SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
|_| Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from ______________ to ______________
Commission file number 000-31380
ATLAS MINING COMPANY.
---------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0096527
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
630 East Mullan Avenue, Osburn, Idaho 83849
--------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(208) 556-1181
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Issuer's telephone number, including area code
Former name, former address and formal fiscal year, if changed since
last report: N/A
Indicate by check 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 shell company (as
defined in Rule 12b-2 of the Exchange Act).
YES /_/ NO /X/
The number of shares outstanding of each of the issuer's classes of
common equity as of August 3, 2006, was as follows: 49,438,367 shares of
Common Stock.
Transitional Small Business Disclosure Format: YES /_/ NO /X/
ATLAS MINING COMPANY
SECOND QUARTER 2003 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet
June 30, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Unaudited Consolidated Statements of Operations
Three Months Ended June 30, 2006 and 2005. . . . . . . . . . . . . . . .5
Unaudited Consolidated Statements of Cash Flows
Three Months Ended June 30, 2006 and 2005. . . . . . . . . . . . . . . .6
Notes to Unaudited Consolidated Financial Statements. . . . . . . . . . .8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . 24
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . . 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 27
Item 2. Unregistered Sales of Equity Securities and Use of ?? . . . . . 27
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 28
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 28
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 28
Item 6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Certification under Sarbanes-Oxley Act of 2002 . . . . . . . . . . . . . 30
Atlas Mining Company and Subsidiary
Consolidated Balance Sheets
ASSETS
-------
June, 30 December 31,
2006 2005
------------ ------------
(unaudited)
Current Assets
Cash $1,043,810 $2,215,930
Accounts receivable (net of allowance of $0) 258,141 40,174
Investments - available for sale 22,379 19,538
Advances 148 750
Deposits and prepaids 55,614 100,454
------------ ------------
Total Current Assets 1,380,091 2,376,846
Property and Equipment
Land and tunnels 1,110,356 1,005,159
Buildings and equipment 188,192 188,192
Mining equipment 690,184 244,499
Milling equipment 431,617 247,714
Drilling equipment 18,212 -
Office equipment 42,104 26,689
Vehicles 116,577 111,259
Less: Accumulated depreciation (330,327) (229,311)
------------ ------------
Total Property and Equipment 2,266,914 1,594,200
Other Assets
Long-term Note Receivable 50,000 50,000
Mining supplies 9,000 9,000
------------ ------------
Total Other Assets 59,000 59,000
------------ ------------
Total Assets $ 3,706,005 $ 4,030,045
============ ============
The accompanying notes are an integral part of these financial statements.
3
Atlas Mining Company and Subsidiary
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
June, 30 December 31,
2006 2005
------------ ------------
(unaudited)
Current Liabilities
Accounts payable and accrued liabilities $ 180,314 $ 101,532
Current portion of long-term debt 22,925 25,973
Current portion of capital lease liabilities 29,901 -
------------ ------------
Total Current Liabilities 233,140 127,505
Long-Term Liabilities
Notes payable, net 103,707 23,688
Capital lease liabilities 68,925 -
------------ ------------
Total Long-Term Liabilities 172,632 23,688
Minority Interest 52,797 52,797
------------ ------------
Commitments & Contingencies - -
Stockholders' Equity (Deficit)
Preferred stock, $1.00 par value, 10,000,000
shares authorized, non-cumulative, nonvoting,
nonconvertible, none issued or outstanding - -
Common stock, no par value, 60,000,000 shares
authorized, 49,438,367 and 48,852,892 shares
issued and outstanding, respectively 14,429,225 13,598,660
Additional Paid in Capital 33,700 -
Cost of treasury stock, 1,313,022 in 2006
and 2005 (131,221) (131,221)
Accumulated Deficit (11,084,442) (9,641,558)
Accumulated other comprehensive income (loss) 174 174
------------ ------------
Total Stockholders' Equity (Deficit) 3,247,435 3,826,055
------------ ------------
Total Liabilities and Stockholders' Equity $ 3,706,005 $ 4,030,045
The accompanying notes are an integral part of these financial statements.
4
Atlas Mining Company
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues - Contract Mining $ 767,097 $ 15,105 $ 1,101,829 $ 158,478
Revenues - Mining Production - - - -
Revenues - Timber - - - -
------------ ------------ ------------ ------------
Total Revenues 767,097 15,105 1,101,829 158,478
Cost of Sales - Contract Mining 526,126 27,738 700,430 179,263
Cost of Sales - Mining Production - - - -
Cost of Sales - Timber - 534 - 534
------------ ------------ ------------ ------------
Total Cost of Sales 526,126 28,272 700,430 179,797
------------ ------------ ------------ ------------
Gross Profit (Loss) 240,971 (13,167) 401,399 (21,319)
Operating Expenses
Exploration & development
costs 512,443 133,924 1,123,211 296,503
Mining production costs 74,632 11,959 180,860 11,959
General & administrative 194,520 997,880 544,648 1,551,815
------------ ------------ ------------ ------------
Total Operating Expenses 781,595 1,143,763 1,848,718 1,860,277
------------ ------------ ------------ ------------
Net Operating Income (Loss) (540,624) (1,156,930) (1,447,319) (1,881,596)
Other Income(Expense)
Interest income 9,568 349 21,069 515
Interest expense (16,158) (6,299) (16,715) (39,483)
Miscellaneous Income 65 5 80 6
Minority Interest - 3 - 3
Gain (Loss) on Settlement
of Debt - 33,424 - 33,424
------------ ------------ ------------ ------------
Total Other Income(Expense) (6,524) 27,482 4,435 (5,535)
------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes (547,148) (1,129,448) (1,442,884) (1,887,131)
Provision (Benefit) for
Income Taxes - - - -
------------ ------------ ------------ ------------
Net Income (Loss) $ (547,148) $(1,129,448) $(1,442,884) $(1,887,131)
============ ============ ============ ============
Net Income (Loss) Per Share $ (0.01) $ (0.03) $ (0.03) $ (0.05)
============ ============ ============ ============
Weighted Average Shares
Outstanding 48,824,432 42,960,089 49,136,018 41,906,265
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
5
Atlas Mining Company and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
2006 2005
------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) $(1,442,884) $ (1,887,131)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation 101,016 54,011
Stock issued for services 45,000 862,966
Compensation for Options 33,700 -
Gain on Settlement of Debt - (33,424)
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable (217,969) 273,014
Deposits and prepaids 44,840 40,812
Accounts payable and accrued expenses 59,234 (207,172)
------------ ------------
Net Cash Provided(Used) by Operating Activities (1,377,062) (896,924)
Cash Flows from Investing Activities:
Purchases of equipment (515,210) (83,897)
Purchases of investments (2,841) -
Payments for advances 602 -
------------ ------------
Net Cash Provided (Used) by Investing Activities (517,448) (83,897)
Cash Flows from Financing Activities:
Payments for notes payable (6,981) (580,550)
Payments on capital leases (56,193) -
Proceeds from issuance of common stock 785,565 4,631,544
------------ ------------
Net Cash Provided (Used) by Financing Activities 722,391 4,050,994
------------ ------------
Increase (Decrease) in Cash (1,172,120) 3,070,173
Cash and Cash Equivalents at Beginning of Period 2,215,930 206,635
------------ ------------
Cash and Cash Equivalents at End of Period $ 1,043,810 $ 3,276,808
============ ============
The accompanying notes are an integral part of these financial statements.
6
Atlas Mining Company and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
2006 2005
------------ ------------
Cash Paid For:
Interest $ 16,715 $ 39,483
Income Taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Stock issued for services $ 45,000 $ 862,966
The accompanying notes are an integral part of these financial statements.
7
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Atlas Mining Company, ("the Company") was incorporated in the state of
Idaho on March 4, 1924. The Company was formed for the purpose of
exploring and developing the Atlas mine, a consolidation of several
patented mining claims located in Coeur d' Alene mining district near
Mullan, Idaho. The Company eventually became inactive as a result of
low silver prices.
In September 1997, the Company became active and purchased
substantially all of the operating equipment and mining supplies from
Fausett International, Inc., a related party. The purchase price
totaled $1,416,099, which consisted of $50,000 cash, 875,000 shares of
the Company's common stock valued at $350,000 and a note payable of
$1,016,094. After the purchase, the Company commenced contracting
operations through the trade name, Atlas Fausett Contracting. Through
Atlas Fausett Contracting, the Company provides shaft sinking,
underground mine development and contracting primarily to companies in
the mining and civil industries. The Company also pursues property
acquisitions and resource development projects. In 2002, the Company
settled out the debt to Fausett International and returned the
majority of the unusable equipment; however the Company continues to
pursue contracting activities.
In 1997 and 1998, the Company was to exchange 844,560 shares of its
common stock for all of the outstanding shares of Sierra Silver Lead
Mines, Inc. (Sierra), an Idaho corporation. As of June 30, 2006,
384,465 shares of the Company's common stock had not been exchanged.
The Company was unable to locate some of the shareholders of Sierra.
Therefore, the Company agreed to transfer the stock to an Atlas Mining
Company Trust account in trust for the unlocated shareholders of
Sierra Silver. The acquisition of Sierra has been recorded as a
purchase. The purchase price totaled $276,157. All of the assets and
liabilities of Sierra were transferred to the Company and Sierra
ceased to exist.
In April 1999, the Company exchanged 741,816 shares of its common
stock and paid cash of $15,770 for all of the outstanding shares of
Olympic Silver Resources, Inc. (Olympic), a Nevada corporation.
Olympic holds the rights to the San Acacio Mine in Zacatecas, Mexico.
The purchase price totaled $228,566. The acquisition has been
recorded as a purchase and all of the assets and liabilities were
transferred to the Company. In 2001, the Company did not renew the
rights to the property due to increased carrying costs.
8
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In 1998 and 1999, the Company exchanged 71,238 shares of its common
stock for 53% of the outstanding shares of Park Copper and Gold
Mining, Ltd. (Park Copper), an Idaho corporation. The purchase price
totaled $72,825. The acquisition was recorded as a purchase.
In July 2001, Atlas Mining Company began leasing the Dragon Mine from
Conjecture Silver Mines, Inc. in Spokane, Washington. Conjecture Mines
has since been merged into Chester Mines, Inc. at the same location.
We initially paid 400,000 shares of our common stock, valued at
$100,000, for a one-year lease. Under the terms of the lease
agreement, we had the right to renew the lease annually in exchange
for 100,000 additional shares of our common stock, or the option to
purchase the property for $500,000 if we had $1,000,000 in sales from
the mine in a 12-month period. We exercised the option to purchase
the Dragon Mine on August 18, 2005 for $500,000. The property consists
of 38 patented mining claims on approximately 230 acres.
b. Revenue Recognition
Revenue is recognized when earned. The Company's revenue recognition
policies are in compliance the Securities and Exchange Commission
Staff Accounting Bulletin No. 101 and 104. The Company sells contract
mining services, mined halloysite clay and raw timber.
Revenue for contract mining services is recognized once a contract
with a fixed and determinable fee has been established the services
have been rendered and collection is reasonably assured.
Revenue for mined halloysite clay is recognized upon shipment and
customer acceptance once a contract with a fixed and determinable fee
has been established and collection is received or the resulting
receivable is deemed probable. Certain of the Company's sales
contracts call for a fixed price per ton plus a percentage of future
sales revenue on the resale of product. Revenues are recorded at the
time of sale based upon the fixed price per ton upon shipment.
Revenues from the future resale of the product are recognized upon
receipt as amounts are not determinable.
Revenue for harvested raw timber is recognized once it has been
shipped to the mill, a contract with a fixed and determinable fee has
been established and collection is received or the resulting
receivable is deemed probable.
9
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Bad Debts
Bad debts on receivables are charged to expense in the year the
receivable is determined uncollectible, therefore, no allowance for
doubtful accounts is included in the financial statements. Amounts
determined as uncollectible are not significant to the overall
presentation of the financial statements.
d. Basis of Consolidation
The Company's investments representing a 50% or greater interest are
consolidated. The consolidated financial statements presented reflect
the accounts of Atlas Mining Company and Park Copper & Gold. At both
June 30, 2006 and December 31, 2005 the Company held a 53% ownership
interest in Park Copper & Gold. The Company recorded no liability for
the 47% non-controlling interest as Park Copper & Gold had a
stockholders deficit at the time of merger. Further, the net loss for
Park Copper & Gold for the periods ended June 30, 2006 and December
31, 2005 applicable to the 47% non-controlling interest were not
allocated to the non-controlling interest as there is no obligation of
the non-controlling interest to share in such losses. All significant
inter-company transactions between the parent and subsidiary have been
eliminated in consolidation.
e. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the
financial statements.
Net Loss Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ------------
For the period ended June 30, 2006:
Basic EPS
Net loss to common shareholders $(1,442,884) 49,136,018 $ (0.03)
============ ============ ============
For the period ended June 30, 2005:
Basic EPS
Net loss to common shareholders $(1,887,131) 41,906,265 $ (0.05)
============ ============ ============
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
10
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss, tax credit carry-forwards, and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
h. Available for Sale Investments
Management determines the appropriate classification of marketable
equity security investments at the time of purchase and reevaluates
such designation as of each balance sheet date. Unrestricted
marketable equity securities have been classified as available for
sale. Available for sale securities are carried at fair value, with
the unrealized gains and losses, net of tax, reported as a net amount
in accumulated other comprehensive income. Realized gains and losses
and declines in value judged to be other-than-temporary on available
for sale securities are included in investment income or loss. The
cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available
for sale are included in investment income.
The following is a summary of available for sale equity securities
which are concentrated in companies in the mining industry:
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
------------ ------------ ------------ ------------
June 30, 2006 $ 22,205 $ 174 $ - $ 22,379
December 31, 2005 $ 19,364 $ 174 $ - $ 19,538
i. Mining Supplies
Mining supplies, consisting primarily of bits, steel, and other mining
related equipment, are stated at the lower of cost (first-in, first-
out) or market. In addition, equipment repair parts and maintenance
items are also included at cost.
11
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. In these financial statements assets and
liabilities involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
k. Property and Equipment
Property and equipment are carried at cost. Depreciation and
amortization is computed on the straight-line method over the
estimated useful lives of the assets as follows:
Estimated
Useful Life
------------
Building 39 years
Mining equipment 2-8 years
Office and shop furniture and equipment 5-8 years
Vehicles 5 years
In accordance with Financial Accounting Standards Board Statement No.
144, the Company records impairment of long-lived assets to be held
and used or to be disposed of when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount. At June 30, 2006 and
December 31, 2005, no impairments were recognized. Depreciation
expense for the quarters ended June 30, 2006 and 2005 totaled $101,016
and $54,011, respectively.
l. Financial Instruments
The recorded amounts of financial instruments, including cash
equivalents, receivables, investments, accounts payable and accrued
expenses, and long-term debt approximate their market values as of
June 30, 2006 and 2005. The Company has no investments in derivative
financial instruments.
12
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
m. Mining Exploration and Development Costs
Land and mining property acquisitions are carried at cost. The
Company expenses prospecting and mining exploration costs. At the
point when a property is determined to have proven and probable
reserves, subsequent development costs are capitalized as capitalized
development costs. Capitalized development costs will include
acquisition costs and property development costs. When these
properties are developed and operations commence, capitalized costs
will be charged to operations using the units-of-production method
over proven and probable reserves. Upon abandonment or sale of a
mineral property, all capitalized costs relating to the specific
property are written off in the period abandoned or sold and a gain or
loss is recognized.
At June 30, 2006, all mine costs have been expensed. During the
quarter ended June 30, 2006, the Company recognized no revenue from
the sale of halloysite clay.
n. Stock Options
The Company has stock option plans that provide for stock-based
employee compensation, including the granting of stock options, to
certain key employees. The plans are more fully described in Note 5.
Prior to January 1, 2006, the Company applied APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related
Interpretations in accounting for awards made under the Company's
stock-based compensation plans. Under this method, compensation
expense was recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.
During the periods presented in the accompanying financial statements,
the Company has adopted the provisions of SFAS No. 123R using the
modified-prospective transition method and the disclosures that follow
are based on applying SFAS No. 123R. Under this transition method,
compensation expense recognized during the six months ended June 30,
2006 included: (a) compensation expense for all share-based awards
granted prior to, but not yet vested as of January 1, 2006, and (b)
compensation expense for all share-based awards granted on or after
January 1, 2006. Accordingly, no compensation expense has been
recognized for grants of options to employees and directors in the
accompanying statements of operations for the period ended June 30,
2006. In accordance with the modified-prospective transition method,
the Company's financial statements for the prior year have not been
restated to reflect, and do not include, the impact of SFAS 123R. Had
compensation cost for the Company's stock option plans and agreements
been determined based on the fair value at the grant date for awards
in 2005 consistent with the provisions of SFAS No. 123R, the Company's
net loss and basic net loss per common share would have been increased
to the pro forma amounts indicated below:
13
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
n. Stock Options Continued
2005
------------
Net Loss As reported $(1,887,131)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method (101,100)
------------
Proforma $(1,988,231)
============
Basic earnings per share As reported $ (0.05)
Proforma $ (0.05)
o. Recently Enacted Accounting Standards
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based
Payment." This Statement is a revision to SFAS No. 123, "Accounting
for Stock-Based Compensation," and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees." SFAS No. 123(R) requires
the measurement of the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value
of the award. The cost will be recognized over the period during which
an employee is required to provide service in exchange for the award.
No compensation cost is recognized for equity instruments for which
employees do not render service. When adopted, the Company will be
required to recognize compensation cost as expense for the portion of
outstanding unvested awards, based on the grant-date fair value of
those awards calculated using an option pricing model. Statement
123(R) is effective for small business issuers at the beginning of the
first interim or annual period beginning after December 15, 2005.
Management is currently evaluating the impact SFAS No. 123(R) will
have on the Company's results of operations as a result of adopting
this new Standard.
In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations an interpretation of FASB
Statement No. 143" ("FIN 47"). FIN 47 clarifies that the term
conditional asset retirement obligation as used in FASB Statement
No. 143, "Accounting for Asset Retirement Obligations," refers to a
legal obligation to perform an asset retirement activity in which the
timing and (or) method of settlement are conditional on a future event
that may or may not be within the control of the entity. The
obligation to perform the asset retirement activity is unconditional
even though uncertainty exists about the timing and (or) method of
settlement. Thus, the timing and (or) method of settlement may be
conditional on a future event.
14
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
o. Recently Enacted Accounting Standards Continued
Accordingly, an entity is required to recognize a liability for the
fair value of a conditional asset retirement obligation if the fair
value of the liability can be reasonably estimated. This
Interpretation is effective no later than the end of fiscal years
ending after December 15, 2005. The adoption of FIN 47 did not have a
material impact on the Company's financial position or results of
operations.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections" ("SFAS 154") which replaces Accounting Principles
Board Opinions No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
Accounting Changes in Interim Financial Statements An Amendment of
APB Opinion No. 28." SFAS 154 provides guidance on the accounting for
and reporting of accounting changes and error corrections. It
establishes retrospective application, or the latest practicable date,
as the required method for reporting a change in accounting principle
and the reporting of a correction of an error. SFAS 154 is effective
for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The Company is currently evaluating
the effect that the adoption of SFAS 154 will have on its consolidated
results of operations and financial condition but does not expect it
to have a material impact.
In October 2005, the FASB issued FSP FAS 13-1, "Accounting for Rental
Costs Incurred During a Construction Period" ("FSP FAS 13-1") which
requires companies to expense rental costs associated with ground or
building operating leases that are incurred during the construction
period. FSP FAS 13-1 is effective in first reporting period beginning
after December 15, 2005. The Company does not expect that this
pronouncement will have a material effect on its financial statements.
NOTE 2 -GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is
dependent upon raising capital to continue operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. Management has sold shares of its
restricted stock in the past year to help support its financing
activities and reduced the Company's debt. The Company has continued
to obtain additional work in the contracting entity and intends to
bring the Dragon Mine into production. The Company believes these
actions will help to solidify its continued operations. Management
feels the elimination of it debts, the revenue stream from contracting
and halloysite clay sales, and the sale of stock will provide
sufficient cash flows to continue as a going concern.
15
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 3 - LONG-TERM LIABILITIES
Long- term liabilities are detailed in the following schedules as of
June 30, 2006 and December 31, 2005:
June 30, December 31,
2006 2005
------------ ------------
Note payable to a leasing company, due in
monthly installments of $2,135, including
interest at 18.62%. The note matures in March
of 2008 and is collateralized equipment. $ 39,527 $ -
Note payable to a leasing company, due in
monthly installments of $1,605, including
interest at 17.03%. The note matures in May
of 2009 and is collateralized equipment. 44,033 -
Note payable to a leasing company, due in
monthly installments of $676, including
interest at 1.35%. The note matures in June
of 2008 and is collateralized equipment. 16,000 -
Note payable to a lending company, due in
Monthly installments of $688, including interest
at 7.59%. The note matures in March 2010 and
is collateralized by a vehicle. 26,847 29,888
Note payable to an insurance company, due in
monthly installments of $2,825. The note matures
in July 2006. 225 19,773
------------ ------------
Total Notes Payable $ 126,632 $ 49,661
------------ ------------
Less Current Portion (22,925) (25,973)
------------ ------------
Total Long-Term Liabilities $ 103,707 $ 23,688
============ ============
Future minimum principal payments on notes payable are as follows:
2006 $ 22,925
2007 50,356
2008 35,870
2009 15,476
2010 2,005
Thereafter -
------------
Total $ 126,632
============
16
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 4 -RELATED PARTY TRANSACTIONS
During 2006 and 2005, an officer loaned the Company $0 and $1,670,
respectively. The loan was repaid to the officer during the 3rd quarter of
2005. The balance of the note payable at June 30, 2006 and December 31,
2005 is $0 and $0, respectively.
NOTE 5 -STOCK OPTIONS
In 1998, the Company adopted a non-qualified stock option plan authorizing
the granting to officers, directors, or employees options to purchase
common stock. Options are granted by the Administrative Committee, which is
elected by the Board of Directors. The number of options granted under this
plan and any other plans active may not exceed 10% of the currently issued
and outstanding shares of the Company's common stock. The term of each
option granted is determined by the Committee, but cannot be for more than
five years from the date the option is granted. The option price per share
with each option granted will be fixed by the Administrative Committee on
the date of grant.
The Company adopted an incentive stock option plan in 1998. The stock
option plan permits the Company to grant to key employees options to
purchase shares of stock in the Company at the direction of the Committee.
The price of shares purchased must be equal to or greater than fair market
value of the common stock at the date. At June 30, 2006, no options have
been granted under this plan.
The Company is authorized to issue stock options under one existing stock
option plan approved by stockholders. The fair value of each of the
Company's stock option awards is estimated on the date of grant using a
Black-Scholes option-pricing model that uses the assumptions noted in the
table below. Expected volatility is based on an average of historical
volatility of the company's stock. The risk-free interest rate for periods
within the contractual life of the stock option award is based on the yield
curve of a zero-coupon U.S. Treasury bond on the date the award is granted
with a maturity equal to the expected term of the award. The Company uses
historical data to estimate forfeitures within its valuation model. The
expected term of awards granted is derived from historical experience under
the Company's stock-based compensation plans and represents the period of
time that awards granted are expected to be outstanding.
The significant weighted average assumptions relating to the valuation of
the Company's Stock Options for the six months ended June 30, 2006 and
2005, were as follows:
2006 2005
------------ ------------
Dividend Yield 0% 0%
Expected Life 4 years 5 years
Expected Volatility 130% 130%
Risk-Free Interest Rate 3.44% 3.44%
17
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 5 - STOCK OPTIONS (Continued)
During 2004, the company's board of directors approved an option to the
Company's CEO to acquire up to 3.5 million shares of common stock over a
five year period at $0.18 per share under the non-qualified stock option
plan. The options vested 43% on January 1, 2005, and 14% on January 1,
2006 -2009.
A summary of the status of the options granted under the Company's 1998
stock option plan and other agreements and changes for the six months ended
June 30, 2006, are as follows:
June 30, 2006
---------------------------------------------
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Shares Price Life Value
---------------------------------------------
Outstanding at beginning of period 3,500,000 $0.18 3 years $2,765,000
Granted - - - -
Exercised - - - -
Forfeited - - - -
Expired - - - -
--------------------------------------------
Outstanding at end of Period 3,500,000 $0.18 2.50 years $5,495,000
--------------------------------------------
Vested and expected to vest
in the future 3,500,000 $0.18 2.50 years
Exercisable at end of period 1,995,000 $0.18 2.50 years $3,132,150
Weighted average fair value of
options granted - - - -
--------------------------------------------
The Company had 1,995,000 non vested options at the beginning of the
period with a weighted average grant date fair value of $0.269. At
June 30, 2006 the Company had 1,505,000 non vested options with a
weighted average grant date fair value of $0.269.
The total intrinsic value of options exercised during the six months
ended June 30, 2006 and 2005 was $0 and $0 respectively. Intrinsic
value is measured using the fair market value at the date of exercise
(for shares exercised) or at June 30, 2006 and 2005 (for outstanding
options), less the applicable exercise price.
18
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 5 - STOCK OPTIONS (Continued)
Common Stock
------------
During the quarter ended June 30, 2006 the Company sold a total of
180,000 shares of restricted common stock at a price of $0.50 per
share for a total of $90,000 cash. The Company also sold a total of
4,180 shares of restricted common stock at a price of $0.25 per share
for a total of $1,045 cash. The sales resulted from the exercise of
an outstanding warrant.
The Company issued 8,000 shares of stock at a price of $1.69 in
payment of $13,520 for payment on the purchase of a mining property.
The Company issued 340,500 shares of stock at a price of $2.00 for
$681,000 in cash.
During the quarter ended June 30, 2006 the Company issued 50,000
shares of stock at a price of $0.90 in payment of $45,000 worth of
services provided to the company.
Stock Warrants
--------------
The Company has issued warrants to non-employees under various
agreements expiring through January 2007. A summary of the status of
warrants granted and outstanding at June 30, 2006, and changes during
the period then ended is as follows:
Weighted Average
Shares Exercise Price
----------- ----------------
Outstanding at beginning of period 1,184,000 0.46
Granted - -
Exercised 184,180 0.44
Forfeited - -
Expired - -
Outstanding at end of period 999,820 0.54
Exercisable at end of period 999,820 0.54
A summary of the status of the warrants outstanding at June 30, 2006
is presented below:
Weighted
-Average Weighted Weighted
Range of Remaining Average -Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------ ------------ ------------ ------------ ------------ ------------
$0.25 109,820 0.50 years $0.25 109,820 $0.25
$0.40 750,000 0.58 years $0.52 750,000 $0.52
$0.50 140,000 0.50 years $0.50 140,000 $0.50
------------ ------------ ------------ ------------ ------------ ------------
999,820 999,820
19
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 5 -STOCK OPTIONS (Continued)
During 2005, the Company granted warrants to purchase up to 750,000 of
its common shares at $0.40 per share expiring in January 2007 with a
calculated weighted average fair value of $0.52 each for services. The
fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model. Assumptions used to
compute the weighted-average grants during the quarter ended December
31, 2005 include risk-free interest rates of 3.25%, expected dividend
yields of 0%, expected life of 2 years, and expected volatility
76.36%.
During June 2006, the Company had outstanding warrants as follows:
Number of shares
underlying the warrants Exercise price Issued Expire
------------------------ -------------- ------------------ -------
140,000 0.50 With common shares 12/06
109,820 0.25 For services 12/06
750,000 0.40 For services 01/07
NOTE 6 CAPITAL LEASES
The Company leases equipment under capital leases that expire in
September 2006 and March through December 2008. The gross amount of
assets recorded under capital leases and the associated accumulated
depreciation are included under property and equipment and are as
follows:
June 30, December 31,
2006 2005
------------ ------------
Mining Equipment $ 155,019 $ -
------------ ------------
Total $ 155,019 $ -
------------ ------------
Less Accumulated Depreciation (20,304) -
------------ ------------
Net Leased Equipment $ 134,715 $ -
------------ ------------
The Company amortizes its lease obligations over the term of each
lease. Amortization expense was $20,304 and $0 for the six month
periods ended June 30, 2006 and 2005, respectively.
20
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 6 CAPITAL LEASES (Continued)
The future minimum lease payments are as follows for the twelve-month
periods ended:
December 31, Amount Due
------------ ------------
2006 $ 37,207
2007 53,914
2008 28,040
2009 -
2010 -
Thereafter -
------------
Total minimum obligations $ 119,161
============
Executory costs and interest (20,335)
------------
PV of minimum obligations 98,826
Current portion (29,901)
------------
Long-term obligations $ 68,925
============
NOTE 7 - COMMITMENTS AND CONTINGENCIES
There are no significant commitments and contingencies related to the
Company.
NOTE 8 SEGMENT REPORTING
The Company's Chief Operating Decision-maker, as defined in SFAS No.
131, is considered to be Atlas's CEO. The Chief Operating Decision-
maker reviews separate financial information for the contract mining
business segment, the mining production business segment and the
timber business segment. Each of the Company's business segments offer
and distribute distinct services to different customer segments. The
contract mining segment provides mining services and specialized civil
construction services in various locations for mine operators,
exploration companies and the construction and natural resources
industries. Other activities include site evaluation, feasibility
studies, trouble-shooting and consultation prior to the undertaking of
exploration and mine development. The mining production segment is
located at the Dragon Mine in Juab County, Utah which contains a
deposit of high quality halloysite clay. The Company is in the
process of extracting this clay to sell to outside parties. The
Company holds property with harvestable timber in Northern Idaho.
Timber harvesting is contracted out to a qualified logger, who is able
to negotiate with local timber mills on the price for the timber. The
Company primarily uses the timber to generate revenues and cash flows
for other operations. The Company therefore considers that it has
three reportable segments under SFAS 131 during 2005 to 2006 as
follows: (i) contract mining, (ii) mining production, and (iii)
timber.
21
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
NOTE 8 SEGMENT REPORTING
The Chief Operating Decision-maker evaluates performance and allocates
resources based on revenues produced from operations. The accounting
policies of the reportable segments are the same as those described in
the summary of significant accounting policies. It is the Company's
policy that trade between the segments is entered into at an arms-
length basis.
Segment Reporting For the Period Ended
June 30,
--------------------------
2006 2005
------------ ------------
Contract Mining:
Net Revenue $ 1,101,829 $ 158,478
Operating Expenses
Cost of Sales 700,430 179,263
General & Administrative 245,092 698,317
------------ ------------
Total Operating Expenses 945,522 877,580
Net Operating Profit (Loss) 156,307 (719,102)
Capital Expenditures: 5,318 2,517
------------ ------------
Depreciation: 4,748 350
Total Assets: 100,786 221,817
------------ ------------
Mining Production:
Net Revenue - -
Operating Expenses
Mining Production Costs 180,860 11,959
Exploration & Development Costs 1,123,211 296,503
General & Administrative 245,092 698,317
------------ ------------
Total Operating Expenses 1,549,163 1,006,779
------------ ------------
Net Operating (Loss) (1,549,163) (1,006,779)
============ ============
Capital Expenditures: 768,411 81,381
------------ ------------
Depreciation: 96,267 53,661
------------ ------------
Total Assets: 3,199,809 3,585,177
22
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
June 30, 2006
Segment Reporting For the Period Ended
June 30,
--------------------------
2006 2005
------------ ------------
Timber:
Net Revenue $ - $ -
Operating Expenses
Cost of Sales - 534
General & Administrative 54,465 155,182
------------ ------------
54,465 155,716
------------ ------------
Net Operating (Loss) (54,465) (155,716)
============ ============
Capital Expenditures: - -
------------ ------------
Depreciation: - -
Total Assets: 405,410 405,410
------------ ------------
Consolidated on Financial Statements:
Total Revenues 1,101,829 158,478
Operating Expenses
Total Cost of Sales 700,430 191,756
Exploration & development costs 1,123,211 296,503
Total General & Administrative 544,648 1,551,815
------------ ------------
Total Operating Expenses 2,549,149 2,040,074
------------ ------------
Net Operating (Loss) (1,447,320) (1,881,596)
============ ============
Capital Expenditures: 773,729 83,898
------------ ------------
Depreciation: 101,016 54,011
Total Assets 3,706,005 4,212,404
============ ============
23
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
This Form 10-QSB contains forward-looking statements, including
statements regarding the expectations of future operations. For this
purpose, any statements contained in this Form 10-QSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate," or "continue" or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors,
many of which are not within the Company's control. These factors include,
but are not limited to, economic conditions generally and in the industries
in which the Company may participate, competition within the chosen
industry, including competition from much larger competitors, technological
advances, and the failure to successfully develop business relationships.
In light of these risks and uncertainties, you are cautioned not to place
undue reliance on these forward-looking statements. This item should be
read in conjunction with "Item 1. Financial Statements" and other items
contained elsewhere in this report.
Overview
We are a natural resources company engaged in the acquisition and
exploration of our resource properties in the states of Idaho and Utah and
in New Foundland, Canada. We also provide contract mining services and
specialized civil construction services for mine operators, exploration
companies and the construction and natural resource industries through our
trade name "Atlas Fausett Contracting."
Our primary source of revenue is generated by our Atlas Fausett
Contracting operations. However, we also have exploration targets and
timber. As a result, we are providing Management's discussion on our plan
of operation.
Contract Mining
Our contract mining generates most of our revenues. This may decrease
as we are able to increase operations on our owned properties, and we will
adjust our resources accordingly. At this time, we anticipate that our
contracting will remain a significant portion of our business.
Property Exploration
We intend to continue our exploration activities for halloysite clay
and other minerals, and intend to acquire commercially feasible properties
that can be put into production with minimal environmental problems and
with limited financial resources. We do not intend to seek out and acquire
other properties unless they fit into the parameters we have set. Further,
we will limit our acquisitions based on our ability to conduct our
feasibility surveys and other exploration work on these properties, and
until we have been able to bring our existing acquisitions into a income
generating stage.
In August 2001, we acquired the Dragon Mine in Juab, Utah and began
our clay exploration. Our exploration and development expenses for the
period ending June 30, 2006 and June 30, 2005 were $512,443 and $133,924
respectively on the halloysite clay project.
The halloysite clay is considered a non-toxic material, and we feel we
can produce a sellable product with minimal environmental consequences
using proper containment and processing techniques. The intended processing
will be the crushing, drying, and packaging of the product for shipment. In
2003 we completed diamond drilling programs to verify location of clay beds
at the Dragon Mine. In 2006 we have continued our diamond drilling
program. With that information we have been able to formulate development
and mining plans. During 2005 and 2006 we have worked to develop and bring
the Dragon Mine into a production stage.
24
Our halloysite clay marketing efforts include contacting potential
customers and distributors, which we have done. Each buyer may have
different uses for the product and, therefore, the prices and quantities
will vary as a result. The sale of product cannot be formalized until we
have verified our ability to provide the quality and quantities as required
by the potential buyers. From results of the product samples distributed
we have numerous potential buyers. In March, 2006 we activated Nano Clay
and Technologies, Inc., a wholly owned subsidiary, and hired Dr. Ron Price
as its President and Chief Executive Officer, to pursue these activities.
Until the Dragon mine is producing in a profitable manner we are not
aggressively trying to develop other properties. However, it is our intent
to look for other properties that can be acquired, developed and mined with
minimal costs, and environmental concerns.
We have a mining plan and reclamation bond approved by the proper
state authorities, have filed and received Mine Safety and Health
Administration (MSHA) registration, and County permitting where applicable.
In the future, we may pursue additional acquisitions and exploration of
other properties for metals and industrial minerals, development of which
will require submission of new mining and reclamation plans to the proper
state and federal authorities.
Timber
We will continue to harvest timber on our property. Timber harvesting
will be dependent upon lumber prices and weather. We normally do not log
much in the winter months.
RESULTS OF OPERATIONS
Revenues for the three month period ending June 30, 2006 were $767,097
and $15,105 for the same period ending June 30, 2005, or an increase of
$751,992. Revenues for the six month period ending June 30, 2006 were
$$1,101,829 and $158,478 for the same period ending June 30 2005, or an
increase of $943,351. The main difference was caused by the increase in
contracting revenues for both periods in 2006 compared to the previous
year.
Gross profit (loss) for the three month period ending June 30, 2006
was $240,971 compared to ($13,167) for the same period ending June 30,
2005, a difference of $254,138. Gross profits (loss) for the six month
period ending June 30, 2006 was $401,399 compared to ($21,319) for the same
period ending June 30, 2005, or an increase of 1,306% This was due to the
increased revenues for the periods ending June 30, 2006 over the same
period ended June 30, 2005.
Total operating expenses for the three month period ending June 30,
2006 was $781,595 compared to $1,131,804 for the same period ending June
30, 2005 or an decrease of 31%. Total Operating expenses for the six month
period ending June 30, 2006 was $1,848,718 compared to $1,848,318 for the
same period ending June 30, 2005. Although the Company recognized less
administrative costs and professional fees in the period ended June 30,
2006 compared to the same period ended June 30, 2005, more exploration and
development costs were incurred.
Our net profit (loss) for the three month period ending June 30, 2006
was ($547,148) compared to ($1,129,448) for the same period ending June 30,
2005, or a decrease of 51%. For the six month period ending June 30, 2006
net profit (loss) was ($1,442,884) compared to ($1,887,131) for the same
period ending June 30, 2005, or a decreases of 23%. Although the Company
experienced more exploration and development expenses for the periods ended
June 30, 2006 compared to the same period ended June 30, 2005, the
increased revenues helped offset them.
LIQUIDITY AND CAPITAL RESOURCES
To date our activities have been financed primarily through the sale
of equity securities, borrowings, and revenues from Atlas Fausett
Contracting and logging operations. We intend to continue pursuing contract
mining work and logging of our timber properties to help pay for our
operations. For the three month periods and the six month periods ended
June 30, 2006 and June 30, 2005 contract mining accounted for 100% of the
revenue. Our current asset and debt structure is explained below.
25
Our total assets as of June 30, 2006 were $3,706,005 compared to
$4,030,045 as of December 31, 2005, or a decrease of $324,040. For the six
month period ended June 30, 2006 the Company has decreased its current
assets by $996,755, and increased its fixed assets by $672,714 through
acquisitions of additional equipment for mining.
Total liabilities were $458,569 as of June 30, 2006, compared to
$203,990 as of December 31, 2005. The Company acquired mining equipment
during the period ended June 30, 2006 to facilitate increased contract
mining activities. The following debts are still outstanding.
We have a note payable to a lending company for a vehicle due in
monthly installments of $688, including interest of 7.59% with a balance of
$26,847. We have a note payable to an insurance company for insurance
premiums with a balance of $225. We have a note payable to a lending
company for the purchase of underground equipment with a monthly
installment of $676 including 1.35% interest, with a balance of $16,000.
We have a lease payable for underground equipment with a monthly
installment of $2,135 with a capitalized balance of $39,527. We have a
lease payable for underground equipment with a monthly installment of
$1,605 with a capitalized balance of $44,033. Current liabilities
including accounts payable and accrued expenses due as of June 30, 2006
were $233,140 and are the result of daily operations and accrued taxes. We
also carry a liability of $52,797 to the minority interest in a subsidiary.
If we do not reduce our debts, we would be obligated to pay an average
of $5,104 per month or $61,248 for the next fiscal year.
We may need to obtain additional funding to pursue our business
strategy during the next fiscal year. If so, we anticipate seeking
additional funding through additional private placements, joint venture
agreements, production financing, and/or pre-sale loans, although we do not
have any specific plans or agreements for such funding. Our inability to
raise additional capital to fund operations through the remainder of this
year and through the next fiscal year could have a detrimental effect on
our ability to pursue our business plan, and possibly our ability to
continue as a going concern.
Our principal sources of cash flow during the first six months of 2006
was from contracting activities which provided an average of $183,638 per
month for the six month period ended June 30, 2006, and averaged $26,413
per month for the same period in 2005. In addition, we rely on our credit
facilities and public or private sales of equity for additional cash flow.
Cash flow from financing activities for the six month period ended
June 30, 2006 was $722,391 compared to $4,050,994 for the same period in
2005, a difference of $3,328,603. The major factor for the difference was
receipt of proceeds from issuance of common stock in 2005.
The Company used $517,448 from investing activities for the six month
period ended June 30, 2006, compared to using $83,897 in the same period in
2005, a difference of $433,551. This was attributed to purchases of more
equipment in the period ended June 30, 2006 compared to the same period in
2005.
Cash flow used by operating activities for the six month period ended
June 30, 2006, was ($1,377,062) compared to ($896,924) for the same period
in 2005, a difference of $480,138. In the six month period in 2006 net
losses were less, depreciation increased, and accounts payable decreased,
compared to the same period in 2005.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between the Company and
any other entity that have, or are reasonably likely to have, a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources that is material to investors.
26
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Chief Executive Officer and its Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure
controls and procedures (as defined in the Securities Exchange Act of
1934 Rules l3a 14(c) and 15d 14(c) as of a date within 90 days of the
filing date of this quarterly report on Form 10-QSB (the "Evaluation
Date"), have concluded that as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and effective to ensure
that material information relating to it would be made known to it by
others within the Company, particularly during the period in which this
quarterly report on Form 10-QSB was being prepared.
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect the Company's disclosure
controls and procedures subsequent to the Evaluation Date, nor any
significant deficiencies or material weaknesses in such disclosure
controls and procedures requiring corrective actions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 31, 2006, the Company issued 20,000 shares of common stock to
an accredited investor for $10,000 for the exercise of an outstanding
warrant.
On April 7, 2006, the Company issued 8,000 shares of common stock to
an accredited investor for $13,520 for the acquisition of an 80%
interest in a gold property.
On April 25, 2006, the Company issued 3,465 shares of common stock to
an accredited investor for $866 for the exercise of an outstanding
warrant.
On April 25, 2006, the Company issued 50,000 shares of common stock to
accredited investors for $25,000 for the exercise of an outstanding
warrant.
On May 11, 2006, the Company issued 340,500 shares of common stock to
an accredited investor for $681,000.
On May 11, 2006, the Company issued 715 shares of common stock to an
accredited investor for $179 for the redemption of an outstanding
warrant.
On May 11, 2006, the Company issued 50,000 shares of common stock to
an accredited investor for $25,000 for the exercise of an outstanding
warrant.
On June 30, 2006, the Company issued 60,000 shares of common stock to
an accredited investor for $30,000 for the exercise of an outstanding
warrant.
Unless otherwise noted, the sales set forth above involved no
underwriter's discounts or commissions and are claimed to be exempt from
registration with the Securities and Exchange Commission pursuant to
Section 4 (2) of the Securities Act of 1933, as amended, as transactions by
an issuer not involving a public offering, the issuance and sale by the
Company of its securities to financially sophisticated individuals who are
fully aware of the Company's activities, as well as its business and
financial condition, and who acquired said securities for investment
purposes and understood the ramifications of same.
27
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
(a) EXHIBITS
The following exhibits are included in this Report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
--------- -----------------------
31.1 Certification pursuant to Rule 13a-14 of the Securities
Exchange Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
and Principal Financial Officer
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer and Principal
Financial Officer
28
SIGNATURES
In accordance with 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.
ATLAS MINING COMPANY
Dated: August 8, 2006 /s/ William Jacobson
--------------------------------------
By: William Jacobson
Chief Executive Officer,
Chief Financial Officer
29