.
In addition to the approximate net impact of the $1.1 million credit, Altair will receive ten percent of the monetized value of any ZEV credits awarded for cars containing its battery packs. Each car qualifying under the Type III program will generate forty ZEV credits in calendar year 2008.