AS ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 11/06/2001
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
AMENDMENT NO. 2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ATLAS MINING COMPANY
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Idaho 1044 82-0096527
- ---------------------------- ------------------------- ---------------------
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD IRS EMPLOYER
OF INCORPORATION INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER
OR ORGANIZATION) CODE NUMBER)
630 EAST MULLAN AVENUE
OSBURN, IDAHO 83849
(208) 556-1181
--------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WILLIAM T. JACOBSON
630 EAST MULLAN AVENUE
OSBURN, IDAHO 83849
(208) 556-1181
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF
AGENT FOR SERVICE OF PROCESS)
Copies to:
NIMISH PATEL, ESQ.
POLLET & RICHARDSON
10900 WILSHIRE BLVD., SUITE 500
LOS ANGELES, CALIFORNIA 90024
(310) 208-1182
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------- ---------------- ---------------------- ------------------------- ------------------------
PROPOSED
TITLE OF EACH CLASS MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE REGISTRATION FEE
- --------------------------- ---------------- ---------------------- ------------------------- ------------------------
Common Stock Offered by 6,000,000 $.25 $1,500,000 $375.00*
Atlas Mining Company
- --------------------------- ---------------- ---------------------- ------------------------- ------------------------
Common Stock Offered by 740,000 $.25 $185,000 $46.25*
Selling Securityholders
- --------------------------- ---------------- ---------------------- ------------------------- ------------------------
Total 6,740,000 $1,685,000 $421.25*
- --------------------------- ---------------- ---------------------- ------------------------- ------------------------
(1) Pursuant to Rule 416 of the Act, this registration statement also covers
such indeterminate additional shares of common stock as may become issuable as a
result of stock splits, stock dividends or other similar events.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
* Amount was previously paid by Registrant under separate SB-2 Registration
Statement filed on November 15, 1999 (SEC File Number 333-90895). The
Registration Statement as filed was subsequently withdrawn on October 24, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHARE THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this Prospectus is not complete and may be changed. We may
not sell these Securities until the Registration Statement filed with the
Securities and Exchange Commission becomes effective. This Prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
ii
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. NEITHER
WE, NOR THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SUBJECT TO COMPLETION, DATED _______________, 2002
PROSPECTUS
ATLAS MINING COMPANY
6,000,000 SHARES OF COMMON STOCK OFFERED BY ATLAS MINING COMPANY
740,000 SHARES OF COMMON STOCK OFFERED BY SELLING SECURITYHOLDERS
This prospectus covers the sale of 6,000,000 shares of our common stock
of Atlas Mining Company. Atlas Mining Company may offer and sell these
shares from time to time pursuant to this prospectus. We are offering
up to a total of 6,000,000 shares of common stock on a best efforts
basis, for maximum aggregate offering proceeds of $1,500,000. The
offering price is $0.25 per share and there is no minimum number of
shares that we have to sell. There will be no escrow account. We will
immediately use all money received from the offering.
Concurrent with this offering, we are registering 740,000 additional
shares of common stock for sale by selling securityholders who may wish
to sell their shares in the open market or in privately negotiated
transactions
Our common stock is quoted on the OTC Pink Sheet under the Trading
Symbol "ALMI". On February 4, 2002, the average of the bid and asked
prices of the common stock on the Pink Sheet was $0.08 and $0.11 per
share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD INVEST IN OUR COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR
ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS
PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS ___________, 2002
---------------------
The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.
ATLAS MINING COMPANY
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY............................................................3
RISK FACTORS..................................................................6
USE OF PROCEEDS..............................................................10
SELLING SECURITYHOLDERS......................................................11
DETERMINATION OF OFFERING PRICE..............................................12
PLAN OF DISTRIBUTION.........................................................13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION....................16
DESCRIPTION OF BUSINESS......................................................19
DESCRIPTION OF PROPERTY......................................................24
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.................28
EXECUTIVE COMPENSATION.......................................................29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................31
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.....................31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............32
DESCRIPTION OF SECURITIES....................................................33
LEGAL PROCEEDINGS............................................................34
INTEREST OF NAMED EXPERTS AND COUNSEL........................................34
INDEMNIFICATION..............................................................34
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................................35
INDEX TO FINANCIAL STATEMENTS.................................................36
2
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION ABOUT OUR BUSINESS AND ABOUT THE
OFFERINGS. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR SECURITIES. PLEASE READ THE ENTIRE
PROSPECTUS.
Some of the information in this prospectus contains forward-looking
statements, including statements relating to anticipated operating results,
growth, and financial resources. The forward-looking statements are based on
assumptions, including assumptions of future events. It is likely that some of
the assumptions will prove to be incorrect for reasons that include those set
forth under "Risk Factors." The actual results and our financial position may
vary from those projected or implied in the forward-looking statements, and the
variances may be material.
ATLAS MINING COMPANY
We are a natural resource company engaged in the acquisition,
exploration, and, if warranted, development of its resource properties in the
state of Idaho and Utah. We also provide contract-mining services, specialized
civil construction services for mine operators, exploration companies, and the
construction and natural resource industries through our trade name "Atlas
Fausett Contracting." We were originally incorporated on March 4, 1924 in Idaho
and commenced our operation on that date.
We are attempting to revitalize several previously owned mines and to
explore the resources of newly acquired mines. We intend to acquire additional
properties near our current mines and elsewhere. In addition to the exploring
potential mineral resources, there are also significant harvestable timber
resources on our properties.
We also intend to expand our contract-mining services. These services
were originally developed and marketed to provide us with operating revenues. We
hope to increase the profit derived from these services and to utilize our
expertise in this area to explore our own properties.
HOW TO CONTACT US
Our executive office is located at 630 East Mullan Avenue, Osburn,
Idaho 83849. Our telephone number is (208) 556-1181.
3
THE OFFERING
Total shares outstanding prior to the offering ..... 7,006,727 as of December 31, 2001
Shares being offered by Atlas Mining................ 6,000,000 (Maximum)
Shares being offered by Selling Security Holders.... 740,000 (Maximum)
Total shares outstanding after the offering (assuming
full subscription).................................. 13,746,727
Price per share offered to the public by Atlas Mining
and Selling Security Holders........................ $0.25
Total proceeds raised by offering................... $1,500,000 gross, less offering related expenses
estimated at $100,000. We will not receive any
proceeds from the sale of shares by the selling
securityholders.
Use of proceeds from the sale of the shares ........ We plan to use the proceeds for exploration of
existing properties. We will also use the net
proceeds to payoff existing liabilities and for
working capital. See "Use of Proceeds."
Trading Symbol...................................... "ALMI" trading on the OTC Pink Sheet.
Termination of Offering............................. Both our offering and the selling shareholder
offering will terminate on the ninetieth (90th) day
following the effectiveness of this Registration
Statement (__________, 2002)
SUMMARY FINANCIAL DATA
The information set forth below for the years ended December 31, 2000
and 2001 are derived from the financial statements included elsewhere in this
prospectus. The information below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this prospectus.
YEAR ENDED
DECEMBER 31,
------------
STATEMENT OF OPERATIONS DATA: 2000 2001
- ----------------------------- ---- ----
Revenues..................................................... $ 784,314 $ 689,636
Operating Expenses........................................... 522,791 657,496
Net Loss..................................................... (347,243) (578,283)
Loss per common share........................................ ($.06) ($.09)
Weighted average number of common shares outstanding......... 5,846,472 6,057,758
4
YEAR ENDED DECEMBER 31
----------------------
BALANCE SHEET DATA: 2000 2001
- ------------------- ---- ----
Working capital...........................................($1,145,274) ($1,302,123)
Total assets.............................................. 1,439,196 1,043,376
Total liabilities......................................... 1,595,731 1,557,527
Shareholders' equity ..................................... ($156,535) ($514,151)
5
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING ATLAS MINING AND ITS
BUSINESS. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE
BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE
PERFORMANCE OF ATLAS MINING.
WE ARE CURRENTLY INSOLVENT AND, AS A RESULT, ARE IN DEFAULT ON ONE OF OUR LOANS.
We have one note payable which is in default, and intend to negotiate
with the creditor to settle our debt. We have a note payable to Moss Adams, LLP
for accounting services provided to us in 1999 and 2000. The principal of the
note is $53,250, with an interest rate of 9%, due in monthly payments of $1,000.
The note matured on August 16, 2001. We have settled a note payable to Fausett
International Inc. for $53,500, for equipment and supplies. We settled this note
by returning the majority of contracting equipment and supplies. This note is to
be repaid from the proceeds of this offering. See "Use of Proceeds."
If we are unable to negotiate a settlement of our debt with Moss Adams,
LLP, and we are unable to acquire equipment at a more reasonable rate, it would
have a material adverse impact on our ability to conduct business, and our
financial position. See our discussion in "Management's Discussion and Analysis
- - Liquidity and Capital Resources."
WE HAVE EXPERIENCED ANNUAL OPERATING LOSSES SINCE SEPTEMBER 1997 AND OUR
AUDITORS HAVE INDICATED UNCERTAINTY CONCERNING OUR ABILITY TO CONTINUE
OPERATIONS AS A GOING CONCERN
We have experienced annual operating losses since our reactivation in
September 1997. As of December 31, 2001, we had an accumulated deficit of
$2,821,027. We will need to raise additional capital to continue as a going
concern. Our auditors have indicated uncertainty concerning our ability to
continue as a going concern. We can not assure you that that our proposed
projects and services, if fully developed, can be successfully marketed or that
we will ever achieve significant revenues or profitable margins.
WE ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A
COMMERCIALLY VIABLE DEPOSIT OR "RESERVE" EXISTS IN ANY OF OUR PROPERTIES.
We are an exploration stage company and cannot assure you that a
commercially viable deposit, or "reserve," exists in any of our exploration
properties. Therefore, determination of the existence of a reserve will depend
on appropriate and sufficient exploration work and the evaluation of legal,
economic, and environmental factors. If we fail to find a commercially viable
deposit on any of our properties, our financial condition and results of
operations will be materially adversely affected.
WE HAVE NOT RECORDED INCOME FOR OUR EXPLORATION ACTIVITIES, AND MAY NOT DO SO IN
THE FUTURE.
To date, none of our exploration properties have warranted further
development, and as a result we have not recorded any income from those
activities. Additionally, although our timber harvesting activities have
generated revenue, we as a company have not yet generated any profit. We may not
be able to develop these activities to commercially viable enterprises or to
obtain additional properties that are commercially viable. The commodities
extracted from our properties may never generate significant revenues or achieve
profitability, which will adversely impact our financial condition.
6
WE WILL NEED ADDITIONAL FINANCING TO FULLY IMPLEMENT OUR BUSINESS PLAN, AND IF
WE FAIL TO OBTAIN ADDITIONAL FUNDING WE MAY NOT BE ABLE TO CONTINUE OUR
OPERATIONS.
Since September 1997, we have focused our efforts on developing our
business in underground mine exploration, contracting primarily to companies in
the mining and civil industries, and other resource development and property
acquisitions. We will need to raise additional capital to implement fully our
business plan and establish adequate operations. We cannot assure you that we
will be able to recover additional public or private financing, including debt
or equity financing, as needed, or, if available, on terms favorable to us.
Furthermore, debt financing, if available, will require payment of interest and
may involve restrictive covenants that could impose limitations on our operating
flexibility. Our failure to successfully obtain additional future funding may
jeopardize our ability to continue our business and operations.
WE REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL MINERAL
DEPOSITS EXIST ON OUR PROPERTIES.
Any potential development and production of our exploration properties
depends upon the results of exploration programs and/or feasibility studies and
the recommendations of duly qualified engineers and geologists. Such programs
require substantial additional funds. Any decision to further expand our
operations on these exploration properties will involve consideration and
evaluation of several significant factors including, but not limited to:
o Costs of bringing each property into production, including
exploration work, preparation of production feasibility
studies, and construction of production facilities;
o Availability and costs of financing;
o Ongoing costs of production;
o Market prices for the minerals to be produced;
o Environmental compliance regulations and restraints; and
o Political climate and/or governmental regulation and control.
WE DO NOT CARRY INSURANCE ON OUR TIMBER ASSETS AND A SIGNIFICANT LOSS OF STOCK
DUE TO FIRE, DISEASE OR OTHER CATASTROPHE MAY MATERIALLY REDUCE THE VALUE OF OUR
TIMBER ASSETS.
We do not carry insurance for fire or disease on its timber reserves
due to the prohibitive cost and our limited financial resources. As a result,
any catastrophic event may significantly reduce the value of our reserves, and
consequently reduce our financial position. The timber industry is affected by
lumber price movements and adjustments, downturns in the housing industry, and
interest rate movements. These factors can reduce the price of timber and lumber
on the open market. A significant decrease in the price of timber may reduce
income and therefore reduce the value of our stock.
OUR SUCCESS DEPENDS A LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN OR HIRE
KEY PERSONNEL, WHICH WE MAY OR MAY NOT BE ABLE TO DO.
To operate successfully and manage our potential future growth, we must
attract and retain highly qualified key engineering, managerial and financial
personnel. We face intense competition for qualified personnel in these areas,
and we cannot assure you that we will be able to attract and retain qualified
personnel. If we lose our key personnel, which includes our president, William
T. Jacobson, or are unable to hire and retain additional qualified personnel in
the future, our business, financial condition and operating results could be
adversely affected. We do not have any employment agreements with any of our
officers, directors or employees.
7
IF WE ARE UNABLE TO MANAGE THE FUTURE GROWTH OF OUR AGGRESSIVE BUSINESS
STRATEGY, IT MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Once we have renegotiated our debt and current liabilities, and have
generated enough revenue to create a cache of working capital, we intend to
pursue a strategy of rapid growth, and plan to expand significantly our service
contracting and acquisition of natural resource properties and devote
substantial resources to our marketing, sales, administrative, operational, and
financial systems. Such expansion will place significant demands on our
marketing, sales, administrative, operational, financial and management
information systems, controls and procedures. Accordingly, our performance and
profitability will depend on the ability of our officers and key employees to:
o Manage our business and our subsidiaries as a cohesive
enterprise;
o Manage expansion through the timely implementation and
maintenance of appropriate administrative, operational,
financial and management information systems, controls and
procedures;
o Add internal capacity, facilities and third-party sourcing
arrangements as and when needed;
o Maintain service quality controls; and
o Attract, train, retain, motivate and manage effectively our
employees.
We may not be able to integrate and successfully manage new systems,
controls and procedures for our business, or that our systems, controls,
procedures, facilities and personnel, even if successfully integrated, will be
adequate to support our projected future operations.
WE MAY NOT BE ABLE TO IMPLEMENT OR MAINTAIN FINANCIAL AND MANAGEMENT SYSTEMS
WHICH COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
If we fail to implement and maintain financial and management
information systems, controls and procedures, add internal capacity, facilities
and third-party sourcing arrangements or attract, train, retain, motivate and
manage effectively our employees, it could have a material adverse effect on our
business, financial condition and results of operations.
THE VALUE OF TIMBER ASSETS MAY FLUCTUATE DUE TO CHANGING TIMBER PRICES, WHICH
MAY ADVERSELY IMPACT OUR REVENUES AND OUR FINANCIAL POSITION.
Although we attempt to harvest timber only when the lumber prices merit
it, timber is subject to fluctuation in price. To help offset a change in
prices, we try to obtain a price agreement with the lumber mills prior to going
into any logging program. We do not currently have any agreements with mills.
Although we attempt to offset this by obtaining agreements with our purchasing
mills prior to beginning our logging, we may not be able to account entirely for
price variations, which may result in lower revenues than anticipated.
SHARES YOU PURCHASE WILL HAVE A BOOK VALUE LESS THAN THE PRICE YOU PAID FOR THE
STOCK.
If the offering is fully subscribed, the stock you purchase will have a
book value of $0.07 per share. If the offering is not fully subscribed, a lower
book value per share will result. The book value will be less than the
consideration paid for the shares.
8
THERE IS COMPREHENSIVE FEDERAL, STATE AND LOCAL REGULATION OF THE EXPLORATION
INDUSTRY THAT COULD HAVE A NEGATIVE IMPACT OUR MINING OPERATIONS.
Exploration operations are subject to federal, state and local laws
relating to the protection of the environment, including laws regulating removal
of natural resources from the ground and the discharge of materials into the
environment. Exploration operations are also subject to federal, state and local
laws and regulations which seek to maintain health and safety standards by
regulating the design and use of exploration methods and equipment. We require
various permits from government bodies for exploration operations to be
conducted. We cannot assure you that such permits will be received. No assurance
can be given that environmental standards imposed by federal, state or local
authorities will not be changed or that any such changes would not have material
adverse effects on our activities. Moreover, compliance with such laws may cause
substantial delays or require capital outlays in excess of those anticipated,
thus causing an adverse effect on us. Additionally, we may be subject to
liability for pollution or other environmental damages that we may elect not to
insure against due to prohibitive premium costs and other reasons. Management is
aware of the necessity of obtaining proper permits prior to conducting any
exploration activity. However, at this point we are not close enough to the
production stage to start the permitting process. See our "Description of
Business - Government Regulation" for further discussion.
APPLICABILITY OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON STOCK
COULD HAVE A NEGATIVE EFFECT ON THE LIQUIDITY AND MARKET PRICE OF OUR COMMON
STOCK.
Our common stock is listed on the Over-the-Counter Pink Sheets. It is
not quoted on any exchange or on NASDAQ, and no other exemptions currently
apply. Therefore, the SEC "penny stock" rules govern the trading in our common
stock. These rules require, among other things, that any broker engaging in a
transaction in our securities provide its customers with the following:
o a risk disclosure document,
o disclosure of market quotations, if any,
o disclosure of the compensation of the broker and its
salespersons in the transaction, and
o monthly account statements showing the market values of our
securities held in the customer's accounts.
The broker must provide the bid and offer quotations and compensation
information before effecting the transaction. This information must be contained
on the customer's confirmation. Generally, brokers subject to the "penny stock"
rules when effecting transactions in our securities may be less willing to do
so. This may make it more difficult for investors to dispose of our common
stock. In addition, the broker prepares the information provided to the broker's
customer. Because we do not prepare the information, we cannot assure you that
such information is accurate, complete or current.
9
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares by the selling
securityholders. Assuming the sale of the maximum number of shares offered by
Atlas Mining, the net proceeds to us from the sale are estimated to be
$1,500,000 before deduction of estimated placement expenses of $100,000.
However, we can not assure you of the amount of proceeds that will be raised, if
any at all, since this is a best efforts, no minimum offering. The first
$100,000 raised from this offering will be applied to legal and accounting fees
relating to this offering. The remainder of the proceeds will be applied in the
following manner, in the approximate percentages identified in table below:
1. Existing Liabilities. If we raise the full amount, we intend
to reduce and/or pay down approximately $400,000 in debts. In
descending order of priority we will pay down the following
existing debts:
1. $120,000 to CLS Mortgage Co. for a real estate
mortgage collateralized by our Shoshone Co. property
2. $100,000 of related party debt, the first $53,500 to
Fausett International and the remaining $46,500 to
William Jacobson
3. $180,000 of current accounts payable, the first
$32,000 to Textron Financial and the remainder to
accounts payable
For further description of the material terms of
these debts see our discussion in "Managements
Discussion & Analysis - Liquidity and Capital
Resources." If the offering is less than fully
subscribed, we will pay as many debts as possible to
reduce our payments.
2. Exploration of Dragon Mine. When all current liabilities are
paid down, we will commence exploration work on the Dragon
Mine to confirm the existence of the clay, and to determine
whether or not we have a commodity in commercially viable
quantities. We intend to drill at least 3 exploration holes to
verify previous work done on the property, and complete some
engineering work to determine if the property can be mined
economically.
3. Working Capital. We will keep an amount in our working capital
account to make sure that we can meet our day-to-day
obligations in a timely manner over the next 12 months. Please
see Risk Factor titled, "If we are unable to manage the future
growth of our aggressive business strategy, it may have a
material adverse effect on our business, financial condition
and results of operations."
MAXIMUM 75% OF 50% OF 25% OF 10% OF
OFFERING OFFERING OFFERING OFFERING OFFERING
-------- -------- -------- -------- --------
PROCEEDS $1,500,000 $1,125,000 $ 750,000 $ 375,000 $ 150,000
APPLICATION OF PROCEEDS
LEGAL, ACCOUNTING AND OTHER FEES $100,000 $100,000 $ 100,000 $ 100,000 $ 100,000
PAYOFF EXISTING LIABILITIES $400,000 $400,000 $ 350,000 $ 150,000
EXPLORATION OF DRAGON MINE $250,000 $200,000 $ 150,000 $ 50,000
WORKING CAPITAL $750,000 $425,000 $ 150,000 $ 75,000 $ 50,000
TOTAL APPLICATION OF PROCEEDS $ 1,500,000 $ 1,125,000 $ 750,000 $ 375,000 $ 150,000
10
While we currently intend to use the proceeds of this offering
substantially in the manner set forth above, we reserve the right to reassess
and reassign such use if, in the judgment of our board of directors, such
changes are necessary or advisable. At present, no material changes are
contemplated. Should there be any material changes in the above projected use of
proceeds in connection with this offering, we will issue an amended prospectus
reflecting the same.
If we are unable to generate enough proceeds with this offering to
repay our current liabilities, we may use some of the registered shares in
exchange for the retirement of existing debt in following descending order of
importance:
1. Legal fees, accounting and other fees related to offering
2. Other debt, as indicated above
SELLING SECURITYHOLDERS
The following table provides certain information with respect to the selling
securityholders' beneficial ownership of common stock as of March 31, 2002 and
as adjusted to give effect to the sale of all of the shares in the offering.
None of the selling securityholders currently is an affiliate of Atlas Mining
and none of them has had a material relationship with Atlas Mining during the
past three years, except for William Jacobson, who has been a director since
1993 and CEO since 1997. See "Plan of Distribution." The selling securityholders
possess sole voting and investment power with respect to the securities shown.
NUMBER OF SHARES BENEFICIALLY
NUMBER OF SHARES OWNED AFTER OFFERING(1)
BENEFICIALLY OWNED NUMBER OF SHARES -----------------------------
NAME BEFORE OFFERING BEING OFFERED NUMBER OF SHARES PERCENTAGE
---- --------------- ------------- ---------------- ----------
William T. Jacobson (2) 697,660 300,000 397,660 3.0%
David W. Keaveny (3) 140,000 140,000 0 0%
Jason Genet (3) 140,000 140,000 0 0%
Michael Garza (3) 140,000 140,000 0 0%
Pollet & Richardson (4) 20,000 20,000 0 0%
TOTAL 1,137,660 740,000 397,660 3.0%
- --------------
(1) Assumes that all shares being offered pursuant to this prospectus will
be resold by the selling shareholders and none will be held by the
selling shareholders for their own accounts.
(2) Mr. Jacobson is our CEO and Chairman of the Board. The shares being
offered were issued to Mr. Jacobson in lieu of partial salary.
(3) Messrs. Keaveny, Genet and Garza, are employees of Breakout Investment
Marketing Group who have provided certain marketing and advisory
services to us. The shares being offered to Messrs. Keaveny, Genet and
Garza were issued pursuant to an Investment Marketing Agreement dated
October 26, 2000.
(4) Pollet & Richardson is our legal counsel. The shares being offered were
issued to Pollet & Richardson under the Attorney Client Fee Agreement
dated September 19, 2001.
11
DETERMINATION OF OFFERING PRICE
OFFERING BY ATLAS MINING:
There is a limited established public market for the common stock being
offered under this prospectus. We are not currently registered on the
Over-the-Counter Bulletin Board system or any national exchange. We intend to
trade on the OTC Bulletin Board system. However, we are unable to determine the
price at which the stock will trade if and when we become eligible on the OTCBB.
We determined the offering price of the common stock based on several
factors: (1) potential investor interest, (2) our current capital needs, and (3)
our ability to pay future dividends, although no dividends are contemplated at
this time. The offering price should not be considered to bear any relationship
to our assets, book value or net worth and should not be considered to be an
indication of our value.
OFFERING BY SELLING SECURITYHOLDERS:
Each selling securityholder is free to offer and sell his or her common
shares at such times, in such manner and at such prices as they may determine.
The types of transactions in which the common shares are sold may include
transactions in the over-the-counter market, if or when it develops, negotiated
transactions, the settlement of short sales of common shares through the writing
and exercise of options or a combination of such methods of sale. The sales will
be at market prices prevailing at the time of sale or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The selling shareholders
have advised us that they have not entered into agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
shares. The selling shareholders do not have an underwriter or coordinating
broker acting in connection with the proposed sale of the common shares. The
shares may not be offered or sold in any jurisdiction or qualified for sale in
that jurisdiction unless the selling security holders coupled with any exemption
or qualification we will pay all of the expenses of the selling security
holders, except for any broker dealer or underwriter commissions, which will be
paid by security holders.
DILUTION
Our net tangible book value before taking this Offering into
consideration at December 31, 2001, was ($514,151) or ($0.07) per share of
common stock. The "net tangible book value" represents the amount of the total
tangible assets less the total liabilities of Atlas Mining as of December 31,
2001. Our net tangible book value per share represents the net tangible book
value of Atlas Mining divided by the total number of shares of common stock
outstanding as of December 31, 2001. The holders of such shares of common stock
are referred below as the "Existing Stockholders."
Without taking into consideration any change in the net tangible book
value of Atlas Mining after December 31, 2001 and assuming subscriptions are
received and accepted for the maximum number of shares of common stock offered
(6,000,000 shares), our adjusted net tangible book value as determined after the
receipt of net proceeds from such maximum offering amount, totaling $885,849,
will be $0.06 per share of common stock. This represents an immediate increase
in our net tangible book value of $0.13 per share of common stock to the
Existing Stockholders, and an immediate dilution of $0.19 per share to the
investors purchasing shares of common stock in this Offering (the "New
Stockholders").
12
The following table illustrates this per share dilution at December 31, 2001:
Offering Price per share of Common Stock.............................. $0.25
Adjusted net tangible book value per share
of Common Stock at December 31, 2001
before this Offering.................................................. ($.07)
Increase attributable to the Offering................................. $0.13
Adjusted net tangible book value
per share of Common
Stock after this Offering............................................. $0.06
Dilution in adjusted net tangible book
Value per share of Common
Stock to New Stockholders............................................. $0.19
In addition, further dilution could occur in the future due to any
contracts we may enter into with third party entities for consulting or other
services. Should any additional common stock shares be issued for consulting or
other services, you may, after the close of this Offering, continue to
experience additional dilution to your investment in Atlas Mining Company. The
dilution amount may also increase if less than a maximum offering results, as
any number of shares sold will increase the pro forma book value per share.
PLAN OF DISTRIBUTION
OFFERING BY ATLAS MINING:
We are offering up to 6,000,000 shares of our common stock at a price
of $0.25 per share to be sold directly by the company, as represented by
President, Chief Executive Officer and Director William Jacobson, and will be a
self-underwritten best efforts offering. The shares will not be sold through any
independent broker dealer or underwriter, so no compensation will be paid with
respect to those sales, except for reimbursement of expenses actually incurred
on behalf of our company in connection with such activities.
There is currently a limited market for our shares and no assurances
can be given that a more liquid public market for such securities will develop
after the closing of this offering or be sustained if developed. While we intend
to procure or encourage one or more broker or dealers to act as a market maker
for our securities following this offering, no such efforts have yet been
undertaken and we cannot assure you that any such efforts will prove successful.
As of the date of this prospectus, we have not retained a broker for the sale of
securities being offered. In the event that we retain a broker dealer who may be
deemed an underwriter, an amendment to our registration statement will be filed.
The offering will remain open for a period of 90 days, unless the
entire maximum offering has been sold prior to that time, or we decide, in our
sole discretion, to cease all selling efforts. Our officers, directors and
stockholders and their affiliates may purchase shares in this offering. At this
time there are no known arrangements with our officers, directors or affiliates
to purchase shares in this offering.
There is no escrow for any of the proceeds of this offering.
Accordingly, we will have use of any proceeds received once a purchase order is
received and funds have cleared. The proceeds shall be non-refundable except as
may be required by applicable law.
13
Subject to the requirements of the Securities Act and applicable state
securities laws, we plan to offer and sell the units in Idaho, California,
Arizona and Florida, however, we may consider accepting subscriptions from
interested investors in other states if it is not unreasonably burdensome to
comply with applicable securities law requirements in such states. We plan to
promote the offering by issuing press releases and advertising in newspapers and
on the radio, and we may distribute request cards and mail copies of our press
releases, advertisements and this prospectus to prospective investors in those
states. Any radio or television broadcasts and written materials used in
connection with the offering and not accompanied or preceded by a prospectus
will include only such limited information as is permitted under federal and
applicable state law. We also plan to hold informational meetings for potential
investors at sites in and around our principal business offices in Idaho.
Attendance at a meeting will not be required to purchase shares. The
informational meetings are intended to give investors an opportunity to ask
questions of the directors and officers and, if they choose, to bring their
legal or financial advisors to ask questions and obtain information about our
business. All attendees at the informational meetings will receive a prospectus.
We are selling the units through the efforts of our President Mr. Bill
Jacobson, without the use of a registered broker-dealer. Consequently, there may
be less due diligence performed in conjunction with this offering than would be
performed in an underwritten offering. We consider Mr. Jacobson not to be broker
under the Securities Exchange Act of 1934 because he has not been, and will not
be in the business of effecting transactions in securities for the accounts of
others. His participation in our offering is limited to this transaction, and is
not part of a general business of effecting securities transactions. We also
believe that he individuals is not a brokers or associated person of a broker
under Rule 3a4-1 of the Securities Exchange Act of 1934, for the following
reasons:
- - He is not subject to a statutory disqualification under the Exchange
Act at the time of his participation in the sale of our securities;
- - He will not be compensated for his participation in the sale of our
securities by the payment of a commission or other remuneration based
either directly or indirectly on transactions in securities;
- - He has not been, for the past 12 months, and is not presently an
associated person of a broker or dealer; and
- - He has not participated in the offering of securities for any issuer
more than once every 12 months.
Mr. Jacobson may have assistants who may also provide ministerial help, but
their activities will be restricted to the following:
- - Preparing written communications and delivering such communications
through the mails or other means that does not involve oral
solicitation of potential purchasers, provided that such written
communications have been approved by us;
- - Responding to inquiries of potential purchasers in communications
initiated by potential purchasers, provided that the content of such
communications is limited to information contained in our registration
statement; or
- - Performing ministerial and clerical work in effecting any transaction.
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SUBSCRIPTION PROCEDURES
-----------------------
HOW TO SUBSCRIBE
If you desire to purchase our shares of common stock you should:
1. Complete, date and sign the subscription agreement you received with
this prospectus, and a form of which is attached as an exhibit to this
document;
2. Make a check, bank draft or money order payable to "Atlas Mining
Company" in an amount equal to the subscription price of $0.25 times
the number of shares you wish to purchase; and
3. Deliver the completed subscription and payment to Atlas Mining at the
following address:
William T. Jacobson
Chairman and Chief Executive Officer
630 East Mullan Avenue
Osburn, Idaho 83849
(208) 556-1181
You will not be able to revoke your subscription after you have
delivered your executed subscription agreement and payment to us. However, we
reserve the right, in our sole discretion, to accept or reject any subscription,
in whole or in part for any reason whatsoever, and no subscription agreement is
binding on us until accepted. If the offering is over-subscribed, we reserve the
right to give preference to subscribers who are residents of the Idaho. We also
reserve the right to accept subscriptions on a first-come, first-serve basis or
on a prorated basis if we receive subscriptions for more than 6,000,000 shares.
If we do not accept all or a portion of a subscription, we will return the
unaccepted portion of your subscription funds without interest.
We will notify you promptly following the closing of the offering
whether your subscription has been accepted. If we reject your subscription, we
will promptly return your subscription agreement and payment, without interest.
If we accept your subscription, your check will be deposited in our general
account and will become immediately available for use by us for the purposes
described in our "Use of Proceeds" discussion.
The closing of the offering is subject to our determination to
terminate the offering, which is subject to our sole discretion, and we will
return your investment with any interest accrued should we decide to terminate
the offering prior to closing.
If we close on the offering, we will deliver a certificate or
certificates representing your ownership of our common stock within 60 days of
the initial closing. Our officers and directors and their affiliates may
purchase shares in this offering on the same terms as other investors. There is
no limit to the amount of securities our officers and directors and their
affiliates may purchase in this offering, and any such purchases will be
investment purposes only and not with the intent of resale.
If you have any questions about the offering or how to subscribe,
please call Mr. William Jacobson, our Chairman and Chief Executive Officer, at
(208) 556-1181. You should retain a copy of the completed subscription agreement
for your records. You must pay the subscription price at the time you deliver
your subscription agreement.
15
OFFERING BY SELLING SECURITYHOLDERS:
The selling securityholders may sell their shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. These broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling shareholders. They may
also receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Our primary source of revenue is generated by our AFC operations. As a
result, we are providing Management's discussion on our plan of operation.
PROPERTY EXPLORATION
We are currently considered an exploration stage company. There is no
assurance that a commercially viable mineral deposit exists on any of our
properties, and further exploration will be required before any evaluation as to
the economic and legal feasibility is determined. We realize that additional
expertise will be needed to proceed with the proper steps to move from the
exploration stage to development and production stages, as warranted. This will
include additional exploration and engineering expenditures.
Exploration expenditures the past two years for the San Acacio mine
were $313,426 in 1999, $48,750 in 2000, and $51,525 in 2001. In 2001 we also had
expenditures of $42,882 on the Dragon mine.
Due to costs of development and exploration, we have not mined the
Atlas, Aulbach and Sierra Mines for over 20 years, and further exploration of
these properties is required. At this time, we would prefer to conduct a
feasibility study estimated at $250,000 on the Dragon Mine in Juab County, Utah.
We consider the Dragon Mine an exploration stage project. Our entry
into the industrial minerals area has just begun. We have furnished samples of
halloysite clay extracted from our mine to at least three potential buyers and
two distributors. As mentioned in other discussion about the Dragon Mine, we do
not intend to start a development or production stage on this property until we
can be assured that we have adequate sales to justify a startup.
TIMBER
We do not intend to acquire any additional timber property at this
time. With the amount of timber remaining on Atlas property, we can supplement
our revenue stream for the next couple of years.
CONTRACT MINING
Our contract mining currently constitutes 85% of our revenue. This may
decrease as we increase operations on our other owned properties, as warranted,
and we intend to adjust our resources accordingly. However, our contract mining
will remain a significant portion of our business.
16
RESULTS OF OPERATIONS
Please refer to our discussions in the sections entitled "Risk Factors"
and "Certain Relationships and Related Transactions," as well as the notes to
our Financial Statements, for further descriptions of the financing and debt
transactions described below.
FISCAL YEAR ENDED 31, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2000.
Our operations for the period ended December 31, 2001, and the period
ended December 31, 2000 consisted mostly of our contracting work and some
exploration activities.
Our total revenues for the period ending December 31, 2001 were
$689,636, which is a 12% decrease from the same period the previous fiscal year.
The reason for this is due to fewer revenues received in 2001 from both the
contracting entity and logging. Our contract mining revenue for the period
ending December 31, 2001 was $632,480, a decrease of 2% from the same period of
the previous year. Our timber revenue for the period ending December 31, 2001
was $53,144, which is 60% less than the same period the previous year. We logged
less in 2001 because the lumber mills were paying less for logs during part of
2001 than in previous year.
We had no capital expenditures for the period ending December 31, 2001
and December 31, 2000.
Our interest payments for the period ending December 31, 2001 were
$126,870, which is an 8% increase from the same period the previous fiscal year.
The reason for this is due to the additional borrowing we have had to do in
order to continue operations. In September 2001, we borrowed $120,000 from CLS
Mortgage for an additional $6,400 in 2000, and an additional $16,400 cost in
2001.
Our general and administrative expenditures for the period ending
December 31, 2001 were $542,127, which is a 8% increase from the same period the
previous fiscal year. The reason for this is attributable to additional costs in
2001 not incurred in 2000 of $20,396 in professional fees, and $21,397 in
promotional expenses.
Our exploration expenses for the period ending December 31, 2001 were
$115, 369, which is a 58% increase form the same period the previous fiscal
year. In 2001 we expensed additional costs on the Dragon Mine, in Juab County,
Utah, a property we picked up in the same year.
Our net losses for the period ending December 31, 2001 ($578,283), is
1.66 times more than the same period the previous fiscal year. The reason for
this is attributed to less revenue in 2001 than in 2000 ($94,678 less), more
exploration expenses in 2001 ($66,619 more), and additional general and
administrative expenses in 2001 of $38,041. Gross profit on revenues however was
3% higher in 2001 then 2000 (30% in 2001 and 27% in 2000).
LIQUIDITY AND CAPITAL RESOURCES
To date our activities have been financed primarily through the sale of
equity securities as well as revenues from AFC and logging operations. We intend
to continue pursuing contracting work and to log our timber properties to help
pay for our operations. In 2000 and 2001 the contracting work accounted to about
85% of the total revenues. We have also borrowed from various sources to finance
our activities. Our current debt structure is explained below.
We have a note payable to William Jacobson, an officer and director of
the company, payable on demand and bearing no interest. The proceeds of this
obligation were used for general working capital. The current amount due as of
December 31, 2001 is $114,648.09. We have an unsecured line of credit for
17
$50,000 with Textron Financial at an interest rate of prime plus 6%. The balance
of the line of credit at December 31, 2001 and 2000 was $32,517 and $39,503,
respectively. The current balance as of March 31, 2002 is $30,969.37. The funds
were used for general working capital and are on a revolving credit line. In
2000, we entered into an agreement with Universal Funding for a secured
revolving credit line, immediately payable by accounts receivable. At December
31, 2000, and 2001 the balance of the advances were $38,715 and 0, respectively.
The current balance at march 31, 2002 is $0. Interest is payable after 90 days
at 0.17% daily. The proceeds of this loan are used for payroll. Accounts payable
and accrued interest due as of December 31, 2001 are $290,068 for daily
operations and taxes owed.
We have a note payable to Moss Adams, LLP, an accounting firm for
$53,250 due in monthly payments of $1,000 with a balloon payment due at
maturity. The note matured on August 16, 2001. We intend to negotiate with them
regarding terms of repayment. The note was for accounting services provided to
us in 1999 and 2000. We also have a note payable to CLS Mortgage Company, due in
monthly installments of $1,614, including interest at 16%. The note has a
current balance of $119,606.24 and is due in August 2005, secured by the
proceeds of our logging activities and collateralized by land and a building on
our property in northern Idaho. See "Description of Property - Shoshone County,
Idaho." The funds were used for working capital and will be repaid from logging
income. We had a note payable, in the amount of $15,000 to Lovon Fausett, a
director of Atlas Mining, payable on demand and bearing no interest The proceeds
of this note were used for working capital. We also had a note payable to
Fausett International due in monthly payments of $15,000, including interest at
8.75% and collateralized by equipment and supplies. This note matured on August
22, 2001. The balance as of December 31, 2001 was $782,741. We settled both
notes by returning the majority of equipment and canceling all Fausett related
obligations for $53,500 which is to be repaid from the proceeds of this
offering. We will acquire other equipment at a more reasonable rate in order to
continue our operations.
Our principal sources of cash flow are from our timber properties,
which averaged $10,000 per month in fiscal year 2000 and $4,400 per month in
2001, and our contract mining, which averaged $53,000 per month in fiscal year
2000 and 2001. In addition we also rely on our credit facilities and any public
or private equity issuances we may conduct in the future.
As of April 1, 2002 we rent office space at 630 E. Mullan Avenue in
Osburn, Idaho for $300 per month, on a month to month basis from the Lutheran
Church. We do not have a written rental agreement. In 2000 and 2001 we rented
from Fausett International, Inc., owned by Lovon Fausett, and paid $2,200 and
$15,400 respectively.
We agreed to sell shares of Atlas common stock for proceeds of up to $2
million to Summa Metals, a Nevada corporation, at approximately $0.33 per share.
During April 2001, we received $95,000 in proceeds from the sale of the common
stock. No further payments were made, and we issued 271,430 shares to Summa and
cancelled the remainder of the agreement.
If we do not reduce any of this debt from proceeds of our offering, or
if we do not renegotiate any of this debt, we would be obligated to pay
approximately $5,540 per month or $66,500 for the next fiscal year.
We will need to obtain additional funding to pursue our business
strategy during the next fiscal year. At the present time, we anticipate seeking
additional funding through additional private placements, joint venture
agreements, production financing, and/or pre-sale loans although we have no
plans to conduct any of these activities at this time. 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.
18
If we receive less than the full offering we will attempt to satisfy
these debts through a negotiated settlement, and/or ask for extended terms until
which time we can become more profitable or until we can conduct an additional
offering to help satisfy these debts. We cannot assure you that any of these
events will occur or, if they do occur, when they will occur. See our "Use of
Proceeds" discussion.
DESCRIPTION OF BUSINESS
We are a natural resource company engaged in the acquisition,
exploration, of our resource properties in the state of Idaho and Utah. We also
provide contract-mining services, specialized civil construction services for
mine operators, exploration companies, and the construction and natural resource
industries through our trade name "Atlas Fausett Contracting." We were
originally incorporated on March 4, 1924 in Idaho and commenced our operation on
that date.
In the future, we intend to be able to acquire additional properties
near our current mines and elsewhere. However, we have no plans to acquire
properties for the immediate future. In addition to the mineral resources, we
also have harvestable timber resources on our properties.
We also intend to expand our contract-mining services. These services
were originally developed and marketed to provide us with an operating revenue.
We hope to increase the revenue derived from these services and to utilize our
expertise in this area to explore our owned properties.
From 1980 to 1997, we had no activities. In 1997, we acquired the
equipment of Fausett International, Inc. for $1,416,099 and began our
contracting business. In 2002 we cancelled this agreement and returned the
equipment. We were not able to utilize this equipment enough to justify the cost
related to owning it. In 1998, we acquired the Sierra Silver Lead Mining
Company, an Idaho corporation for $276,157. This merger added an additional
329.18 acres of mineral rights to our current holdings. In 1999, we also
acquired the majority outstanding shares of Olympic Silver Resources, Inc., a
Nevada corporation for $288,566. The acquisition of Olympic gave us control of
an Olympic subsidiary mine in Zacatecas, Mexico. In 2001 our agreement on the
mine in Zacatecas expired and we no longer have any interest there. In 1999 we
acquired the Aulbach mining claims for $ 50,000, approximately 100 acres of
timber and mineral property in northern Idaho. In 1999 we acquired 54% interest
in the Park Copper Mining Company for $72,825, which holds 100 acres of timber
and mineral property in northern Idaho. In 2001, we entered into a lease
purchase agreement on the Dragon Mine in Juab County, Utah for $100,000. We
believe this property may contain a deposit of high quality clay, which we plan
to explore further. We have also harvested timber on approximately 320 acres of
our previously owned and newly acquired properties.
CONTRACT MINING
Because of exploration and other budget constraints, exploration on our
properties has remained idle since the 1980s. However, on August 10, 1997 our
board met and approved a plan to revitalize Atlas Mining for the purpose of
increasing shareholder value and, in the long term, of making us an operating
company with producing mines.
The first step in this process was to form a contract mining service
under the trade name of Atlas Fausett Contracting, which we refer to as AFC. We
acquired equipment and tools, we also hired key employees from Fausett
International ("Fausett"), a privately held mining contracting firm with over 30
years experience in the mining business. These employees brought with them
extensive knowledge and expertise in all aspects of underground mining.
19
AFC began contracting work on August 15, 1997. Among its many services,
AFC performs site evaluation, feasibility studies, trouble-shooting and
consultation prior to the undertaking of exploration and mine development. AFC's
projects include all types of underground mine development, rehabilitation and
specialized civil construction. In addition AFC provides mine closures services.
Services are contracted for either individually or as joint ventures depending
on the requirements of a particular project or the specific needs of an
individual client. AFC also handles work under contract from government
agencies.
AFC crews are experienced and have worked on projects in Idaho,
Montana, Oregon, Washington, Nevada, Colorado, Arizona, New Mexico, and British
Columbia. AFC has the required licenses to work in Idaho, Washington and Montana
and has the ability to license in most states in the western United States. AFC
operates under a permit from the Mine Safety and Health Administration and also
possesses a permit to handle explosives from the Bureau of Alcohol, Tobacco and
Firearms.
AFC was the main contractor at the Mayflower Mine, a Brimstone Gold
Corp. project, outside of Whitehall, Montana, and for the Holden Mine closure, a
U.S. Government and U.R.S. Corporation project on Lake Chelan, Washington.
AFC must also compete with other smaller companies that provide
contract services related to underground mining. However, AFC has experience in
a number of different mining techniques. Besides normal underground mining
activities, AFC pursues projects in civil construction which require its
expertise in ground stabilization (such as grouting, shotcrete, and rock
bolting). AFC has provided tunnel construction expertise for hydroelectric work.
AFC also works with government agencies and other mining companies with respect
to mine closures to help with industry efforts to alleviate potential hazards
from abandoned mines.
Since AFC mainly concentrates on underground mining activities, there
is very little surface disturbance, which is the main environmental concern
faced by mining companies whose activities are centered on surface mining.
TIMBER
Our entry into the timber industry was commenced primarily as a means
of generating cash flow from our exploration properties in northern Idaho. Our
intention is to remain in this industry only to the extent that it supplements
our revenue while we are conducting our exploration activities. With the amount
of timber remaining on Atlas property, we can supplement our revenue for the
next couple of years. As we harvest this timber, we will continue to seek out
additional exploration properties with harvestable timber. It takes
approximately fifteen to twenty years for a tree to mature in northern Idaho,
and our current goal is to acquire enough harvestable land to enable us to
rotate our logging activities on a yearly basis to allow previously harvested
areas the time to grow and mature marketable trees.
When we sell or timber we contract our logging to a qualified logger,
Randy Mattson, whose experience and reputation in the industry qualifies him to
negotiate the sale of our timber to various lumber mills in the area. We do not
have a written contract with Mr. Mattson, but rather hire him on an as needed
basis. As with most commodities, timber is subject to price fluctuations and by
government regulation. See "Risk Factors."
20
The timber business is a cyclical business with lumber prices that
fluctuate based on a number of factors including new housing starts, imports,
and government regulations. North Idaho is predominately held by the U.S.
government, either by the Forest Service or by the Bureau of Land Management.
When these agencies decide to harvest timber the excess timber can affect the
price the mills are willing to pay. In recent years there have been less
government sales of timber due to the environmental and bureaucratic policies
related to these sales. This has put more demand on the privately held timber.
We do not hold any contracts with any particular mills. We do, however, supply
timber to Louisiana Pacific, a local mill, which constitutes 80% of our annual
timber revenues generated, and maintain a good relationship with them. Other
factors which create the cyclical nature of this business is the weather. North
Idaho has a heavy snowfall each winter, making logging difficult during those
months. Consequently we do the majority of our logging efforts in the summer and
fall. Our property consists primarily of pine, fir and larch, which is used
predominately in the building industry.
Our logging activities are regulated by the Idaho State Department of
Lands. They inspect our logging practices and inform us of any activities that
may cause either a safety or an environmental problem. Our logger carries
workers compensation and liability insurance, and falls under the guidelines of
Occupational Safety and Health Act of (OSHA).
EXPLORATION
We intend to conduct our exploration activities for silver ore and
halloysite clay, 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 other properties to acquire
until we have finished conducting our feasibility surveys and other exploration
work on our current properties. Although we have not yet generated income from
these properties, we are continuing our exploratory work on these properties.
In 1999, we spent $362,520 on our silver exploration, and $48,750 in
2000. In August 2001, we acquired the Dragon Mine in Juab, Utah and began our
clay exploration. Our exploration expenses for the period ending December 31,
2001, were $115,369. We spent 51,525 on our silver exploration, and $63,844 on
our clay exploration.
The halloysite clay is considered a non-toxic material and with proper
containment and processing techniques that, if commercially viable amounts are
discovered on the property, we feel we can produce a sellable product with
minimal environmental consequences. The intended processing will be the
crushing, drying, and packaging of the product for shipment. As this is a
process that will be achieved only after the exploration stage and development
stages are completed, we have not formalized any plans for mining and processing
the clay.
We do not have any customers, suppliers or contracts relating to the
silver or clay businesses and are still attempting to complete our exploration
of our properties. Should production be warranted in either operation, we intend
to generate a list of potential buyers. Each buyer may have a different use for
the product and the price and quantity will vary as a result.
Should any of our exploration activities reach the development and/or
production stages, we intend to submit a mining and reclamation plan to the
proper state and federal authorities, and will proceed with our activities upon
acceptance of our plan. Realizing that this process is sometimes time consuming,
if we find that we will be moving forward on this or any other exploration
project, we will begin this process as soon as possible.
21
BUSINESS STRATEGY
As was noted above, the creation of AFC was done for the purpose of
creating an operating revenue for us. We intend to expand our exploration, and
our timber production.
To date our activities have been financed primarily through the sale of
equity securities and the issuance of equity for the acquisition of mining
property. See "Management's Discussion and Analysis of Financial Condition -
Results of Operations."
We will need to obtain additional funding to pursue our business
strategy during the next fiscal year. At the present time, we anticipate seeking
additional funding through additional private placements, joint venture
agreements, production financing, and/or pre-sale loans, although we have not
entered into negotiations for any of these sources at this time. Our inability
to raise additional capital to fund operations through the remainder of this
year and through the next fiscal year would have a detrimental effect on our
viability and capability to pursue our business plan.
COMPETITION
CONTRACT MINING
A review of Dun and Bradstreet shows that the main competitors of AFC
in the contract mining business are: American Mine Services, Inc.; Dynatec
Mining Corporation; Tyson; J.S. Redpath and Small Mines Development. Each of
these companies are larger corporation or part of a larger company which gives
them the depth to take on larger projects that require large capital
investments.
Similarly, AFC must compete with other companies that provide contract
services related to underground mining. AFC has had the opportunity to compete
outside of this area on occasion in that it has used its underground mining
expertise in different ways. Such related use of this expertise has been in such
things as rock bolting, shotcrete, and grouting for ground support. AFC has also
acquired and completed mine closure projects under the jurisdiction of the
Forest Service and State and Federal Environmental Agencies.
The amount of underground contracts for which AFC could bid fluctuates
greatly depending and the economic climate of the industry. However on average
the total contracts offered are generally between $100 to $120 million per year.
The major competitors to AFC, Redpath, Dynatec and Tyson and Small Mines
Development, get the largest projects, which probably accounts for 80% to 90% of
all projects available. The remaining projects are spread out between American
Mine Services, AFC and a few others.
However, we believe we are in a unique position due to our manpower and
mining knowledge and experience. AFC has the ability to compete on larger
projects because of its expertise. However, the issue of whether to compete on
larger projects depends on our willingness to devote the necessary capital,
bonding, and other resources to larger projects when these resources might be
better used in the exploration of our own properties. The goal of our management
at this time is to show continued growth and profitability in AFC in order to
support the total corporate structure, and to utilize the talents and resources
of the AFC for our own exploration projects when those resources are available.
We have noticed less activity in the mining industry in the United
States over the past three years. During this period the price of metals has
declined while additional costs due to regulations imposed on the industry have
driven mining costs upward making mining less profitable. Consequently, the
ability to generate a sustainable revenues source from AFC has been hampered.
Because we do not know if and when this trend will end management has decided to
find mineable resources on its own to utilize the manpower and expertise
available to the company.
22
EXPLORATION
We face a large number of competitors with respect to our exploration
activities. Although we may have some advantage with respect to companies
smaller than ours, we also face the common disadvantage against larger companies
with more available capital. Consequently we have limited our exploration
activities to the clay property (Dragon Mine).
TIMBER
We face large numbers of competitors in this industry, and our
competitors include individuals who may own property in northern Idaho and wish
to sell their lumber at market prices to local mills. We are affected by market
prices, and as prices fall and competitor suppliers increase, our revenues from
this business may fall significantly. Logging activities in northern Idaho are
seasonal due to the large amount of snow we accumulate during the winter. We do
most of our logging activity in the summer and fall.
GOVERNMENTAL REGULATION
CONTRACT MINING
We are subject to the following state and federal regulations with
respect to this aspect of our business:
Most states require a contractors' license before conducting business
in their state. Each state has a different procedure for licensing. We estimate
the annual cost to maintain our state contractors licenses to be approximately
$500 per year. We obtain and pay workers compensation insurance, unemployment,
and state withholding in all states in which we work. We handle these functions
as a part of our normal clerical process, but estimate that we spend
approximately $5,500 per year to maintain this function.
Several states that we operate in require a permit to handle
explosives, and we maintain such a license under the U.S. Bureau of Alcohol
Tobacco and Firearms (ATF, USC18, Chapter 40). This license is renewed every
three years for $50.00. If we hire new employees that will handle our
explosives, we are required to submit information to the ATF. Over the past
year, the ATF has asked that we keep in contact with them regarding any projects
that require the use of explosives. We estimate our cost each year to be
approximately $50 to keep this license in good standing.
We have always required that the mine owner permit his project with the
proper regulatory authority prior to beginning work, which relieves us of
liability for this.
We are licensed under the Mine Safety and Health Act of 1997 (MSHA)
(License number: VL-2). We are required to submit quarterly reports of our
activities the MSHA and to conduct annual refresher courses for our employees.
The annual cost of these functions varies based on the amount of activity;
however, we estimate that in the past two fiscal years we have had an annual
expenditure of approximately $700 per year, and anticipate the next fiscal
year's cost to be the same
TIMBER
We are subject to the following state and federal regulations with
respect to this aspect of our business:
23
We are regulated by the Idaho state Department of Lands under at the
Idaho Forestry Act Title 38, Chapter 1. Under this regulation, the logger must
apply for and obtain a Notification of Forest Practices prior to starting a
logging project. This permit requires the logger to maintain proper logging
practices, including erosion abatement, and fire prevention. The State of Idaho
retains $4 per thousand board feet from all logs hauled to the mill, and once
the project is completed along with a State inspection verifying that the
project was completed according to Idaho Forest Practices Act, the logger
applies a release of these funds. Although we contract out our logging, we may
be liable for problems created by the logger as the landowner. However, we take
measures to ensure that our contracted loggers are reputable and incidents do
not occur. We do not currently have any direct costs related to this regulation.
EXPLORATION
We are subject to the following state and federal regulations with
respect to this aspect of our business:
Should we decide to conduct exploration activities in Idaho, we will
notify the Idaho State Bureau of Mines as required under Title 47, Chapter 1,
the Department of Lands, and the federal Mine Safety and Health Administration
of our intent. If we produce any ground disturbance, we will then need to notify
the State Department of Environmental Quality to ensure that we are working
within their guidelines. However, we do not intend to conduct any exploration in
Idaho at this time.
We do intend to conduct some exploration at the Dragon Mine in Juab
County, Utah. The Utah Department of Natural Resources sets the guidelines for
exploration based on provisions of the Mined Land Reclamation Act, Title 40-8,
Utah Code Annotated 1953, as amended, and the General Rules and Rules of
Practice and Procedures, R647-1 through R647-5. We intend to apply for an
exploration permit in the near future, which will cost $100 annually.
We will also apply for authority from the Utah Department of Commerce
to conduct business as a foreign corporation in the state as required by Utah
Code, Title 16-10A-1501. We will pay $50 for this application and $50 annually
thereafter.
We do not plan to hire any additional people for his process at this
time, but will utilize existing employees already covered by Idaho State
employment regulations.
EMPLOYEES
As of December 31, 2001, Atlas Mining and its subsidiaries have five
employees. We have also outsourced some of our logging work to a logging
contractor who employs approximately ten people. In addition, we periodically
utilize the services of various individuals on a consulting basis. In 2001 we
paid a geologist, Richard Tschauder, $36,000, and an industrial minerals
consultant, Phlogiston Company, $30,000 for their consulting services. We do not
have employment agreements with any of our employees. None of our employees are
covered by a collective bargaining agreement, we have never experienced a work
stoppage, and we consider our labor relations to be excellent.
DESCRIPTION OF PROPERTY
We have assets of real property, mineral leases and options. The
following section describes our right, title, or claim to our properties and
each property's location. This section also discusses our present plans for
exploration of the properties, and an estimate of mineralized material located
on each property. Please refer to our Glossary at the end of this section for
definitions of technical terms used in our discussion.
24
PRINCIPAL OFFICE
- ----------------
We rent office space from the Silver Valley Christian Academy in
Osburn, Shoshone County, Idaho. The address of the property is 630 East Mullan
Avenue, Osburn, Idaho 83849. The property is a two room office, containing
approximately 800 square feet, in a business complex in the downtown area of
Osburn, Idaho. The rent is $300 per month and there is no rental agreement.
SHOSHONE COUNTY, IDAHO
EXPLORATION
-----------
We own approximately 800 acres of fee simple property and patented
mining claims, and 260 acres of mineral rights and unpatented claims, located in
the Coeur d'Alene mining district in Shoshone County, Idaho, commonly referred
to as the Silver Valley of North Idaho. Atlas was originally incorporated to
pursue mining activities on the Atlas mine property near Mullan, Idaho. This
property had some past production of silver, lead, zinc and copper in the early
1900's. However, the existence of minerals on this property cannot be determined
without extensive exploration.
We have no plans for exploration of the Shoshone County mines at this
time, and the property is currently mortgaged to CLS Mortgage. See "Management's
Discussion of Analysis of Plan of Operation - Liquidity and Capital Resources."
If all of our offered shares of stock are sold, then we plan to explore the
Dragon Mine in Juab County, Utah. Any revenues we may eventually generate may be
used to further explore mines within the Shoshone County area or to acquire new
properties wholly unrelated to its Shoshone County properties. See "Use of
Proceeds."
Our properties are divided into five separate tracts. These sections
are named for the mines located in that specific section. The section location
and estimated acreage are as follows:
SECTION OF THE COEUR D'ALENE MINING DISTRICT ESTIMATED ACRES
Atlas Mine 540 acres fee simple and patented,
180 unpatented
Sierra Trapper Creek 80 acres patented
Aulbach, Section 6 & 7 100 acres patented
Sierra Silver, Woodland Pk & 9 Mi 60 acres patented, 80 acres mineral
rights
Sierra Hardscrabble 20 acres patented
The largest section is the Atlas Mine. The underground Atlas Mine, idle
since the early 1980's due to exploration budget restraints, is located on the
east end of the Coeur d'Alene Mining District in Shoshone County. The property
is accessible by interstate freeway and a county maintained road. Geologically,
the property lies just south of the Osburn Fault in the Wallace and St. Regis
formations. The Mine has over 7,000 feet of tunnels with a rail system and a
2,000-foot internal shaft which can be accessed for future exploration.
The other properties in Shoshone County have no accessible workings.
All the properties are accessible either by state highway, county road or forest
service roads.
TIMBER
------
We estimate that the five properties listed above contain approximately
2 million board feet of harvestable timber. Atlas contracts independent loggers
to harvest the timber and deliver it to the mill. The current return to Atlas is
approximately $150 per thousand board feet. A board foot of lumber is one foot
by one foot by one inch. We implement reforestation techniques to replenish its
timber supply. We contract our logging activities to Randy Mattson, who has over
20 years of experience in the industry.
25
We acquired our Sierra property through the acquisition of Sierra
Silver Lead Mining Company. Through this purchase the Company acquired
approximately 329 acres of mineral rights that include approximately 250 acres
of surface and timber. Although there was a small amount of zinc mined on the
Sierra Silver property, there has been no mining activity for over forty years.
Subsequent to the purchase we sold approximately 100 acres.
The majority of the Sierra property lies south of the Osburn Fault in
the Wallace formation, and has no reserves. The property does have approximately
500,000 board feet of timber, which we value at approximately $75,000, which is
included in the total timber value estimate in the paragraph above.
We acquired its Aulbach claims in March 1999 from Trail Gulch Gold
Mining Company. Through this purchase, we acquired approximately 100 acres of
surface and mineral rights which included timber. We have logged approximately
650,000 board feet of timber on the property with an approximate net value
of $105,000.
JUAB COUNTY, UTAH
- -----------------
DRAGON MINE
The Dragon Mine property, located in Juab County, Utah near the City of
Eureka (Tintic Mining District) has been principally exploited for halloysite
clay, a rare and high unit value clay mineral. The property consists of 38
patented mining claims, approximately 230 acres, located in the following
sections: T10S, R2W, sections 29, 30, 31, and T10S, R3W, Section 36, all
relative to the Salt Lake Meridian. Atlas Mining Company currently controls the
property through a lease purchase agreement executed on July 10, 2001, with
Conjecture Silver Mines, Inc., whose address is P.O.B. 14006, Spokane,
Washington 99214. Conjecture Mines acquired the claims through a Quit Claim deed
and share exchange with Grand Central Silver Mines, Inc. We signed a lease
purchase agreement with Conjecture Silver Mines in August, 2001. Under the lease
purchase agreement, we paid 400,000 shares of common stock valued at $100,000
for a one year lease. Under the terms of the lease agreement we have the right
to renew the lease annually for the payment of 100,000 additional shares or may
buy the property for $500,000 if we have $1,000,000 in sales from the mine in a
12 month period. Should we mine the property, if warranted, before we have
bought it we are liable to pay a 3% royalty on the gross sales of product from
the property.Prior to the ownership mentioned the Dragon Mine was owned by
Anaconda and operated by Filtrol Corporation from 1950 to 1977. Examination of
the mine maps, the open pit and surviving correspondence, coupled with informal
interviews of former employees, all lead us to the conclusion that mining
techniques were likely inefficient. A combination of developments of synthetic
catalysts (the halloysite was mined for petroleum cracking) and production
inefficiencies led the mine to price itself out of business. The property has
been idle since 1977. Previous owners records indicate that over 1.1 million
tons were mined at the property from 1950 until it closed. Those records also
indicate approximately 300,000 tons of mineralized material remain on the
property. The previous owners also conducted some exploration core drilling and
some reverse circulation drilling, however those records are incomplete. These
figures are dependent on the assumption that the old records and maps are
accurate. Our analysis of the surviving maps and record lead us to believe that
their estimates of 300,000 tons of materialized material is still in place.
Their area of influence were no more than 80 feet along strike and 100 feet
along dip. There was no chemically quantifiable cutoffs to the mineralized
material. It appeared that the most distinguishable factors were visual
indicators. The specific gravity they used was a density of 17 cubic feet per
ton. Until we are able to conduct our own exploration drilling program, we can
not confirm this information. If these records are not correct we may be
overstating the estimated mineralization material left in the mine.
26
The property is located in the arid mountains approximately 2 miles
west of Eureka, Utah and can be accessed via state highway and county road. The
property has been mined in the past, however the only evidence of mining is an
open pit area and an abandoned head frame. The Union Pacific Railroad has a spur
approximately 2 miles from the property. Power is approximately 1.5 miles from
the site, and there is no available water on the property at this time.
We believed the halloysite material was formed through the alteration
of a shale bed lying between a limestone bed and igneous rocks. The base of the
limestone was selectively replaced by iron oxide material with abundant
manganese. The shale was altered to halloysite. This unit is evident in the open
pit. Following the alteration event, halloysite was squeezed into
northeast-striking faults upward through the limestone to the top of the bedrock
in places. Our geologists see added potential to the northeast along these
faults and in the replaced beds to the east and northeast. This potential has
not yet been quantified.
Samples taken from surface exposures of the halloysite material have
been made available to parties interested in conducting suitability tests.
Samples have been taken from seven areas within the open pit. On the surface,
the halloysite material is chalky white, often stained by iron leaking downward
from the iron cap, but a few inches beneath the surface, the halloysite material
turns to soft, wet-looking and soapy feeling, often with a bluish tinge.
However, this material loses its water content and turns chalky within a few
days of exposure to air.
DESCRIPTION OF PROPERTY GLOSSARY
--------------------------------
Adit: A nearly horizontal passage from the surface by which a mine
is entered.
Alteration: Changes in chemical or mineralogical composition of a rock
generally produced by weathering or hydrothermal solutions
Clay: A size term regarding particles, regardless of mineral
composition, with a diameter of less than four microns, or a
group of hydrous alumino-silicate minerals related to the
micas
Cross Section: A profile portraying an interpretation of a vertical
section of the earth explored by geophysical and/or geological
methods.
Development: The preparation of an established commercially minable deposit
(reserves) for its extraction which are not in the production
stage.
Diapir: A structure formed by the squeezing of plastic material into
the overlying rock - usually results in a dome in the
overlying rock
Exploration: The search for mineral deposits (reserves) which are not in
either the development or production stage.
Fault: A fracture or fracture zone along which there has been
displacement of the sides relative to one another parallel to
the fracture
Formation: The primary unit of formal mapping or description
Grout: A form of ground stabilization where in cement is pumped into
the rock formation
Halloysite: A clay mineral related to kaolin with essentially the same
chemical composition, but has crystals which are slender
hollow tubes
27
Mineral: A naturally formed chemical element or compound having a
definite range in chemical composition and usually a
characteristic crystal form
Mining Claim: That portion of mineral lands that a miner takes and
holds in accordance with mining laws
Open Pit: A hole in the ground left by the extraction of material
Potassic: Of, pertaining to, or containing potassium
Reserve: That part of an identified resource from which a useable
commodity can be economically and legally extracted at the
time of determination
Resource: A concentration of naturally occurring materials in such form
that economic extraction is currently or potentially feasible
Reverse Fault: A fault on which the hanging wall has been raised
relative to the footwall
Shaft: An excavation of limited area compared to its depth
Shotcrete: A form of ground stabilization where concrete is sprayed on
the rock to give it strength.
Vein: A body long in two dimensions and short in a third, usually
used to describe a steeply dipping mineral deposit with the
same characteristics
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors, executive officers and significant personnel of Atlas
Mining Company and their ages are as follows:
Name Age Position
- ---- --- --------
William T. Jacobson 54 President, CEO, Director
Jack Harvey 78 Vice President and Director
Kurt Hoffman 34 Treasurer and Director
Thomas E. Groce 79 Director
Marqueta Martinez 51 Secretary
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the foregoing Directors or Executive Officers has, during the
past five years:
(a) Had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to
that time;
(b) Been convicted in a criminal proceeding or subject to a pending
criminal proceeding;
(c) Been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities, futures, commodities or banking activities;
and
(d) Been found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
28
WILLIAM T. JACOBSON has been president of Atlas Mining Company since
August 1997. He has had a fifteen year career in the mining industry and spent
fifteen years in the banking industry. Prior to joining the Company, Mr.
Jacobson was a president and director of the Silver Trend Mining Company,
located in Kellogg, Idaho. Mr. Jacobson holds a business degree from the
University of Idaho. Mr. Jacobson does not hold a board seat in any other public
company.
JOHN "JACK" HARVEY has been vice president of Atlas for 17 years. He
received his mining engineering degree from Montana Tech. He worked in Butte,
Montana with Anaconda and Arco until he retired about 15 years ago, after a 41
year career. Mr. Harvey does not hold a board seat in any other public company.
KURT HOFFMAN is the treasurer of Atlas Mining Company and has been the
the president of Trend Mining Company since 1998 which is a publicly traded
company traded on the over the counter bulletin board under the symbol TRDM. Mr.
Hoffman also owns and has operated Hoffman Mining and Land Services since 1995.
Other than TRDM, Mr. Hoffman does not hold a board seat in any other public
company.
THOMAS E. GROCE received a metallurgical engineering degree from
Montana Tech. He retired 16 years ago, after a 30- year career at Kaiser
Aluminum. Mr. Groce held the position of secretary treasurer for 16 years. Mr.
Groce does not hold a board seat in any other public company.
MARQUETA MARTINEZ is the secretary for the corporation, and works as a
full time employee for the Company. She has worked in the mining industry since
1991. Ms. Martinez does not hold a board seat in Atlas Mining or any other
public company. Marqueta is also the treasurer for the Shoshone County Habitat
for Humanity.
All directors hold office until the next annual meeting of shareholders
and the election and qualification of their successors. Officers are elected
annually by, and serve at the discretion of, the Board of Directors. Board
members are not presently compensated, but are reimbursed for their expenses
associated with attending Board meetings.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following executive compensation disclosure reflects all
compensation awarded to, earned by or paid to the Named Executive Officers, as
defined below, for the fiscal years ended December 31, 2001, 2000 and 1999. The
named executive officers (the "Named Executive Officers") are Atlas Mining's
Chief Executive Officer and the other executive officers of Atlas Mining who
each received in excess of $100,000 in total annual salary and bonus for fiscal
year 2001. Compensation is shown in the following table:
29
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Restricted Securities
Name and Principal Fiscal Other Annual Stock Awards Underlying All Other
Position Year Salary ($) Compensation ($) Options/SARs (#) Compensation
- -------- ---- ---------- ------------ --- ---------------- ------------
William T. 2001 78,000
Jacobson(1) 2000 72,000
CEO 1999 72,000
- ------------------
(1) Mr. Jacobson's employment began in 1997.
STOCK OPTION GRANTS
The following table shows all individual grants of stock options to the
Named Executive Officers during the fiscal year ended December 31, 2001.
Option/SAR Grants in Last Fiscal Year
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/SH) Date
- ---- ----------- ----------- ------------ ----
None
- -------------------
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL-END OPTION VALUES
Set forth below is information with respect to exercises of stock
options by the Named Executive Officers during the fiscal year ended December
31, 2000, and the fiscal year-end value of all unexercised stock options held by
such persons.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised,
Options Held at In-the-Money Options at
Fiscal Year-End# Fiscal Year-End ($)(1)
---------------- ----------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
None
EMPLOYMENT AND CONSULTING AGREEMENTS
We do not have any written employment/consulting agreements with our
executive officers and directors.
COMPENSATION OF DIRECTORS
Members of the Board of Directors are not compensated for serving as
directors of Atlas Mining, however expenses may be reimbursed.
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We engage in a number of transactions with interested parties. We make
every effort to ensure that these transactions are conducted as arm length
transactions. However, at this time we do not have a formal conflicts of
interest policy.
Fausett International, Inc. sold operating equipment and supplies to us
in 1997 for a purchase price totaling $1,416,094. The valuation of the operating
equipment was done by appraiser Clyde James of Professional Adjusters, Inc. The
owner of Fausett International is Lovon Fausett who is also a director for Atlas
Mining. The purchase price was paid in cash, capital stock (875,000 shares of
common stock valued at $350,000), and a note payable which terms of settlement
are discussed below and are described in our discussion entitled "Management's
Discussion and Analysis - Liquidity and Capital Resources." As part of the
purchase of Fausett International Inc.'s assets, we engaged Fausett
International in a consulting agreement, beginning in 1998, to be provided by
Lovon Fausett, the majority stockholder of Fausett International Inc., and
payable at $1500 per month. We discontinued payments after the first year due to
lack of activity in the industry.
During 2000, Lovon Fausett loaned Atlas Mining $15,000 for use as
working capital. The note has been settled with Fausett International according
to the terms mentioned below and described in our discussion entitled
"Management's Discussion and Analysis - Liquidity and Capital Resources."
Atlas Mining leased office space from Fausett International for $1,100
per month, on a month-to-month basis. In each of 2001 and 2000, we paid $2,200
and $15,400 respectively. We have recently terminated are lease agreement with
Fausett International, and will be renting office space for significantly less.
We have settled all of the above-mentioned notes relating to
obligations to Fausett International and Lovon Fausett for the equipment
purchase, the loans and the remainder of outstanding rent. And as of this filing
we have only a promissory note of $53,500 to be repaid from this offering to
Fausett International.
During 2001 and 2000, William Jacobson loaned Atlas Mining $31,300 and
$36,000, respectively, for use as working capital. The total balance remaining
as of December 31, 2001 is $114,648 and $114,501 respectively. The note is
payable upon demand and bears no interest.
Further discussions of these transactions are described in
"Management's Discussion and Analysis of Plan of Operation - Liquidity and
Capital Resources."
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock is traded on the OTC Pink Sheets under the symbol
"ALMI." The following table sets forth the high and low bid prices of our common
stock, as reported by Pennaluna and Company, Coeur d'Alene, Idaho, for each
quarter for the years 1999 and 2000, and the first, second and third
quarters-through September 30, 2001. The quotations set forth below reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
31
HIGH LOW
---- ---
1999
First Quarter....................................... $.25 $.18
Second Quarter...................................... $.25 $.18
Third Quarter....................................... $.25 $.04
Fourth Quarter...................................... $.25 $.04
HIGH LOW
---- ---
2000
First Quarter........................................ $.25 $.12
Second Quarter....................................... $.25 $.12
Third Quarter ....................................... $.12 $.06
Fourth Quarter ...................................... $.12 $.06
HIGH LOW
---- ---
2001
First Quarter........................................ $.09 $.02
Second Quarter....................................... $.25 $.07
Third Quarter ....................................... $.25 $.10
Fourth Quarter....................................... $.15 $.08
As of December 31, 2001, there were approximately 1,690 holders of
record of our common stock. We have not paid any dividends on our common stock
during the past two years. We expect to continue to retain all earnings
generated by our operations for the development and growth of our business, and
do not anticipate paying any cash dividends to our shareholders in the
foreseeable future. The payment of future dividends on our common stock and the
rate of such dividends, if any, will be determined by our board of directors in
light of our earnings, financial condition, capital requirements and other
factors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of our shares as of March 31, 2002, for (i) each current Director and
each nominee for Director (ii) each officer of Atlas Mining, (iii) all persons
known by us to beneficially own more than 5% of the outstanding shares of Atlas
Mining shares, and (iv) all officers and Directors of Atlas Mining as a group.
Unless otherwise noted, we believe that all shares are beneficially
owned and that all persons named in the table or family members have sole voting
and investment power with respect to all shares owned by them. A person is
deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days from the date hereof upon the exercise of warrants or
options. Each beneficial owner's percentage of ownership is determined by
assuming that options or warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days from the date
hereof have been exercised. As of the date of this Registration Statement, no
options, warrants or rights to acquire shares have been granted.
32
NUMBER OF SHARES
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF TOTAL
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common William T. Jacobson, 697,660 10.0%
Chairman, CEO
630 East Mullan Avenue
Osburn, Idaho 83849
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common Jack Harvey 60,767 *
Vice President, Director
630 East Mullan Avenue
Osburn, Idaho 83849
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common Kurt Hoffman 2,500 *
Treasurer, Director
630 East Mullan Avenue
Osburn, Idaho 83849
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common Thomas E. Groce 121,340 1.7%
Director
630 East Mullan Avenue
Osburn, Idaho 83849
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common Marqueta Martinez 25,300 *
Secretary
630 East Mullan Avenue
Osburn, Idaho 83849
- ------------------------------- ------------------------------------------- ---------------------- -------------------
Common Fausett International, Inc. 500,000 7.1%
P.O. Box 968
Osburn, Idaho 83849-0968
- ------------------------------- ------------------------------------------- ---------------------- -------------------
All Officers and Directors as a Group
(6 persons) 943,347 13.5%
- ------------------------------- ------------------------------------------- ---------------------- -------------------
* represents less than one percent of the total outstanding shares.
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 60,000,000 shares of common
stock, no par value, of which 7,006,727 are issued and outstanding as of
December 31, 2001 and 10,000,000 shares of Preferred Stock, par value $1.00, of
which none are issued and outstanding as of December 31, 2001.
COMMON STOCK
All of the authorized voting common shares of Atlas Mining are of the
same class and, once issued, rank equally as to dividends, voting powers and
participation in assets. Holders of common shares are entitled to one vote for
each share held of record on all matters to be acted upon by the shareholders.
Holders of common shares are entitled to receive such dividends as may be
declared from time to time by the Board of Directors, in its discretion, out of
funds legally available there from. No shares have been issued subject to call
or assessment. There are no preemptive or conversion rights and no provisions
33
for redemption or purchase for cancellation, surrender, or sinking or purchase
funds, nor any cumulative voting rights. The Directors of Atlas Mining may from
time to time declare and authorize payment of dividends, as they deem advisable.
Subject to the rights of members, all dividends on shares shall be declared and
paid according to the number of shares held. No dividends have been declared
since incorporation. The outstanding shares are fully-paid and non-assessable.
PREFERRED STOCK
Although we are authorized to issue noncumulative, nonvoting,
nonconvertible preferred shares, we have not yet done so, and have not
determined any specific terms for any such shares we may offer in the future.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of common stock is
Cottonwood Stock Transfer Company, 5899 South State Street, Salt Lake City, Utah
84107.
REPORTS TO SHAREHOLDERS
We intend to furnish annual reports to shareholders, which will include
certified financial statements reported on by our certified public accountants.
In addition, we will issue unaudited quarterly or other interim reports to
shareholders pursuant to the federal securities laws.
LEGAL PROCEEDINGS
We are not a party to any legal proceeding or litigation, and none of
our property is the subject of a pending legal proceeding. Further, the officers
and directors know of no legal proceedings against us or our property
contemplated by any person, entity or government authority.
INTEREST OF NAMED EXPERTS AND COUNSEL
The Balance Sheets as of December 31, 2000 and 1999 and the statements
of operations, stockholders' (deficit) equity and cash flows for the years then
ended, included in this prospectus, have been included herein in reliance on the
report of Chisholm & Associates, independent auditors, which includes an
explanatory paragraph on Atlas Mining Company's ability to continue as a going
concern, given on the authority of that firm as experts in accounting and
auditing.
The legality of the securities offered hereby has been passed upon by
Pollet & Richardson, A Law Corporation, Los Angeles, California.
INDEMNIFICATION
The Idaho Revised Statutes and certain provisions of Atlas Mining
Company's Articles of Incorporation and Bylaws under certain circumstances
provide for indemnification of our Officers, Directors and controlling persons
against liabilities that they may incur in such capacities. A summary of the
circumstances in which such indemnification is provided for is contained herein,
but this description is qualified in its entirety by reference to our Articles
and Bylaws and to the statutory provisions.
34
In general, any Officer, Director, employee or agent may be indemnified
against expenses, fines, settlements or judgments arising in connection with a
legal proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in our best interest, and were not unlawful.
Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by independent
decision of the Board of Directors, by legal counsel, or by a vote of the
stockholders, that the applicable standard of conduct was met by the person to
be indemnified.
The circumstances under which indemnification is granted in connection
with an action brought on behalf of Atlas Mining Company is generally the same
as those set forth above; however, with respect to such actions, indemnification
is granted only with respect to expenses actually incurred in connection with
the defense or settlement of the action. In such actions, the person to be
indemnified must have acted in good faith and in a manner believed to have been
in our best interest, and must not have been adjudged liable for negligence or
misconduct.
Indemnification may also be granted pursuant to the terms of agreements
that may be entered in the future or pursuant to a vote of stockholders or
Directors. The statutory provision cited above also grants the power to us to
purchase and maintain insurance which protects our Officers and Directors
against any liabilities incurred in connection with their service in such a
position, and such a policy may be obtained by Atlas Mining Company.
Article VII of the amended Articles of Incorporation state: "A director
shall not be held liable to the company or its shareholders for monetary damages
for any action taken or any failure to take any action as a director except to
the minimum degree required under Idaho law as it now exists or hereafter may be
amended. Further, the company is authorized to indemnify, agree to indemnify, or
obligate itself or advance or reimburse expenses incurred by its directors,
officers, employees, or agents to the full extent of the laws of the state of
Idaho as may now or hereafter exist; excepting incidents involving intentional
violation of criminal law."
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have experienced no recent change in or disagreement with our
accountant. Our present auditor, Chisholm & Associates, Box 540216, No. Salt
Lake, UT 84054, has been the Company's auditor since 1999. Management of the
Company intends to keep Chisholm & Associates as its auditor for the foreseeable
future.
35
INDEX TO FINANCIAL STATEMENTS
ATLAS MINING COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 2001
Independent Auditor's Report................................................. 37
Consolidated Balance Sheets.................................................. 38
Consolidated Statements of Operations........................................ 40
Consolidated Statements of Stockholders' Equity.............................. 41
Consolidated Statements of Cash Flows........................................ 43
Notes to The Financial Statements............................................ 45
36
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Atlas Mining Company
We have audited the accompanying consolidated balance sheets of Atlas Mining
Company as of December 31, 2001 and 2000 and the related consolidated statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well a evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Atlas Mining Company
as of December 31, 2001 and 2000 and the results of its operations and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Chisholm & Associates
North Salt Lake, UT
January 23, 2002
37
ATLAS MINING COMPANY
Consolidated Balance sheets
ASSETS
------
December 31,
------------------------------
2001 2000
------------ ------------
CURRENT ASSETS
Cash - checking $ - $ 27,847
Certificate of deposit - 50,000
Investment securities available for sale 11,464 3,274
Trade accounts receivable 29,667 148,881
Notes receivable - current - 5,000
Other current receivables 1,136 126
Deposits and prepaids 26,523 28,995
------------ ------------
Total Current Assets 68,790 264,123
------------ ------------
PROPERTY AND EQUIPMENT
Land and tunnels 345,159 345,159
Buildings and equipment 77,680 77,680
Contracting equipment 1,080,750 1,080,750
Office equipment 10,000 10,000
Vehicles 72,972 72,972
------------ ------------
1,586,561 1,586,561
Less:
Accumulated depreciation (819,098) (643,657)
------------ ------------
Total Property and Equipment 767,463 942,904
------------ ------------
OTHER ASSETS
Contracting supplies 207,123 207,123
Notes receivable - noncurrent - 25,046
------------ ------------
Total Other Assets 207,123 232,169
------------ ------------
TOTAL ASSETS $ 1,043,376 $ 1,439,196
============ ============
The accompanying notes are an integral part of these financial statements.
38
ATLAS MINING COMPANY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31,
------------------------------
2001 2000
------------ ------------
CURRENT LIABILITIES
Bank overdraft $ 10,395 $ -
Accounts payable and accrued expenses 290,068 273,951
Accounts payable - related party 44,534 48,557
Line of credit 32,157 78,218
Current maturities on long-term debt 993,759 1,008,671
------------ ------------
Total Current Liabilities 1,370,913 1,409,397
------------ ------------
LONG TERM LIABILITIES
Notes payable 189,249 203,845
Notes payable - related party 912,389 912,242
Less current maturities on long-term debt (993,759) (1,008,671)
------------ ------------
Total Long Term Liabilities 107,879 107,416
------------ ------------
MINORITY INTEREST 78,735 78,918
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, no par value; 60,000,000 shares authorized;
6,997,283 and 6,009,853, respectively 2,387,445 2,277,421
Preferred stock, $1.00 par value 10,000,000 shares
authorized, noncumulative nonvoting, nonconvertible,
none issued or outstanding - -
Additional paid-in capital - -
Retained earnings (deficit) (2,821,027) (2,242,744)
Accumulated comprehensive income/(loss) (30,569) (30,051)
Less cost of treasury stock, -0- and 324,852 shares
respectively - (161,161)
Prepaid expenses (50,000) -
------------ ------------
Total Stockholders' Equity (514,151) (156,535)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,043,376 $ 1,439,196
============ ============
The accompanying notes are an integral part of these financial statements.
39
ATLAS MINING COMPANY
Consolidated Statements of Operations
December 31,
-------------------------------
2001 2000
--------------- ---------------
REVENUES $ 689,636 $ 784,314
COST OF SALES 482,305 572,164
--------------- ---------------
GROSS PROFIT 207,331 212,150
--------------- ---------------
EXPLORATION EXPENSES 115,369 48,750
GENERAL AND ADMINISTRATIVE EXPENSES 542,127 504,041
--------------- ---------------
TOTAL OPERATING EXPENSES 657,496 552,791
--------------- ---------------
OPERATING INCOME (LOSS) (450,165) (340,641)
OTHER INCOME AND (EXPENSES)
Interest income 2,330 2,161
Miscellaneous income (expense) 1,535 (33)
Interest expense (126,870) (116,451)
Gain (loss) on sale of available for sale investments - (25,598)
Gain on sale of assets (5,296) 150,159
Minority interest 183 113
--------------- ---------------
Total Other Income and (Expenses) (128,118) 10,351
--------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (578,283) (330,290)
PROVISION (BENEFIT) FOR INCOME TAXES - 16,953
--------------- ---------------
NET INCOME (LOSS) $ (578,283) $ (347,243)
=============== ===============
NET INCOME (LOSS) PER SHARE $ (0.09) $ (0.06)
=============== ===============
WEIGHTED AVERAGE OUTSTANDING SHARES 6,057,758 5,846,472
=============== ===============
The accompanying notes are an integral part of these financial statements.
40
ATLAS MINING COMPANY
Consolidated Statements of Stockholders' Equity
December 31, 2001 and 2000
Common Stock Additional Retained Treasury Stock Accumulated
----------------------- Paid-In Earnings ----------------------- Comprehensive Prepaid
Shares Amount Capital (Deficit) Shares Amount Income Expenses
------------ ---------- ----------- ---------- ----------- ---------- ------------- ----------
Balance, December 31, 1999 5,716,761 2,253,144 - (1,895,501) (324,852) (161,161) (67,811) -
2/15/00 - Issuance of common
stock for services at $.25 400 100 - - - - - -
3/13/00 - Issuance of common
stock for services at $.13 82,692 10,750 - - - - - -
8/11/00 - Issuance of common
stock for services at $.05 75,000 3,750 - - - - - -
8/11/00 - Issuance of common
stock for cash at $.07 135,000 9,677 - - - - - -
Net change in unrealized gains
(losses) on available for sale
securities - - - - - - 37,760 -
Net loss for the year ended
December 31, 2000 - - - (347,243) - - - -
----------- ---------- ---------- ----------- --------- ----------- -------------- ----------
Balance, December 31, 2000 6,009,853 2,277,421 - (2,242,744) (324,852) (161,161) (30,051) -
3/27/01 - Issuance of common
stock for services at $0.10 6,000 600 - - - - - -
4/6/01 - Issuance of common
stock for services at $0.07 300,000 21,000 - - - - - -
4/17/01 - Issuance of common
stock for services at $0.10 10,000 1,000 - - - - - -
6/30/01 - Issuance of common
stock for cash at $0.35 271,430 95,000 - - - - - -
7/10/01 - Issuance of common
stock for lease at $0.25 400,000 100,000 - - - - - (100,000)
8/13/01 - Issuance of treasury
stock for services at $0.18 - - - - 305,852 53,585 - -
8/13/01 - Difference in issue
price of treasury stock and
original repurchase price - (97,899) - - - 97,899 - -
8/13/01 - Cancel treasury stock - (9,677) - - 19,000 9,677 - -
Net change in unrealized gains
(losses) on available for sale
securities - - - - - - (518) -
Amortization of prepaid
expenses - - - - - - - 50,000
The accompanying notes are an integral part of these financial statements.
41
ATLAS MINING COMPANY
Consolidated Statements of Stockholders' Equity
December 31, 2001 and 2000
Common Stock Additional Retained Treasury Stock Accumulated
----------------------- Paid-In Earnings ----------------------- Comprehensive Prepaid
Shares Amount Capital (Deficit) Shares Amount Income Expenses
----------- ---------- ----------- ------------- ----------- ----------- ------------- ----------
Net losses for the year ended
December 31, 2001 - - - (578,283) - - - -
----------- ---------- ----------- ------------- ----------- ----------- ------------- ----------
Balance, December 31, 2001 6,997,283 $2,387,445 $ - $(2,821,027) - $ - $ (30,569) $ (50,000)
=========== ========== =========== ============ =========== =========== ============= ==========
The accompanying notes are an integral part of these financial statements.
42
ATLAS MINING COMPANY
Consolidated Statements of Cash Flows
December 31,
---------------------------
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (578,283) $ (347,243)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation 175,440 176,140
Bad debt 5,296 -
Gain on sale of equipment - (79)
(Gain) loss on sale of investments - 25,598
Shares issued for services 76,185 14,600
Amortization of prepaid expenses (equity) 50,000 -
Note issued for wages - 36,451
Minority interest (183) (113)
(Increase) decrease in:
Trade accounts receivable 119,214 (141,671)
Contracting supplies - 567
Deposits and prepaids 2,472 (712)
Other current receivables (1,010) 80
Deferred taxes - 16,953
Accounts payable and accrued expenses 22,489 131,298
------------ ------------
Net Cash Provided (Used) by Investing Activities (128,380) (88,131)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from notes receivable 24,750 2,897
Proceeds from sale of investments - 38,567
Purchase of investments (8,700) -
Proceeds from sale of property and equipment - 6,276
------------ ------------
Net Cash Provided (Used) by Investing Activities 16,050 47,740
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 31,300 395,943
Payments on notes payable (45,749) (304,420)
Proceeds from line of credit 8,795 -
Payments on line of credit (54,863) -
Proceeds from issuance of common stock 95,000 9,677
------------ ------------
Net cash Provided (Used) by Financing Activities 34,483 101,200
The accompanying notes are an integral part of these financial statements.
43
ATLAS MINING COMPANY
Consolidated Statements of Cash Flows (Continued)
December 31,
-----------------------------
2001 2000
-------------- --------------
Net increase (decrease) in cash and cash equivalents $ (77,847) 60,809
Cash and cash equivalents at beginning of year 77,847 17,038
-------------- --------------
Cash and cash equivalents at end of year $ - $ 77,847
============== ==============
Supplemental Cash Flows Information:
Cash paid for interest $ 52,500 $ 84,422
Cash paid for income taxes $ - $ -
Supplemental Schedule of Non-cash Investing and
Financing Activities
Common stock issued for services $ 76,185 $ 10,750
Common stock issued for prepaid expenses $ 100,000 $ -
The accompanying notes are an integral part of these financial statements.
44
ATLAS MINING COMPANY
Notes to the Financial Statements
December 31, 2001 and 2000
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 contracting
supplies from Fausett International, Inc., a related party. The
purchase price was $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 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
December 31, 1999, 391,114 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 was $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. The purchase price was $228,566. The acquisition has
been recorded as a purchase and all of the assets and liabilities
were transferred to the Company. At the time of the acquisition,
Olympic held the rights to the San Acacio Mine in Zacatecas,
Mexico. The rights to the mine have since been terminated in
2001.
45
ATLAS MINING COMPANY
Notes to the Financial Statements
December 31, 2001 and 2000
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), and Idaho corporation. The
purchase price was $72,825. The acquisition has been recorded as
a purchase.
b. Revenue and Cost Recognition
The Company recognizes income and expenses on the accrual basis
of accounting. Revenues from unit price contracts are recognized
on the units produced method which management considers to be the
best available measure of progress on contracts.
Contract costs include al direct material and labor costs and
those indirect costs related to contract performance, such a
indirect labor, supplies, tools, repairs, and depreciation costs.
Costs associated with the start-up of contracts are capitalized
as deferred contract costs and amortized to expense over the life
of the contract. General and administrative costs are charged to
expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses
are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract
penalty provisions, and final contract settlements may result in
revisions to costs and income and are recognized in the period in
which revisions are determined.
Contract claims are included in revenue when realization is
probable and can be reliably estimated.
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 consolidated financial statements include the accounts of
Park Copper & Gold Mining Ltd. Al significant inter-company
accounts and transactions have been eliminated in the
consolidation.
46
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
------------------ ------------- --------------------
For the year ended December 31, 2001:
Basic EPS
Income (loss) to common
Stockholders $ (578,283) 6,057,758 $ (0.09)
================== ================== ==================
For the year ended December 31,
2000:
Basic EPS
Income (loss) to common
Shareholders $ (347,243) 5,846,472 $ (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.
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.
47
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
December 31,
--------------------------------------
2001 2000
------------------ ------------------
Deferred tax assets:
Net operation loss carry-forwards $ 466,915 $ 321,651
Contribution carry-forwards 148 148
Unrealized loss on available for sale securities 7,630 7,550
------------------ ------------------
Total Deferred Tax Assets 474,693 329,299
Valuation allowance for deferred tax assets (464,567) (316,332)
------------------ ------------------
10,126 12,967
------------------ ------------------
Deferred tax liabilities:
Tax over book depreciation 10,126 12,967
------------------ ------------------
Total Deferred Tax Liabilities 10,126 12,967
------------------ ------------------
$ - $ -
================== ==================
At December 31, 2001, the Company has net operating losses of
$1,604,355 which expire from 2002 through 2020.
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 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. 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.
48
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Available for Sale Investments (Continued)
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
---------------- --------------- --------------- ----------------
December 31, 2001 $ 42,033 $ - $ (30,569) $ 11,464
December 31, 2000 $ 33,325 $ - $ (30,051) $ 3,274
i. Contracting Supplies
Contracting 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.
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
Contracting equipment 2-8 years
Office and shop furniture and equipment 5-8 years
Vehicles 5 years
49
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Property and Equipment (Continued)
In accordance with Financial Accounting Standards Board Statement
No. 121, the Company records impairment of ling-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 December 31, 2001 and 2000, no impairments were
recognized.
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 December 31, 2001 and 2000, The Company has no
investments in derivative financial instruments.
m. Mining Exploration Costs
The company has elected to expense all mining exploration costs
due to the inactivity of their mining operations. At such a time
as mining continues in any of the Company's properties, the
Company will capitalize costs of developing the properties, when
future benefit of the costs can be identified.
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. It is management's
plan to raise additional funds to continue its operations. In
2001 and 2000 the Company pursued an SB-2 filing with the
Securities and Exchange Commission (SEC). It is managements
intent to continue the filing process, which when completed will
fully register Atlas Mining Company as required by the SEC, and
authorize the Company to offer 6 million shares of common stock
for sale.
50
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 3 - NOTES RECEIVABLE
Notes receivable at December 31, 2001 and 2000 consist of the
following:
2001 2000
------------- -------------
Note receivable bearing interest at 10% per
annum, Due in annual installments of $5,000
plus accrued interest, secured by property - 30,046
------------- -------------
Total - 30,046
Less current portion - 5,000
------------- -------------
Notes receivable - long term $ - $ 25,046
============= =============
NOTE 4 - LONG-TERM LIABILITIES
Long- term liabilities are detailed in the following schedules as
of December 31, 2001 and 2000:
2001 2000
-------------- --------------
Note payable to a company, due in monthly
payments of $1,000 with a balloon payment
due at maturity, including interest at 9%.
The note matured August 16, 2001, now in default. $ 53,250 $ 53,250
Note payable to a lending company, due
in monthly installments of $578, including
interest at 11.99%. The note is due in August
2003 and collateralized by a vehicle. 16,393 17,450
Note payable to a mortgage company, due in
monthly installments of $1,614, including interest
at 16%. The note is due in August 2005,
secured by the proceeds of a logging agreement and
collateralized by land and a building. 119,606 119,981
Note payable to a bank, principal due at maturity
with interest at 11%. The note matured February 1,
2001. - 13,164
-------------- --------------
Total Notes Payable 189,249 203,845
-------------- --------------
51
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 4 - LONG-TERM LIABILITIES (Continued)
2001 2000
------------- -------------
Notes payable - related party:
Note payable to Fausett International Inc. due in
monthly payments of $15,000, including interest at
8.75% and is collateralized by all equipment and
contracting supplies. The note matured August 22, 2001,
now in default. 782,741 782,741
Note payable to an officer, payable on demand and
bears no interest. 114,648 114,501
Note payable to a board of director, payable on
demand and bears no interest. 15,000 15,000
------------- -------------
Total Notes Payable - Related Party $ 912,389 $ 912,242
------------- -------------
Total Long-term Liabilities $ 1,101,638 $ 1,116,087
Less Current Portion (81,370) (96,429)
Less Current Portion-related party (912,389) (912,242)
------------- -------------
Total Current Portion (993,759) (1,008,671)
------------- -------------
Total Long-Term Liabilities $ 107,879 $ 107,416
============ =============
Future minimum principal payments on notes payable are as
follows:
2002 $ 993,759
2003 56,963
2004 28,929
2005 21,987
---------------
Total $ 1,101,638
===============
NOTE 5 - LINE OF CREDIT
In 2001 and 2000, the Company has an unsecured line of credit for
$50,000 at an interest rate of prime plus 6%. The balance of the
line of credit at December 31, 2001 and 2000 is $32,517 and
$39,503, respectively.
52
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
Note 5 - LINE OF CREDIT (Continued)
In 2000, the Company entered into an agreement whereby advances
are received by pledging accounts receivable as collateral. At
December 31, 2001 and 2000, the balance of the advances is $0 and
$38,715, respectively. Interest is payable after 90 days at .17%
daily.
NOTE 6 - RELATED PARTY TRANSACTIONS
In 1997, the Company purchased the operating equipment and
contracting supplies from Fausett International, Inc. The owner
of Fausett is also a Board of Director of the Company. The
balance of the notes payable in connection with the purchase as
of
December 31, 2001 and 2000 is $782,741. No principal payments
were made during 2001 and 2000. The interest paid during 2001 and
2000 was $52,500 and $60,000, respectively.
During 2000, a Board of Director loaned the Company $15,000. The
note is payable upon demand and bears no interest. The balance of
the note at December 31, 2001 and 2000 is $15,000.
The Company leases office space from a Board of Director for
$1,100 per month, on a month to month basis. In 2001 and 2000,
the Company paid $15,400 and $2,200, respectively.
The Company entered into a consulting agreement in connection
with the asset purchase of Fausett International, Inc. The owner
was to be paid $1,500 per month for 36 months beginning October
1, 1997. There were no payments made during 2001 and 2000.
During 2001 and 2000, an officer loaned the Company $31,300 and
$36,000, respectively. In 2001 and 2000, the Company paid $31,153
and $-0- on the loan. The loan balance at December 31, 2001 and
2000 is $114,648 and $114,501, respectively.
NOTE 7 - 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 priced per share with each option granted will be fixed by
the Administrative Committee on the date of grant. At December
31, 2001, no options had been granted under this plan.
53
ATLAS MINING COMPANY
Notes to The Financial Statements
December 31, 2001 and 2000
NOTE 7 - STOCK OPTIONS (Continued)
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 December 31, 2001, no options have been granted
under the plan.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
On July 10, 2001, the Company entered into an agreement to lease
and possibly purchase a mine in Juab County, UT. The Company has
the sole option to renew the lease on an annual basis. The
Company paid the first year of the lease through the issuance of
400,000 shares of its common stock valued at $100,000. This
amount has been recorded as a prepaid expense in the equity
section of the balance sheet and is being amortized over a one
year period. For subsequent years, the agreement requires that
the lease payments be made through the issuance of 100,000 shares
of the Company's common stock. If during any one year period the
Company sells $1,000,000 of product from the mine, the Company
has the option to purchase the mine for $500,000. In addition to
the $500,000 payment, the Company will pay a 3% royalty on the
gross sales from the mine.
NOTE 9 - SUBSEQUENT EVENTS
On February 5, 2002, the company signed an agreement to settle
its outstanding debt, accrued interest and accounts payable due
to a related party. The total balance payable to the related
party at December 31, 2001 was approximately $890,000. The
Company has agreed to return to the related party assets which
have a net book value of approximately $679,000 at December 31,
2001. In exchange, the related party has forgiven the debt of
$890,000 and has accepted a new note in the amount of $53,500.
54
- --------------------------------------- ------------------------------------
No person is authorized to give any
information or to make any
representation other than those
contained in this prospectus, and
if made such information or
representation must not be relied ATLAS MINING COMPANY
upon as having been given or
authorized. This prospectus does 6,740,000 Shares of Common Stock
not constitute an offer to sell or
a solicitation of an offer to buy
any securities other than the
Securities offered by this
prospectus or an offer to sell or a
solicitation of an offer to buy the
Securities in any jurisdiction to
any person to whom it is unlawful
to make such offer or solicitation
in such jurisdiction.
The delivery of this prospectus
shall not, under any circumstances,
create any implication that there
has been no changes in the affairs
of the Company since the date of
this prospectus. However, in the
event of a material change, this
prospectus will be amended or
supplemented accordingly.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY..............................3
RISK FACTORS....................................6
USE OF PROCEEDS................................10
Selling Securityholders........................11
DETERMINATION OF OFFERING PRICE................12 -----------------------
PLAN OF DISTRIBUTION...........................13 PROSPECTUS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF -----------------------
PLAN OF OPERATION..............................16
DESCRIPTION OF BUSINESS........................19
DESCRIPTION OF PROPERTY........................24
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS................................28
EXECUTIVE COMPENSATION.........................29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.31
MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS............................31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..........................32 April __, 2002
DESCRIPTION OF SECURITIES......................33
LEGAL PROCEEDINGS..............................34
INTEREST OF NAMED EXPERTS AND COUNSEL..........34
INDEMNIFICATION................................34
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.........35
INDEX TO FINANCIAL STATEMENTS..................36
- --------------------------------------- ------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
a. Title 30, Chapter 1 of the Idaho Revised Statutes provides for the
indemnification of a corporation's officers and directors under certain
circumstances.
b. Article VII of Registrant's Amended Articles of Incorporation
provides, in part:
"A director shall not be held liable to the company or
its shareholders for monetary damages for any action taken or any
failure to take any action as a director except to the minimum
degree required under Idaho law as it now exists or hereafter may
be amended. Further, the company is authorized to indemnify,
agree to indemnify, or obligate itself or advance or reimburse
expenses incurred by its directors, officers, employees, or
agents to the full extent of the laws of the state of Idaho as
may now or hereafter exist; excepting incidents involving
intentional violation of criminal law."
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne
by the Company, are as follows:
SEC Filing Fee* $3,000
Printing Expenses* 5,000
Accounting Fees and Expenses* 20,000
Legal Fees and Expenses* 67,000
Blue Sky Fees and Expenses* 2,000
Registrar and Transfer Agent Fee* 1,000
Miscellaneous* 2,000
---------------------------------------------------------
Total* $100,000
*Estimated
Item 26: RECENT SALES OF UNREGISTERED SECURITIES
In September 1997, the Company issued 875,000 shares of common stock
(valued at $350,000) to Fausett International, Inc. for the purchase of mining
equipment and tools. The shares issued were exempt from registration pursuant to
Section 4(2) of the Securities Act because the issuance was not a public
offering.
In 1997, Atlas issued 842, 964 shares of common stock (valued at
$276,157) to Sierra Silver Lead Mining Company in order to acquire Sierra Silver
Lead Mining Company, an Idaho corporation. Atlas issued 1 share of the company's
common stock for every 3.76 shares of Sierra Silver. The shares issued were
exempt from registration pursuant to Section 4(2) of the Securities Act because
the issuance was not a public offering.
In February 1999, the Company issued approximately 750,000 share of
common stock (valued at $232,500) to the shareholders of Olympic Silver
Resources, Inc., a Nevada corporation, in order to purchase the majority
outstanding shares of Olympic. The shares issued were exempt from registration
pursuant to Section 4(2) of the Securities Act because the issuance was not a
public offering.
In 1999 the Company issued 96,903 shares of common stock to Park
Copper and Gold Mining Company acquire 53% interest in Park Copper and Gold
Mining Company. The shares issued were exempt from registration pursuant to
Section 4(2) of the Securities Act because this issuance was not a public
offering.
In July, 2001, the Company issued 271,430 shares of common stock to
Summa Metals Corporation for $95,000 cash payment from Summa Metals Corporation.
The shares issued were exempt from registration pursuant to Section 4(2) of the
Securities Act because this issuance was not a public offering.
In July, 2001, the Company issued 400,000 shares of common stock to
Conjecture Silver Mines to acquire the interest in the Dragon Mine in Juab
County, Utah. The shares issued were exempt from registration pursuant to
Section 4(2) of the Securities Act because this issuance was not a public
offering. In, 2001, the Company issued 300,000 shares of common stock to William
T. Jacobson for $21,000. The shares issued were exempt from registration
pursuant to Section 4(2) and Rule 506 of Regulation D of the Securities Act
because this issuance was not a public offering.
In March 2002, the Company issued 440,000 shares of common stock to 4
consultants of the Company in exchange for marketing and legal advisory
services. The shares issued were exempt from registration pursuant to Section
4(2) of the Securities Act.
Item 27. EXHIBITS.
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B:
Number Description
- ------ -----------
3.1 Articles of Incorporation, as amended
3.2 Bylaws, as amended
5.0 Legal Opinion of Pollet & Richardson
10.1 Subscription Agreement
10.2 Dragon Mine Lease Purchase Agreement
10.3 Article of Merger of Sierra Silver-Lead Mining Company and
Atlas Mining Company
10.4 Equipment Purchase Agreement
10.5 Stock Option Plan of Atlas Mining Company
10.6 Incentive Stock Option Plan of Atlas Mining Company
10.7 Investment Marketing Agreement by and between Atlas Mining
Company and Breakout Investment Marketing, Inc.
10.8 Note payable to Moss Adams, LLP
10.9 Note payable to CLS Mortgage Company
10.10 Settlement Agreement with Fausett International
21.0 Subsidiaries of the Registrant
23.1 Independent Auditors Consent
23.2 Consent of Pollet & Richardson (included in Exhibit 5.0)
Item 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
4. To provide, upon effectiveness, certificates in such denominations
and registered in such names as are required to permit prompt delivery to each
purchaser.
SIGNATURES
Pursuant to the requirements of the 1933 Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement on Form SB-2 to be signed on its behalf by the undersigned thereunto
duly authorized. In the City of Osburn, State of Idaho on the 5th November,
2001.
ATLAS MINING COMPANY,
a Idaho corporation
/s/ William T. Jacobson, President
----------------------------------
Pursuant to the requirements of the 1933 Securities Act, this Form
SB-2 Registration Statement has been signed by the following persons in the
capacities with Atlas Mining Company and on the dates indicated.
Dated: April 18, 2002 /s/ William T. Jacobson
------------------------------------------
William T. Jacobson, Chief Executive Officer
and President
Dated: April 18, 2002 /s/ Jack Harvey
-------------------------------------------
Jack Harvey, Vice President and
Director
Dated: April 18, 2002 /s/ Kurt Hoffman
-------------------------------------------
Kurt Hoffman, Treasurer, Director and
Principal Financial Officer
Dated: April 18, 2002 /s/ Thomas E. Groce
-------------------------------------------
Thomas E. Groce, Director
Dated: April 18, 2002 /s/ Marqueta Martinez
-------------------------------------------
Marqueta Martinez, Secretary, Chief Accounting
Officer and Controller